Pension Schemes Bill (Fourth sitting)
Torsten Bell Excerpts(7 months, 1 week ago)
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Mark Garnier
As we have heard, the amendment authorises the use of surplus pension funds to contribute to the provision of free, impartial pension advice and guidance services to scheme members. The age of 40 is very important, and I hope that the Minister, on his 42nd birthday—
Mark Garnier
Forty-third! He looks 28. None the less, I hope he is getting plenty of pension advice; who knows when he may need it?
This is a very good provision. The more informed people are about their retirement opportunities, the better. I suppose I have to declare a bit of an interest, inasmuch as I will retire in five years’ time, hopefully. It is incredibly important that people are well prepared for their retirement, and the more information a member of a pension fund has, the better it is. If the amendment is pressed to a vote, we will support it wholeheartedly.
Steve Darling
I should start by saying that I do not recognise the purist approach that we have heard from the hon. Member for Aberdeen North. This is an issue close to my heart, because my father, having seen the poverty that his father was in, saved significantly in his private pension scheme as a lorry driver. Sadly, however, he was extremely poorly advised, and as he approached retirement he put thousands and thousands of pounds into equities; then, in the late 1980s, there was a stock market crash. He might as well have burned half of his money. The further we drive the health of the pension industry, the better, and particularly knowledge for those who may not be very much in the financial world.
We heard in evidence from NEST that only 40% of people have even registered online to know what their pension is doing. For people for whom the financial world is a complete challenge—and even for many of us in this room, getting our head around it totally is a bit of a challenge—it is essential that we use every possible lever to make sure that quality advice is available. As Liberal Democrats, we will unashamedly use every opportunity in the Bill to provide high levels of education for those who are in receipt of pensions and to give them as much wind in their sails as possible.
Torsten Bell
I shall give a short speech, because there is a worrying habit developing of the hon. Member for Aberdeen North giving the Government Front-Bench speech for me. I should encourage that as we go on—she might be slightly traumatised by that, but we are where we are. Everybody in this room will agree on the importance of the principle that has been highlighted, and we have just heard a powerful point exactly along those lines.
Although the Government understand the intent behind amendment 3, there are two reasons why we will not support it. The first is a point of principle, which I have already set out: it is for trustees, not the Government, to decide how surpluses that benefit members should take place. We discussed the issue of discretionary benefits just now.
The second reason is less a point of principle and more a matter of reality. The amendment would provide advice only to existing members of specific schemes. I think we all agree, particularly in the light of the point made by the hon. Member for Aberdeen North, that the main problems are about the defined-contribution space and people coming up towards retirement. Lots of the people who are in schemes who would be coming forward for surplus release are already drawing down a very well-defined pension income.
It is not the ideal way to focus on the particular problem that we all agree exists, but we completely agree that robust guidance that assures that everyone has access to free and impartial advice is very important. That is the job of the Money and Pensions Service, but I completely hear what has been said about how it needs to go further. I am grateful for hon. Members’ contributions, but I urge the hon. Member for Horsham to withdraw his amendment.
John Milne
I thank the Minister for his reply, and I thank hon. Members for their contributions. One thing we all absolutely agree on is the importance and centrality of this issue. If there is one area in which I feel the Bill could have gone further, it is this one.
It is a scary thing to look to the future and see all the trends in where we are heading with pension adequacy. The number of people who will have zero or a very small pension is deeply frightening, particularly when we lay alongside that the fact that many of those people will not own their own house and will still be paying private market rent. The state pension is not designed for that.
It is a crucial issue. I appreciate both the Minister’s objection in principle and the practical objections from him and the hon. Member for Aberdeen North, but we will still push the amendment to a vote. That is more to lay a marker than anything else; I appreciate that our chances of winning the vote are small. We want to lay as much emphasis on the issue as possible. Whether or not it ends up as part of the Bill, perhaps under new clause 1, we want it highlighted.
Question put, That the amendment be made.
Kirsty Blackman
The Liberal Democrat and Conservative amendments are very different methods to achieve a similar outcome. Conservative amendment 258 is a bit wider, in the sense that it would require the affirmative procedure for a wider range of things, but both parties are concerned about the possibility of regulations allowing a surplus below the buy-out threshold level.
I think the amendments are reasonable asks. I am generally in the habit of supporting more scrutiny of regulations; upgrading the requirements for regulations from the negative to the affirmative procedure is very much in my wheelhouse, given that it is so difficult for Parliament to oppose regulations made under the negative procedure unless the Leader of the Opposition puts their name to a motion praying against them. In practice, that very, very rarely happens. Given that both amendments are asking for relatively small changes to ensure increased parliamentary scrutiny, particularly where the threshold drops below the buy-out level, I think that they are not unreasonable. I am happy to support them both.
Torsten Bell
I thank the hon. Members for Torbay and for Wyre Forest for their amendments. On amendment 264, I hope that I have already reassured hon. Members that there are many safeguards built into the policy for surplus release, both at an individual scheme level and at a wider policy level, including the ultimate control of trustees, the need for prudent funding to be maintained and the actuarial certification.
The Government’s view is that it is not for the Secretary of State to assess every single scheme in the way that the amendment intends. To offer some more reassurance, however, TPR and the PPF have carried out scenario testing in this area; we heard the PPF chief executive’s reassurance in oral evidence on Tuesday. In that regard, I do not think the amendment is necessary. It would also involve the Secretary of State holding a lot of evidence about every single DB scheme in the country, which I do not think is a good use of resources.
Kirsty Blackman
The point is about the regulations on the surplus and the times at which schemes can pay it. It is not about looking at each individual scheme; it is about looking at the level that is set in the regulations. Much as I am sure that the Minister is having a lovely birthday, he would probably admit that he is not going to be the Pensions Minister in perpetuity. It is unlikely that he will still be the Pensions Minister in 50 years’ time. He may therefore not have control of these regulations. This is about putting guardrails in place so that, no matter who is in government, the level cannot be reduced below the full buy-out funding level.
Torsten Bell
I think I am grateful to the hon. Lady for her attempt to fire me. To clarify, carrying out the kind of prescribed stress scenarios and assessments set out in the amendment would require the Department for Work and Pensions to examine the DB landscape. In this specific area, that is the role of TPR and the PPF.
I turn to amendment 258. The first regulations on surplus will be subject to the affirmative procedure, for exactly the reasons that have been set out, and exactly because at that point they will be new but also comprehensive. As with every other pensions Bill, what we do not want to see is the affirmative procedure being used for small, technical changes that come to those regulations in the years that follow. However, our approach does allow for the necessary debate when those regulations are made. On that basis, I urge hon. Members to support the Bill as drafted.
Steve Darling
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 258, in clause 9, page 9, line 21, leave out
“in subsection (2A), after ‘section’ insert ‘37(2A),’”
and insert
“in subsection (2), after ‘virtue of’ insert ‘(za) section 37(2A)’”.—(Mark Garnier.)
This amendment would make all regulations on DB surplus extraction subject to the affirmative procedure all times they were made rather than just after first use.
Question put, That the amendment be made.
Torsten Bell
Clause 9 will amend the safeguards on the sharing of surplus. The details will be set out in regulations, the parliamentary procedures of which we have just discussed. These safeguards will place the safety of members’ benefits at the heart of the policy.
Proposed new subsection (2B) of section 37 of the Pensions Act 1995 sets out the requirements, which are there to protect members, that must be set out in regulations before trustees can pay a surplus to the employer—namely that before a trustee can agree to release a surplus, they will first be required to receive an actuarial certification that the scheme meets a prudent funding threshold, and that members must be notified before surplus is released.
The funding threshold will be set out in regulations, which we will consult on, as discussed. We expect that release of the surplus will be permitted only when a scheme is fully funded on a low-dependency basis. Trustees are already required, through existing legislation, to set a long-term funding and investment strategy that targets exactly this funding level. These funding conditions will be set out in regulations made under the affirmative procedure and debated when first introduced.
Proposed new subsection (2C) will provide the ability to introduce additional regulations aimed at further enhancing member protections, where considered appropriate. Superfunds will be subject to their own regime for profit extraction; I am spelling this out, because we will come to it later in the Bill. The proposed new subsection will allow regulations to be made that are consistent with those provisions. Regulations may prevent payments from superfunds for a period, if surplus regulations come into force earlier than the superfund legislation, which we will debate later in the Bill. Crucially, decisions to release any surplus will remain subject to trustee discretion. I also note the removal of the statutory test in section 37(3)(d) of the Pensions Act, on the grounds that it does no more than reflect trustees’ existing duties.
The technical and consequential amendments at subsections (4) to (7) of clause 9 are to ensure that the new measures sit correctly in existing legislation but do not affect the overall policy. In summary, the clause will ensure that the release of a surplus is subject to strict safeguards. I commend it to the Committee.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Relevant schemes: value for money
Steve Darling
I beg to move amendment 269, in clause 10, page 10, line 10, at end insert—
“(aa) make, publish and keep under review the consistency of—
(i) regulated VFM schemes, or
(ii) regulated VFM arrangements,
with the goals of the Paris Agreement on climate change and clean energy;”.
This amendment, with Amendment 270, would require pension funds and managers to show whether their portfolio investments are consistent with the Paris Agreement.
John Milne
I rise to support what my hon. Friend the Member for Torbay said. As has been emphasised, we are not talking about making things mandatory. It is about making things possible, because there have been cases in which managers take a rather narrow view of fiduciary duty and almost deliberately exclude other considerations. It is about removing that blockage. We feel that the requirement in the amendment is of value and hope that the Minister will consider it.
It is also worth saying that very often one cannot definitively say that one investment will be better than another. There are all the projections and estimates. If it was that clear, every single fund would have the same 10 investments and that would be the end of it, and it would be a very small industry. It is often a matter of assertion, or a calculation. It is often not a case of choosing a lesser return; any return is conjectural in the first place.
Torsten Bell
My support for the Welsh Government’s Well-being of Future Generations (Wales) Act 2015 is on the record, so I get to disagree with the hon. Member for Aberdeen North on something, which will be a relief for everybody.
I thank the hon. Member for Torbay for tabling the amendments. Clearly, addressing climate change is absolutely central to this Government’s agenda. It needs to be done in the right way. Pension funds hold significant capital, and I am pleased to say that at every conference and every session I hold with people involved in the industry I see that investors and pension schemes do now use their influence on companies to encourage them to take responsible action. That has been a big change over the course of the last decade. It can lead to better risk management and potentially also improve returns on investments, as well as helping companies to perform better in relation to environmental targets.
My overall argument, though, is that trustees must already consider financially material risks, including ESG factors. The statement of investment principles and the implementation statement are key tools that are already in place for disclosing a scheme’s approach to ESG issues, including climate change. Ultimately, the amendment is about disclosures; that is what it aims to achieve. Additionally, large schemes with assets above £1 billion, which in future will be the majority of schemes because of the scale measures that we will come back to, must also report on climate-related risks and opportunities, in line with the Task Force on Climate-Related Financial Disclosures.
We are looking to strengthen sustainability reporting, exactly as the hon. Member for Torbay wishes to see, through new UK sustainability reporting standards and our transition plan’s commitment, which the Government consulted on this summer. Taken together, our policy initiatives will modernise the UK’s framework for corporate reporting, giving pension schemes vital information about companies’ decarbonisation plans and about whether to escalate their engagement efforts with investee companies on environmental issues. The DWP is contributing to that work and will review the effectiveness of climate reporting requirements later this year, as part of our post-implementation review of the requirements of the Taskforce on Inequality and Social-related Financial Disclosures.
Given the existing reporting requirements, the Government’s position is that we will gently resist the amendments, to avoid duplication.
Steve Darling
Climate change is an existential threat to humanity, and although sewage may not be such a threat, it is still a significant issue; indeed, it is a wicked issue that needs to be tackled by our society as a whole. I wish to press the amendment to a vote, to show the Committee’s intent ahead of the Bill’s next stage.
Question put, That the amendment be made.
Mark Garnier
That is a very good question. Ultimately it means, “What is the performance of the fund?” Members’ best interests can include a lot of different things, but ultimately we need to see the fund grow with the best performance it possibly can, given all things brought together. When members start to receive their pensions, they will therefore get the best terms they possibly can.
We run the risk of trying to look at the wrong definition. For example, there has been an argument recently about the local government pension scheme—this came up earlier this week—with the Reform party talking about the fact that the scheme is charging 50 basis points. The argument is that reducing it to 10 basis points would save money. However, as I was discussing with a Government Back Bencher the other day, one of the problems is that if fees are too low, that reduces the ability of the managers to assess more complicated financial opportunities. If fees are kept at 50 basis points, the capacity to start analysing unlisted investments is retained. If fees are reduced to 10 basis points, the ability and skill of the managers to look into more than investing in other people’s funds or into simple listed equities is reduced. If we start to look at it as a cost-based issue only, we miss out the fact that we get quite a lot of extra expertise if slightly higher management fees are paid.
The Australian framework incorporates additional core metrics including service quality, investment performance and outcomes. There is a concern that the UK value for money framework overemphasises costs and risks discouraging investment in asset classes, as I discussed, that historically produced higher returns but that might have higher shorter-term fees or complexities. This narrow focus could also dampen innovation in pension scheme design and reduce member engagement, ultimately harming long-term retirement outcomes for scheme members. It may be valuable to learn from the Australian approach by developing a value for money framework that balances cost transparency with metrics that encourage good investment strategies and quality services, aligning regulators’ and trustees’ incentives with members’ long-term financial interests.
Our amendment tries to broaden the definition of value for money using the Australian model as a template. It would require the assessment of net benefit outcome, investment performance, quality of service and long-term member outcomes, not just cost. It would introduce a requirement for schemes to report and benchmark across these holistic measures, thereby enabling a more balanced and meaningful comparison of value.
Torsten Bell
I think there is more agreement than the hon. Member for Wyre Forest set out, because we all agree that we want to focus not just on cost and charges. I remind everybody that we were discussing the local government pension scheme this morning—
Alice Macdonald (Norwich North) (Lab/Co-op)
I want to take this opportunity to thank the Minister for his remarks on the value for money scheme, which I welcome, and to put on the record that I am a member of the local government pension scheme. I did not have an opportunity to do that earlier.
Torsten Bell
We are now turning to the value for money framework, which relates to defined-contribution schemes. As I said, we are aiming for a full spectrum of value to be considered by the framework.
I do not think I would normally say this, but I am worried that the hon. Member for Wyre Forest is lacking a bit of patriotism, because the Australian scheme does not take into account some of the wider metrics, such as customer service, that he is rightly encouraging the scheme to focus on, whereas the intention in the Bill is exactly as he sets out—that we should be taking into account not only those longer-term returns, which are ultimately what we should all care about, but also customer service. I completely endorse his objectives.
The value for money clauses have been drafted in a way that allows the Secretary of State the necessary flexibility to set out in regulations the categories of information for the VFM assessments of the kind that are set out in the amendment, such that we can adapt to changes in the pension landscape and learn from operational experiences, as we are already learning from the experience in Australia. There are things to learn from Australia that have gone well, and there are certainly things to learn from that have gone less well. Although the amendment recognises the importance of assessing value across all the pillars of value, it is vital that we do not restrict the framework by embedding the exact details of the categories of information in the primary legislation.
VFM metrics, benchmarks and the assessment process will be specified through regulations, providing clarity for industry on how to report on and assess value provided by in-scope schemes—which, as I said, are basically at this stage workplace defined contribution schemes. Over time, those will be reviewed to make sure that they continue to reflect market changes and the needs of savers. For those reasons, we believe that the clauses are spot on. I urge the hon. Member for Wyre Forest to withdraw the amendment.
Torsten Bell
I beg to move amendment 28, in clause 10, page 11, leave out line 9 and insert—
“an occupational pension scheme that provides money purchase benefits.”
This amendment ensures that the value for money framework is capable of applying to hybrid schemes (that is, schemes that provide both money purchase benefits and other benefits).
The Chair
With this it will be convenient to discuss the following:
Amendment 1, in clause 10, page 11, line 9, leave out—
“a money purchase scheme that is”.
This amendment, together with Amendment 2, would ensure that the value for money provisions introduced by this Bill apply to all occupational pension schemes.
Amendment 2, in clause 10, page 11, line 14, at end insert—
“(14) Value for money regulations may make different provision for different descriptions of relevant pension schemes and must make provision for the application of the value for money assessment with a VFM rating to defined benefit occupational pension schemes.”
This amendment, together with Amendment 1, would ensure that the value for money provisions introduced by this Bill apply to all occupational pension schemes.
Clause stand part.
Government amendment 35.
Torsten Bell
Amendments 28 and 35 introduce changes into chapter 1 of part 2 of the Bill. Amendment 28 ensures that the value for money framework is capable of applying to hybrid schemes—schemes that provide both money purchase benefits and other benefits. Amendment 35 is minor and consequential to amendment 28. The amendments are of a minor and technical nature and do not alter the policy. I commend them to the Committee.
On a point of order, Sir Christopher, should I proceed to comment on the other amendments or allow those proposing other amendments to come forward before I turn to the clause stand part?
Torsten Bell
On we go! I was going to thank the hon. Member for Torbay for his words on his amendments, but I shall move on to them anyway, and to clause stand part. Ultimately, value for money is a much-needed member protection measure for savers enrolled in a defined contribution scheme. I should remind the Committee why we have it and why it is so important: because the risk of poor value for money now lies in the defined contribution market to such a large extent with individual savers. That is what the Bill is ultimately, most importantly, about.
It is important to remember that members of defined benefit pension schemes already have protections and benefit from the sponsor employer shouldering all that risk, as was mentioned earlier by the hon. Member for Aberdeen North. Those employers also have greater agency to deal with the value-related issues, such as the effective administration of their pension schemes.
Clause 10 sets out that certain pension schemes and arrangements will be in scope for the value for money framework. The clause provides regulation-making powers to specify the types of schemes and arrangements that will be in scope of the value for money requirements. We envisage that those initially in scope will be default occupational pension schemes offering defined contribution benefits. That is fundamental, given that the vast majority of defined contribution savers are saving into exactly those kind of pension schemes. To spell out what that means, we are not talking about non-workplace defined contribution pensions—that is, personal pensions. There is a regulatory power to extend in future if required, but initially we are talking about workplace defined contribution pension schemes.
With that explanation, I hope that the hon. Member for Torbay will not press his amendment, and I commend clause 10 to the Committee.
Kirsty Blackman
I rise to speak to clause 10 and the consultations that the Secretary of State will undertake in advance of making the value for money regulations. Subsection (7) says:
“The Secretary of State must consult with such persons as the Secretary of State considers appropriate before— (a) making value for money regulations; (b) issuing guidance under subsection (6).”
I appreciate that that is in there—it should be in there, as it is important. However, I do not know the road map off the top of my head, although the Minister might. Will the value for money regulations be published in draft in advance of the final decisions being made? I understand that they will go through the affirmative procedure when they do come before Parliament, but, in order to consult, will the Secretary of State publish the drafted regulations so that all of us can see them?
Also, on the right people to consult, I would always recommend that the Secretary of State runs those regulations before the Select Committee in advance of publishing them, so that it can suggest any changes. It is far easier for the changes to be made in advance of the statutory instrument being laid, when it is in draft form, than for there to be an argument in a Delegated Legislation Committee—I am sure that nobody on either side of the House wants there to be arguments in a Delegated Legislation Committee. We would all, I am sure, hope that there would be widespread agreement in advance.
The value for money regulations are really important, and it is important that they are got right. I am pleased that there is to be a consultation, but I push the Minister to agree that it will be significant—not just a couple of people in advance—so that potential problems with the value for money regulations are ironed out, and we do not see 273 amendments to them down the line.
Steve Darling
That had eluded me, Sir Christopher, so thank you for drawing me out on this one. Amendments 1 and 2 ensure that there is consistency and that there are no gaps where schemes could perhaps fall between the cracks of legislation. We feel that the amendments would give that continuity of support to schemes.
Torsten Bell
In response to the hon. Member for Torbay, I should say that I have already set out the case for the value for money framework not covering defined benefit pension schemes, which is what the effect of the amendment would be.
To the questions raised by the hon. Member for Aberdeen North, broadly, the answer is yes: the regulations will be published in detail as part of the consultation. Significant consultations have already gone on with a very wide range of stakeholders, both by the TPR and by the Financial Conduct Authority. There are further consultations, and then draft regulations, to come. It is worth thinking about how a lot of the changes in the Bill reinforce each other. It is important that we make reasonably swift progress on the value for money regulations, because the value for money regime is a requirement for us to be able to then make progress on some of the other bits that we will come to discuss, such as contract override and, indeed, small pots.
Amendment 28 agreed to.
Clause 10, as amended, ordered to stand part of the Bill.
Clause 11
Publication etc of metric data
Torsten Bell
I beg to move amendment 29, in clause 11, page 11, line 34, after “publication” insert “or sharing”.
This amendment ensures that information on the database mentioned in clause 11(2)(d) can be made available to (for example) the Secretary of State for Work and Pensions for the purpose of internal review, as well as made available for publication.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Government new clause 11—Sharing of database where FCA makes corresponding rules.
Let me explain: although we often debate new clauses as parts of a group, the decisions on the new clauses will be taken after everything else. If Members look at the amendment paper, they will see that that is the situation.
Torsten Bell
Thank you, Sir Christopher. A central part of assessing whether a pension scheme or arrangement is providing value to the saver is how it performs in terms of investment, the quality of the service provided and costs. Having standardised performance metrics and a consistent measure of value will allow for easy and better comparisons across arrangements, which in turn will drive schemes to address poor value.
That is why clause 11 provides the powers necessary to ensure that schemes disclose value for money data on areas such as investment performance, including the types of assets being invested in, the quality of the service provided and charges on members. This information will have to be submitted within specified timescales. It is crucial that the metric data is open to public scrutiny, so clause 11 provides powers to require that the metrics are published and available on an electronic database. To ensure standardisation, regulations may also require the Pensions Regulator to set out the format that information should be submitted in. The powers taken in this clause will enable the creation of consistent, transparent and comparable VFM data to allow us to better understand which schemes are providing best possible value.
I turn to new clause 11, which will be inserted into chapter 1 of part 2. It provides clarity on the use of the electronic database mentioned at clause 11. Where the Financial Conduct Authority has made rules for contract-based schemes that correspond to VFM regulations, it will be permitted to use the electronic database. The new clause therefore facilitates the work of the FCA by facilitating schemes to provide that data to the electronic database. It provides for regulations to permit the use of the electronic database for the publication or sharing of information relating to contract-based schemes. The regulations will be subject to the negative procedure.
The context is that we have been clear from the outset that, for the value for money framework to work effectively, it must apply consistently across both trust-based and contract-based sides of the market. The new clause enables that to happen. It is purely technical in nature and will ensure that value for money data is treated consistently across both those two parts of the market. It does not alter the policy. I commend it to the Committee.
I turn to Government amendment 29, which introduces a change to chapter 1 of part 2. The amendment ensures that information on the database can be made available to, for example, the Secretary of State for Work and Pensions for the purpose of internal review. A large amount of high-quality data is being collected via that process, and it will be able to be made available to the Secretary of State or others, as well as being used for its main purpose under the Bill, which is obviously publication. The amendment is of a minor and technical nature and does not alter the policy. I commend clause 11 and the amendment to the Committee.
Mark Garnier
This seems like a very technical clause, and we certainly have no objections to it. I also have no doubt that we will not be voting against the Government amendment. I think we are very happy with it.
Kirsty Blackman
I have a similar question to the one I had earlier. We need to ensure that those responsible for generating the data are kept in the loop and that they have enough of a timeline to create the correct data. The Government must listen if they say, “We’re very sorry, but we can’t this bit of data in the way that the Government want.” I seek reassurance from the Government that this would be a conversation, so that the Government get the data they want, but that an unreasonable burden will not be placed on the trustees or managers who have to provide that data. That conversation needs to continue as time goes on.
Torsten Bell
The answer to the hon. Lady’s question is that that conversation is going on to a huge degree. Because there are so many lessons to be learned from abroad and so many technical questions to be worked through, including about the provision of data—these are important technical questions for the scheme to work and be operationalised—there is a high level of consultation on the value for money framework. It is absolutely an ongoing conversation. It was happening for some time under the previous Government, and it is continuing now. Another phase of that discussion will be launched in the near future and will continue as we move to the operational phase.
Amendment 29 agreed to.
Clause 11, as amended, ordered to stand part of the Bill.
Clause 12
VFM assessments
The Chair
With this it will be convenient to discuss the following:
New clause 42—Holistic Value for Money Assessment—
“(1) The Secretary of State must make regulations to require that any value for money assessment framework for defined contribution pension schemes includes holistic indicators beyond cost and return.
(2) The framework must include consideration of—
(a) whether the scheme offers access to free or subsidised pension advice or guidance;
(b) the frequency and impact of pension transfer delays for members;
(c) other qualitative indicators as may be prescribed, including those related to member engagement and support services.
(3) Regulations under this section may require that—
(a) schemes are rated according to both quantitative and qualitative indicators of value;
(b) schemes publicly disclose their performance against these holistic criteria;
(c) the frequency of assessment is sufficient to ensure up-to-date information for regulators and members.
(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
This new clause ensures that the value for money framework for defined contribution schemes includes whether schemes offer free or subsidised advice, and the extent to which pension transfer delays occur and affect member outcomes.
Torsten Bell
To ensure effective comparability across arrangements, it is necessary to have a clear and standardised assessment of how value is determined. Clause 12 will enable those undertaking the assessment to be clear about the method that they should follow and the criteria to be used. It will allow regulations to detail how a VFM assessment is to be made, the factors that need to be taken into account when making comparisons, the metrics to be used and, importantly, how such comparisons should be made. The clause also gives the flexibility for VFM regulations to introduce benchmarks that schemes should compare their arrangements against. That is necessary to improve comparability and transparency, and to help drive competition among schemes. That will help improve returns for members.
I turn to new clause 42, tabled by the Liberal Democrats; I am grateful to them for their contributions to the debate. Measuring the quality of services provided to members is an important aspect of the VFM framework—I support that entirely. It ensures that we assess not only the quantitative value provided by pension schemes, but the qualitative. Under the VFM framework, the Secretary of State will have the power to require schemes in scope to report on and assess the quality of the services provided to their members; I just made the point about the absence of that in Australia but the fact that it will have a role within our framework. Clause 11 provides for categories of information that schemes may be required to disclose to include
“the quality of services provided to members of the scheme”.
Further detail on the metrics for measuring quality of services will be set out in regulations. It is crucial that metrics are set out in the regulations so that we have flexibility to respond to changes in the pensions market and to learn from operational delivery—again, that is something we have seen in Australia. For that reason, we believe that the current legislative framework is sufficient. I ask the hon. Member for Torbay not to press the new clause.
Mark Garnier
Clause 12 seems fairly reasonable in its approach. Liberal Democrat new clause 42 seems in the broadest sense to follow our amendment 254 in respect of the Australian model; should it be pressed to a vote, we would be happy to support it. I have nothing more to add.
Steve Darling
As I stated earlier, one of our key drivers is making sure that people are able to make quality, informed decisions about their financial long-term future. The debate on the new clause drives that agenda. I am sure that the Minister has the best intentions, but what we are discussing is still within regulations that have yet to break cover. We would be more comfortable if it was in the Bill rather than tucked away in regulations. We will seek to press the new clause to a vote when the time comes.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Clause 13
Member satisfaction surveys
Question proposed, That the clause stand part of the Bill.
Torsten Bell
It will be a great relief to everybody to hear that clause 13, although vital, is relatively small. Importantly, it enables requirements relating to member satisfaction surveys, of a kind that I know hon. Members are supportive of, to be set out in the value for money regulations. As I have just argued, quality of service is one of the key pillars of the value for money assessment, and member satisfaction is a key aspect within that pillar. These surveys will allow schemes to better understand their members’ experience and to gauge just how good a service they are providing for scheme members. Members’ experiences and views on the quality of service will provide inputs to the holistic assessment of value that this entire part of the Bill aims to offer.
Mark Garnier
We are very happy with this measure. One of the important points, which has been made on a number of occasions, is to do with the wider financial education piece. One would hope that the satisfaction surveys would ask not only whether members of pension schemes are being given sufficient information, but whether they are being taught how to understand what that information means. That is quite important. It is more of a cultural thing than something that should go into the Bill. When we start talking about the complexities of pension funds, it does not necessarily mean a huge amount to the vast majority of people out there, and customer satisfaction surveys should be constructed on that basis. We need to ensure action on that financial education piece, but aside from that, we are very happy to support the clause.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Clause 14
VFM ratings
Question proposed, That the clause stand part of the Bill.
Torsten Bell
Central to the value for money framework is the assignment of value for money ratings. We discussed that briefly during the evidence session on Tuesday, and some hard questions were asked of me by the hon. Member for Wyre Forest; this clause will help to explain more about it. Rating or scoring a scheme’s value is a major cornerstone of the VFM policy. It is essential to helping savers and employers make informed decisions; they would otherwise have to analyse a very large amount of data. The finer details behind the ratings, such as the conditions under which each rating will apply and when they should be used, will be provided in full in regulations. That will provide clarity and allow the framework to evolve with the market.
After a VFM assessment, trustees or a manager will be required to assign a VFM rating. The clause describes the three categories of ratings that will be used in the VFM regime: fully delivering, intermediate and not delivering. As I pointed out on Tuesday, there are multiple levels available within intermediate—it is not a one-size-fits-all box.
Arrangements rated as fully delivering are those deemed to be providing best value for their members. At the opposite end of the scale, we have the “not delivering” grade. For those arrangements rated as not delivering, trustees will have to draw up an action plan of next steps to move pension savers to an arrangement that is providing value, thus avoiding persistent underperformance affecting members for long periods of time.
Arrangements given an intermediate rating will be those that require more work to improve their value to members. They may be required to inform employers of a “not delivering” rating and to produce an improvement plan that outlines the steps they plan to take towards improvement. That, in turn, will help employers to be better informed of the status of the schemes or arrangements that their staff are enrolled in and allow businesses to make better informed choices when it comes to workplace pensions.
The clause provides flexibility for multiple subcategories of the intermediate rating, meaning that the rating system is not limited to three ratings. To help tackle potential gaming of the VFM regime, we will tighten the rules on how some schemes choose comparators, so that schemes are not able to self-select the comparators they are able to use. That will be done by defining what a scheme should be comparing itself against and detailing the metrics that will determine whether a scheme is providing value. We will of course consult on the draft regulations.
Mark Garnier
In a broad sense, we are very happy to support the clause. There are, though, a number of issues, and the point about benchmarking and what performance is being valued against can be rather complicated. We heard from the Liberal Democrat spokesman, the hon. Member for Torbay, a little earlier about his father’s experience of putting money aside and finding himself wanting to take it out in October 1987—I remember it well; I had been a dealer on the floor of the London stock exchange, so a stock market crash was a pretty hideous thing. However, if we look at a chart of the FTSE 100 from the early 1980s up to now and the 1987 crash, although I think it was down 37% at one point, looks like the smallest of blips in what was otherwise a very long-term bull market that continues to this day.
The one thing we do know for sure is that those wanting better performance are likely to be investing in slightly more volatile assets. That can come from investing in equities or higher-growth businesses. There is no doubt that some higher-growth businesses will go bust, because they are taking risks, but ultimately, how many of us wish we had put more money into Amazon, Google or Apple back in the late 1990s? At the time it was not necessarily seen as a brilliant thing, but some of these businesses have done unbelievably well. That said, how can anybody understand how a company like Tesla, which is really a battery manufacturer, is worth more than General Motors, Ford and Chrysler? It does not necessarily make a huge amount of sense, and yet people are still investing in it.
We can find ourselves looking at the value for money framework and come up with a load of benchmarks, which brings us to the point about the intermediate rating. We could find that an intermediate rating is done at a time when there are particular problems in the stock market, yet, looking at the long term, we could have what could turn out to be a stunning performance. We have to be very careful and not find ourselves throwing out the good in favour of the perfect. This will be something quite complicated; I do not necessarily think it is something for the Bill to worry about, but, as we continue the discourse of pensions performance and adequacy, we need to be very careful that we do not become obsessed with ruling out risk.
There is a big argument about risk in our economy at the moment, which, again, is not for this place, but we could find ourselves ruling out risk. The other thing worth bearing in mind is that, by ruling out risk, we could stop money being invested into businesses that may look absolutely bonkers today, but turn out to be the next Apple, Amazon or Google. We just have to be careful about that.
I suspect we shall have lots of debates over this. The Pensions Minister is on such a meteoric career progression at the moment that I am sure he will find himself as Chancellor of the Exchequer before very long—probably quicker than he imagines—but this is something that we need to keep an eye on. As I say, it is about making sure that we do not rule out the good in pursuit of the perfect.
Torsten Bell
I always aim to provide words of wisdom—say one in 100. Let me engage directly with the points about the nature of the arrangement. The honest answer is that lots of it will be in regulations, but the exact issues raised by both main Opposition parties are ones that we have thought a significant amount about.
The hon. Member for Wyre Forest is right to say that risk aversion generally can be dangerous within the system, in just the same way that excessive risk-taking can be dangerous. He raised two specific issues. One was how short-term market developments affect ratings—that is why the benchmarking is a relative process. Relative benchmarking deals with the ups and downs of the stock market or other asset valuations—we are assessing the relative performance, not the absolute performance.
The hon. Gentleman raises a separate question on the nature of the investment we want to look at, where there may be returns over different timescales. That is why we need to look at different measures and metrics, some of which are backward looking—for example, more standard measures of value for money—and some of which might be forward looking—for example, looking at the costs and asset allocation strategy to come to a view about what forward-looking returns might look like relatively. We have thought about that in some detail.
We then had a useful discussion about life stages—when someone moves from higher risk, because they are confident that they will not be retiring in the middle of a 1987-style downturn. That is exactly what we should be thinking about. One of the objectives of the Bill as a whole is to drive higher returns on average. Later lifestyling, as it is called, into safe assets means that someone can be exposed to some growth potential for longer over their life. When we come to discuss the default pension solutions, that is exactly why, on average, that approach will drive safer outcomes.
At the moment, defined-contribution pension schemes often put people into very safe assets—almost entirely bonds—in the run-up to their retirement. That would not be necessary if we knew that they were heading for a default solution with annuitisation or lifetime income coming in their 70s or 80s. That is exactly the benefit of the changes that we will discuss later. I hope that was a useful discussion of the important points that hon. Members have raised.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clause 15
Consequences of an intermediate rating
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendments 30 to 34.
Clause 16 stand part.
Torsten Bell
Clause 15 details the actions that may be required when an arrangement falls into an intermediate rating. That could be an arrangement that is at risk of not delivering value, or one that provides a certain level of value, but needs more work to improve the value it offers. It allows for regulations to detail the actions required of trustees and managers for schemes or arrangements rated intermediate. That could include producing an improvement or action plan, outlining their planned steps towards improved value for members or informing the employers currently paying into the arrangement of its value for money rating and ensuring that the arrangement does not take on new employers until it improves the value rating. That last point was raised at the evidence session on Tuesday.
As clause 14 provides the ability to set a number of sub-categories of rating within the intermediate category, clause 15 enables different consequences to be attached to those sub-categories depending on the value being provided. We are proposing to give schemes in the intermediate rating a period of up to two value for money assessment cycles to make the improvement needed to provide value to their savers.
It is important to differentiate between the intermediate and the “not delivering” rating. Schemes rated as not delivering are essentially not providing value to savers, with no identifiable improvements within a reasonable amount of time. Those schemes will be required to make an assessment of their next steps, which will most likely be to transfer the savers to a scheme that is providing value. That is the ultimate sanction within this framework.
Schemes that are rated intermediate will have identified where improvements can be made and will be required to complete an improvement plan. This would outline the proposed changes to improve their VFM rating within two years. As well as providing definitions of employer and participating employer in the context of the clause, it also allows for the content of an improvement plan to be included in secondary legislation.
Kirsty Blackman
When questioned on Tuesday, the Minister talked about the issues that had been raised about intermediate ratings, and the possibility of intermediate points within intermediate ratings. It would be helpful if he could confirm from the Front Bench that he will take action to ensure that the negative consequences that were raised, with people being so keen to avoid falling out of that, do not happen. The Minister will be aware that confirmation from the Front Bench is helpful in clarifying the intent of the legislation and would put some of our minds at rest.
Torsten Bell
Let me directly address that point, and then I will turn to the Government amendments. The answer is yes. I did not respond, but I should have, to the related point raised by the hon. Member for Wyre Forest in the previous grouping. The experience in Australia was that there was a binary cut-off, but with a very high-stakes outcome if people fell on the wrong side of it. That did lead to herding behaviour. That is one of the most well-established lessons from the Australian experience, and it is certainly central to the evidence that we have heard in the consultations. I can absolutely provide the confirmation that we will be avoiding that outcome, not least via these multiple levels of intermediate ratings.
Government amendments 30 to 34 introduce other changes. These amendments are of a minor and technical nature and clarify the policy intent. Amendments 30, 31 and 33 make drafting corrections. Amendment 32 clarifies that the Pensions Regulator’s assessment of a transfer solution is to be based on the trustees or managers’ assessment carried out for the purposes of the action plan. Finally, amendment 34 removes a power that we no longer need.
Clause 16 details the actions that must be undertaken when schemes or arrangements are rated as not delivering value for money. This is necessary to help protect pension savers from lingering in arrangements that are “not value” and allow them to be moved into arrangements that do provide value. These actions may include submitting an action plan to regulators, informing employers currently contributing to the arrangement of its “not value” rating and closing the arrangement entirely to new employers.
Clause 16 also enables regulations to set out further actions that will be required of trustees or managers, including the conditions under which a “not value” arrangement may not have to be closed to new members. The clause also allows the Pensions Regulator to require trustees or managers to initiate the transfer of members from the “not value” arrangement into another that does offer value. It outlines the conditions when this would apply.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16
Consequences of a “not delivering” rating
Amendments made: 30, in clause 16, page 16, line 20, leave out
“the responsible trustees or managers to transfer”.
This amendment corrects an error.
Amendment 31: in clause 16, page 16, line 21, leave out “(all or” and insert “all (or”.
This amendment corrects an error.
Amendment 32: in clause 16, page 16, line 31, leave out sub-paragraph (i) and insert—
“(i) based on the assessment carried out by the responsible trustees or managers under section 14(6)(a) in the action plan of the scheme or arrangement, transferring the benefits of all (or a subset of) the members of the scheme or arrangement to another pension scheme (or arrangement under a pension scheme) could reasonably be expected to result in the generality of the members of the scheme or arrangement receiving improved long-term value for money, and”
This amendment clarifies that the Pensions Regulator’s assessment of a transfer solution is to be based on the trustees or managers’ assessment carried out for the purposes of the action plan.
Amendment 33: in clause 16, page 16, line 34, leave out “the measures” and insert “any other measures”.
This amendment makes a minor clarification.
Amendment 34: in clause 16, page 17, line 8, leave out subsection (5).—(Torsten Bell.)
This amendment removes a power which is no longer needed.
Clause 16, as amended, ordered to stand part of the Bill.
Clause 17
Compliance and oversight
Question proposed, that the clause stand part of the Bill.
Torsten Bell
To ensure consistency, comparability and transparency of the value that arrangements provide, it is essential that all arrangements undertake the same process in the same way and that there is sufficient oversight of the process by the regulator. That is why clause 17 sets out the range of ways in which the regulator may make provision for ensuring compliance with the value for money framework.
The Pensions Regulator will be able to issue compliance and penalty notices to trustees, managers and third parties in breach of their VFM obligations. These notices enable the regulator to set out the steps that must be taken to ensure compliance with the VFM requirements. Financial penalties can be imposed, to a maximum of £10,000 in the case of an individual and up to £100,000 in other cases. Those figures align with other powers we have taken in part 2. There is also provision for the withdrawal of a penalty notice and for the Pensions Regulator to challenge an incorrect VFM rating.
Clause 18 makes it clear that the provisions in this chapter apply equally to pension schemes run by or on behalf of the Crown and to Crown employees. This is the standard approach in legislation to ensure that Crown-operated schemes are covered by the same rules, unless explicitly excluded. Clause 19 is the interpretation clause, which sets out the meaning of the terms used in the VFM clauses 10 to 17. I commend these clauses to the Committee.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18 ordered to stand part of the Bill.
Clause 19
Interpretation of Chapter
Amendment made: 35, in clause 19, page 20, leave out lines 13 and 14.—(Torsten Bell.)
This amendment is consequential on Amendment 28.
Clause 19, as amended, ordered to stand part of the Bill.
Clause 20
Small pots regulations
John Milne
I beg to move amendment 262, in clause 20, page 21, line 12, leave out “£1,000” and insert “£2,000”.
This amendment changes the value of small pot consolidation from £1,000 to £2,000.
The purpose of this amendment is to accelerate the consolidation of small, dormant pension pots and to enable more pots to be included. In other words, the amendment would support the Government’s intention to simplify retirement savings by reducing the number of scattered small pots and helping members to keep track of their savings and to avoid losing their pensions altogether. It would serve to improve the efficiency of providers, which in turn could reduce costs for savers.
Torsten Bell
The hon. Lady is not only telling me I am going to be fired, but then clearly angling for the job by again giving the speech I was going to give. I agree that there is broad consensus across the room that there is no perfect answer, but there is a balance of risks. We are attempting to introduce a large change to the pension system that will affect millions of people, and we need to do that in a steady and gradual way—yes, with the intention of considering going further in the future, but not in a rushed way.
Let me talk through a few of the issues and points that were raised. As I am sure those proposing the amendment know, our view is that we should stick with the £1,000 limit at this point and then come back to consider future increases once the system has been put in place. We want all hon. Members to have it in their heads that the implementation of this aspect of the Bill is on a slightly slower timeline than some of the other bits we have discussed—for example, because we need the value for money regime to be in place before we move to the small pots part of the picture.
Directly on the question of where the £1,000 limit came from, it came from extensive engagement and formal consultation with industry stakeholders over quite a large number of years. There is no academic answer to why it is £1,000 and not £900 or £1,100, but it does strike a balance between the pressures on a competitive industry and the level of administrative hassle, and the number of people who will be affected. We need to build a system that can manage the flows.
To give Members some idea of quantity, the evidence gathered from pension schemes last year showed that the £1,000 threshold would bring approximately 13 million pots into scope. I appreciate the logic behind calling for a higher threshold, but this one would mean a significant 13 million pots. The hon. Member for Wyre Forest is looking aghast at that number. I am just providing it as a bit of context. For further context, it already represents more than half of all deferred small pots, so it is not that we are trying to affect hardly any to start with; it is a significant number. That is in 2024 terms; the picture will look different in 2030 or so when the measure comes in, but that helps Members to have a sense of it.
On how to change the threshold, I can absolutely provide the reassurance that was asked for: that will be done in a public-facing way. An affirmative resolution is always required to change it. Unlike some other aspects of the Bill, where the first regulations are subject to the affirmative procedure but later changes can be made through the negative procedure, any change to the pot size requirement will always require the affirmative procedure, for exactly the reasons that have been discussed, which are that this would be a material change that affected the industry and individuals as they go through. Certainly, we would consult on that in the future.
For those reasons, I am glad that this is a probing amendment. I hope I have been probed, and we would like the clause to stand part.
Kirsty Blackman
On that point, perhaps I am reading the clause completely wrongly, but it says:
“Small pots regulations…are subject to the affirmative procedure if they…are the first such regulations…otherwise, are subject to the negative procedure.”
I am confused.
Torsten Bell
That is for all regulations except for the setting of the threshold number.
John Milne
Yes, it sounds rather unpleasant. We will think more about this subject, and I am sure we will discuss further, but I thank him for the clarification. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mark Garnier
I beg to move amendment 259, clause 20, page 21, line 23, leave out from “procedure” to end of line 29
This amendment would make all regulations on consolidation of small dormant pots in DC schemes to the affirmative procedure all times they were made rather than just after first use.
The hon. Member for Aberdeen North asked an interesting question about the application of the affirmative procedure to regulations on the pot size. Our amendment seeks to address the use of the affirmative procedure in the wider legislation that goes with this.
As we continue to table amendments urging extra parliamentary scrutiny, I feel myself becoming slightly depressed at the prospect of having to see too much of the Minister, even though he is undoubtedly a lovely chap, in Delegated Legislation Committees as we consider every single change. It is important though, because at the end of the day Parliament needs to scrutinise what is going on, so it is a good thing that the size of the pot is subject to the affirmative procedure.
It is okay, but not ideal that for anything that could be to do with the wider legislation, the negative procedure applies. Members having to look for a very material change going through in a written ministerial statement or whatever and then raise it is not necessarily such a good thing, given that this is fixing 13 million of these pots. That is an awful lot of them. If we increased the threshold to £2,000, would that number be 26 million? A lot of people that could be affected by this.
This was largely a probing amendment to see what the Minister has to say. We are unlikely to divide the Committee on it. None the less, I am very interested to hear what the Minister has to say about the affirmative procedure.
Torsten Bell
I understand why the hon. Member tabled the amendment. I think amendments like this one should be tabled in most Bill Committees by all Oppositions, as they have been over the years.
Let me make one general point and one specific point about the Bill. The general point is that there is always a trade-off between maximum scrutiny of every single part of any change that comes through secondary legislation and the risk of putting undue pressure on parliamentary time for what will be quite minor changes. In the case of the Bill, the pot size requirement is crucial. Lots of what the rest of the regulations deal with will, in fact, be very practical and detailed.
I am not sure that the Committee’s concern that we will be spending our lives together would be allayed by having our time clogged up by all of that detail coming through whenever anything is amended, but I understand the good, democratic reasons why the hon. Gentleman tabled the amendment. I hope that he accepts that as reassurance.
Mark Garnier
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Torsten Bell
The clause, as we have just discussed, will ensure that the Government have the power to introduce regulations to secure the consolidation of eligible small pots into an authorised consolidator scheme. The Bill enables us to address the growing problem of pension fragmentation, where individuals accumulate multiple small pension pots as they move between jobs. Fragmentation can lead to inefficiencies, higher costs for providers and savers, and poor retirement outcomes.
As we have just discussed, the clause creates the eligibility conditions for small pots to be consolidated, including the £1,000 limit. The pot must be classed as dormant, which means that contributions have not been paid into it for at least 12 months, so the individual is not actively saving into the scheme. In addition, there is a requirement that the individual has not, subject to any prescribed exceptions, actively expressed how the pension pot is to be invested. The prescribed exceptions are in part to ensure that the scope specifically targets those who are unengaged savers in default funds, but this will enable us to broaden the scope to include individuals such as those in sharia-compliant funds, who would otherwise be excluded from the automatic consolidation process.
We estimate that these eligibility criteria will bring into scope 13 million dormant pots. This multiple default consolidator approach will support improved retirement outcomes for savers, not least by lowering the charges that they pay on those pots over time, as well as reduce the administrative hassle for pension providers, alongside supporting our vision for a pensions market with fewer, larger schemes that provide greater value. Our impact assessment demonstrates that this solution is estimated to generate greater overall net benefits over the period than other options, including pot follows member.
Kirsty Blackman
I have a question on the definition of “dormant”. The clause states that a pension pot is “dormant” if no contributions have been made for 12 months and if
“the individual has, subject to any prescribed exceptions, taken no step to confirm or alter the way in which the pension pot is invested.”
I am concerned that that definition is too wide.
If somebody has just said, “How much is in my pot?” and is confirming what is invested in it, are they considered to be somebody who is actively involved in their pot and who may not want consolidation? There is obviously a requirement to tell people anyway that it is going to be consolidated. What if they were actively involved, but only to the level that they checked the numbers?
For example, I have a small pension pot. I have tried to amalgamate it with another one, but it did not work because I have changed my name. I would love for it to be amalgamated; I cannot work out how to do it, but I have engaged with that pension pot in recent times and therefore it may not be considered a dormant pot.
Can the Minister give us some clarity or promise future clarity about what “dormant” means? If there has been a rough engagement with it, is that dormant? If people are very keen on their pension pot and have spent a lot of time saying, “Actually, it should be invested like this,” that is definitely not dormant, no matter how small it is. A lot of people will have had only a passing interest and would be delighted for it to be consolidated.
Torsten Bell
The hon. Lady’s last point is basically the right one. The policy objective is that where someone is not actively engaging in their pot, that is available for consolidation. The kind of minor administrative engagement—trying to access the website—is not what is envisaged by the clause. It is to make sure that somebody who has taken active choices about how their pot is invested is not treated as being disengaged when they have done something that is, it turns out, very unusual.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21
Small pots data platform
Question proposed, That the clause stand part of the Bill.
Torsten Bell
I beg the Committee’s patience, as a number of clauses are grouped here—Members can thank the powers that be for that—and I will run through them all.
Clause 21 enables the Government to introduce a small pots data platform. This platform will be responsible for determining where each small dormant pot should be consolidated. It will ensure that decisions about where pots should go are made consistently, transparently and with the members’ best interests in mind.
International evidence from other countries, such as Australia, with similar pension systems to the UK has shown that a central platform improves consolidation outcomes, rather than just putting duties on schemes to sort it out. This clause establishes the framework to allow for the necessary infrastructure to be built to support data matching and pot consolidation. The Government believe that the infrastructure will be required to support pension schemes to deal with the volume of small pots that left the hon. Member for Wyre Forest aghast five seconds ago, effectively and efficiently.
As Members may know, we recently worked with Pensions UK, who have undertaken a feasibility review to examine and assess the technical requirements of the small pots data platform. The Government will consider that work as part of our next stages in developing the necessary infrastructure and the underpinning legislation. However, before committing to how best to deliver this infrastructure, we must undertake that full and proper assessment of capabilities.
Clause 22 enables the Government to ensure that members are properly informed about any action that is taken to consolidate their small dormant pension pot. Transfer notices will be the key point of communication between the scheme and the member. We have not had the time to make this point yet, but obviously it will be up to members to opt out of consolidation should they so wish.
Rebecca Smith
How will members know that they have that opt-out? Will that be clear enough, given all the comments we have been making on financial education? People have got to be pretty engaged, and we know from the history that they are not always that engaged in their future.
Torsten Bell
That is an important question. The communication to members will be standardised, by providing the key information that has to be provided and the option of an opt-out—so it will be explicit that they have the option to opt out of the consolidation process—as well as their alternative options, for example moving their fund into another consolidator. I hope that that answers the question.
The notice is of high importance, because receiving that key information is basically the only point at which the member is informed about what is happening to the financial transaction—the Government are not generally in the business of legislating to change people’s financial arrangements without their consent. Clause 22 will ensure that schemes are bound by regulations to send prescribed information that will enable a member to make the decisions, for exactly the reasons that the hon. Lady set out.
Clause 23 will introduce an important safeguard in the broader framework for consolidating small dormant pension pots. It recognises that although automatic consolidation will benefit the majority, it may not be right for everyone and in all circumstances. The Bill aims to streamline pension savings and reduce fragmentation across the industry, but the clause ensures that members’ interests remain at the heart of the process.
Under the clause, a small dormant pension pot may be designated as exempt from automatic transfer if two key conditions are met. First, the pot must satisfy certain prescribed conditions, which will be set out in regulations. Secondly, the trustees or managers of the scheme must determine that it is in the best interests of the individual or a class of individuals in their scheme for the pot to remain where it is.
That is a vital member protection and safeguard. It recognises that although consolidation is generally beneficial, because it reduces administrative costs, there will be circumstances in which transferring a pot may not be in the member’s best interest. The clause provides the ability for the scheme to make that clear and not to transfer in those circumstances.
Kirsty Blackman
Does the Minister have any hypothetical examples? I am not asking him to commit to anything being a prescribed condition, but just to give us some examples so that we have an idea.
Torsten Bell
That is a fair question. The most prevalent example will be people whose existing pot, although small, has unusual and valuable guarantees attached to it, or benefits that they would lose if they transferred into the default fund of another provider. That is likely to be the most common use of the clause. The clause will provide for transparency by allowing regulations to be made to set out in more detail how those decisions and others will take place.
Given the admin costs and unprofitability of small dormant pots, we do not expect schemes to abuse this exemption. For the benefit of people who do not spend lots of time looking at these matters, I should say that lots of schemes are happy to see small pots go, because they are expensive for them to operate; they are neither in the provider’s interest nor in the saver’s. This clause strikes a careful balance.
Clause 24 will ensure that pension savings are not left idle, requiring all eligible pots to be held by a default consolidator. As Members will know, millions of workers accumulate small pension pots as they move between jobs. Specifically, the clause will allow for the transfer of those dormant pots without requiring active consent—again, that is something that Governments do not do lightly, but it is required by the best interests of savers in these cases—where a transfer notice has been issued and no objection received from the member, as I set out in relation to clause 22.
If a member does not opt out, the trustees and managers of the scheme are required to act on the transfer notice and transfer the pot to the designated consolidator. Clause 24 also provides legal certainty, because it will empower schemes to consolidate pots even if doing so breaches existing scheme rules. That removes administrative barriers and places the member’s interest at the heart of the system.
Clause 25 plays a role in providing legal clarity and continuity for individuals whose small dormant pots are transferred. The clause sets out what happens when a pension pot is moved to a different pension scheme or a different arrangement within the current scheme. This ensures that an individual’s membership status, rights and obligations are automatically and seamlessly updated at the point of transfer—so it is not just that a member’s pot has been transferred, but that they have become a member of the scheme that they are entering, even though they have not signed up to a contract explicitly in so doing. This means that they automatically acquire all the rights and responsibilities that come with that membership. In schemes where membership results in a new contractual relationship, the clause will deem that a new contract is formed at the point of transfer.
Clause 26 will play a critical role in ensuring that the transfer of small pots to consolidating schemes is undertaken in a legally robust and administratively efficient manner. By establishing clear timeframes for transfers, it will allow for the safe and effective consolidation of small dormant pension pots.
This clause introduces two key timing rules. First, it mandates the minimum 30-day notice period before any transfer or change of arrangement can take place. That gives individuals the opportunity to review the proposal and respond. That time period is aligned to the approach taken for members who wish to opt out of automatic enrolment.
Secondly, the clause sets out a maximum one-year deadline for completion of the transfer or change of arrangement. It provides clarity and operational certainty for pension schemes and savers. That also enables schemes to maximise the use of bulk transfers, supporting a lower-cost and more efficient transfer process, rather than having shorter deadlines that force them to move individuals in small batches. It also ensures that the small pots consolidation framework remains responsive and co-ordinated. If trustees and scheme managers are waiting for proposals from the small pots data platform, the transfer period can be extended. This clause strikes the right balance by protecting savers and making sure they have time to act, while also providing an impetus for timely action in the consolidation process.
I am grateful to members of the Committee for listening to all those points, and I commend clauses 21 to 26.
Kirsty Blackman
I have a couple of questions on the small pots data platform. On Second Reading, I raised issues about the pensions dashboard and the fact that after a significant length of time, it has not yet appeared. I appreciate that lots of people have been doing lots of work on it, but we do not have it yet.
It is vital that the small pots data platform exists and works in order for small pots consolidation to happen. Can the Minister give us some comfort that it will materialise and work? If there is a possibility of any errors in the system or the data is not correct—if the platform is not absolutely spot on—there is the risk of significant problems being created. Is he convinced that enough investment will be made in the data platform for it to work, and that it will be incredibly safe, given that it will potentially have—like the pensions dashboard—significant amounts of data relating to individuals and money? It therefore needs to be as safe from cyber-attack as possible, if it is presumably in the cloud or another such system. I would appreciate any reassurance about that, and lastly, that it will have the required resources to work and that the Government will push to create the resources if they are not there and the timeline is beginning to lag.
Torsten Bell
I thank the hon. Member for those questions. She is right to mention the dashboard, and I will say two things about that. First, although these are different systems, there are lots of learnings from the process—as we heard from Chris Curry on Tuesday—not least the impetus that it has provided to schemes to make sure they have put all their record keeping in order. For them to be able to engage with the dashboard, they now have a legal requirement to have that data in a standard format. It is also about how the central system works, but it will be a different system, so the hon. Member is right to raise those questions.
I do not want to offer her total certainty because that is not available to me for a scheme that is looking to be operational in the next decade. We have intentionally left that longer timeline for exactly the reasons that the hon. Member has outlined. I can reassure her that very extensive engagement has been going on with industry about this. I mentioned the feasibility study, but there has also been heavy engagement, including on the security element that she mentioned. That is absolutely key, and lessons definitely have gone through from the dashboard approach to make sure that we are happy with how that will take place. I hope that provides her with some—if not perfect—reassurance.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Clauses 22 to 26 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned—(Gerald Jones.)
Pension Schemes Bill (Second sitting)
Torsten Bell ExcerptsTuesday 2nd September 2025
(7 months, 1 week ago)
Public Bill CommitteesRead Full debate Pension Schemes Bill 2024-26 View all Pension Schemes Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 2 September 2025 - (2 Sep 2025)
Luke Murphy
Q
Councillor Phillips: Like a lot of judgments.
The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)
Q
Councillor Phillips: My understanding is that it is a back foot.
Torsten Bell
Q
Councillor Phillips: Right.
Torsten Bell
Q
Given that that is your logic, the question is why that has not happened. If you go and ask actual pension providers why that has not happened, they will tell you they have a collective action problem and an industry focused exclusively on cost and not on returns, and that they struggle to deliver against that. If you have a collective action problem, you need to ask how we resolve that.
You then get to the fact that the Mansion House accord is entirely industry led, with numbers set by them—it is not about distortion to the market; you might want to reflect on that, given the comments you have just made. You also spoke about a lack of clarity, but the Mansion House accord provides clarity about the objectives: everyone can see them and they are set by the industry. When it comes to savers’ interests, you know that the Bill includes a carve-out for trustees to say, “This isn’t in my members’ interests, so we won’t be doing it.” Reflect a bit on the consistency of the argument you have made about the real progress you want to see on investment in a wider range of assets—because it is in savers’ interests and should have happened in the past but did not—and the changes in the Bill. I would gently suggest you might want to think about the consistency of that.
Sophia Singleton: We are not a mature industry—the defined contribution industry—and in the past we have not invested in these assets because there have been operational barriers, including the focus on cost.
Torsten Bell
That is not the view of the whole industry, which points to the collective action problem of an exclusive focus on cost, as much as it is a barrier—
Sophia Singleton: The value for money framework in the Bill is extremely helpful—
Torsten Bell
It is.
Sophia Singleton: —and we have said that we need to move the focus from cost to value, and we are seeing that very much come through in the culture within the industry, to be focusing on value. I have given evidence about funds recruiting investment teams to invest in these assets, because they are not simple to invest in for DC schemes. If you look at the experience in Australia through the covid pandemic, there were some real challenges that those schemes had to face relating to stale pricing, intergenerational fairness and cross-subsidies. They are not simple assets for DC schemes to invest in. The market is moving, going, and will get there. What we are saying is the mandation power is not needed to achieve that, because we are, with your help, getting to the right place.
Torsten Bell
Q
Helen Forrest Hall: Just to give my own perspective, there are a number of structural issues with the development of the sector. Defined benefit has been in run-off, which has driven a particular type of investment strategy. DC has not been at scale, and a number of us in the sector have been calling for consolidation for a long time. I think it goes without saying that we are having this conversation in the context of being very supportive of the vast majority of provisions in this Bill.
Torsten Bell
I was encouraging you to say that; you got there.
Helen Forrest Hall: Apologies; we are very, very supportive of the vast majority. This is basically the one substantive issue from our perspective. As Sophia has said, the value for money and consolidation elements in particular are incredibly helpful in removing some of the barriers that have existed, including for trustees. They technically have the ability to operate within their fiduciary duty, but sometimes the legislation and the structure of the industry get in their way. Things such as value for money and scale will really help with that. This Bill is incredibly enabling in the vast majority of its provisions. There are just a small number—mandation being one of them—where we have a bit of concern.
John Milne
Q
Helen Forrest Hall: From a principles basis, yes, and just to address the funding point, they absolutely can. I know there will be a number of us in the room who have either experienced or been subject to the outcomes of what has happened when those significant events have taken place. In the context of where we are with DB now, a significant proportion of schemes are employing investment strategies that really do protect them against the kind of volatile market movements you might see.
The provisions in the Bill strike the right balance between, as I said earlier, giving trustees greater flexibility to exercise their fiduciary duty in discussion with employers, while also ensuring that they are considering the best interests of the members. One of the key considerations for trustees in that conversation is: how confident are we that our investment strategy would withstand significant market movements at the point when we might release a surplus? That is a key consideration.
We have seen that a number of pension schemes did not benefit from September 2022 in the way that others did, and that was because they had decided to protect themselves against that kind of market movement. There are things that schemes can deploy to give themselves that level of confidence.
Sophia Singleton: We were very pleased to see the stringent funding safeguards that are in the Bill in order to allow a surplus to be released. One thing I would say is that, as Helen says, it is giving the trustees the tools to properly exercise their discretionary power and, in a sense, fiduciary duty, but it has created an opportunity for trustees to negotiate and agree a win-win situation, in a sense. The conversations we are having with schemes is that they are now more likely to be able to feel comfortable in paying, and be able to pay out, discretionary benefits than they would have been before the Bill was in place. It gives schemes the opportunity to run on and for the employer to access the service, but also for members to have more access to discretionary benefits and to additional benefits.
Mark Garnier
Q
Patrick Heath-Lay: I do not want to be flippant in my response, but our scale already means that we are over that limit, so I have not really put too much thought into how they will do it. I believe that there is enough, within the business plans of entities that might be affected, to be able to make some reasonable assumptions as to what ongoing contributions will be coming through the door and how they will respond to some of the opportunities that may arise in this market over the next few years, from organisations that are choosing to move because of the extent of change that is coming.
I emphasise that I still think that the package of measures and that scale test is the right thing to instil that movement, because I think savers will be better off, provided that it is harnessed in the right way. That is why I come back to this: value for money is the proof point, and we need to make sure that we centre on that as an industry. Being able to evaluate how these changes have created a more competitive market in key areas going forward is really quite important.
Torsten Bell
Q
Ian Cornelius: It is one of the elements of the Bill that we very much welcome. I think guided retirement solutions are overdue. Certainly, our members have been opted into a retirement savings scheme, and they end up with a pot of money rather than an income. I think their expectation is an income. In fact, in the research we have done with our members, they say that the most important things for them are to have a sustainable income, confidence that it will not run out and an element of flexibility, because their circumstances can change very quickly in retirement. I think the guided retirement solution moves us in that direction.
At NEST, we have been working on this for some time, as we recognise that it is a core issue for our members. We therefore want to introduce a guided retirement solution—it is very much a work in progress—that delivers that sustainable income, but also gives them a guarantee that it will not run out. That will be some sort of deferred annuity, purchased probably when they are 75, to kick in when they are 85. We are actively working on that and will be looking to introduce it in 2027, aligning with the expectation in the Bill.
Patrick Heath-Lay: It is very similar from our perspective. We should not underestimate how much onus the shift from final salary to DC has put on individual savers, in terms of the decision that they have to make, in a very complex world that they really do not understand. Even if you surface a lot of information, your constituents will still struggle to navigate those decision points. We also should not underestimate the onus they have taken on, in terms of the risk of their own fund, when you think about the productive finance agenda and other things here. I think it is absolutely the right move. It is a good development for us to bring about guided retirement journeys in a way that is either “Do it for me” or “Do it with me” for policyholders.
Similarly, we are thinking about drawdown and how we can facilitate or help people to understand the implications of the actions they may take with accessing their funds, and then, when they get to later life, some sort of deferred annuity as an approach. The really important aspect is the guidance and how we can help, but have certain obligations on ourselves, as providers, to make sure that we are accountable for the help that we are giving as we go through the process.
Torsten Bell
Q
Ian Cornelius: It is difficult to speak for the industry, but I can speak for NEST. At NEST, we are very committed to investing in private markets: 18% of our assets are invested in private markets, and 20% of our assets are invested in the UK.
Torsten Bell
And that compares to the Mansion House benchmarks of 10% and 5%.
Ian Cornelius: The Mansion House commitment is 10% into private markets, with half of that into the UK, so we are already well ahead.
Torsten Bell
Q
Ian Cornelius: Absolutely. It is providing attractive returns, it diversifies risk and it also invests in the UK.
Torsten Bell
Q
Ian Cornelius: It is hard to speak for others, but scale is an important factor, as we have talked about. You need scale and sophistication to access these investment opportunities. NEST has that scale and is building that sophistication. It often involves quite innovative solutions and partnering. Partners want to partner with someone who has got scale and assets coming in at pace, and we have those things. There are some unique circumstances that have made it attractive for us. I will let Patrick speak for People’s, but it is on that journey as well.
Patrick Heath-Lay: Yes, we are, although we are much nearer the start of that journey. Again, it comes back to the scale point. Why is £25 billion or £30 billion about the right amount? Because it is about the right part that you can economically start investing in those items.
To answer your question, and to pick up a more general point, it is incredibly important that we work collaboratively on the issue, because, as an industry, there is not much point in us all sailing our own little boats around trying to find the right harbour to invest. There is a degree of collaboration that the industry, together with Government, can do to open up the opportunities where that investment needs to go and how it can be executed in the most efficient manner. The biggest risk with investing in private markets is that they are expensive. If the vehicles that are being used on a commercial basis are not sharing the economics of that investment well enough with savers, it will certainly not be an investment that we are interested in pursuing.
The other point is that putting down the foundations for this to be a pipeline of repeatable investment activity is critical. Because of its scale, NEST has got ahead of where we are today, but that is the phase we are in at People’s at the moment. There is over £1 billion a year from our scheme alone that will be invested in those markets on an ongoing basis. Given the scale that we are both experiencing, in terms of how we are scaling up, that will be an ever-increasing number, so it is important that we have reliable and very cost-effective routes by which we can deploy that capital.
Ian Cornelius: Going back to your original question, I think that the industry is moving in the right direction. The Mansion House accord had 17 signatories and we are seeing the right moves.
Steve Darling (Torbay) (LD)
Q
Ian Cornelius: There is no doubt that there is detail to work through across the whole Bill. One of the really interesting areas will be the interaction of targeted support and default solutions. There is now a consultation on targeted support, being led by the Financial Conduct Authority. That opens up lots of opportunities to provide an enhanced level of support to people who cannot afford to take advice. The fact is that financial advice is only available to about 9% of the population. Nearly all our members cannot afford to take financial advice, so they need that enhanced level of support, either to check that they are making the right choices—“Is the default solution the right one for me?”—or because they might have circumstances that mean that they want to explore something different. Targeted support is very welcome, and we look forward to engaging with the Pensions Regulator and FCA in making that a reality and making it work for low and moderate earners.
Patrick Heath-Lay: I am probably going to sound quite boring, but this is an area in which value for money and making sure the solutions are developed in the right way to support consumers can be really quite effective.
Mark Garnier
If I remember rightly, the Bill allows for the detail to come in afterwards, so we will have a bit of work to do when this is all over. Thank you very much.
Torsten Bell
Q
Chris Curry: I listened with interest to some of the earlier witnesses talk about dashboards, and there certainly are some lessons that we can learn from the pensions dashboards programme, as it has been evolving over the past few years, for small pots in particular.
There are two issues that I would pull out. The first is on the technology front. I think someone suggested that the next five years or so could be quite a tight timetable to build a technological solution and get it in place. You have to be very careful—you cannot underestimate just how much complexity there is and how long it takes to do these things—but I would say that the work that we have done on pensions dashboards is giving us a bit of a head start. That is not to say that we necessarily need to build on or use parts of the system that we have already built, but it has helped us understand a lot about, for example, how you can find pensions—the way you can use integrated service providers rather than having to go direct to all the schemes, and use a syndicated model to find where people might have their pensions.
It has helped the industry get a long way down the path to where it needs to be, as well. One of the big challenges for pensions dashboards is the quality of data. Enabling individuals to find their pensions means data quality: it needs not only to exist and be there; it needs to be accurate and it needs to be up to date. When you are thinking about an automatic consolidator or default consolidator for small pots, that is even more important. You are not just transferring information, but transferring money, so it is really important that the data is high quality. The work that is being done on pensions dashboards will get people in the industry a long way to having part of that in place as well.
There are definitely lessons that can be learned from how we progressed on the pensions dashboards programme. It has got us much closer to where we would be if we had had a completely blank page to start from, but there is still a reasonable amount of work to do, because it is working in a slightly different way.
John Milne
Q
William Wright: I think it is a mix of both. It very much depends on what sort of assets we are talking about. For example, if we are thinking about the UK stock market or domestic equity markets, we tend to see that markets such as Canada and the Netherlands have an even lower allocation to domestic equities, whichever way you look at it, than comparable UK pensions have to the UK market.
Ultimately, this comes down to what you might call the accidental design of the UK system. It has evolved over 20, 30 or 40 years, whereas the systems with which we like to compare the UK system, or large parts of them, were actively designed anything from 30 or 40 to 50 or 60 years ago. We are now seeing the benefits of that active design in those systems. Their focus on scale enables them to invest in a far broader range of assets at a lower unit cost.
Going back to the value for money point, UK pensions have ended up in the worst of both worlds. Fee pressure, particularly in terms of winning and transferring new business between providers, is driving down fees, but the average fees on DC pensions today are very middle of the pack: 45 to 50 basis points a year. That is much higher than much larger schemes in Canada, such as the Canada Pension Plan Investment Board, the big Canadian reserve fund, and much higher than large UK schemes, such as the universities superannuation scheme, but they are stuck in the middle: they are actually paying higher fees, but because of the fee pressure they have a very vanilla, almost simple asset allocation. As Tim Fassam from Phoenix pointed out, that tends to steer people towards the lowest cost investment option. Active design, focusing on scale and sophistication, enables pension schemes to take a much longer term and much broader view of what they should invest in and where they should invest in it, whereas in the UK we have tended to accidentally move from one system to another.
Mark Garnier
Q
Rachel Elwell: Border to Coast, if we do have those 18, will stretch from the Scottish border to the southern coast. Even today, we have partner funds who are right across England, which is brilliant because those are people who have actively chosen to come together, form a partnership and work together.
Time permitting, if it is of interest to the Committee, we could talk a bit more about local investment and the way of getting investment that is truly local for each individual fund but also a way of crowding investment from other people into the slightly larger opportunities that might be in a region. Every investment we make is local—it impacts local people.
You do not need to only have, for example, Durham council investing in Durham. You want all of the LGPS and all asset owners to feel that they can do that. Some of the ways that we are working through doing local investment with our partner funds have really got an eye to the different ways in which you can crowd in versus something very specific that needs to be addressed in the region or locality.
Torsten Bell
Q
Rachel Elwell: Again, for all of us working in the LGPS, that sense of purpose is really important. I know my partner funds do a huge amount to make sure they are engaging directly with members, running events, as well as the importance of member representation on the pensions committees and on the pension boards, whether that is through union representation, pensioner representation or other scheme member representation.
We also have two fantastic scheme member representatives on our joint committee, which is the body that comes together across all of the partner funds to oversee and engage with what we are doing on their behalf. They are really bringing that voice into our considerations as a board and the wider organisation—the wider partnership.
Torsten Bell
Q
Rachel Elwell: This is before I was employed to bring it to life. This is a decision our partner funds made really early, because they recognised the real benefits that can come from being FCA regulated. This is really important. We will hopefully be managing over £100 billion on behalf of the LGPS, and a good proportion of that is managed directly within my team. We are managing that for, hopefully, 18 different customers—effectively, investors and our owners. We need to have those disciplines in place, and we need to make sure that we are following those regulations. We do not need another regulatory set. There are already some very good, strong regulations that exist, so we, as a partnership and as a company, think that is the right thing to do.
Steve Darling
Q
Rachel Elwell: There are some fantastic provisions in the Bill, particularly around implementing the good governance review, and the clarity of roles and responsibilities between the different parties within the LGPS. About five or six years ago, we, along with some of the other pools, commissioned some work looking at good practice internationally, so talking to about 15 others—from Australia, the Canadians, the Dutch, the Norwegians—and looking at the journey they had been on with this. They are about 15 years ahead of us, really, with that policy. We wanted to learn from what they had done.
There were various success factors, some of which Michelle shared with you earlier, but one of those was real clarity about the Government’s policy intent, and I think the Bill really does help with that. That will help us, in turn, engage with our pensions committees and partner funds to make sure that we are providing a holistic joined-up view. There are some areas in the Bill where, particularly for the LGPS, the detail will be in the regulations. I would just make a plea, given the timelines we are working towards, that we see the regulations sooner rather than later, please. I have already said that I think it would be helpful to maybe get a bit more clarity on the circumstances in which we may be directed by the Secretary of State.
Pension Schemes Bill (First sitting)
Torsten Bell ExcerptsTuesday 2nd September 2025
(7 months, 1 week ago)
Public Bill CommitteesRead Full debate Pension Schemes Bill 2024-26 View all Pension Schemes Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 2 September 2025 - (2 Sep 2025)
Mark Garnier
Or, indeed, when they first start to work. As somebody once said, compound interest is the eighth wonder of the world.
The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)
Q
Patrick Coyne: Over a number of years, we have worked closely with the Financial Conduct Authority to ensure that when we deliver interventions within the pensions landscape, the outcomes are consistent. One way we have done that is through an update to a joint strategy. We also have almost daily calls with one another to ensure that when we consider interventions and how to enable the system to provide value for money and support people at retirement, we do so in a coherent and comprehensive way. We must really understand the different constituents of our marketplace, whether they be workplace versus non-workplace pensions, or, in the People’s Pension space, pensions analogous to the master trust offer.
Charlotte Clark: To add to Patrick’s point, we meet fairly regularly. There are various different forums and working groups. As you say, Minister, there is that sense that it does not matter where you save. Most people are probably saving in both the contract-based side and the master trust side, given that people have pots in lots of different places. It is important not that people understand where the regulation is, but that the regulation is consistent and there is no arbitrage between the two systems.
Rebecca Smith
Q
Charlotte Clark: The level of that process would be something that we would put into secondary legislation and rules. We would really have to think through what that process looks like.
Patrick Coyne: Yes, absolutely. Implementation is critical here. This will be something that is done with wide consultation with the industry.
Torsten Bell
Q
Torsten Bell
The question to the witness is to expand a bit more on that point. In reality, this provides a “comply or explain” power. In terms of the point Charlotte was just making there, it is absolutely right about the ability of the trustees to say, “This is not in the interest of our members.” It might be worth talking a bit about how when we move forward the consultation will allow us to set out how that would work in practice.
Charlotte Clark: It is an area that we would need to work through in terms of the road map. At the moment, our focus is very much on getting the value for money framework right. How the mandation would work and the process around it—as the Minister says, first, we would consult on it. We would have to have a look to see what information was given and how we would monitor it in the period from now to 2030 or 2035. We would have to work through all of those aspects of the process. We would do that in conjunction with the industry, making sure that what we were asking for was information that it could readily provide and that we felt confident that we could make a good assessment around.
Patrick Coyne: Our engagement with the marketplace so far already shows that many are considering investment strategies that have significant proportions of diversified investments, so the market is already responding based on some of the Mansion House accord commitments.
John Milne
Q
Patrick Coyne: I think that fiduciary duty is a powerful force for good. Across the Bill, this is about giving those trustees the tools for the job. I think there are a number of areas where that is true. Within the value for money framework, at the moment, it is very difficult for employers or schemes to effectively compare performance. As an anecdote, I was speaking to a provider recently. They were pitching for new business. They came in and pitched their investment data, and the employer said, “You’re the third provider today that has shown us they are the top-performing provider.” That cannot be right.
Then, when you are looking across the Bill towards the DB space, because of the funding reality that many schemes are facing at the moment, there is choice in end game options—so, “How do I enhance member outcomes at the same time as securing benefits?” Actually providing a statutory framework for super-funds as another option is a good first step, as is allowing the release of surplus, if it is in the members’ best interests to do so.
Mark Garnier
Q
Christopher Brooks: We do not work on final salary pensions, so I do not take a view on it.
Torsten Bell
Q
Christopher Brooks: I think they all work together, so I would say it is a combination of them, but scale seems to be one of the main drivers. I am thinking about NEST in particular, which has been leading the way in terms of investing in private assets. It is able to negotiate a good deal, because of its scale. If you can drive that with similar outcomes across the marketplace, it will be really beneficial to members.
Torsten Bell
Q
Christopher Brooks: NEST has essentially negotiated with the private finance industry, and is not paying the “two and 20” classic fee structure, so it is not paying the performance fees. It has incorporated it all into its existing charges. If the intention is to drive greater investment in private finance, that is the way to go about it. If that scale is replicated across the industry—across the 15 to 20, or however many, schemes remaining at the end of the consolidation process, which I fully support—then hopefully you would be in a position to replicate those types of outcomes for members across the board, in their DC savings.
Jack Jones: I would say something very similar. As a package, on the DC side, it is scale that potentially has the greatest power. It is probably important to look at the factors that would make sure that the scale results in the changes you want. It is interesting to look at NEST; it has scale, but it also has a business model and governance structure that incentivise it to go and build up its experience in investing in those markets, and to have an understanding of what its fiduciary duty is, which very clearly includes looking at the widest range of assets possible and investing in them. So I think it is scale, as long as you have everything else in place there to make sure that schemes are using that scale in ways that benefit members.
The Chair
Can I ask for short answers now, please, because we need to move on to other Members.
Colin Clarke: It is an interesting question. It is not something I am a huge expert on, to be honest, and it needs careful thought, because there could potentially be some unforeseen consequences that I have not considered. If there were going to be any suggestions to change any rules in that regard, there would have to be evidence gathered to understand what the potential implications of that would be.
Torsten Bell
Q
Dale Critchley: Obviously, this is dependent on regulations, but DWP people have been very open in conversations. That has been really welcome, and we have a good picture of where we are headed. We launched a “flex first, fix later” solution called guided retirement. We are now looking at flexing that guided retirement solution to offer different flavours to fit the different cohorts and the amount of risk people can take in terms of fluctuations in their income, dependent upon guaranteed income from elsewhere, or the level of their fund. At one end, you might have a cohort of people who almost need a guarantee. We could go down the route of an annuity, but we are reluctant to do that, because we think that an immediate annuity purchase might put people off. We need to ease people into the idea of an annuity purchase, and that is where we are going. For those people who want more of a guarantee, it might be lower-risk investments and in a drawdown phase for a shorter amount of time. For people who can take more risk, it may be higher-risk investments in the drawdown phase and in drawdown for longer, with an annuity purchase later. That is where our thinking is at the moment.
Torsten Bell
Q
Dale Critchley: It is the ability to take risk.
Torsten Bell
Your metric for that is just other income sources plus size of pot?
Dale Critchley: It is those main two at the moment. We are also working with a guy called Shlomo Benartzi, who is a behavioural science expert, to look at the whole concept of defaults in retirement. It is one thing defaulting people into taking £120 a month from their salary; it is a very different thing to say, “I am now going to take the biggest amount of money you have ever seen in your life and use that to purchase an income.” That is what we want to test, because if the default is strong and if inertia works, we will get people moving away from the poor solutions they are choosing at the moment, but if people still think, “Well, I do not like the look of that,” they will go on to make the same poor decisions they are making now, and we will not achieve the policy aim. So we think we need to deliver what is right for customers and members, but also what is attractive to them—so looking at their wants as well as their needs.
The Chair
Could we have shorter questions and answers? Does Mr Clarke have anything to add?
Colin Clarke: We have been working a lot on the FCA’s targeted support proposals, which are very supportive of the measures proposed in the Bill. We have been doing a lot of research around member segmentation and looking at the different scenarios and outcomes, so potentially going a little bit further than looking just at age and pot value, and also looking at what sort of questions we need to ask people to ensure that they are guided to the solution that is appropriate for them.
I agree with Dale that decumulation defaults and accumulation defaults are completely different things. In accumulation, there is more of a “one size fits all” approach, because it is all about delivering the best returns for members, whereas when you get to decumulation, it is very personalised, and you do not want to put people into something where they cannot change their mind. It needs to be flexible; people have a wide variety of different needs, and we are doing a lot of research on member needs at the moment.
Work and Pensions
Torsten Bell Excerpts(7 months, 1 week ago)
Written CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Torsten Bell
An important consideration in the Government making this decision was that evidence showed that sending people unsolicited letters is unlikely to affect what they know. That is why letters are sent only as part of wider communication campaigns. This evidence was not properly considered by the ombudsman. Another consideration was that the great majority of 1950s-born women were aware of the state pension age changing, if not of a change in their specific state pension age, as several hon. Members have pointed out. My hon. Friend the Member for Salford mentioned the statistic of 43%, referring to the 2024 rather than 2023 survey. However, as she will know, that refers to all women, including some women as young as 16; if we look at the cohort of women born in the 1950s, the figure is far, far higher. On those and other grounds, we rejected the ombudsman’s approach to injustice and remedy.
[Official Report, 3 July 2025; Vol. 770, c. 513.]
Written correction submitted by the Under-Secretary of State for Work and Pensions, the hon. Member for Swansea West (Torsten Bell):
Torsten Bell
My hon. Friend the Member for Salford mentioned the statistic of 43%, referring to the 2004 rather than 2003 survey. However, as she will know, that refers to all women, including some women as young as 16; if we look at the cohort of women closest to those born in the 1950s, the figure is far higher. On those and other grounds, we rejected the ombudsman’s approach to injustice and remedy.
Oral Answers to Questions
Torsten Bell Excerpts(7 months, 1 week ago)
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Christine Jardine (Edinburgh West) (LD)
The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)
The Government are committed to ensuring that all pensioners receive the support to which they are entitled. That is why we have been running the biggest ever pension credit take-up campaign. We plan to continue promotional activity from September through to the end of this financial year, with the focus not just on eligible pensioners but on their friends and family too.
Christine Jardine
Earlier this year, a constituent of mine in Edinburgh West contacted me about the delay she had faced in getting the pension credit she was entitled to. She applied in September last year and was told that she would receive it in November, but it was March before she got her pension credit awarded. The delay meant that she went without extra support just when she lost her winter fuel allowance, so what steps will the Minister take to cut those delays and stop more vulnerable pensioners from being left cold this winter?
Torsten Bell
I hope the hon. Member will write to me with the details of the case she raised. On the more general picture, I can reassure her that we now have a lower backlog of pension credit cases to be processed than we inherited from the last Government, despite the record number of claims that have come through.
Juliet Campbell (Broxtowe) (Lab)
Boots has been a significant employer in my constituency since 1927, and many of my constituents have been proud to work for it. However, those close to claiming their pensions have been advised that they will be unable to withdraw their pension at an unreduced rate at the age of 60, contrary to what they were led to believe. Does the Minister recognise the frustration that many of the Boots pensioners feel, and does he agree that the Pensions Ombudsman should progress swiftly with its process?
Torsten Bell
My hon. Friend has raised this matter with me before, and the one thing I can confirm is that she is a powerful advocate for her constituents on this very important issue for them. As she knows, I cannot comment on individual cases—particularly as the matter is now with the Pensions Ombudsman—but more generally, it is important that promises made to pensioners about their pensions are lived up to. Making sure that happens is exactly why the Pensions Ombudsman exists.
Mark Garnier (Wyre Forest) (Con)
Thanks to our Conservative winter fuel payments campaign, thousands of pensioners have signed up to pension credit, and millions more pensioners will receive winter fuel allowance, now that the Labour party has admitted that its policy on winter fuel payments was wrong. However, the Social Security Advisory Committee recently concluded that the Government’s winter fuel plans fall short of delivering their objectives of fairness, administrative simplicity and targeted support. It seems that the Government have prioritised civil service bureaucracy over helping frozen pensioners. Does the Minister agree with the Social Security Advisory Committee’s conclusion about their policies?
Torsten Bell
I thank the hon. Member for his question, and I congratulate Members on all sides of this House who have run campaigns to drive up pension credit uptake. That is very important, and it is why we have seen 60,000 extra awards over the course of the year to July 2025 compared with the previous year. That work, which is very welcome, has been done by not just Members but civil society organisations and local authorities.
On the points that the hon. Member raised about the process for winter fuel payments this winter and going forward, I do not agree with the characterisation he chose to present. Particularly on the tax side, the process will be automatic. Nobody will be brought into tax or self-assessment purely because of that change; the vast majority of people will have their winter fuel payments automatically recouped through the pay-as-you-earn system; and anyone who wants to can opt out. I remind Members that the deadline for that is 15 September.
Steve Darling (Torbay) (LD)
Around a year ago, the Labour Government inherited from the previous Conservative Government around 3 million pensioners in poverty. Sadly, last winter’s cuts to the winter fuel payment saw many pensioners pushed into hardship. In the light of winter fuel price hikes, will the Minister reconsider the Government’s proposals and ensure that moneys are paid to pensioners who missed out on the winter fuel payment last winter?
Torsten Bell
I thank the hon. Member for his question, but would gently say that every time he opposes every single tax rise or any difficult choice in this House, he is saying that the Liberal Democrats are not a party that could deliver on commitments, for example, to the triple lock, which will increase in cost, as my right hon. Friend the Secretary of State mentioned earlier, by £31 billion by the end of this Parliament. There are things called “choices”, which are necessary if we are to provide for our top priorities—and for Labour Members, the top priorities, when it comes to pensioners, are making sure that we can increase the state pension, the bedrock of most pensioners’ living standards, and saving the NHS, and that is exactly what we will continue to do.
Edward Morello (West Dorset) (LD)
Sarah Bool (South Northamptonshire) (Con)
The Parliamentary Secretary to the Treasury (Torsten Bell)
The hon. Lady only had to wait till next week’s Treasury questions, when she could have asked her question, but she has the same answer. What we should do is look at the record of parties and what they have done. When I look back over the last 14 years of Tory Budgets, I see a party—[Interruption.] And the Lib Dems; thank you for pointing that out. I have seen parties chopping and changing pension tax relief left, right and centre, because they had no plan. Those were the same Budgets that drove child poverty up and wages down.
Mr Luke Charters (York Outer) (Lab)
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
Torsten Bell
I thank the hon. Member for his question. We discussed this issue at some length in the statement before the recess. He knows that the priority for the Labour party has been to raise the state pension by committing to the triple lock throughout this Parliament at a cost of £31 billion a year. For the new state pension, that will mean an increase of £1,900 a year by the end of this Parliament.
On winter fuel payments specifically—and I thought this was the Conservative party’s position—most people think that we should not be paying hundreds of pounds to the very richest pensioners. We have listened to concerns and raised the threshold, but it is important to maintain that principle. If the Conservatives’ position is now that they want a return to universal winter fuel payments, they need to have a word with the Leader of the Opposition, who has not supported universal winter fuel payments or, indeed, a universal state pension.
John Slinger (Rugby) (Lab)
Peter Swallow (Bracknell) (Lab)
Torsten Bell
I thank my hon. Friend for his crucial question. That is exactly why we have revived the landmark pensions commission. We have to confront the reality that we are on track for tomorrow’s pensioners to be poorer than today’s. Auto-enrolment has been a huge success, with 88% of eligible employees now saving, but 45% of working-age adults, including 3 million self-employed and one in four low earners, are currently saving nothing. The commission will ensure that we build a pension system that is strong, fair and sustainable.
Alison Bennett (Mid Sussex) (LD)
The carer’s allowance overpayments review was due to report in early summer. It is now 1 September. In recent weeks, I have become aware of a case where the DWP has informed somebody that they now owe it £18,000. That is a scandal. When will the review report back?
Sir Julian Lewis (New Forest East) (Con)
Despite his new role in riding to the rescue of the Treasury, is the Pensions Minister still available to fulfil in principle the undertaking he gave me before the recess to have a meeting about the plight of ExxonMobil pensioners and the difficulties in them getting the discretionary surplus benefits to which I think they should be entitled?
Credit Unions
Torsten Bell Excerpts(8 months, 3 weeks ago)
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The Parliamentary Secretary to the Treasury (Torsten Bell)
It is always a pleasure to serve under your chairmanship, Mr Twigg. I start obviously by congratulating my hon. Friend the Member for Cumbernauld and Kirkintilloch (Katrina Murray) on securing this important debate and speaking so powerfully about the role of credit unions. The interest in this topic, particularly on this side of the House and for some parts of the country, shows how important credit unions are in supporting individuals and communities. The same commitment and motivations underpin the Government’s strong support for credit unions and the mutuals sector more widely, as the Opposition spokesperson just mentioned.
As a country, we have a rich history of mutuality. In 1775, Richard Ketley founded the world’s first ever building society in Birmingham, and that continues in the west midlands today, as we heard from my hon. Friend the Member for Wolverhampton North East (Mrs Brackenridge). The modern co-operative movement was also British-born, albeit slightly further north, in Rochdale.
Today we are here to discuss credit unions, which are deeply embedded in our local communities. Everyone in this Chamber passes on our thanks to Beth, who the hon. Member for Wokingham (Clive Jones) talked about so powerfully in his remarks. Before I turn to the important points that colleagues have raised specifically about credit unions, let me say a few words about the Government’s strong support for the mutual sector, as the Opposition spokesperson has raised it.
Mutuals have a footprint in high streets around the country and they provide jobs. They strengthen their communities, and they support people to build savings habits and access affordable credit and mortgages. Growth in the mutual sector means growth that touches all levels of society, aiding economic participation in the broadest possible sense, as my hon. Friend the Member for Glasgow North East (Maureen Burke) set out. That is why the Government have committed to doubling the size of the sector.
I am glad that the Opposition spokesperson has been paying attention to all the Government’s commitments and the change that we were elected to bring. In south Wales, building society branches are expanding in some areas, even as banks are stepping back. We have already begun to make our commitment a reality, not least when it comes to credit unions, whose lending is growing, even though, as several hon. Members have mentioned, the number of credit unions has fallen in recent years.
In her November Mansion House speech, the Chancellor announced new measures to support the growth of credit unions and mutuals. The shadow Minister would be keen to have the Chancellor give an even longer speech at every Mansion House, but she cannot reiterate all her greatest hits at every single one. We did not let people away till after 10 o’clock last night as it was, and there is such a thing as decent human behaviour. The measures included publishing a call for evidence on the potential to reform common bonds for credit unions in Great Britain, asking the Financial Conduct Authority and the Prudential Regulation Authority to produce a report on the mutuals landscape by the end of this year, which is now well under way, and welcoming the establishment of an industry-led mutual and co-operative business council, which has a live workstream specifically exploring the role of the credit union sector.
The common bond is a unique feature of a credit union. It fosters trust and accountability among members. However, there has been a long-standing request from the sector that the Government review the common bond, and that was reiterated by my hon. Friend the Member for Wolverhampton North East this morning. That is why we put out the call for evidence. I thank everyone who fed into that process, including individual credit unions, trade associations and some Members here today. We are now engaging with the sector and the regulators on those responses and are considering next steps. The Government and the Economic Secretary to the Treasury will provide an update on that work in due course.
More widely, all Members who have spoken today, including my hon. Friend the Member for Airdrie and Shotts (Kenneth Stevenson), recognise the role that credit unions play in achieving financial inclusion, more broadly considered. They provide access to financial services and products and allow people to participate in the economy.
The hon. Member for Wokingham asked about the long-standing calls for a fair banking Act. I gently note that there was little progress on that in the five years in which the Liberal Democrats were part of the UK Government. That tends to get slightly forgotten. When I spend time here in Westminster Hall—as was pointed out earlier, I do spend a lot of time here—I am told about long-standing Liberal Democrat policy in a whole range of areas.
The answer to the hon. Gentleman’s question is that our focus is on taking forward a financial inclusion strategy under the Economic Secretary to the Treasury. I know she will want to work with my hon. Friend the Member for North Ayrshire and Arran (Irene Campbell) in her new role—I congratulate her on it. That work is being supported by a committee of consumer groups and industry representatives, including Fair4All Finance, which has a key role in supporting the sector. That strategy will be published later this year and will seek to tackle a range of barriers facing individuals in accessing financial services, including banking and affordable credit. More importantly, it will consider what more the industry and the Government can do to address these issues.
The financial inclusion committee has recommended that the financial inclusion strategy focus on helping people build an emergency savings buffer—a pot of money that could help them replace a household appliance or repair a car. One area we are exploring is payroll saving schemes, which several Members have called for, which are offered by employers to staff. In my day job of dealing with the pensions landscape, people are talking about learning from the experience of automatic enrolment, and a number of credit unions already deliver such schemes. We talked about the role of a particular credit union earlier.
The Government are directly encouraging those on lower incomes to save via help to save, introduced under the previous Government. Although the scheme has been effective for those who use it, I think we would all say that take-up has been low. In April, eligibility was extended to all universal credit claimants in work, meaning that about 3 million people will be able to benefit from the scheme.
More widely, we are continuing to monitor the availability of affordable credit as part of that financial inclusion strategy work. The Treasury engages regularly to understand the current barriers faced by the mutual sector and credit unions specifically, and to identify opportunities for growth. There have been several discussions about credit union service organisations. That is an important development. The PRA is consulting on how we can facilitate that, given its role in the growth of the sector.
The hon. Member for Strangford (Jim Shannon) asked about growth. He is obviously well aware that the policy area is devolved to Northern Ireland, but he can see the legislation that is being progressed here. We are always happy to engage with our opposite numbers in the Northern Ireland Executive, and we do indeed do so. I join him in celebrating the growth in Northern Ireland. He might not like the progress on the legislative side, but on actual lending and members’ engagement, those of us in other parts of the United Kingdom have a lot to learn.
My hon. Friend the Member for Glasgow North (Martin Rhodes) asked wider questions about bank finance regulation—not least about buy now, pay later. I hope he is happy that the legislation that has long been promised was introduced just a few weeks ago. A few Members who are taking part in this morning’s debate were present in that Committee.
More widely, hon. Members rightly said that credit unions have a different regime from mainstream providers when it comes to regulation. I assure my hon. Friend the Member for Cumbernauld and Kirkintilloch that we are really clear about the differential requirements, including capital requirements and exemptions from consumer credit regulations. We maintain those different regimes for good reasons: we want a proportionate system for different parts of our financial sector.
My hon. Friend has consistently raised concerns about the Financial Ombudsman Service’s approach to handling certain complaints against credit unions, and about the volume of complaints more generally. Although they are a very small part of the Financial Ombudsman Service’s work, I appreciate that is not how it feels for the credit unions wrestling with them. We have heard those complaints, and we recognise the risk of a chilling effect on credit union lending. That is why we have acted. In the March regulation action plan, the Government announced that the Economic Secretary would lead a review of the FOS to examine whether it is delivering on its role.
Today’s debate is well timed. Yesterday the Chancellor launched a consultation on a significant package of policy proposals. That will run until October and I encourage all Members to engage with it. As the Chancellor set out at the Mansion House, the Financial Ombudsman Service will be returned to its original role as a simple, impartial dispute-resolution service, which quickly and effectively deals with complaints. Directly addressing the central point made by my hon. Friend the Member for Cumbernauld and Kirkintilloch, the Government propose to reform the legislative framework that the FOS operates in to stop it acting as a quasi-regulator. We will take steps to provide greater regulatory coherence with the FCA. Consumers and industry will benefit from a more consistent and predictable regulatory environment, and I encourage my hon. Friend and credit unions with recent exposure to and experience of the ombudsman to feed into the consultation over the summer.
In conclusion, the Government recognise the important role that credit unions play in our economy: helping individuals, strengthening communities, and as a major player in any attempt to make our society and economy genuinely financially inclusive. I see that in Swansea, not least in the work of the Celtic credit union. We remain absolutely committed to supporting the growth of the credit union sector now and into the future. I thank all hon. Members who have spoken in today’s important debate.
Beer Duty
Torsten Bell Excerpts(8 months, 4 weeks ago)
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The Parliamentary Secretary to the Treasury (Torsten Bell)
I always look forward to seeing you in the Chair, Dr Murrison—nearly as much as I am looking forward to that pint. I am grateful to the hon. Member for Woking (Mr Forster) for securing and opening the debate. I thank all the colleagues who have spoken—perhaps unsurprisingly, given the subject—with great enthusiasm. I am shocked that there is in fact cross-party support for beer; that is the kind of bold politics that has got everybody in this room where they are today.
Nobody in this place needs persuading of the cultural, social and economic value of the Great British pint, nor of the pubs that serve pints and the breweries that produce them. Pubs are places of consumption but, more importantly, they are places of friendship, community and employment. I have learned a lot in a year as a new MP, but not as much as I learned about life when I started my first job in a pub at 16. I learned a lot about the price of beer, even if not about the ins and outs of alcohol duty, or indeed, drinking alcohol—obviously.
Last autumn, the Chancellor cut alcohol duty on qualifying draught products, affecting 60% of the alcoholic drinks sold in pubs. The cut reduced bills by over £85 million a year. People now pay 13.9% less in tax for draught beer and cider than their packaged equivalents—a discount up by more than 50% since the previous Government’s introduction of the policy, as mentioned in the debate. The cut recognised the roles of pubs and other hospitality venues in supporting responsible drinking in social settings.
The Chancellor also recognised the UK’s 1,600 or so small breweries by making more generous small producer relief, which, as the hon. Member for Kingswinford and South Staffordshire (Mike Wood) was kind enough to mention, was introduced by Gordon Brown under the last Labour Government, and continued by the previous Conservative Government.
To respond directly to the question put by the hon. Member for Strangford (Jim Shannon), small producer relief is available in Northern Ireland, even though licensing is a devolved policy matter. I am happy to exchange letters with him on the wider points he made.
The Budget also committed to a review of small brewers’ access to UK pubs, including through the provision of guest beers, as mentioned by my hon. Friend the Member for Hartlepool (Mr Brash). I know that Members with breweries in their constituencies will contact the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders), given his responsibility for that review.
Of course, alcohol duty does not exist in a vacuum. It relates to the real challenges that we face as a country on public health and the public finances. I understand the wish to call for lower duties, as the hon. Member for Woking did, but the implications for the Exchequer are real. I will dwell on a few related points, given that that call was the basis of the hon. Gentleman’s speech. I am not sure that the 50p call has been entirely thought through: the duty on a typical draught pint of 4.5% beer is currently 48p, so the hon. Gentleman has called for the whole duty to be abolished. He might want to reflect on that.
Questions were asked about the relationship of what is technically called the elasticity of beer consumption to the changes in duties. The Office for Budget Responsibility publishes its own view on the elasticity, which hon. Members can go and find. Suffice it to say that the implications of any large change in alcohol duty for the Exchequer are real. Obviously, the context is that alcohol duty on beer is down by 10% in real terms since 2019.
Questions were also asked about the international comparisons. The proportion of the price of beer that is made up of tax here is similar to that in Ireland. As Finland was raised, I should point out that the proportion there is less than that in Sweden, where members of my family are consuming beer today at higher prices.
At the autumn Budget, the Chancellor increased the main duty rate in line with the retail price index, but she kept the tax burden on packaged products flat overall in real terms, as has been the long-established policy under all three main parties. Along with the increase to draft relief, that balanced the need to fund public services, reduce harmful alcohol consumption, and support moderate responsible drinkers with the cost of living. We have to weigh all those factors together.
Alcohol harm costs this country an estimated £27.4 billion a year. Regrettably, deaths from alcohol are at record highs—admittedly, that is mainly among a concentrated part of the population, but that is still something we all need to wrestle with. That is why the Government will introduce new standards for alcohol labelling.
But we want to address the health challenges while supporting valued producers and communal settings. That is the grounds for the balanced approach we have taken on duty, valuing the pubs that are at the centre of all our communities, as we have heard this afternoon. There is also good reason to be optimistic about the future of the brewing industry, although I recognise the wider challenges that brewers face. I thank hon. Members for their clear representations on those challenges.
Some Members, including the hon. Member for Woking in particular, raised the issue of the extended producer responsibility for packaging and the forthcoming deposit return scheme. I gently point out that the Liberal Democrats regularly call for a fast move to a circular economy, but when anything actually turns up, they oppose it in practice. I gently note that that is not a politics that will get any of us very far in the long term.
The reforms are designed to increase recycling and reduce litter and landfill. Critically, local authorities will receive every penny of the EPR fees, thereby bringing much-needed investment into our recycling infrastructure. The EPR scheme administrator has already published the 2025 base fees, with those for most materials, including glass, down on earlier illustrations. In the case of glass, the base fee is down by 20%.
DEFRA continues to work with the industry on the dual-use packaging that several hon. Members mentioned. The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Coventry East (Mary Creagh) recently held a roundtable on the issue, and I think she intends to hold more.
I acknowledge, as many Members have, that alcohol duty is but one small part of the business equation for pubs and hospitality venues, which is why the Government have made concrete interventions to support the sector, including a £1.5 million hospitality support scheme. I also recognise the points raised, not least by the hon. Member for Wokingham (Clive Jones), about business rates. We have frozen the small business multiplier for the current tax year and are providing 40% relief to retail, hospitality and leisure properties. As I say, I recognise the points made, but the package is worth more than £1.6 billion this year, and the previous Government left us with the relief due to end entirely in April 2025.
We are introducing high street rental auctions to bring vacant properties back into productive use, thereby offering smaller brewers and taprooms more affordable sites. Although there is bad news about pubs shutting across the country, and we are all sad when we see it in our constituencies, we also see some opening up on some high streets, and that is to be welcomed.
On 4 April 2025, we announced the licensing policy taskforce, co-chaired by Nick Mackenzie, the chief executive of Greene King. It is working intensively with the industry to ensure that the licensing conditions for businesses such as pubs, restaurants and music venues are proportional.
I began by acknowledging the unique place that beer and pubs hold in our national life. They deserve and have the steadfast attention of this Government and, it is clear, every hon. Member in this room. My local pubs in Swansea, from the Brunswick to the Deer’s Leap, certainly have my attention, and—I promise—my consumption. Through draught relief, small producer relief and tailored interventions for high streets, we are helping the sector to thrive.
I close with two brief invitations. First, I urge Members to please continue to bring to the Treasury their stories, spreadsheets, and suggestions from pubs and brewers, as they have done this afternoon. Secondly, I invite the industry to continue talking to us and demonstrating, year in and year out, that the British brewing scene is second to none.
Pension Schemes Bill
Torsten Bell ExcerptsMonday 7th July 2025
(9 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)
I beg to move, That the Bill be now read a Second time.
This Bill aims to deliver fundamental reforms to our pensions landscape, and it is good to see that the prospect of discussing a long, slightly technical pensions Bill has seen so many Members flooding into the Chamber. These are reforms on which there is a broad consensus across the pensions industry. They also build on at least something of a consensus across the House. In its principal focus on higher returns for pension savers, the Bill also responds to specific responsibilities that we hold in the House.
It is because of decisions of Parliament that something significant has happened over the past decade: British workers have got back into the habit of saving for a pension. Today, more than 22 million workers are building up a pension pot. That represents a 10 million increase since 2012, when Parliament introduced the policy of automatically enrolling workers. The rise is largest for women and lower earners. So there is lots to celebrate as more save, but there are no grounds at all for complacency about what they are getting in return.
The private sector final salary pensions that many of today’s pensioners rely on guarantee a particular income in retirement. If those pension schemes do not deliver good investment returns, that is a problem for the employer and not directly for the saver. But most of tomorrow’s retirees with a defined-contribution pension bear all the risk; there is nothing guaranteed. How well the pension scheme that they save into performs matters hugely, and because pensions are a very long game, even small differences in how fast a pension pot grows can make a massive difference over time.
That is the system that the House has chosen, so the onus is on us to ensure that it delivers. But the pension system that we have today is too fragmented, too rarely does it ensure that people’s savings are working hard enough to support them in retirement, and it is too disconnected from the UK economy. That is the case for change and the context for the Bill.
The UK has the second-largest pension system in the world, worth £2 trillion. It is our largest source of domestic capital, underpinning not just the retirement we all look forward—or at least most of us look forward to—but the investment on which our future prosperity depends. But our big pension system has far too few big pension schemes. There are approaching 1,000 defined-contribution schemes and less than 10 providers who currently have £25 billion or more in assets.
A consolidation process is already under way, with the number of DC schemes reducing by about 10% a year. What the Bill does is add wind to the sails of that consolidation. It implements the conclusions of the pensions investment review, creating so-called megafunds. For the DC market, we intend to use the powers provided for in clause 38 to require multi-employer schemes to have at least £25 billion in assets by 2030, or a credible pathway to be there by 2035. Bigger and better pension funds can deliver lower costs, diversified investments and better returns for savers. That supports the work that the industry is already doing to better deliver for savers.
As the House has discussed before, in May, 17 major pension providers managing about 90% of active defined-contribution pensions signed the Mansion House accord. This industry-led initiative saw signatories pledge to invest 10% of their main default funds in private assets such as infrastructure by 2030, with at least 5% in UK assets. That investment could support a better outcome for pension savers and back clean energy developments or fast-growing businesses. To support this industry-led change, the Bill includes a reserve power that would allow the Government to require larger auto-enrolment schemes to invest a set percentage into those wider asset classes. That reflects the reality that the industry has been calling for the shift for some time, but words have been slow to translate into actions.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I draw the House’s attention to the fact that I am a trustee of the parliamentary contributory pension fund. Consolidation is absolutely the right direction of travel so that pension funds have better experts who are better able to advise. I still have a slight concern, though, about mandation. There will have to be schemes to invest in, and they will need to ensure that they are getting returns. How will the Minister ensure that the Bill actively delivers on both sides of the equation?
Torsten Bell
I thank my hon. Friend for her question and for her oversight of all our pensions, which I think is reassuring. [Laughter.] Sorry; it is reassuring! I will come directly to her point, because I know that is one question that hon. Members on both sides of the House will want to raise. Let me just say that the Bill explicitly recognises the fiduciary duty of trustees towards their members.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
In the last Parliament, a number of us raised concerns about the administration of defined-benefit schemes by, among others, BP, Shell and Hewlett-Packard. It was obvious at that stage—I think this view was held by his right hon. Friend the Minister for Social Security and Disability, who was then the Chair of the Work and Pensions Committee—that one of the root causes of the problem was insufficient independence and oversight by defined-benefit pension trustees. What is there in this Bill that will protect the position of pensioners in their retirement under those schemes?
Torsten Bell
The right hon. Member invites me to skip quite a long way forward in my speech, and it is a long speech.
Torsten Bell
That was not the support I was hoping for from the Chair—understandable, but harsh. I will come to some of the points that the right hon. Member raises. I think he is referring particularly to pre-1997 indexation, which I shall come to.
As I said, the Bill includes a reserved power that will allow the Government to require larger auto-enrolment schemes to invest a set percentage into wider assets. That reflects the wider calls that have been made for this change but have not led to its taking place. What pension providers are saying is that they face a collective action problem, where employers focus too narrowly on the lowest charges, not what matters most to savers: the highest returns. I do not currently intend to use the power in the Bill, but its existence gives clarity to the industry that, this time, change will actually come.
Some argue—I will come to some of the points made by my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier)—that this somehow undermines the duty that pension providers have to savers. That is simply wrong. First, the Bill includes clear safeguards to prioritise savers’ interests and is entirely consistent with the core principle of trustees’ fiduciary duties. Clause 38 includes an explicit mechanism, which I have discussed with Members from the main three parties in this House, to allow providers to opt out if complying risks material detriment to savers. Secondly—this is the key point that motivates a lot of the Bill—savers are being let down by the status quo. There is a reason major pension schemes across the rest of the world are already investing in this more diverse range of assets.
Fragmentation within the pensions industry happens within providers, not just between them. Some insurers have thousands of legacy funds, so clause 41 extends to contract schemes the ability that trust-based schemes already have to address that. Providers will be able to transfer savers to another arrangement without proactive individual consent if, and only if, it is independently certified as being in the member’s best interest.
Another point that I hope is of common ground across the House is that we need to do more to realise the untapped potential of the local government pension scheme in England and Wales. We need scale to get the most out of the LGPS’s £400 billion-worth of assets. Again, the Bill will turn that consensus into concrete action. It provides for LGPS assets spread across 86 administering authorities to be fully consolidated into six pools. That will ensure that the assets used to provide pensions to its more than 6 million members—predominantly low-paid women—are managed effectively and at scale. Each authority will continue to set its investment strategy, including how much local investment it expects to see. In fact, these reforms will build on the LGPS’s strong track record of investing in local economic growth, requiring pension pools to work with the likes of mayoral combined authorities. In time, bigger and more visible LGPS pools will help to crowd private pension funds and other institutional investors into growth assets across the country.
Our measures will build scale, support investment and deliver for savers, but the Bill does more to ensure that working people get the maximum bang for every buck saved. To reinforce the shift away from an excessively narrow focus on costs, clause 5 provides for a new value-for-money framework. For the first time, we will require pension schemes to prove that they provide value for money, with standardised metrics. That will help savers to compare schemes more easily, and drive schemes themselves to focus on the value that they deliver. For persistently poor performers, regulators will have the power to enforce consolidation. That will protect savers from getting stuck in poorly performing schemes—something that can knock thousands of pounds off their pension pots.
We are also at last addressing the small pension pots issue. I was out door-knocking in Swansea earlier this spring, and a woman in her mid-30s told me that something was really winding her up—and it was not me knocking on the door. [Laughter.] This is a very unsupportive audience. It was trying to keep track of small amounts of pension savings that she had from old jobs; the only thing that was worse was that her husband kept going on about it. There are now 13 million small pension pots that hold £1,000 or less floating around. Another million are being added each year. That increases hassle, which is what she was complaining about, with over £31 billion-worth of pension pots estimated to currently be lost. It costs the pensions industry around £240 million each year to administer. Clause 20 provides powers for those pots to be automatically brought together into one pension scheme that has been certified as delivering good value. Anyone who wants to can of course opt out, but this change alone could boost the pension pot of an average earner by around £1,000.
Of course, once you have a pension pot, the question is: what do you do with it? We often talk about pension freedoms, but there is nothing liberating about the complexity currently involved in turning a pension pot into a retirement income. You have to consolidate those pots, choose between annuities, lump sums, drawdowns or cashing out. You have to analyse different providers and countless products. Choice can be a good thing, but this overwhelming complexity is not—77% of DC savers yet to access their pension have no clear plan about how to do so.
John Glen (Salisbury) (Con)
I agree with a lot of what the Minister is saying. Given what was said last week by the Financial Conduct Authority on targeted support, would he look again at what is being resisted by the Money and Pensions Service? It is not prepared to work with the pension schemes to allow automatic appointments so that pension savers can be guided to better outcomes. I realise that MaPS will say that it is too busy, but this is a key moment. If we could get people to engage at age 50, say, we would see vastly different outcomes for them if they invested properly, and in better ways, with their pensions.
Torsten Bell
I thank the right hon. Member for his question, and for the discussions that we have had on this important topic. He spent years working on this. The priority for MaPS right now is to ensure that we have the system set up to deal with the additional calls that are likely to come when pension dashboards are rolled out, but I will keep in mind the point that he raises. I think he and a number of hon. Members wrote to me about exactly that point. As I promised in my letter, I will keep it under review, but we must not overburden the system, because we need it to be able to deliver when pension dashboards come onstream.
Nick Smith (Blaenau Gwent and Rhymney) (Lab)
Will the Minister update us on when consumers will see the introduction of the pensions dashboard? [Laughter.]
Torsten Bell
I think recent progress on the pensions dashboard means that that deserves a little less laughter. What we are seeing at the moment is success, driving the first connections to the dashboards. Obviously, all schemes and providers are due to be connected by the autumn of 2026, but I will provide good notice of when we can give a firm date for that. My hon. Friend and near neighbour has secured himself early warning of exactly that happening.
We need to make the choices clearer for people as they move from building retirement savings to using them. The Bill gives pension schemes a duty to provide default solutions for savers’ retirement income—yes, with clear opt-outs. As well as reducing complexity and risk for savers, that will support higher returns because providers will be able to invest in assets for longer if they do not need to secure the possibility of having to provide full drawdown at retirement.
Each of these measures to drive up returns will have an impact on their own, but it is their cumulative impact that matters most, especially when it is compounded over the decades that we save for a pension. To give the House a sense of scale, someone on average earnings saving over their career could see their retirement pot boosted by £29,000 thanks to the higher returns that the Bill supports. That is a significant increase for something that should matter to us all.
The reforms that I have set out will transform the DC pensions landscape, but with £1.2 trillion-worth of assets supporting around 9 million people, defined-benefit schemes remain vital—they have already been raised by the right hon. Member for Orkney and Shetland (Mr Carmichael). Their improved funding position is hugely welcome. Around 75% are now in surplus, which has enabled far more schemes to reach buy-out with an insurer. Many more intend to do so, welcoming the security that buy-out can offer. Others may not be able to reach buy-out or may value running on their scheme for at least a time. The Bill provides those trustees with a wider range of options. Clauses 8 and 9 give more trustees the option to safely share surplus funds, which is something that many can already do.
Alan Gemmell (Central Ayrshire) (Lab)
I thank the Minister for giving way and the right hon. Member for Orkney and Shetland (Mr Carmichael) for raising this issue. What will the Bill do for my constituent Patricia Kennedy and the members of the Hewlett Packard Pension Association who are asking for more action on their pre-1997 non-index-linked contributions.
Torsten Bell
My hon. Friend has raised this issue with me on a number of occasions, and he is a powerful advocate for his constituents who have lost out through the discretionary increases that they were hoping to see on their pensions not being delivered. This is the same issue that the right hon. Member for Orkney and Shetland raised. One of the things that surplus release will allow is that trustees may at that point consider how members can benefit from any release that takes place. One thing I would encourage them to prioritise if they are considering a surplus release is the indexation of those that have not received it on their pre-1997 accrual. I hope that provides some clarity to the right hon. Gentleman and my hon. Friend.
Sir Julian Lewis (New Forest East) (Con)
I am extremely grateful to the Minister for taking my intervention and for the very helpful letter he sent me on 30 June about schemes of this sort, and in particular the ExxonMobil pension scheme. His letter encouragingly states:
“Following our reforms, trustees will continue to consider the correct balance of interest between members and the sponsoring employer when making decisions about the release of surplus funds. Trustees will be responsible for determining how members may benefit from any release of surplus…and have a suite of options to choose from—for example, through discretionary benefit increases.”
The trouble is that these pensioners have received a letter from the trustees of the ExxonMobil pension fund stating:
“The power to award discretionary increases is held by Esso Petroleum Company Limited (the “Company”). Whether or not any discretionary increase is provided is for the Company to determine: the Trustee has no power to award discretionary increases itself.”
This may be a loophole that the Minister needs to address. If the trustees cannot award the surplus as benefits and the company says no, that is not going to benefit my constituents.
Torsten Bell
I thank the right hon. Member for raising that specific case. I will look at it in more detail for him as he has kindly raised it here, but he has raised a point that will have more general application, which is that lots of different schemes, particularly DB schemes, will have a wide range of scheme rules. He has raised one of those, which is about discretionary increases. One thing that is consistent across all the schemes, with the legislation we are bringing in today, is that trustees must agree for any surplus to be released. It may be the case that the employer, in the details of those scheme rules, is required to agree to a discretionary increase, but the trustees are perfectly within their rights to request that that is part of an agreement that leads to a surplus release.
Torsten Bell
In any circumstances, the trustees would need to agree to a surplus release, so they are welcome to say to their employer: we are only going to agree to it on the basis of a change to something that the employer holds the cards over. I am happy to discuss that with the right hon. Member further, and there may be other schemes that are in a similar situation.
Lincoln Jopp (Spelthorne) (Con)
The way in which the Minister is talking about insurance buy-out suggests that, in the Government’s mind, insurance buy-out is still in some way a gold standard. Can he reassure the House that he is seeking to flatten the playing field, such that the increased choice available to defined-benefit pension schemes will mean that for perpetuals who run on—such as OMERS, which started off as the Ontario municipal employees retirement system and is now worth 140 billion Canadian dollars—there is as much safety in superfunds as there is in insurance buy-out?
Torsten Bell
I shall come on directly to the question of superfunds, which I know the hon. Member has a long-standing interest in. There is obviously a distinction between closed and open defined-benefit schemes, which I think is relevant to the point he is raising. It is also important for trustees to have a range of options.
Kirsty Blackman (Aberdeen North) (SNP)
Obviously that can happen only where there are surplus funds, and there may not be surplus funds in all circumstances. I just want to give the Minister a heads-up in relation to the questions about employee benefits. It would be useful in Committee to have more information about the Government’s analysis of how many of these surplus releases will directly benefit the employees rather than the employers. I understand that the Government, with their mission for growth, want investment in growing the company as well, but what kind of split does he expect to see? I do not expect an answer to that today.
Torsten Bell
It is nice to sometimes be able to surprise on the upside. I would expect employees to benefit in most cases, because trustees are in the driving seat and I am sure they will want to consider how employers and employees will benefit from any surplus release. Obviously, the exact split between the two will be a matter for the individual cases, but I am sure we will discuss that further in Committee.
I want to reassure the House that this is not about a return to the 1990s free-for-all. DB regulation has been transformed since then, and schemes will have to remain well funded and trustees will remain in the driving seat. They will agree to a release only where it is in members’ interests and, as I said, not all schemes are able to afford to buy out members’ pensions with insurers.
The Bill also introduces the long-awaited permanent legislative regime for DB superfunds, which is an alternative means to consolidate legacy DB liabilities. This supports employers who want to focus on their core business, and, as the superfunds grow, they will have the potential to use their scale to invest in more productive ways. Crucially, trustees will be able to agree to a transfer into a superfund only where buy-out is not available and where it increases savers’ security.
The Pension Protection Fund is, of course, the security backstop for DB members. It celebrates its 20th anniversary this year, and it now secures the pensions of over 290,000 people. The Bill updates its work in three important ways: first, by lifting restrictions on the PPF board so that it can reduce its levy where appropriate, freeing schemes and employers to invest; secondly, by ensuring that PPF and financial assistance scheme information will be displayed on the pensions dashboard as it comes onstream, which my hon. Friend the Member for Blaenau Gwent and Rhymney (Nick Smith), who is now not in his place, is keen to see; and thirdly and most importantly, by making a change to support people going through the toughest of times. As several hon. Members have called for, we are extending the definition of terminal illness from a 6-month to a 12-month prognosis, providing earlier access to compensation for those who need it most.
Pensions are complex beasts, and so are the laws that surround them. That complexity is inevitable, but not to the extent that some recent court cases risk creating. The Bill also legislates to provide clarity that decisions of the Pensions Ombudsman in overpayment cases may be enforced without going to a further court. I have been clear that the Government will also look to introduce legislation to give affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historical benefit changes met the necessary standards at the time.
Governments are like people in one important respect: they can easily put off thinking about pensions until it is too late. I am determined not to do that. We are ramping up the pace of pension reform. The past two decades have delivered a big win, with more people saving for their retirement, but that was only ever half the job. Today, too many are on course for an income in retirement that is less than they deserve and less than they expect. The Bill focuses on securing higher returns for savers and supporting higher income in retirement without asking any more than is necessary of workers’ living standards in the here and now.
The Bill sits within wider pension reforms as we seek to build not just savings pots but a pensions system that delivers comfortable retirements and underpins the country’s future prosperity. Legislation for multi-employer collective defined-contribution schemes will be introduced as soon as possible after the summer recess, and we will shortly launch the next phase of our pensions review to complete the job of building a pensions system that is strong, fair and sustainable. It is time to make sure that pension savings work as hard for all our constituents as our constituents worked to earn them. I commend the Bill to the House.
Kit Malthouse
That may well be true, but that is a different question. There is a question about financial education and the ability of large numbers of our fellow citizens to understand these financial complexities. We have a large and professional independent financial adviser community, and all pension funds are required to have pension advisers who can speak to members, tell them what is going on and explain the decisions before them. I do think that over the years, such steps have disenfranchised the British people from their financial decisions, yet we hold them responsible for their debts, their mortgages and their future. There is a larger question for us in this House about how much we have subtracted from the autonomy of the British people, and therefore how much blame attaches to us as politicians when their financial circumstances are not what they expect.
Torsten Bell
The right hon. Member is giving a lucid speech, as he always does—he speaks very well—but I am failing to understand exactly the point he is making. He is talking about a local government pension scheme, which is guaranteeing him an income in retirement, as if it is a defined-contribution scheme where he is the one at risk from changes in the investment performance. It is local taxpayers with their employer contribution who ultimately bear the risk in the scheme he is talking about. It is our job to make sure that those taxpayers have the best possible chance of not having bad returns, leading to bad outcomes for them. He is not at risk in the way he is talking about.
Kit Malthouse
Yes, I have. I paid contributions through my employment at City Hall, as did my employer. Admittedly, it was a scheme based on a defined benefit, rather than a defined contribution, but that was the deal done with me on a settled contract, saying that this was what I would be provided for from my contribution. Every year, I review my pension benefit forecast. I am consulted by the fund about how it should conduct its affairs. I am asked to turn up to my pensioners’ conference to discuss with trustees how they are looking after my future. The point is that the Government are steaming in with absolutely no consultation with me as a pensioner and I have no right to be represented, although I am uniquely affected, beyond other pension schemes. I consider that to be high-handed and, as the hon. Member for Oldham East and Saddleworth said, to be solving a problem that does not exist.
My third point was also raised by my hon. Friend the Member for Wyre Forest (Mark Garnier): who carries the can? What happens when the Minister tells my private pension scheme or the parliamentary pension scheme that it must invest in, for instance, HS2 and it turns out to be a disaster? What happens when whichever ministerial pet project rises to the top of the priority list for pension allocation—what rough beast, its hour come round at last, slouches towards Whitehall to get its finance—and it all goes horribly wrong? I am sorry to quote Yeats to the Minister, but who will pay when that happens? When there is a deficit in defined-contribution pension funds that have been so directed by the Minister, who will pay for that deficit?
Women’s State Pension Age: Financial Redress
Torsten Bell Excerpts(9 months, 1 week ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)
I thank all hon. Members who have spoken powerfully today, and in particular my hon. Friend the Member for Salford (Rebecca Long Bailey) for leading today’s debate on behalf of the Backbench Business Committee. This is an important topic that she and I have discussed several times, both in public and in private. I look forward to her closing remarks.
When we retire, the question of how comfortable we will be in retirement and in the years leading up to it— ot least given the growth in pre-retirement poverty, partly due to ill health, as the hon. Member for Mid Dunbarton-shire (Susan Murray) set out—is crucial to all of us. We ask that question of ourselves, and of those we care about. As the debate has shown, many hon. Members rightly ask that about the country as a whole. We should expect people to have strong views on the state pension age. We all know women affected by the changes made, since 2010 in particular, that affect that age group—constituents, friends and family. I have declared a family interest on this front before, alongside my professional one.
Dawn Butler (Brent East) (Lab)
I, too, have many constituents who are affected, and I have held up the banner saying, “I stand with WASPI women.” My hon. Friend the Member for Salford (Rebecca Long Bailey) laid out where we can find the money. Surely we can promise to revisit this when the public purse allows, rather than letting down these women who have been let down over and over again. Justice delayed is justice denied.
Torsten Bell
I always thank my hon. Friend for her contributions. She makes a powerful case. I will come on to the reasons why we do not agree with that case, but I understand her point.
This is a cohort of women who have too often faced discrimination in the world of work, with lasting effects on the value of their workplace pensions. They have borne the brunt of unequal caring responsibilities, and as my hon. Friend the Member for Salford set out, historically the genders have had very unequal state pensions. That, at least, has been addressed, but the workplace pension divide remains as big as ever.
Lee Pitcher (Doncaster East and the Isle of Axholme) (Lab)
I should declare that my mum is a WASPI woman. She would be disappointed if I was not here today, and there is nothing worse than your mum being disappointed in you. I also represent 6,030 other WASPI women in my constituency. I just wonder if the Minister really understands the discrimination faced by 1950s women, including sexism and a lot of discrimination in the workplace. They just feel let down. Does the Minister realise that, and that they absolutely deserve justice?
Torsten Bell
I thank my hon. Friend for his question. I know, without having met her, that his mum will not be disappointed in him. Obviously, the point he makes is absolutely right; it is the point that I was just making. I think we are all aware of the experiences that this generation of women have had to face, not just in the labour market but much more broadly. He makes a powerful case, as always.
Now, there is broad political consensus that it is right to equalise the state pension age for men and women, but the acceleration of the state pension age increases by the Conservative and Liberal Democrat coalition was more politically controversial. I was not going to mention it, but I will gently remind Liberal Democrat Members who have spoken today—the hon. Members for Eastleigh (Liz Jarvis) and for Lewes (James MacCleary) used particularly strong language on this point—that it was the choice made by their party. Not to mention that acceleration at all—[Interruption.] If Members are going to use strong language about difficult choices, then they need to reflect on the choices that led to that point. My party opposed those choices at the time.
However, neither the acceleration nor the longer planned increases to the SPA legislated for since 1995 were matters the ombudsman investigated. This matters, given that it is the desirability of the original policy decisions made by previous Governments that is most frequently referred to by campaigners and by hon. Members, including the hon. Member for Strangford (Jim Shannon) today, who focus on the increases to the state pension age. In contrast, the ombudsman’s focus was on how those changes were communicated by the Department for Work and Pensions, as the hon. Member for Mid Dunbartonshire very clearly pointed out.
As all hon. Members know, we carefully considered the ombudsman’s findings. We always will, given its important role, which was set out by the right hon. Member for South Holland and The Deepings (Sir John Hayes) today and in several debates that I have taken part in with him in recent months.
Sir John Hayes
The Minister is right to say that no party—indeed, no previous Government—can be excused in this respect, because this matter covers the time in office of several Governments. The difference is that members of his party, in opposition, said,
“This injustice can’t go on. I have been a longstanding supporter of the WASPI campaign”,
and that Labour “will compensate” the WASPI women, as it is “their money”. That was said by the current Work and Pensions Secretary and the current Deputy Prime Minister.
Torsten Bell
The right hon. Gentleman has been a Member of this House for much longer than me, so he knows how this works. Parties set out their manifestos, and I am sure that if he looks at the Labour party’s 2024 manifesto, he will find there different words from the ones he has just shared with the House.
The Government agree that letters should have been sent sooner. We have apologised, and we will learn the lessons from that. However, as hon. Members and campaigners on this issue are well aware, we do not agree with the ombudsman’s approach to injustice or to remedy—and neither, reading carefully between the lines of the speech from the hon. Member for East Wiltshire (Danny Kruger), do the Opposition. The hon. Gentleman spoke very eloquently, as always.
Let us look at what the ombudsman said when it made its decision to lay the report before Parliament. It was not looking ahead to what a future Government might do; it knew that the then Conservative Government would have come to a similar conclusion. Hon. Members should remember that the long debate over those years between the Government and the ombudsman was held in private, so the ombudsman was aware of the approach of the Government, to whom it was talking in a way that those of us outside Government at the time could not have known.
The hon. Member for Harrogate and Knaresborough (Tom Gordon) and the right hon. Member for New Forest East (Sir Julian Lewis) asked about the decision not to accept an ombudsman’s findings. They are right to say that it is unusual, but it is definitely not unprecedented. I should spell out that the Government have accepted other ombudsman findings since, so it is not right to say that this is some kind of fundamental break in the approach by Government.
Seamus Logan
Earlier, the right hon. Member for Hayes and Harlington (John McDonnell) warned us that we might simply see the Government Front Bencher regurgitation the Government’s views today. Can the Minister clarify whether he has been sent here to defend the indefensible, or will he give us something new today?
Torsten Bell
The hon. Gentleman is welcome to choose his tone; I will continue to the end of my comments. My job is to come and explain the Government’s decision, and to be held accountable for it. That is what I am doing today, and what I will continue to do over the course of my remarks. It is right that the Government are then asked questions about their decision; that is the nature of this democracy, as the hon. Member for East Wiltshire said.
An important consideration in the Government making this decision was that evidence showed that sending people unsolicited letters is unlikely to affect what they know. That is why letters are sent only as part of wider communication campaigns. This evidence was not properly considered by the ombudsman. Another consideration was that the great majority of 1950s-born women were aware of the state pension age changing, if not of a change in their specific state pension age, as several hon. Members have pointed out. My hon. Friend the Member for Salford mentioned the statistic of 43%, referring to the 2024 rather than 2023 survey. However, as she will know, that refers to all women, including some women as young as 16; if we look at the cohort of women born in the 1950s, the figure is far, far higher. On those and other grounds, we rejected the ombudsman’s approach to injustice and remedy.
Members will be aware that litigation is live, so I will not go into lots more detail on the research evidence, which is the core of that litigation. I will just say two things: first, our decision was based on published research reports, which were robust and met professional standards; secondly, the same awareness research, which the right hon. Member for New Forest East disparaged, was used by the ombudsman.
Sir Julian Lewis
Will the Minister explain to the House why not one single speech in this debate until his has taken the line that he is taking? Everyone who has spoken in this debate believes that some compensation, at least symbolically, should be paid.
Torsten Bell
I thank the right hon. Member for his intervention. I am a liberal man. People will come to different views on the evidence. There are many Members in the House who have campaigned powerfully on this issue over many years, and I respect the work they have done on that. I am setting out a different view from the one that the right hon. Member has taken. That is the nature of policy choice, the nature of accountability, and the nature of this debate.
The ombudsman is clear that redress and compensation should normally reflect individual impact, as it did in the case of the Equitable Life compensation scheme that an hon. Member mentioned. And they spell out the challenges of assessing the individual circumstances of 3.5 million women, not least given that it took the ombudsman nearly six years to look at just six cases. The reality is that assessing them would take thousands of staff very many years. We gave detailed thought to whether we could design a fair and feasible compensation scheme. However, most of the schemes that were suggested would not focus on women who lost opportunities as a result of the delay in sending letters. Rule-based schemes, such as that suggested by the Work and Pensions Committee, would make payments on the basis of the likes of age rather than injustice. Simply playing a flat rate to all 3.5 million women born in the 1950s, irrespective of any injustice, is also hard to justify.
Fundamentally, though, our decision was not only driven by cost—to answer directly the question of the hon. Member for Falkirk (Euan Stainbank)—but by the fact that we do not agree with the ombudsman’s approach to injustice or remedy for the reasons that I have set out. Indeed, our commitment to pensioners can be seen in the significant fiscal investments that we are making in our priorities for pensioners, including raising the state pension and rescuing the NHS.
John McDonnell
I have an awful lot of affection for the hon. Member. Is there any difference between this speech and the one that was made in Westminster Hall? As it does not look as though there is, he might as well just send us the tape of the last one.
Torsten Bell
Well, the right hon. Member has demonstrated more affection on previous occasions is what I would gently say to that. If he is asking me whether the Government’s position has changed, I am afraid that the answer, from his perspective, is no.
Daisy Cooper
A few moments ago, the Minister said that the Government had concluded that it would not be appropriate to apply a flat rate to all 3.8 million women. Have the Government done any modelling on paying a flat rate to any other smaller cohorts within that 3.8 million women—for example, women on pension credit, or under a certain level of income or savings?
Torsten Bell
I thank the hon. Lady for her question. I think we have discussed versions of this question before. Yes, there have been models that may have focused on a subset of women—for example, those on pension credit—but that still comes up against the fundamental challenge of payments based on some other qualifying condition, which in this case is income, and not the injustice that has been suffered. The ombudsman set out that compensation was due for the injustice, not just the virtue of being a woman born in the 1950s.
Torsten Bell
I will give way, but then I will wrap up before Madam Deputy Speaker loses her patience.
Daisy Cooper
I am grateful to the Minister for giving way again. He will be aware that in other compensation schemes, there are often waves of compensation. The first wave of compensation can be on one indicator, with a second wave looking at other complicating factors. Have the Government looked at that model?
Torsten Bell
I refer the hon. Lady to our very detailed response, which was published in December. It runs over a number of pages, so I will send her the relevant extracts on the conclusions that we have considered. [Interruption.] I will have to conclude now because I am testing the patience of Madam Deputy Speaker.
I recognise that none of what I have said today is likely to change the minds of many Members here, as the right hon. Member for New Forest East (Sir Julian Lewis) has kindly pointed out to me. I know that, not least because I see many familiar faces from similar debates in Westminster Hall, as the even more friendly right hon. Member for Hayes and Harlington (John McDonnell) has told me. The campaigners, too, are unlikely to be satisfied. Their tenacity has been clear for all to see and has been attested to sufficiently today. They are right to continue to point to the wider context, which is that society has been far from universally kind to women born in the 1950s, as they have wrestled with discrimination in the labour market and beyond, which is what the hon. Member for Ceredigion Preseli (Ben Lake) set out earlier. Nothing regarding the case I have set out today diminishes any of that. However, the Government have made their decision and we owe it to everybody to be clear about it. It is right that hon. Members hold us to account for it, as the hon. Member for East Wiltshire (Danny Kruger) has set out.
That has happened today and in other debates in the House, including Westminster Hall. As I have said before, there are lessons for the Department to learn, and learn them we will. We will also continue to support women born in the 1950s and pensioners generally, not least by raising the state pension and turning around our NHS. I know that they and hon. Members will expect nothing less.
Work and Pensions
Torsten Bell Excerpts(9 months, 1 week ago)
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Shaun Davies
Away from the knockabout of Westminster politics, I and people in Telford welcome this change. The principle of means-testing was right, but the level was too low. Does my hon. Friend agree that millionaires, MPs who happen to be of pensionable age and those who are living abroad should not receive this payment?
Torsten Bell
I almost always agree with my hon. Friend, so the answer is yes. He also provides me with an opportunity to clarify a point that has not been covered in the last hour or so: the payment will continue not to be exportable for those not resident in the UK.
[Official Report, 9 June 2025; Vol. 768, c. 636.]
Written correction submitted by the Under-Secretary of State for Work and Pensions, the hon. Member for Swansea West (Torsten Bell):
Torsten Bell
I almost always agree with my hon. Friend, so the answer is yes. He also provides me with an opportunity to clarify a point that has not been covered in the last hour or so: the payment will not be exportable for those not resident in the UK.