Clause 68
Pensions Bill
9:30 am
Andrew Selous (Shadow Minister, Work & Pensions; South West Bedfordshire, Conservative)
I beg to move amendment No. 158, in clause 68, page 32, line 4, at end insert—
‘(1A) In section 1 (meaning of “stakeholder pension scheme”), omit subsections (7) and (8).’.
Let me welcome you back to the Chair, Sir Nicholas. We also welcome my hon. Friend the Member for Rochford and Southend, East to the Committee. I would like to put on record all Members’ sympathy for the Minister for Pensions Reform, who is not with us due to a family bereavement.
Clause 68 brings in necessary reforms to stakeholder pension schemes, principally to remove the statutory duty on employers to have a designated stakeholder pension scheme in the light of the introduction of personal accounts though the Bill. We support what clause 68 seeks to do because the pensions landscape will have moved on and stakeholder pension schemes will not be necessary in the way that they once were.
Genuine and understandable concerns have been expressed, however, about what will happen to existing stakeholder schemes, particularly in 2017. In the early evidence sessions of the Committee, Tim Jones and the Minister for Pensions Reform both said they were keen to look at whether the personal accounts trustee corporation would be able to allow transfers out of personal accounts, probably in around 2017. We understand the reason for that. One very good reason is that there could be hundreds of thousands of very small personal account pots, perhaps belonging to foreign workers who have been in this country for a matter of months and have returned to their home country and are never going to come back. The personal accounts trustee corporation will be forced to maintain those small accounts for all time if there is not the option to transfer out.
The concern is that these transfers-out may end up being pushed on to the existing stakeholder pension schemes because current legislation, which is not being rescinded, prevents the winding down of these stakeholder pension schemes, even if the stakeholder provider might not want to keep them going. Clause 68 would force stakeholder pension schemes to accept transfers-in of possibly large numbers of very small amounts. There is concern that this may lead to an increase in the charges stakeholder pension schemes.
Such charges were initially brought in and capped at 1.5 per cent. for an initial 10-year period. I am sure the Minister will tell us this when he responds, but my understanding is that 2017, when we are looking at the potential for transferring out, will be beyond that 10-year period in most cases. Therefore, the stakeholder schemes will have the option—and indeed they might be forced—to increase charges to cope with the administration of perhaps a very large number of small pension accounts being forcibly transferred in.
This could have serious consequences for the existing members of those stakeholder pension schemes, who might find their returns to be less than expected because of higher levels of charges being imposed on them because of these transfers-in, which clause 68 currently allows.