Pension Schemes Bill [Lords]

Wendy Chamberlain Excerpts

2nd reading & 2nd reading: House of Commons & Money resolution & Money resolution: House of Commons & Programme motion & Programme motion: House of Commons
Wednesday 7th October 2020 Commons Chamber

[Wendy Chamberlain (North East Fife) (LD)]

First, I express my thanks to Members of the other place for introducing the Bill and for their work in bringing it to its current form. Clearly, much expertise and scrutiny have been brought to bear.

Secondly, I want to acknowledge that life expectancy is increasing and that that is good news. It also brings challenges and that is a good problem to have. Older people may now need a pension income that will last for 20, 30 or even 40 years and we should welcome that. As I said in the debate last week on the Social Security (Up-rating of Benefits) Bill, the triple-lock guarantee for pensions has never been more important. It is clear that many working-age people, and especially younger people, are not saving, and are simply unable to save enough, for their retirement. Final salary pension schemes, such as defined-benefit schemes, are increasingly closing to new entrants. This will mean that the state pension will become an increasingly important source of retirement income in the future. That makes this Bill and its consideration of how best to manage workplace pension schemes even more vital. As a result of the work in the other place, there is much to welcome.

I have had a number of jobs over my time in employment. I cannot beat 11 in five years but, at the last count, I am currently a member of four different pension schemes—both private and public sector and both defined-benefit and defined-contribution schemes. It is clear that, as work changes and more people move from employer to employer, such circumstances are more likely, and I welcome the Bill’s acknowledgment of this increasing reality for many.

I will restrict my remarks to a small number of areas. Other Members have outlined the details of parts 1 and 2 and the proposal to introduce collective defined-contribution schemes and collective money purchase schemes to allow savers to take advantage of market highs and avoid the lows. It makes sense to offer a more balanced alternative to having all the risk lying with either the sponsoring employer, as in defined-benefit schemes, or with the employee, as in defined-contribution schemes. The cross-party employer and employee support outlined in the Government’s consultation reflects that and, having outlined the importance of ensuring inter-generational fairness last week, I highlight the Lords amendment to clause 27, which would provide that, whenever the pensions regulator issued a notice requiring a scheme to submit a supervisory return, it must include a requirement that the trustees assess the extent to which the scheme is operating in a manner that is fair to all its members. I seek a response from the Minister on that amendment and on the steps that the Government are taking to ensure that such fairness is there from the outset of any CDC scheme.

On part 4, like many, I welcome the creation of dashboards that will allow people not only to see their current pension provisions all in one place but even find pensions they potentially did not know that they had. That is currently estimated to be one in five people. The burden of responsibility for risk-taking lies increasingly with the individual. They have more flexibility, but they need to have as much information as possible made available to them so they can make the best possible decisions and be protected from the scams that many Members have mentioned.

The recommendation for dashboards dates back to 2016, and I am disappointed that it has taken until now to see concrete measures. Further details on timescales for dashboards would be appreciated. In addition, I am interested in hearing from the Minister about the DWP proposals to allow a pension to follow an individual from job to job. Given the increasing responsibility of individuals, that is one way to ensure that people understand their entitlements, save accordingly and, potentially, reduce their dependence on the state pension in future.

On part 5, I want to highlight, like many, clause 123 and the amendment accepted in the other place relating to the treatment of open and closed defined-benefit schemes. I understand that the Pensions Regulator is concerned that the failure and subsequent cost to fund DB schemes is becoming a risk, but a great many DB schemes are still open. For them, being forced to de-risk would mean that they would not be able to continue to afford paying out as high a pension to their members.

In other words, DB schemes would be forced to make less risky investments, such as on Government bonds, which means that they would create less of a return on their investments, but still be required to pay out the same amount. Given that Government bonds and other low-risk investments will have very low rates for the longer term, as a result of covid, the risks to such DB open schemes’ viability becomes even more stark.

Yesterday, like the hon. Member for Birmingham, Selly Oak (Steve McCabe), I met executives of the railways pension scheme. They explained that closed schemes have a fixed end point in sight. They need readily available assets to pay pensions, and they invest in lower risk assets by default. Open-to-new-member schemes are more balanced, with new members replacing older leavers. Such schemes’ needs and objectives are fundamentally different, and they do not need to sell assets. Primary legislation is needed to recognise the different characteristics, and I hope that the Minister will indicate whether that will be supported in Committee.

Finally, the Liberal Democrats welcome clause 124—it is a welcome step—and the Minister’s comments on asset managers earlier. Beyond covid, the climate emergency remains the biggest future challenge to the UK. As I said at the outset, there is much to welcome in the Bill, but I echo the comments of the SNP spokesperson, the hon. Member for Airdrie and Shotts (Neil Gray), that it does not address previous pension injustices, including the persistence of a gender pension gap and the situation experienced by previous members of the plumbers’ pension scheme—like the hon. Member for Gordon (Richard Thomson), I am a member of the APPG and have affected constituents. I hope that those situations will be looked at further in Committee.