My Lords, I take this opportunity to thank all noble Lords for the positive engagement and feedback they have provided over the past couple of weeks and since the Bill was originally introduced in October last year. From the conversations I have had with many noble Lords, I believe there is a genuine desire across the House to tackle the matters addressed by the Bill. It is my sincere hope that we can continue to engage in this way as the Bill progresses through this House. Should any noble Lord wish to discuss any part of the Bill between its stages, our doors are always open.
It is unlikely to have escaped noble Lords’ attention that this is not a small Bill, partly because we have also legislated for Northern Ireland. Now there is a functioning Assembly again we have been in contact with Northern Ireland Ministers to establish whether they are content in principle for Westminster to legislate on their behalf in this Bill. I believe it is important to ensure that the people of Northern Ireland also benefit from the changes and safeguards put in place for the rest of Great Britain.
Although the Evening Standard referred to the Bill in October as a morsel of “fresh legislative meat,” it is far more than that. It has been built on consensus across the pensions community and political spectrum and has consumer protection at its heart. It focuses on a range of key measures that are a priority today, not just for those who are already receiving a pension, but for record numbers who are now saving for their retirement. This Bill will help people plan for the future, provide simpler oversight of pensions savings and protect people’s savings by providing greater powers for the Pensions Regulator to tackle irresponsible management of private pension schemes.
Before I talk a little more about the measures in this Bill and why they are so important, I would like to touch on delegated powers. I know from talking to noble Lords that there are some concerns about the number of delegated powers in the Bill and how they may be used. There are a number of good reasons why we have structured the Bill the way we have, and we will respond fully to any concerns the DPRRC may have when we reply to its report. However, I have listened to what your Lordships have said to me and have asked my officials to prepare illustrative regulations under Part 1 before we reach Committee. I hope that they will help your Lordships understand the way delegated powers in that part are intended to be used and the limitations in pre-empting their use.
The measures in this Bill build on the reforms of the past 10 years, and I shall take a few moments of noble Lords’ time to explain how. On Part 1, which relates to collective defined contribution schemes, which are known as CDCs, current UK pensions law defines all private pension benefits as either money purchase, where investment and longevity risks are shouldered by the individual member, or as non-money purchase, where all risks are born by the sponsor, usually an employer or insurer. Current pensions legislation means that new types of pension schemes have to fit within those two definitions. This stifles innovation and prohibits new kinds of risk sharing.
Part 1 sets out the regulatory framework for new collective money purchase schemes. These are more commonly known as collective defined contribution schemes or CDCs. In developing these measures, I welcome the cross-party and external stakeholder support for the methodology and the legislative approach that the Government have used. The measures facilitate, and build upon, the initiative between the Royal Mail and the Communication Workers Union which have concluded that a CDC scheme would best suit their needs for the future. I put on the record our thanks for the constructive and supportive way in which both Royal Mail and the Communication Workers Union have engaged in developing these measures. It is right for us to support employers and unions working together to bring about such a positive outcome. The scheme will be the first of its type in the UK, and it offers a model for other employers and other workforces to launch their own schemes.
There has been some interest in CDC provision from other unions and large commercial master trusts. However, we believe that this new type of provision and the supporting regulatory regime need time to bed in before a decision is made on whether multiple employer, sector-specific or commercial CDC provision should be facilitated. Nevertheless, the Bill provides for us to adapt the legislation, where appropriate, to extend the framework in the future.
These new schemes will enable contributions to be pooled and invested to give members a target benefit level. They aim to deliver for members an income in retirement without the high cost of guarantees and without placing unpredictable future liabilities on the employer, and they will give employers new options for managing their pension obligations.
In its press release on the Bill’s introduction in October, the Pensions and Lifetime Savings Association said that CDC schemes
“offer employers increased flexibility and choice in how they structure schemes to benefit savers.”
Further, Hymans Robertson commented:
“Providing a framework for collective money purchase schemes … will offer the clear benefits that can be derived from pooling of these risks across individuals.”
I hope that we can all welcome these measures, which enable employers and workers to come together in a way that will benefit both.
I move on to CDCs in Northern Ireland and shall focus briefly on Part 2 of the Bill. As noble Lords know, private pensions are a devolved matter for Northern Ireland. Throughout the development of this Bill, Ministers and officials have worked closely with the Northern Ireland Office and the Department for Communities, Northern Ireland. In the absence of an Assembly, the Department for Communities has asked the UK Parliament to include provisions for Northern Ireland in the Bill. This will ensure regulatory alignment across the UK and parity for pension schemes and their members in Northern Ireland. Part 2 and other clauses embedded in each part of the Bill therefore make provision for corresponding Northern Ireland legislation.
Moving on to the Pensions Regulator, several recent high-profile insolvency cases in relation to defined benefit pension schemes have weakened confidence in the pensions system. They have highlighted that the existing regulatory regime is not always an effective deterrent to serious wrongdoing. Doing nothing will mean that more people are likely to be affected by employers not taking their responsibilities seriously, and the existing fines that the Pensions Regulator can pursue are an ineffective deterrent to more serious wrongdoing. In order to amend the existing powers and provide the regulator with new powers, changes and additions must be made through primary legislation. Not doing so will mean that the current gaps and problems continue to exist.
Part 3 addresses that and fulfils a commitment that we made in 2017. It places a requirement on those responsible for corporate transactions to set out in a statement how they will mitigate any adverse effects on the pension scheme. The measures will improve the regulator’s information-gathering powers, enabling it to enter a wider range of premises and require individuals to attend an interview. This will boost the regulator’s ability to ensure that those responsible comply with pensions legislation. There will also be new civil and criminal sanctions to punish those who wilfully or recklessly harm their pension scheme, including a maximum seven-year prison sentence and a civil penalty of up to £1 million.
I know that some noble Lords have expressed concern about the adequacy of the sentences outlined in the Bill and have advocated even tougher ones. We have set the maximum level of the financial penalty at a level similar to equivalent sanctions in the financial sector for financial crimes. However, we also recognise that there might be a need to increase this maximum amount in the future to ensure that the financial penalty continues to provide suitable levels of deterrence and punishment. The Bill therefore includes a regulation-making power enabling the maximum amount of the financial penalty to be increased if needed in the future.
Charles Counsell, the chief executive of the Pensions Regulator, said of these measures:
“Fines and criminal sanctions, combined with improved avoidance powers, have the potential to act as a strong deterrent in respect of behaviour that represents a risk to savers.”
The Pensions and Lifetime Savings Association was also clear, saying:
“While most pension schemes are well-run and managed, high-profile cases like Carillion and BHS damage confidence in the pensions system. We support new powers for the Pensions Regulator to take action sooner, impose significant fines, and have more oversight of risky corporate transactions in order to prevent reckless behaviour and protect savers’ hard-earned money.”
Cumulatively, the improvements to the regulator’s powers outlined in this Bill will help the regulator to meet its aim of being “clearer, quicker, and tougher”. In turn, this will afford increased protection for defined benefit scheme members’ savings.
Part 4 of the Bill delivers on our commitment to provide for pensions dashboards. Many savers worry that they do not have adequate information or knowledge to enable them to plan and make decisions about their saving for retirement. This can be exacerbated by the fact that it can be hard for savers to keep track of pension savings where they have had multiple jobs. Dashboards will provide an online service allowing people to view all their pension information—including state pension—in a single place.
The measures in this Bill set out the legislative framework to define what a qualifying dashboard service is, along with requirements that must be met by potential dashboard providers. Importantly, they will compel occupational, personal and stakeholder pension schemes to present an individual’s pension information to them through a qualifying dashboard service. To make sure that they do, the measures also introduce compliance powers for enforcement of this requirement through the Financial Conduct Authority and the Pensions Regulator. Finally, Part 4 also provides for the Money and Pensions Service to oversee the development of the dashboard infrastructure.
As I said earlier, there is broad support for pensions dashboards. For example, Aegon has commented:
“Millions of individuals have multiple pensions in which they’ve built up benefits over their working lives and Pension Dashboards will for the first time allow them to see all of these, online at the touch of a button. This offers a huge opportunity to help millions of individuals better engage with their retirement planning”.
I turn now to Part 5 of the Bill. The measures within this part cover four important areas. Clause 123 and Schedule 10 relate to defined benefit scheme funding. The defined benefit landscape is changing, with many schemes now closed to new members and future accrual. As more schemes reach maturity, with fewer contributing members and more members receiving their pension benefits, it is important that we act now to ensure that trustees manage their funding and investment in a way that is appropriate to the specific characteristics of their scheme.
The measures in the Bill will enable the Pensions Regulator to enforce clearer scheme funding standards in defined benefit pension schemes. They will support the regulator’s risk-based regulatory approach by introducing a requirement for trustees to have a funding and investment strategy for the scheme, and for the statutory funding objective to be achieved consistently with this strategy. The measures also require trustees to explain their approach to the regulator in a statement of strategy. The measures can require trustees to send this statement to the regulator at such occasions and intervals as may be prescribed.
These provisions seek to help trustees to improve their scheme funding and investment decisions, and to better manage potential risk. They enable the regulator to take action more effectively to protect members’ pensions, mitigate risks to the Pension Protection Fund, and take account of the sustainable growth of the employer.
Clause 124 introduces new powers to protect individuals’ pensions savings by helping trustees to prevent transfers to fraudulent schemes through restricting the statutory right to transfer a pension. This will protect members from pension scams by helping trustees of occupational pension schemes to ensure that transfers of pension savings are made to safe, not fraudulent, schemes.
Clause 125 rectifies some of the unintended outcomes of a High Court judgment. It retrospectively restores the policy intent with regard to the calculation of Pension Protection Fund compensation payments. The measure will provide statutory cover for past payments and will ensure that there is no question of vulnerable members being asked to repay any overpayments.
Clause 126 updates the definition of “administration charge” to make clear which costs are in scope of the overarching definition contained in the Pensions Act 2014.
I beg to move.
My Lords, I thank the Minister for her introduction of the Bill. It is her first pension Bill and we wish her well. I welcome the open approach that she has signified and the focus already on delegated powers, which I am sure we will discuss extensively.
As we have heard, the Bill focuses on three significant areas: a framework for setting up, operating and regulating “collective money purchase” schemes, otherwise known as collective defined contribution pensions or CDC; enhanced powers for the pensions regulator; and pensions dashboards. As we have heard, Part 1 relates to England, Scotland and Wales and Part 2 to Northern Ireland. We have agreed to consider these in parallel.
My noble friend Lady Drake will focus in particular on matters relating to the dashboard while my noble friend Lady Sherlock will focus on the powers of the regulator. On the former, we know that the move away from DB schemes has been accompanied by a growing tendency for individuals to lose track of their pension pots through moving house or changing jobs. That is why we support the dashboard, but with a preference for it to be a single publicly funded one. On the latter, we are registering concerns about the breadth of Clause 107 and will wish to pursue them in Committee. Otherwise, we are broadly in agreement with the measures in the Bill. I acknowledge the close engagement of my colleague Jack Dromey MP with the Royal Mail and the CWU in formulating the CDC proposals.
In concentrating on the main provisions, though, we should not overlook the measures in Part 5, which the Minister referred to and which also have our support. These variously provide for amendments to DB scheme funding to help improve decision-making and governance across the sector. This runs from the 2018 White Paper, which concluded that DB pension schemes were well managed on average, and we agree with the proposal for a DB funding code. Although active membership of DB schemes continues to fall—in the private sector it now has some 500,000 members, but with assets of £1.5 trillion—we should not write them off. However, we understand that the Pensions Minister, Guy Opperman, has made it clear that he would not support CDC schemes being a route to enable the closure of DB schemes. How is this secured in the Bill, if indeed it is? How many more CDC schemes, if any, are currently being considered? I take it from her introduction that the answer should be none, but it would be good to have that on the record.
So we have DB, DC and now CDC schemes. How can an individual best save in a cost-effective manner for a predictable income in retirement? An individual would of course typically not know for how long they might live, but they should know with greater accuracy how long on average a group of people might live. So finding ways of harnessing collective arrangements to allow the sharing of longevity risk is one way forward, and that applies to CDC.
Much of our consideration of pensions policy provisions hitherto has been a binary matter, with choices conducted between DB and DC schemes. On the one hand, the investment, longevity and inflation risk are with the sponsoring employer, and on the other, they are with the individual member until on annuitisation they are shared more widely. Annuities are a collective risk through contracted insurance contracts, but these have become very expensive.
UK legislation now allows for a different approach. The Pension Schemes Act 2015 enables sharing of risks by individual members through payment of collective benefits, the value of which could vary. However, the Government have chosen not to implement the 2015 provisions but, as has been explained, to bring forward in the Bill a more bespoke regime. The overlapping provisions are repealed. Can the Minister tell us what future plans there are, if any, for the remaining 2015 Bill provisions that have not been repealed? There may be none.
The impetus for the provisions in the Bill has come from Royal Mail and the CWU, which should be congratulated on their collaboration and determination. This development of course came in the circumstance of decisions to close the DB scheme. As we know, the structure of CDC involves pensions being set by reference to targets determined by actuaries. It is argued that CDC arrangements typically have better outcomes. This is in part due to economies of scale on investment and enabling a timeline on investment beyond the individual member. It is of course a feature of CDC that there are no guarantees on pension levels paid out on assets of the scheme. As the Minister said, there is no recourse to a sponsoring employer. Indeed, pension levels set by actuarially determined targets rather than binding targets require a robust communications effort to ensure that Royal Mail employees, in this case, are fully aware of what this all means.
However, numerous studies by academics and practitioners have concluded that CDC can give better outcomes when compared to DC plus either draw-down or annuitisation. We take some comfort from the fact that the CDC concept has the support, we understand, of both the CBI and the TUC. While novel in the UK, it has been operated by the Dutch and Danish systems, albeit not on identical terms, for a number of years.
As has been pointed out, and indeed acknowledged by the Minister, this is very much a framework Bill, with much detail to be filled in by regulations. These will have to cover extensive issues, from financing, fit and proper persons, scheme design, sustainability, actuarial valuations and much more. There is a need to understand the valuation timetable and the gap between asset valuation and changes to pensions to be paid. If there is not to be a buffer, what alternative headroom measures are envisaged?
What can the Minister tell us about the tax regime which will operate and how auto-enrolment will work? Will it require changes to primary legislation? In relation to the SIs and the information that will come forward, can the Minister tell us when this will be available? I think she said by Committee, but that is actually very soon. I wonder how much detail we will get if that is the timeframe. We would certainly welcome it by Committee, but it is often more usual to get it by Report. However, I do not want to deter the Minister or suggest that she spends her time on other matters.
One of the criticisms raised about CDCs is that they invariably generate intergenerational unfairness, with older members doing better at the expense of younger members. How does the Minister respond to that? As is often the case with pensions legislation, it is the things left undone, just as much as those included, on which judgments will be made.
A number of commentators have expressed disappointment that the opportunity has not been taken to implement the changes to auto-enrolment recommended by the 2017 review: namely, to extend the application to workers aged 18, and to remove the qualifying earnings deduction and the earnings threshold. As NOW: Pensions points out, all three of these would help to narrow the gender pensions gap. Is it not time that we got to grips with the self-employed issue?
I am told that the Tory party manifesto, which I have not read, contained a promise to sort out the net pay anomaly. I would welcome that, but do not know whether the Minister has an update on the timeframe. I acknowledge the efforts of a group of professionals, prompted by the noble Baroness, Lady Altmann, in engaging with HMRC to that end.
One further disappointment is the lack of a consolidator regime. It is suggested that superfunds will provide a new and affordable option to enable schemes to consolidate—although, like CDCs, they would require a robust authorisation and supervisory regime. We trust that the Minister, Mr Opperman, has not spent all his capital on CDCs.
My Lords, for the sake of transparency, I should record that one of my children works for the Money and Pensions Service and that I have not had, nor will I have, any discussions about any of the matters covered by the Bill with her—or, probably, about anything else.
We welcome the Bill and the Minister’s openness and willingness to engage. We congratulate the Government on their engagement with stakeholders; we especially congratulate the Royal Mail and the CWU on their successful advocacy for CDC schemes. We think it a good thing that the Bill makes general provision for these schemes, rather than for only a bespoke Royal Mail scheme. However, we have some serious reservations about the approach taken by the Bill in several key areas. In large part, especially in Part 1, this is actually a skeleton Bill. Let me take CDCs or, as the Bill now calls them, CMPB schemes. As I said, we support the general idea enthusiastically but have serious concerns about how the Bill sets things out.
Our greatest concern is the number and scope of the powers to make regulations given to the Secretary of State. Part 1 runs to 41 pages. In these 41 pages, I counted 39 separate instances of giving the Secretary of State powers to make delegated legislation. I recognise that pensions legislation is often necessarily complex and that secondary legislation plays a vital role. But it is very difficult to have a realistic view of the Bill’s effects or scrutinise it effectively if we have no detail at all of this secondary legislation. Perhaps the Minister can explain why it has not been possible to provide drafts of these regulations. After all, the Bill was first presented to Parliament last October.
I also draw the Minister’s attention to the apparently random use of affirmative and negative procedures for the regulation-making powers. Can she give the House guidance on the principles underlying the choice of procedure? In particular, can she explain why, on numerous occasions, the first use of a regulatory power is subject to the affirmative procedure but all subsequent uses of the same power are subject only to the negative procedure?
Some of these powers are very wide. For example, Clause 28(3) on page 18 seems to allow the Secretary of State to define significant events entirely as he pleases. In Clause 18, on the calculation of benefits, subsection (4) seems to give power to change the very substance of any CMPB scheme. Is this to do with the need to safeguard intergenerational fairness within the scheme? If not, what is it for, how is intergenerational fairness to be protected and why does such provision not appear to be in the Bill? What is to prevent transfers out of the older members with large sums, to the clear detriment of their younger colleagues who remain? Does not the absence of a requirement for a capital buffer make this situation even worse, as the ABI’s excellent briefing note suggests?
In the context of powers given to make regulations, I would highlight subsections (6) and (7) of Clause 36, which appear to give the Minister unlimited discretion on how schemes may be restructured in the case of continuity option 1, while Clause 47(5) appears to be a fully-grown, entirely naked Henry VIII power. I am sure that the House will want to consider this provision carefully. Finally on delegated powers, we will want to discuss Clause 51, especially subsection (2), which again seems to confer unfettered power. We will also want to discuss Clause 31, dealing with triggering events, especially as it might concern eventually the withdrawal of a significant employer from a multi-employer scheme.
I am sorry if all this has sounded rather negative, as I am sure it has. Perhaps I should conclude my remarks on Part 1 by saying again that we enthusiastically support the idea of a CMPB scheme. We are, however, very concerned about the number and scope of the delegated powers that Part 1 contains and the absence of any drafts. I am grateful to the Minister for his commitment to provide the House with notes on what all these SIs hope to achieve, but that is not the same as being able to scrutinise draft legislation. I hope that we will have the opportunity to meet between now and Committee to discuss these issues further.
Part 3 deals with the Pensions Regulator, who I see was busy this morning exercising its powers by fining its fellow regulator, the FCA—only £2,000. We welcome the increase in the scope and strength of the regulator’s powers. My only general comment is to wonder whether the proposed penalties are sufficiently large to provide effective deterrence and to change behaviour. Clause 112, in inserting new Section 77A into the Pensions Act 2004, specifies a maximum penalty of £50,000 for failure to comply with Sections 72 to 75 of that Act. How was this limit arrived at? I think I heard the Minister explain that it was to parallel a limit elsewhere. What consultation or modelling took place to determine whether it would have effect?
In Clause 115, there is a new £1 million upper bound on penalties related to Section 88 of the Pensions Act 2004. The same clause, as the Minister remarked, gives the Secretary of State the power by regulation to increase this amount. No new upper bound is specified in the Bill. Is it wise to give such unlimited and potentially draconian powers to the Secretary of State? In any case, the House will want to know how the original limit of £1 million was set and what consultation or modelling took place. The provision to raise the £1 million limit without restriction and without further scrutiny not only seems rather dangerous but suggests a clear lack of confidence that the original limit will work. I can see why that might be so, given the resources of some of those on whom the penalty may fall, but surely it would be better to have in the Bill an original limit that we thought might work. We will want to come back to this in Committee, but I would be grateful for the Minister’s thoughts on the matter.
I also note that the noble Lord, Lord Balfe, who I do not think is in his place, has a Private Member’s Bill which proposes among other things to require the consent of pensions trustees before dividends are paid. I hope we may see amendments in Committee that allow us to discuss what may be an interesting proposal.
I now turn to Part 4, dealing with the pensions dashboards. I note that there is an obvious and obviously increasing need to provide better information and guidance about pensions, particularly pension draw-downs. This need has grown substantially since we last discussed it in the Chamber during the passage of the Financial Guidance and Claims Bill. Since then, FCA data suggests that over 645,000 pensions have been accessed, with only 15% believed to have had a Pension Wise appointment before accessing their benefits. More than half of the pensions accessed by savers for the first time between April 2018 and March 2019 saw the saver withdraw the maximum amount. This has all the hallmarks of a not-so-slow motion disaster, and the best remedy is more information, more advice and more guidance.
We agree that the pensions dashboard is a very important part of this, especially since auto-enrolment has brought an additional 10 million people into saving for a pension and, alarmingly, one in five adults admits to having lost track of a pension pot. The latest PPI research indicates that £19 billion has gone astray in this way. The dashboard, or dashboards, will help relocate this huge amount.
The question in my mind is whether it should be “dashboard” singular or “dashboards” plural. Should it be a dashboard provided only by MaPS, or should it be many dashboards, provided by MaPS and other qualified organisations? On the assumption that there will be very tight restrictions on how dashboard information is presented, and that future projections will not be allowed much variation, I see the merit in multiple dashboards. It seems to me that the key argument is one of reach. Allowing many dashboards will get more people to take notice and use dashboards. Restricting dashboards to MaPS risks a much smaller take-up. This has an analogue in Pension Wise, a superb service taken up historically by far too few people.
But there is more to helping the consumer than the dashboard. The increase in scams and unwise transfers connected to pension draw-downs is of urgent and increasing concern. Last week, the Times reported that the FCA had written to financial advisers warning against unsafe recommendations of transfers out of DB schemes, and last Saturday the front-page headline in the FT read:
“FCA urged to probe pension … advice” with the sub-heading
“fears over fresh mis-selling scandal”.
The article noted that the regulator planned to write to 1,841 financial advisers about “potential harm” in their DB transfer advice. That is 76% of all advisory firms.
Noble Lords may remember that I, the noble Lord, Lord McKenzie, the noble Earl, Lord Kinnoull, and the noble Baroness, Lady Altmann, proposed a simple default guidance draw-down mechanism, Amendment 24, during Report stage of the Financial Guidance and Claims Bill. The House passed this amendment by a majority of 80 or so. The Commons substituted its own version, which we accepted, perhaps a little reluctantly. This Commons version is now Sections 18 and 19 of the Act. They delegate the design of a “nudge” to the FCA, the industry, the DWP and MaPS.
As a result, there are now in the field two pilot tests. Both have the aim of delivering a nudge to guidance at the point at which someone wishes to access their pension pot, with a view to making receiving guidance a social norm. The trials will run for three months or so, and MaPS has said that it will publish a report on the outcome in spring 2020. This is quite a long time from October 2017, when we passed Amendment 24. Could I encourage the Minister to see whether this process could be accelerated? Government definitions of spring have been known to extend to July, sometimes in the same year.
More importantly, can the Minister say how the results of the trial will be judged? I do not mean one trial against the other; what absolute levels of take-up or behavioural change will be considered large enough to trigger a full-scale national rollout? I note that the Long Title to this Bill is simply to
“Make provision about pension schemes.”
This seems to me to allow scope for the reintroduction of Amendment 24 if the trials fail to produce the right result. This is certainly something we will want to consider as the Bill proceeds.
Again, we very much support the intentions of this Bill. I stress again how important we think it is that we see the draft regulations for Part 1 before Committee.
My Lords, I too generally welcome the Bill, which makes a number of improvements to the pensions landscape. However, there are a few areas that I would like to raise.
I welcome the introduction of the new class of pensions: collective money purchase schemes, or CDCs. The ability to pool risks across members should bring real benefits, including potentially higher pensions than current defined contribution schemes can produce. However, I would strike a note of caution. I fear that these schemes are being seen as a replacement for defined benefit schemes, which they most emphatically are not.
First, as the noble Lord, Lord McKenzie, said, we must clearly understand that CDC schemes do not guarantee any particular level of pension but merely provide a target. More importantly, even once you start to receive your pension, the amounts paid each year are still not guaranteed and may go down as well as up. That is a fundamental difference compared with defined benefit schemes and annuities purchased under defined contribution schemes. Retirees will expect their pension to at least grow in line with inflation, but the experience in the Netherlands shows that that is not always the case. Indeed, none of the five largest Dutch schemes has managed to keep up with inflation over the last decade, and three of them have made cuts in nominal terms to the level of benefits. If we are to avoid scandal, this risk must be clearly communicated, with very clear health warnings when people sign up to a CDC, in any communication that includes a forecast, and when people are nearing retirement, so that they understand the risk that their pension is not a fixed and growing amount.
Secondly, the principal benefits from CDC schemes arise, as we have heard, from the pooling of risk. However, when risk is shared, there are inevitably winners and losers. As the noble Lord, Lord Sharkey, mentioned, it is important to ensure that we do not create further intergenerational unfairness. Because employers have no obligation to increase funding, a CDC scheme has only two ways of reacting to lower returns: cutting benefits for existing pensioners or raising contribution levels for employees, or a combination of both. It is always easier to push the problem into the future. This creates the risk that one group is favoured over another. Trustees and the regulator will need to ensure that risks and returns are not skewed against the younger generation to the benefit of pensioners, or indeed the other way around. It would be good if the Minister could comment on these issues.
The next part of the Bill strengthens the powers of the Pensions Regulator, especially in relation to corporate transactions, which is greatly to be welcomed. However, I cannot help feeling that there is a missed opportunity to do more here. Recent high-profile failures, such as Carillion and BHS, went under with significant pension fund deficits after shareholders had taken substantial sums out of the companies; for example, Carillion consistently paid out dividends in the range of £50 million to £75 million a year, while at the same time the pension deficit grew from less than £100 million to over £600 million. In the year to March 2018, FTSE 100 companies with DB schemes paid £84 billion in dividends, compared with £8.2 billion repairing their deficits—a ratio of over 10 times. For FTSE 350 companies with DB schemes, the median ratio of dividends to deficit reduction contributions is even higher, at 14.2 times, and is growing. The Pensions Regulator itself has said:
“We are concerned about the growing disparity between dividend growth and stable deficit reduction payments. Recent corporate failures have highlighted the risk of long recovery plans while payments to shareholders are excessive relative to deficit repair contributions.”
It would be tempting simply to prevent companies with pension fund deficits from paying dividends at all, but commercial reality is not that simple. Stopping a company paying dividends might actually make its financial position less stable as markets react badly and the cost of capital increases. Deficits can be short-term, and the payment of a dividend may have no material adverse impact on the position of the pension fund. We should also remember where dividends go; much goes into pension funds. There is a balance to find here. However, we could move that balance to strengthen the position of pension funds relative to shareholder returns. Clause 103 in Part 3 goes some way in this direction, but we could do more to safeguard scheme members.
The noble Lord, Lord Sharkey, mentioned the Bill that the noble Lord, Lord Balfe, introduced to make it a requirement for trustees and the regulator to approve the distribution of dividends, which I support. This important protection could easily be covered in this Bill, at least in part, simply by including the declaration of a dividend as a notifiable event under Clause 109, to be treated in the same way as any other relevant corporate transaction. I would welcome the thoughts of the Minister on this.
Related to this, we have heard about delegated powers in this Bill, but one that jumps out at me, where the Bill and the Explanatory Memorandum are somewhat less than clear, is what will actually constitute a notifiable event in Clause 109. The Explanatory Notes refer simply to,
“circumstances to be prescribed by regulations.”
It seems odd that such an important, even headline, element of the Bill is left completely to be dealt with by future regulation. It would clearly be better to put what is intended into the Bill. Perhaps the Minister could clarify what notifiable events will in fact include and why that cannot be included in the Bill. At least, could the regulations be published before Committee, as with those from Part 1, which she mentioned earlier?
My next point relates to pensions dashboards. I wholeheartedly welcome them. As someone who is rapidly approaching his crucial 55th birthday and trying to work out what to do about pension funds from various past employers, having all the information in one place will be of great benefit. In fact, I am probably one of the one in five to whom the noble Lord, Lord Sharkey, referred. My fear, however, is that those funds that are oldest and hardest to find will be the very ones that do not end up on the dashboard. How do the Government propose to ensure that all funds can be added to dashboards in a reasonable timescale? Also, importantly, will the state pension entitlements be included in the dashboard?
Finally, the Bill makes some welcome changes to transfer rights, but it does not address the important underlying issue of how transfer values themselves are calculated. I greatly recommend an article in the Sunday Times by Louise Cooper on
This chimes with my experience of looking into consolidating a small pension from an old DB scheme. The differences between transfer values and annuity prices are so large that, intuitively, someone must be profiteering here. While the law requires advice to be taken before the transfer of funds over £30,000, there seems to be no legal way to ensure fairness in respect of the transfer valuation itself—how it is calculated. I imagine that consumers may be losing out substantially. It would be good to hear the Minister’s thoughts on that as well.
My Lords, I declare my interest as set out in the register of interests and warmly welcome my noble friend to the Front Bench on the Bill. I certainly agree that this is far more than a morsel: whoever called it that had not quite seen its scale. I warmly welcome it.
My remarks will be mostly framed from the perspective of members of pension schemes, customers of pension providers, and their interests, being future pensioners. Part 1 on collective defined contribution, is adding a new type of pension scheme with the concept of a target pension. As the noble Lords, Lord McKenzie and Lord Sharkey, mentioned, it is important that people realise that this is not one of the two current systems. It is not a money purchase system, where there is no guaranteed outcome and members shoulder all the investment risk and costs, whatever the final outcome. Nor is it a non-money purchase scheme, where there is some element of guarantee: either the traditional defined benefit with an assured lifetime pension income—although that can be reduced in the PPF—or the assurance of a lump sum payment, where employers bear some of the risk and the costs, beyond just their contributions.
The aim of this scheme is to ensure that employers know the limits of their liabilities. That means that the huge challenge with the CMPSs, as they will be called—we have added another acronym to our arsenal—will be communications to explain the lack of security that these schemes will provide.
The shouldering of investment risk and the intergenerational risks is vital for us to help members to understand. As with the Netherlands and Denmark, as the noble Lord, Lord Vaux, mentioned, CDC pensions can reduce when in payment. The risk is still on the worker. Although the scheme will bear the cost of the actuarial analyses, and will look after the management of investment choices and the decumulation options for some members if they stay, there are still residual risks. The Bill is not yet sufficiently robust on what regulatory protection there should be for members’ money. Of course, Royal Mail, which is expected to be the first scheme using this CDC structure, may be a powerful and well-resourced employer.
I am pleased that Clause 7 requires the authorisation of these schemes and that Clauses 11 to 17 suggest that there will be criteria but, as other noble Lords have said, we need to know what those criteria are and what attention will be paid to a situation where authorisation is withdrawn, as proposed in Clause 26. We also need to know what provisions we need to put in place at this stage if the scheme needs to wind up and members’ pensions must be raided to cover the costs of the wind-up, to make sure that members do not end up with no pension—as could happen in theory, although I hope not in practice. We need some more robust underpinning and assets set aside to cover the cost of a wind-up, or some kind of insurance could be embedded in the Pension Protection Fund.
Having seen this before, I know that there are risks. So what risk margins will be retained for future market falls? This is particularly relevant to Clause 25 where members will apparently have a right to transfer their benefits, but these are not accrued pension rights. They do not have accrued rights to an income. So what reserving requirements and risk margins need to be applied to members who want to transfer out on the basis of their rights to a particular portion of the fund today, which may then leave future members and those who do not transfer out—those who are trusting the scheme, if you like—at risk of having reduced pensions later on because those who transfer out today took more than they would ultimately have been entitled to?
Part 3 deals with the regulator’s powers. I fully support the idea of giving the regulator extra powers—its statutory duty to protect scheme benefits is certainly important—such as the power to intervene sooner and the power to demand information. At the moment, the regulator can ask for information but it must use its powers before it can require that, so I warmly welcome this measure.
The aim is to focus on forcing employers to fund these schemes in full but, as we have heard from the noble Lord, Lord Vaux, and others, the annuity cost of these schemes are way beyond the ongoing costs of running them. So the ongoing funding and the technical provisions of these schemes are well below what would be required in buying out with an annuity. Even certain billionaires have been allowed to walk away without meeting Section 75 debt. Just paying an initial starting pension means that the future pensions will be lower, which recognises some of the problems that exist in the annuity market today as a result of quantitative easing and its impact on the cost of buying so-called secure or risk-free long-term assets.
I support the aims, but perhaps my noble friend will consider whether we need to look at the issue of Section 75 debt as well because it is imposing draconian costs. I want particularly to raise the issue of the plumbing pension scheme. In this case, employers are being asked to pay money they do not have without selling their own homes and losing everything they have built up over their entire lives in order to fund Section 75 debts for an event that they were never warned about, which is their retirement and which apparently crystallised these debts, and yet the scheme is supposedly fully funded. There has been no deficit recovery and all the dues have been paid. I urge my noble friend to facilitate a meeting to discuss this issue and consider whether some of these problems can be dealt with in the Bill.
I fully support the aim of having a pensions dashboard, but I fear that the Government have severely underestimated the challenge facing the Money and Pensions Service in delivering any kind of comprehensive pensions dashboard. It needs to include charges and the information that members would actually like to see, as called for by Which?, but the Bill seems to imply that the Government believe that the existing regulatory framework will provide appropriate consumer protection. I have serious concerns about that. There are more than 12 pension regimes with different subsets of those regimes, legacy schemes which have guaranteed annuity rates, protected tax-free cash and death benefits. All of these need to be identified on a dashboard before members decide whether they want to transfer money or consolidate their benefits. We need to make provision for that.
There are masses of manual records in the depths of life assurance companies and pensions administrators, so I fear that the powerful financial institutions may not wholly support the dashboard, especially those which have bought closed books of past pensions. The cost of transferring millions of partial manual records on to a platform on an electronic database has not been adequately appreciated. I would therefore welcome my noble friend asking her department to consider mandating the simple statements that are currently being consulted on. These could be sent out to everyone in a standard format as the very minimum requirement to facilitate a comprehensive dashboard, regardless of whether they are immediately provided in an electronic format. The Money and Pensions Service could work together with the consultation team to make sure that a dashboard-compliant annual statement is produced so that the data can be merged. Of course, any commercial pensions dashboard needs to be properly regulated and authorised. I have severe concerns about this being used as a marketing tool, which may not be in the best interests of the members.
There is also the issue of DB funding and transfer rights, along with the allied problem of scams. Of course we must put duties on trustees and managers to facilitate transfers where members want them, but I support what the noble Lord, Lord Sharkey, was saying about how best to protect those members who have potentially fallen for a scam, which is usually the result of a cold call, against transferring their pensions out of the scheme and then regretting it later. Perhaps we could put conditions on the transfer rights that would ideally trigger an automatic referral to Pension Wise. Its representatives could go through questions with the individual to help identify whether it is likely to be a scam. Or, at the very least, it would require the trustees to ask those questions themselves, which to be fair are not that many, such as, “Are you trying to transfer out as the result of a cold call? Do you know the people who are recommending you to transfer? Do you know anything about the scheme that you want to transfer to?” Those would raise red flags and thus would immediately help to protect members from what we all want to ensure does not happen. We must not forget how many hundreds of billions of pounds of taxpayers’ money is in these pension schemes from the tax relief they receive over the years. That money was given to make sure we do not have problems of having to support poor pensioners.
I implore my noble friend to look at a couple of other issues dear to my heart; I know a number of other noble Lords have alluded to them. Number one is the problem of net pay pension schemes and whether we can put in this Bill a duty on trustees and the regulator to ensure that any member automatically enrolled in a pension scheme is enrolled in one that is suitable for them—in other words, not one that charges the lowest earners 25% extra for their pension, which a net pay pension scheme currently does. Finally, there is an issue with the National Health Service Pension Scheme. It might be worth pursuing whether we can look at putting any of this problem into this Bill to help sort out on the scheme-pays side for the NHS.
I stress that I welcome this Bill. I am delighted that we are looking at all the measures in it; it is a very large piece of legislation. I look forward to hearing from my noble friend and to discussing it further in Committee.
My Lords, I draw attention to my interests in the register. I too welcome this Bill, but I believe that parts need strengthening.
The Pensions Regulator protects pensions from the moral hazard of employers avoiding their responsibilities, but the BHS and Carillion cases raise two questions of public interest to tackle today: is the regulator deploying its existing powers in an effective and timely manner, and are the powers in the regulator’s armoury sufficient to prevent employers avoiding their responsibilities?
The regulator’s recent activities have focused on using and testing the full range of existing powers. This Bill strengthens them—which is welcome—extending when an employer can be required to contribute money into a scheme, and enhancing powers to collect information and sanctioning those that mislead on corporate activities.
During the Work and Pensions Select Committee inquiry into BHS, documents from the regulator revealed that on
Clause 107 introduces new civil and criminal sanctions. I welcome the Government’s intention to address what they describe as plundering by “reckless bosses”. But concerns have been expressed, including by the Association of Pension Lawyers, that a power designed to prevent future BHS and Carillion-type situations has been drawn incredibly widely, such that it could criminalise minor actions or ordinary business activities and expose third parties such as banks and even trade unions to sanctions, giving rise to consequences not properly considered. I certainly support stiffer sanctions, but these concerns should be probed, given the range and credibility of the people expressing them. Will the Government give consideration to the concerns expressed?
Part 5 provides for more enforceable scheme funding standards. One important supporting amendment—referenced by the noble Lord, Lord Vaux—was also captured well by the Government Actuary in evidence to the Work and Pensions Select Committee. The committee’s report said that
“the average ratio of deficit recovery contributions to dividends has declined” over the last five years for FTSE 350 companies, meaning that more than half of these companies paid out
“Ten times more … to shareholders” than to their DB pension scheme—largely due to the significant increase in dividends over the period, without a similar increase in contributions.
Financial technology can deliver a pensions dashboard and make a real difference to savers, finding their lost pots and allowing them to see in one place their total pensions savings, state and private, to assist them in making important decisions. A finder service could search the records of all schemes to identify data matched to an individual, which could be presented to the individual to view, transforming accessibility for more than 22 million people. But public good cannot be traded off against commercial interests. Notwithstanding future government decisions on commercial dashboards, there must be a public good dashboard, the governance, control and ownership of which must be with a public body.
The CEO of the Pensions Regulator appeared to be with me in that view, and he emphasised to the Work and Pensions Select Committee on
“there must be a public dashboard.”
It would be extraordinary if the Government compelled all private, public and state schemes to release the data of over 22 million individuals and £7.6 trillion of pensions assets, when individuals can access their own data only in the commercial marketplace because the Government have denied them access to a safe space in a public good dashboard.
The public are with me on this. Surveys of public attitudes conducted by the Money Advice Service, the DWP, the ABI, ComRes and others all found that the public wanted an accessible public good dashboard, publicly owned, which they would trust more than a commercial dashboard. The DWP feasibility study on dashboards in December 2018 stated that
“evidence would suggest that starting with a single, non-commercial dashboard … is likely to reduce the potential for confusion and help to establish consumer trust.”
In April 2019, in response to the consultation, the Government altered their view and referred to simultaneous testing of commercial dashboards and an openness to further functionality, taking multiple dashboards beyond their initial find and view purpose. The impact assessment states:
“Option 2: Government to legislate: (the preferred option). Government supports the coordination of an industry-led dashboard … This will lead to the creation of dashboard service designed, developed and owned by industry, facilitated by Government”.
This is a remarkable statement. There is no public dashboard mentioned, only a commercially owned pensions “dashboard ecosystem”, with no limit on its functionality. There is a reference tucked away in paragraph 50 to the industry being expected to create a non-commercial dashboard—a loose expectation, undefined.
Equal in importance to ownership is consumer protection. The provisions in Part 4 are far too weak. As Which? argued in its briefing,
“it is absolutely crucial that there are strong regulations in place to prevent potential harm against consumers from the misuse of commercial dashboards by providers. The bill does not go far enough to mitigate against this harm, and should be amended.”
The Bill must establish a high bar for consumer protection at the heart of the dashboard which hardwires the best interests of the savers and the resolution of conflicts of interest in the sole interests of members and beneficiaries. Transactional dashboards should not be allowed without further legislation; they open up a new market, with very significant potential for consumer detriment. We need to understand market and consumer behaviour, with legislation being brought forward before dashboards become transactional.
As has been mentioned, there is also public interest in data standards, the information to be provided, how it is presented, who can hold it and how, and so on. A priority is getting schemes’ basic data fit for release—for many it is not—but demands for further information will come, such as where investments are held and whether they align with the Paris Agreement on climate change.
If the Government compel the release of the data of 20 million to 30 million individuals to commercially owned dashboards, while simultaneously denying the public the right to access their own data through a public good dashboard not owned by the industry, and failing to implement a tough consumer protection regime, then they will fail in their obligation to millions of people. The technology is great and it should be available to people, but in a way that protects their interests.
Efficient ways for workers to share risk are to be welcomed. The Bill allows these collective money purchase schemes to be set up by a single employer or group of connected employers. However, like master trusts, these CMPSs will have to meet a financial sustainability requirement and demonstrate that they have sufficient financial resources to run the scheme for a period of time in the event of a scheme failure, such as employer insolvency and a loss of contributing members, administrative failure or removal of authorisation. As the noble Baroness, Lady Altmann, referenced, it is important to probe how this protection will work and the extent to which the employer who set up the CMP scheme has to financially contribute to the sustainability requirement. This is the issue not of funding the benefits, but of resources to manage a potential failure in a CMP scheme.
I am conscious of the time, so I will be brief. I completely support the noble Baroness, Lady Altmann, in her campaigning on the way the tax system can really disadvantage not only consultants but a large number of low-paid women. I was disappointed that the Bill does not address the gender pension gap. I compliment her on the work she has done, but I want to raise an issue that I keep raising: I will take advantage of my last minute to do so again.
There should be a carer’s credit paid through the social security system towards a private pension, complementing the carer’s credit in the state pension system. Prior to the flat rate state pension introduced in 2016, carers were credited with entitlements in both the first-tier basic state pension and the second-tier state second pension. Now that the second-tier has been totally transferred to the private pension, carer’s credit should not be lost. Prior to 2016, public policy accepted that caring was an economic contribution credited for the first and second-tier pension. Until that crediting is rightly restored, our reforms will have disadvantaged carers.
My Lords, I only very recently decided to speak on the Bill. Unfortunately, due to other commitments, I was unable to attend any of the meetings with the Minister—but that will be forthcoming in due course. But here are my initial thoughts on what I have found out so far as, I suppose, a newcomer to pensions.
I agree with all the Bill’s general intentions, but there are some areas where I do not think it has gone far enough and many where pensioners’ security will depend on regulations that we have very little policy guidance on, or reassurance about, in the Bill. I note that the Minister said that we will have illustrative regulations, but we need the shape of the policy and how far in the future those regulations can or cannot go outlined in the Bill. I hope that, once they are written, something can be adduced from them and reflected backwardly.
Collective money purchase schemes seem entirely sensible for well-known reasons that have already been explained. They enable longevity and other risks to be pooled, and they potentially allow a more consistent investment policy. That is the theory, at least, but it has to be recognised, especially in the potential case of smaller schemes, that the pooled advantages can be undermined by too many transfers out, or even the equivalent of a run by older members. What safeguards are there? Can the Minister say whether this will be kept under watch and count as an “event” to trigger the operation of some safeguards or a continuity plan?
It is clear that a person who has the power to take decisions under the scheme, or a trustee, can intervene to indicate that, for example, the fund should be wound up—but what if they do not give such an indication? How is the regulator to know and intervene; is it only through obtaining valuations and making directions under Clause 23, or are there other mechanisms that make sure that the regulator is well informed?
What is the role of the viability statement in this regard? Is it a specific matter to be reported to the regulator, and, if not, why not? Will schemes be expected to have provisions for lock-in periods or redemption windows? The questions now being asked about investment fund redemptions, following the run on the illiquid Woodford funds, are mirrored here—with the slant, as the noble Lord, Lord Sharkey, and others, have pointed out, that the older generation has the whip hand. I agree very much with the noble Baroness, Lady Altmann, that these new schemes are a halfway house. Something is missing, some kind of capital provision or buffer so that when there is trouble, there is something to call on, rather than seeing those still in the scheme left in the lurch by those old enough to do a runner.
Turning to penalties, I found 20 recitations to do with the new collective scheme, when only the small civil penalties under Section 10 of the Pensions Act 1995 can be invoked. Some of these things deserve greater penalties, especially if done repeatedly or deliberately: for example, not taking actuarial advice; not getting valuations; not carrying out a continuity strategy; not properly dealing with the discharge of liabilities and winding up; or not dealing with directions regarding failures. Seriously, should the maximum fines for what could be pretty egregious omissions really be just £5,000 for an individual or £50,000 for companies?
While researching, I looked at the recent fines levied on the regulator’s website. They were all smaller than the Section 10 maximums. I raised an eyebrow at the FCA pension scheme’s fine, but today’s Times says that the £2,000 fine is the highest possible fine for lack of information to members in a chair’s report. Irrespective of what fine the FCA merited, it is another pretty derisory maximum for what could be a serious lack of information provided to members. These fines are lower than the cost of taking advice on whether you have got your report right. What kind of incentive is it to get your report right?
Elsewhere in the Bill, there are new escalating fines for failing to provide information or allow site inspections. Of course, by that stage things will have got pretty serious, but should the escalating concept be widened for repeat offences and more serious matters related to the viability or stability of a scheme? Early warnings are key, before things get to notifiable or dangerous status. Also, can the Pensions Regulator remove persistent repeat offenders on the basis that they are no longer fit and proper persons? We found out from the FCA’s report on the GRG that removing people as fit and proper was not all that easy, because they put lots of other rules around it that were not necessarily infringed. So what is the situation with the Pensions Regulator and that possibility?
Going up in amounts, of course I note the new £1 million fine that the regulator will be able to apply in what are the worst instances of behaviour around deficit matters in defined benefit schemes, or providing false and misleading information. But this is way too small for all circumstances, given the deficits revealed with BHS—Philip Green eventually put back £363 million of the £571 million deficit, which was just about his dividends, but we are still way off—and £2.6 billion for Carillion. Last year, the UK’s direct benefit pension scheme deficit increased by another £60 billion to £260 billion. Companies with deficits are continuing to increase dividends significantly, without pro-rata repayment of deficit. I, too, welcome the initiative the noble Lord, Lord Balfe, is taking on this matter.
Against that background, £1 million looks like an affordable cost of doing business for larger organisations. I consider that it would be relevant to apply fines that match, for example, a multiple of the unpaid deficit, or based on turnover, such as the fines for offending against the GDPR or competition law. Putting employees’ pensions at risk or raiding the public purse via the Pension Protection Fund is egregious behaviour and deserves no less penalty than those other policy areas where larger fines can be levied. There are precedents beyond financial services, which are behind the game on what fines should be for egregious matters.
I realise that there are new criminal offences and there is always nervousness about them, especially by the people who probably never risk being caught by them. We have to try to make them work against the people we need to catch, but we know how difficult it can be to prove mens rea in the collective decision-making of the corporate environment. Frankly, I think that prosecutors and judges can recognise wrongdoing when they see it and so I do not take so strongly as the noble Baroness, Lady Drake, the cautions in this regard.
Finally, I come to the pensions dashboard. Yes, it is a good idea to have somewhere where you can access all your information. I have already done some of the voluntary ones on platforms where I have got pensions—I have filled things in and got things popping out at the other end—but, in the longer term, there are lots of ideas around these things that we are thinking of. There is the nudge effect that such dashboards can have on encouraging more savings into pensions. Commercial platforms enabling you to act on the nudge may well be more successful than just getting a message to save more somewhere. For example, it may turn out that banks are better placed to nudge regularly as people log-in online to banks more frequently, and there is already the open banking experience to model upon.
The noble Baroness, Lady Drake, is right: we have to take great care when we introduce any kind of transactional dashboard. Even before that, whatever the rules say, once there is a dashboard other people will come along with their dashboard, which may not be a qualifying dashboard. So we have to make sure that we can catch scammers and other dashboards where you catch your own data, because they will not fall within the rules of a non-qualifying platform.
You cannot rely on entities being regulated. We have had plenty of experience of highly regulated entities, such as banks, where wrongdoing has not been caught because the activity itself was not regulated. For example, again with GRG, the FCA report says that it was unable to act against bankers because the activity of commercial lending is unregulated. So the only way to catch perpetrators who in some way abuse the concept of dashboards is for dashboard activity—whatever it is in a wider sense—to be regulated in a widely defined way so that regulators can act. It is just too risky to leave wriggle room with matters as precious as people’s pensions.
My Lords, I wish to make a brief contribution to this Second Reading debate and, like others, I welcome the provisions in the Bill. I wish my noble friend well in piloting it through your Lordships’ House and commend her and her department for the briefing with which they have provided us.
It may be my noble friend’s first pensions Bill but I hope she will not mind if I tell her that I first spoke on a pensions Bill on
“As a generation we have the collective effrontery to insist that our children make sacrifices on our behalf, on a scale that we are not prepared to make on behalf of the elderly today.”—[Official Report, Commons, 18/3/1975; col. 1538.]
I went on:
“If the benefits which she has promised are forthcoming, it is not she whom we ought to thank but the future generations, as yet unborn, who have been committed by her to a level of contributions that we are not prepared to pay ourselves.”
My parting shot at Barbara Castle was:
“I leave the Minister with this thought. How sad it would be if, in order to meet the contributions that future generations will have to make, the retirement age had to be raised to generate the necessary income.”—[Official Report, Commons, 18/3/1975; col. 1540.]
That was an accurate prediction of what has in fact happened.
Forty-four years later, and a beneficiary of that Bill, I want to focus my remarks on Part 4, dealing with the pensions dashboard. Like other noble Lords, I welcome putting this on a statutory footing and placing a requirement for pension schemes to provide information for the dashboard. Most people make inadequate provision for their old age, despite the success of auto-enrolment, and this is particularly true of young people. The excellent briefing by Which? for this debate showed that half of those over 50 and still in employment are not sure of the value of their pension savings, one-third find it difficult to keep track of their pension pots and one-fifth have never checked. The dashboard will bring home to people at the flick of a mouse what their entitlement will be and perhaps cause them to think seriously about whether that will suffice. Perhaps the dashboard might have some options indicating what that individual’s contributions would need to be if they wanted to retire on today’s salary.
I have a few queries, which my noble friend might like to address in a letter if that is more convenient. Over the weekend, I logged on to the Pensions Dashboard Prototype Project, which I found informative, but right at the end it said:
“The industry and government hope to have Pensions Dashboard services ready by 2019.”
That sounds as if folk will already be able to access the service, but they cannot.
Reading the response to the consultation document, we are told:
“Once the supporting infrastructure and consumer protections are in place, and data standards and security are assured, most pension schemes should be ready to provide consumer’s information to them within three to four years.”
Even that rather long timescale is qualified by the words “most” and “should”. This project has been on the stocks for some time, and I wonder whether we really have to wait that long for this. If we do, perhaps somebody might amend the wording on the website as it is seriously misleading.
My second query is about the identity service referred to in Clause 119(3). The government response says:
“Before the pension search can take place, the identity service will authenticate the user to an accepted standard.”
The Explanatory Notes state:
“For example, the regulations may provide that ID verification must be completed before any information is provided”.
As I understand it, that means one has to register with a service such as Verify in order to get the digital key that unlocks access to this new service.
Last year, the NAO issued a very critical report on Verify:
“GDS reported a verification success rate of 48% at the beginning of February 2019, against a 2015 projection of 90%.”
GDS is the Government Digital Service. I tried to access Verify and was rejected by two before I succeeded with the third of the six private sector authenticators. Government support for Verify ends this March, with the hope that the private sector will take over. Is my noble friend satisfied that those who want to access the dashboard will not be deterred by the at times cumbersome and unreliable identity services?
My third query is about the many pension schemes where the widow, widower or partner has benefits when the principal beneficiary dies. Will those “secondary” beneficiaries be able to access their entitlement under the principal’s scheme both before and after the principal has died? If the objective is to give people a good idea of what their pension will be and whether they need to make additional provision, that information is essential if they are to get a complete picture. There may be data protection issues, but I think that this issue needs addressing and I hope that my noble friend will be able to say something about it.
It is not clear—this point was raised by my noble friend Lady Altmann—whether the information will include charges and income projection figures. To be meaningful, both should be included. Presumably, schemes will not be able to make their own heroic assumptions about projections. Can the Minister confirm that there will be a standardised methodology for projections?
Next, equity release is becoming an increasingly important component of retirement planning. A person’s equity might be worth far more than their pension pot and be capable of providing an income stream in retirement. I do not want to suggest anything that might slow down the rollout of the dashboard, but is it being configured in such a way that it will be possible downstream to incorporate the savings locked up in equity as well as the savings locked up in the pension pot, together with potential income streams?
My final query relates to the use of “pensions dashboards” in the plural—a point raised by other noble Lords. If I were mischievous, I would table an amendment to delete “dashboards” and insert “dashboard” in the singular in Clause 118. I assume, incidentally, that there will be no charge for access to any dashboard, and perhaps that might be made explicit in the Bill.
As a Conservative, I am in favour of competition and choice, but I asked myself why we need more than one dashboard, particularly as under Clause 122 the Money and Pensions Service will be obliged to provide one itself. Of course, the same information will be available to all dashboards, and designing and setting one up will involve providers in considerable expense, with no revenue. The excellent Library briefing refers to the industry’s concern about the costs of establishing a dashboard.
I see a parallel with the directory enquiry service. That was abolished in 2003 and replaced with a bewildering array of no less than 20 118 schemes. I am not convinced that competition and plurality has always been a worthwhile innovation. Any mischief on my part might be avoided if any dashboard had to be regulated by the FCA—as suggested by the noble Baroness, Lady Drake—to make sure that it was compliant.
Having said all that, I welcome the Bill and hope that it might reach the statute book before too long.
My Lords, we always welcome the contributions of the noble Lord, Lord Young of Cookham. I say that we all do but I am not sure that that is always the case with his Front Bench, which he occupied with distinction. He is very fortunate that Barbara Castle is not present to reply to him in her normal robust fashion.
I refer to the Members’ register in welcoming the Second Reading of this Bill, especially having been Secretary of State for Work and Pensions in 2007-08. Its provision for collective defined contribution—CDC—schemes is a step forwards in addressing the UK’s growing pensions crisis.
Individual, as opposed to collective, defined contribution schemes are now the default for occupational pensions, but these individual DC schemes are characterised by inadequate contribution rates and uncertain outcomes that completely fail to provide a decent standard of living in retirement. The average total contribution rate for an individual defined contribution scheme is just 5% of pensionable earnings, and the average pension pot is £50,000, which would give an annual income of just £2,500 a year. That is nowhere near enough to live on, and experts are saying that we should save at least 13% of our income from the age of 25. By comparison, average contribution rates for defined benefit—DB—schemes are far higher, at nearly 26% of earnings, compared with 5%.
Fresh impetus was given to the push for collective defined contribution pension schemes when Royal Mail and the Communication Workers Union agreed in February 2018 that they would seek to introduce a CDC pension scheme for Royal Mail’s 143,000 employees. I commend Royal Mail and the CWU for their efforts in working closely together to pursue this new “third way” pension scheme, which, as CWU national officer Terry Pullinger said at the time of the agreement, would
“secure our members’ future employment, standard of living and retirement security”.
Nobody pretends that CDC is some silver bullet, as the noble Baroness, Lady Altmann, pointed out so succinctly; indeed the Royal Society for the Encouragement of Arts, Manufactures and Commerce has recently published an excellent analysis, which I hope the Minister will read, highlighting some of the specific issues of concern that all CDC schemes must address. But there is widespread recognition that CDC schemes can provide greater certainty about retirement outcomes than is possible in traditional individual defined contribution schemes.
When in 2018 the CWU secured this ground-breaking deal with Royal Mail to introduce a CDC scheme after the company closed its defined benefit scheme to future accrual due to rising deficit costs, the union had fought to save the DB scheme, but, with the deficit repayments increasing from £400 million to £1 billion a year, they had no choice but to discuss alternatives.
The agreement opens the way for new collective pension schemes to be rolled out across the UK with the help of this Bill. It shows how elements of defined benefit can be linked to CDC because it includes a defined benefit cash balance fund that will provide guaranteed lump sums for members. In pushing for this deal, the union saw a clear need to do something to improve pension provision for all its members, 80,000 of whom were in the company’s defined benefit scheme and 40,000 in the defined contributions scheme. The DB scheme was closed to new entrants in 2008. Most DC scheme members were on the base contribution level, which was very low, and most were in the younger age bracket, so there was a question of generational fairness and making sure that younger employees had access to a decent pension scheme. There was also the need for the CWU to protect those who were in the defined benefit scheme, as moving them on to the defined contribution scheme would have substantially reduced their expected benefits.
Although a CDC scheme provides for a target rather than a guaranteed pension benefit—a point made by other noble Lords and Baronesses—modelling shows that the Royal Mail CDC scheme would hugely outperform the individual defined contribution scheme and could even deliver the kinds of benefits that would have been expected under DB.
It is important to understand why CDC schemes, at least of the kind negotiated between the CWU and Royal Mail in 2018, have clear advantages over individual DC schemes. First, they allow savers to pool their risk, which enables higher yield investment strategies and better returns. Studies have shown that CDC schemes can generate a pension that is up to 39% higher than a traditional DC scheme. Evidence from other countries—such as the Netherlands, as has been mentioned, where CDC schemes are widespread—clearly demonstrates that CDC schemes offer a better alternative to DC schemes. Secondly, collective pensions are subject to less volatility than individual pensions, making them far more predictable. They also avoid the need for an annuity or draw-down, which reduces costs and avoids difficult and often stressful decisions for savers about how to invest their funds. It is no secret that the guarantees associated with annuities are expensive and consumers often receive a poor deal when choosing them.
There has been some resistance to these plans from those with a vested interest in selling DC products, of course. They say that CDC schemes could run counter to the trend towards individual freedom and choice in pensions, but the evidence suggests that the majority of scheme members do not want the responsibility of managing their savings pot when they come to retire, or the uncertainty that comes with it. I certainly would not want that. Most savers just want financial security with the guarantee of a pension income for life, and that is what CDC offers.
Of course, there are also benefits for employers because CDC schemes avoid the risk of large, long-term pension liabilities on their balance sheets. Defined benefit schemes remain the gold standard for occupational pension provision and should be defended as far as possible. Sadly, however, DB schemes have been closing at an alarming rate over the last decade as companies have sought to cut costs. There has also been a total lack of innovation in the pensions space. The only show in town has been inadequate defined contribution —DC—schemes. If they remain the norm, and the Government, with business, do nothing, the state—which means the taxpayer—will begin incurring multi-billion costs in future to save millions of elderly citizens from abject destitution.
As the CWU’s Terry Pullinger has explained, in the Royal Mail we have a generation of people fast approaching 40 years of age who do not own any property and have little or no pension provision. It is a social car crash waiting to happen and, if not addressed, will leave an entire generation facing poverty in old age with total reliance on the state.
Research by the TUC has found that a typical DC saver could be £5,000 a year poorer in their old age if they retire after a bad period of investment returns for pension funds rather than in a good period. The benefits of scale and pooling of investment and longevity risk in CDC schemes are clear; modelling by the highly respected Pensions Policy Institute likewise confirms that, over the long term, CDC produces better outcomes than individual DC schemes.
Overt measures have been taken in the design of the Royal Mail scheme to ensure that there is no deliberate saving up of a capital buffer which would represent money paid in by one generation that is held back from that generation’s benefit provision. While there will inevitably be variations across generations, Royal Mail and the CWU have worked to ensure that these are only the product of varying circumstances rather than an inherent bias.
Furthermore, the legislation before us is drafted in such a way as to ensure that CDC schemes are governed within a strict regulatory structure and implemented only once a clear governance and disclosure framework is put in place. This regulatory framework is vital in providing savers with full confidence in this new type of scheme. There is an indisputable case for enabling CDC schemes through legislation and encouraging their take-up as an alternative, at least to DC pensions. That is why it is welcome that the Bill sets out not only how Royal Mail and the CWU can progress with their CDC scheme, but also how other companies could follow suit.
As the CWU has said, this scheme will drive pension innovation for current and future generations of working people, and will resurrect the principle of dignity and security in retirement. Royal Assent to this Bill is needed as early as possible. Can the Minister in replying please say when exactly that is expected to occur?
CDC schemes offer a third way forward, which has been recognised by one of our largest employers, Royal Mail, and one of our largest trade unions, the CWU. If we get this legislation right and enable the establishment of these schemes, I believe that they could offer a positive way forward for many other employers, as well as unions.
My Lords, I always welcome the contribution of the noble Lord, Lord Hain, who likes to call a spade a spade. He is right to say that everyone should be encouraged to save more, especially in pensions, as they represent such a favourable form of saving.
I thank my noble friend Lady Stedman-Scott for her summary of the Bill. She used to be my Whip, and I can think of nobody more kindly and more helpful. It is a tribute to her ability that this Bill has started in this House. Her experience in the charitable sector, her openness—on which everyone has commented—and her readiness to tackle the nitty-gritty are just what is needed today. I look forward to helping her make any necessary improvements.
This is a very complicated subject and I will deal with only a few issues, which unfortunately involves leaving many important ones unmentioned by me.
The truth is that pensions legislation has a rocky past, from which we must learn. The combination of long timescales, complexity and unexpected changes in the market and in demography has been disastrous. In the 1980s, the Government promoted private pensions —a good idea in principle. However, the selling was largely unregulated and, as a consequence, a substantial number of teachers and nurses were persuaded to relinquish their state-financed final salary pensions.
In the 1990s, Robert Maxwell dealt with his financing difficulties by borrowing money from the Mirror pension funds, and he came to a sticky end. When the markets were strong, pension funds did well, but there was a rule that you could not keep more than a certain surplus in a pension fund so a number of companies gave staff pension holidays instead of saving such surpluses for a rainy day. The rain came with the arrival of Gordon Brown, who made a substantial raid on the pension funds, arguably setting them up for later failure.
I was responsible for pensions when I was an executive at Tesco, and I used to have cups of tea with Frank Field as we both felt that private provision for all company staff was a marvellous benefit. The pensions cap that limited payouts to senior staff perversely encouraged executives to wind down the favourable final-salary pensions and to reduce corporate contributions to all employees.
One of the positive changes in this sorry story has been auto-enrolment, which makes young people save for a pension with a match from their employers. In its time, that was very unpopular, especially with small business, but I believe it was right. As the noble Lord, Lord Sharkey, said, it has boosted the pension prospects of 10 million people in just seven years.
Today I shall mention just two aspects of the Bill and one omission. The first aspect is the introduction of collective money purchase schemes. I strongly support this as it will remove the unhappy choice between, on the one hand, defined benefit schemes that are unaffordable and, on the other, defined contribution schemes that put most of the risk on the individual. Savers pool their money into a single fund and share the risks of longevity and investing. As we have heard, this will help the Royal Mail, whose workers now face huge challenges as online life replaces the letter and the stamp. However, I will want to question the Minister on the potential danger of the transfer of DB scheme members to collective money purchase, possibly leading to pension providers reneging on their promises, as highlighted by the Institute and Faculty of Actuaries.
The second aspect is the requirement for pensions dashboards. With employment patterns changing, many people have several small pots and find it very difficult to keep track of them. Dashboards would allow people to see how much they could expect on retirement and to prepare better, by putting more money aside where they can—for example, through tax-free ISAs—or indeed working for longer. When the Tesco scheme was established, the average beneficiary lived until 62.
The pensions dashboard is a great digital idea. Matt Hancock would be proud of it. However, there is another problem that we will have to debate in Committee: the substantial cost, and whether that is borne by employees, employers or other beneficiaries. I have to say that the impact assessment for the Bill is impressively fat, but, unfortunately, it is difficult to understand. The various dashboard costs appear to me to tot up to well over £1 billion, which is a lot of money. We must try to keep that cost down. Can we work up a single, secure and simple dashboard system in order to do so? Is this another area where we could see a draft statutory instrument and debate the options? And is there a case for some state help for the smallest and poorest schemes? The noble and, if I may say so, expert Baroness, Lady Drake, also made some good points about the dashboards that I think need to be addressed and discussed.
I also listened to the noble Baroness on the subject of sanctions. I would like to express some doubts about the scale and nature of penalties. I think the noble Baroness, Lady Bowles, needs to listen to the Minister on this. Most pension schemes are well run and well managed. Indeed, I fear that increasing penalties, especially increasing them more than proposed, could deter respectable people from becoming trustees or entering the pensions industry. That would obviously be another perverse effect.
My final point relates to the omission in the Bill of any remedy to tackle the problem of the pension cap for professionals, notably in the health sector. This Treasury-inspired cap is leading to many GPs and hospital doctors retiring early and/or refusing to work extra hours. I understand that there has been a short-term interim fix, but my doctor friends tell me that it has introduced other disincentives. I know this is not within the Minister’s remit, but will she undertake to talk to the Treasury and write to us about this whole issue before Committee? That is just in case we need to use this Bill to help the Government to solve this appalling problem.
My Lords, I declare my interest as a board member of the Pension Protection Fund, which protects the pensions of employees in defined benefit schemes when their employers go bust and cannot pay their pensions.
Looking at this Bill from a defined benefit perspective, I find much to support. I shall touch on four topics: the DB scheme funding code; TPR’s anti-avoidance powers; the pensions dashboard; and some areas that I believe require further consideration.
Before diving into the detail, it is worth stepping back for a moment and making two broader observations. First, the Bill looks to build on and improve the defined benefit landscape rather than radically reshape it. In broad terms, it confirms that the settlement established by the Pensions Act 2004, which created the regulator and the PPF, has stood the test of time.
Secondly, it is of course right that we need to focus on how we can further improve outcomes and strengthen member protections, but it is worth saying loudly that, compared to pre-2004 days, DB scheme members are considerably better protected today, thanks to the Pension Protection Fund. Before 2004, your holiday was better protected than your pension. There was no safety net for DB scheme members in the event of employer insolvency. In some cases, that meant heavy reductions on their promised benefits; some faced real hardship in retirement. In some ways, it is a shame that memories of the pre-PPF days have now largely faded, but it speaks volumes for the quiet achievement of the PPF. BHS is an example: if PPF had not existed, members of the pension scheme would have faced dramatic reductions on what they had been promised. Today, PPF provides safe harbour for over 250,000 members and its compensation can make a huge difference to many people’s lives. I hope the Minister will join me in recognising the valuable protection that it provides and its role as a force for good.
Turning to the Bill itself, I welcome the measures to review and improve the DB scheme funding regime. Striking the right balance between sponsor affordability and member protection is of course easier to say than do, and as we go through the Bill we will undoubtedly find that the devil is in the detail. Having said that, we should be careful in guarding against the new scheme funding code being seen as an opportunity to increase flexibilities or to ease up on closing down funding shortfalls. The majority of DB schemes still remain in deficit. Flexibility is of course essential, given the range of circumstances facing schemes and employers in the DB universe, but recent experience has shown that, if anything, that very flexibility has in some cases been inappropriately used. Take Carillion: senior managers apparently viewed contributions to the pension schemes as a “waste of money” to be ranked below dividends to shareholders.
If we are to ensure members are not exposed to unnecessary risks, now is not the time for schemes and sponsors to take their foot off the gas. It is vital that the new code results in schemes closing their deficits within reasonable timeframes, prevents excessive recovery plans on the basis of current covenant strength and ensures schemes are given equitable treatment with other financial stakeholders.
I also welcome the provisions to further enhance TPR’s anti-avoidance powers. The regulator must have the right tools in its armoury so it can be proactive in preventing detriment to pension schemes. While it already has an array of powers, these targeted enhancements may help deter potential wrongdoing and are useful for TPR to have in its back pocket. I suspect that these provisions are likely to be needed only in extremis, if at all. They are, one would hope, for use in only exceptional cases, not in relation to the vast majority of sponsors and schemes which do the right thing by their members.
As other speakers have said, the pensions dashboard is an important innovation. For too many savers, pensions can be confusing and difficult to understand. Added to this, many savers have multiple pension pots and keeping track of these can be difficult. Therefore, I welcome the underlying ambition to enable people to better engage with their pension savings through digital channels, while very much endorsing the cautionary points made by my noble friend Lady Drake.
Having welcomed a lot in this Bill, I cannot help but identify some notable omissions. There are two areas which are not currently covered by the Bill but which are important to draw out briefly in the context of this debate. First, in relation to commercial consolidation vehicles, the current DB legislative and regulatory framework as set out in the 2004 Act was predicated on a continuing link between scheme and sponsor. The emergence of the consolidator model challenges this. Well-run consolidators could be beneficial, offering a route to improved security for scheme members. Equally, they also present significant new potential risks, particularly to PPF members and levy payers. To manage these, a new legislative and regulatory framework will certainly be required. However, I recognise that this is relatively new and fast-evolving territory and it is important to get it right, so it is understandable that provisions are not currently contained in the Bill.
The second area relates to PPF compensation. The Bill contains measures intended to address the outcome of the Beaton case. I would appreciate it if the Minister could say whether she expects there will similarly need to be legislative clarity in relation to the Hampshire case in due course.
Pension freedoms are a further area of interest for us as policymakers and for scheme members. Since 2015, something like 160,000 members have opted out of their DB schemes. Some were required to take independent legal advice. There are growing concerns about the advice they received. For example, in the case of British Steel in 2017, it is clear that some members were given poor advice. It may not be a matter specifically for this Bill but, given its scale and impact, it is something we must address.
My Lords, it is some time since I have spoken on a pensions Bill. Indeed, I think the last occasion may well have been when the noble Lord, Lord McKenzie of Luton, was sitting in the place now occupied by my noble friend the Minister and I was sitting where the noble Lord now sits. I particularly recall many hours late into the night spent debating the powers of the Pensions Regulator in the Pensions Act 2008. I shall return to that when I speak about Part 3 later in my speech.
I shall start with collective defined contribution schemes. These account for more than half the pages in this quite long Bill. We are promised large volumes of delegated legislation to follow. I have no particular objection to CDC schemes, but the plain fact is that this extraordinarily complex legislation is being introduced to accommodate just one employer, namely Royal Mail. Despite a wide-ranging consultation and exposure in the specialist media, there has been absolutely no other corporate interest in CDC schemes. Other private sector companies have transitioned in whole or in part from their DB schemes unaided and it is far from clear to me that this is a good use of government and parliamentary time.
Nevertheless, now that we have the Bill, I would like to raise one question with the Minister. The Government have been clear that they wish to ensure that pension freedoms are available to members of CDC schemes as they are to members of other schemes. At one level, that sounds perfectly okay, but I am concerned about the impact that this might have on the notion of shared risk, which is an intrinsic part of CDC schemes. My particular focus is on longevity risk.
Pension freedoms are not always used wisely, but one clear beneficial use case—it applies even to defined benefit schemes—concerns members whose health status means that they can do better by removing their funds and purchasing an impaired life annuity. If members of CDC schemes in this situation acted rationally and took their share of the assets out of the scheme, that could well disadvantage the remaining members. The average life expectancy of those remaining would increase and, all other things being equal, the benefits payable to them would reduce. Are the Government comfortable with this outcome, in effect allowing selective risk-sharing under this new arrangement? This is a subset of the wider issue of intergenerational fairness, which has been raised by other noble Lords, including the noble Lord, Lord Sharkey.
I now turn to Part 3 and the Pensions Regulator. I thank the Association of Pension Lawyers for its analysis of the new offences, which I know has already been provided to the Minister’s officials. Very briefly, its concerns relate to the scope of the new criminal offences set out in Clause 107, the meaning of “likelihood” and “materiality” in that clause, and the way in which the reasonable excuse defence will work.
When the Government first announced these new offences, they were explained in terms of people running their companies into the ground. It often happens that, when legal draftsmen get to work, an intuitively reasonable proposal ends up being so wide that it can trap the unwary. The issues that have been raised are serious and I hope the Minister will be able to allay the fears expressed. In doing so, I hope that she will not simply fall back on the courts acting reasonably in interpreting the new offences. If we have to wait until we get a body of case law, which could take a decade or more, that will mean major uncertainty for the business community.
I have a separate question for the Minister on Part 3, concerning the new financial penalties of up to £1 million in Clause 115. I support the principle of the Pensions Regulator being able to take swift action, but such powers carry dangers, especially when used against those concerned with the pension funds of smaller companies. I would like to understand what checks and balances exist within the system to ensure that this power is used in a proportionate way. Can a person in receipt of a financial penalty challenge the Pensions Regulator? Will there be an opportunity for an appeal to an independent body? This is particularly important because the invocation of the penalty powers involves several key judgments, including materiality and likelihood, just like the criminal offences, but there is no court to interpret them. The Minister will know that something more accessible than judicial review is needed because in practice that is simply not available for those with limited resources.
My last topic is the pensions dashboard in Part 4. I have to say that this is at best a half-baked policy. We have no idea exactly how this will work. Part 4 is littered with rule-making powers which may well tell us in due course what is involved. The impact assessment has a huge range of potential costs between £0.5 billion and £2 billion over 10 years. My noble friend Lady Neville-Rolfe referred to the figure of £1 billion, but it is over £2 billion if you take the set-up costs and the ongoing costs over the first 10 years. If this were a business proposition, it would be sent away and told not to come back until the costs and precise impacts had been precisely worked up. Furthermore, benefits have not been clearly identified and the impact assessment admits that the behavioural impacts are “highly uncertain”. I do not doubt that having 10 or 11 jobs over a working life means that keeping track of pension entitlements is a problem. But I am far from clear that the dashboard is the answer and we are no further forward in giving people access to advice, as opposed to guidance, on what to do when faced with the information that the dashboard contains.
I have long thought that a more sensible approach would be to facilitate the consolidation of pension pots, which means tackling the cost and bureaucracy involved when people attempt to do that for themselves. Switching bank accounts has been made pain free for consumers but there has been no equivalent for pensions. I completely accept that the issues are far more complex for pensions than for bank accounts; equally, the industry has no real interest in solving this problem. The Government would be doing pension savers a great service if they set their sights a bit higher than this dashboard.
My Lords, it is always a pleasure to follow the noble Baroness, Lady Noakes. I suspect that she is correct about CDCs, but if they had not been put in the Bill, there would not have been a Bill. This is possibly a case of the tail wagging the dog, but at least we have an opportunity to deal with other important aspects of pensions.
I thank the Minister for her presentation of this Second Reading, which she did in her usual frank and open-handed way. I am not the first person to say that, but I see no harm in saying it again. She accepts that the Bill is limited in its objectives. We are used to skeleton framework Bills from successive Conservative Governments. I can only add to the plea that we are given as much information as possible before Committee if we are to keep the number of amendments to a manageable amount and have sensible discussion. The Bill needs to be set in the context of the wider issues of pensions and the inequality of pensions provision, as well as being about dashboards, CDCs and auto-enrolment.
On CDCs, briefly, they have attracted support from both sides of industry. The scheme agreed between the Royal Mail and the CWU, the communications union, appears to be potentially reasonably good, but let us not forget that it was done in the context of the decision to close the defined benefit scheme. The union was faced with the harsh reality of today’s pension jungle, so it represents some security for employees. CDCs could give a better outcome than other schemes, such as defined contribution schemes, but I echo what others have said about the importance of informing employees in the pension scheme that these schemes are not guaranteed and that pension amounts could go down as well as up. How will workers be made aware of this? How can we be assured that CDCs do not represent the death knell for defined benefit schemes, and how will intergenerational unfairness be dealt with? Does the Minister agree that CDC pension schemes could have a negative impact on members of defined benefit schemes? It is clearly not for me to oppose such a scheme when it has been negotiated in good faith by Royal Mail and the CWU, but I hope that the Minister will be able to reply to some of my questions on and clear reservations about the uncertainties surrounding this pension option.
Nowhere in our unequal society is inequality so stark and shocking as in the area of pensions. According to the Money and Pensions Service, 22 million people say that they do not know enough to plan for their retirement, while the OECD places the UK well down the rankings of G20 countries—behind France, Norway and many others. The Money and Pensions Service went on to say:
“Financial wellbeing is about feeling secure and in control” and that poor financial well-being affects mental and physical health and relationships. Examples of inequality are the huge gaps in protection for the self-employed, those working in the gig economy and those excluded from auto-enrolment, and those who, for whatever reason, do not take up the pension credit to which they are entitled. Almost 2 million older people aged 65 and over are living in poverty in the UK. Independent Age has been asking the Government to set out an action plan to improve the take-up of pension credit. More than two in five of the pensioner households which are entitled to pension credit do not receive it. The Explanatory Notes refer to the Government’s commitment to help people with better planning for retirement and for achieving financial security in their later life. What better way could there be than ensuring that the 1.3 million pensioners who miss out on £3.5 billion every year actually receive their entitlement? I echo the question asked by Independent Age: what is the Government’s action plan to improve the take-up of pension credits?
So much has already been said about the pensions dashboard. I favour having one publicly funded pensions dashboard, but I do not think that the Government are looking that way. How will they ensure data quality and the protection of privacy in multi schemes? The director of policy at The People’s Pension has said:
“if the government continues to promote multiple dashboards it’s imperative that a legal duty to operate in the best interests of savers is placed on all … operators.”
Will the Government agree to such a legal duty?
As the noble Lord, Lord Young, said, Which? has called on the Government to clarify that it is their intention for dashboards to include pension charges and income projection figures at the earliest opportunity. This is too important to be left to secondary legislation and the Financial Conduct Authority. As Which? stated, the Government recently proposed including charges on annual statements; the same principle should apply to dashboards. Although Which? supports in principle the proposals for commercial dashboards, it has said that it is absolutely crucial that there are strong regulations in place. It calls on the Government to make the provision of a pensions dashboard a regulated activity, to ensure that providers are authorised and subject to the FCA’s complaints-handling rules.
It is in everyone’s interest to get this right. According to the Association of British Insurers, it is estimated that £19.4 billion is held in pots that consumers have lost track of. The DWP—the Minister’s own department—estimates that, without a dashboard, 50 million pension pots will be lost or dormant by 2050, leaving people wide open to frauds and scams. In 2017, the victims of pension scams lost £91,000 each to fraudsters.
On the subject of auto-enrolment, I did not expect the Government to address the injustices done to women born in the 1950s, who lost thousands of pounds in pension payments, nor did I expect them to deal with pension equality between men and women— that would be very nice and I deplore the fact that it is not in the Bill, but I did not expect it. What I did expect is a boost to the auto-enrolment system. As my noble friend Lord McKenzie said, the Government should include an increase in auto-enrolment minimum contribution rates. They should support those in multiple occupations, so common in the gig economy, so that their collective earnings can be counted towards eligibility for auto-enrolment. They should expand auto-enrolment to include the self-employed, allow 18 year-olds to join and remove the lower earnings limit, which in turn would solve the problem in relation to multiple occupations. This would lead to an additional £2.5 billion in savings. What plans do the Government have for auto-enrolment?
Finally, I am fortunate that I have two modest public service pensions and a state pension. I always assumed when I was working that things would get even better. Looking at today’s pensions landscape does not fill me with great confidence. However, there is much to discuss, and I look forward to Committee stage.
My Lords, I want to make just a short contribution to this debate, looking mostly at the provisions and powers relating to the functions of the Pensions Regulator. I declare my interest in doing so as a pension trustee for a UK company scheme.
I support the proposals generally and the emphasis on the need for faster responses to deal particularly with reckless or irresponsible behaviour by employers and, as my noble friend the Minister said in her introduction, certainly to look at “serious wrongdoing” and tackle it. I agree with her on that. We have all seen examples of bad behaviour which have resulted in pension schemes being put at serious risk by deliberate acts or omissions.
In the 2018 consultation paper Protecting Defined Benefit Pension Schemes–A Stronger Pensions Regulator, the Government invited responses to proposals to widen the scope of “notifiable events” to include more corporate transactions and board decisions. The responses were very mixed, partially in the area of possible penalties for failure to comply. As my noble friend Lady Noakes mentioned in her remarks, criminality was, rightly, to be in areas of wilful and reckless behaviour where a mental intent was involved, as is the case in other areas of criminal law. As a lawyer, I worry slightly about giving a regulator—indeed, any institution outside the direct courts—rights in relation to the imposition of criminal penalties. Mere failure to comply with notifiable events was suggested to be subject only to civil penalties. Clause 107 therefore produces a quandary for me. Bad employers should always be criminalised in appropriate circumstances, but applying criminal sanctions to anyone associated with a scheme, including especially trustees, for some areas where simple judgment has been exercised by them could result in some quite minor actions and even normal business activity becoming a criminal matter. The Government should look carefully at this to avoid injustice. That is not to say that there have been many demonstrable situations which need much tougher penalties attached to them. I fully support remarks made earlier by noble Lords on that theme.
I am also concerned at Clause 110(4), where the criminal offence is extended to cover a situation where an individual summoned for interview by the regulator fails to answer a question or provide an acceptable explanation on any matter specified in a notice under new Section 72A(1) of the Pensions Act 2004. I am concerned because an “explanation” is defined as a statement or account that makes something clear. This is of course a highly subjective matter and provides the regulator with a criminal sanction that cuts across the basic rights of individuals, including, so far as the country generally is concerned, the right to avoid self-incrimination.
I fully support the need to tackle serious “offenders”, but the powers of the regulator must be seen as equitable and enforceable. It is not the duty of the regulator, I would submit, to run businesses or make major corporate decisions. Indeed, my remarks are partly to protect the regulator, because it should not be put in a compromising position and provided with powers where it is required to make decisions which are strictly beyond its proper remit or abilities. That is an unfair burden on our regulator.
My final point relates to the relationship between trustees and employers. That relationship needs to be close, as we all know, especially in regard to the funding plans in a scheme and the investment strategy. In the end, it is important not to require employer agreement to long-term investment plans. Under Section 35(5) of the Pensions Act 1995, the employer’s consent is not required, so, to avoid confusion, paragraph 6 of Schedule 10 to the Bill must make it clear that the trustees at the end of the day may make investments without the employer’s consent if they regard that as necessary. That is not to say that good practice does not always suggest full consultation—I think anyone running a scheme worth looking at is conscious of the need for that consideration and consultation.
A close and positive relationship between employer, trustees and the regulator is absolutely necessary for the success and viability of any pension scheme. To flourish, however, the provisions in place, including those set out in this Bill, must be workable, understandable, flexible and pragmatic.
My Lords, it is a great pleasure to follow the noble Lord, Lord Kirkhope, with whose remarks I am mostly in full agreement.
This is a necessary Bill, and I am delighted that we have the opportunity to have this Second Reading debate so early in our Session. It is designed to make a number of welcome reforms, which will, for example, help reinforce the existing safeguards protecting defined benefit pension schemes. The reforms have been made necessary, as we have all seen, by recent scandals, especially in the case of BHS, which have highlighted failures in the existing framework. Measures such as these provide greater confidence in pension savings, help assure savers that schemes are properly managed and assist the process of encouraging more people to save for their retirement, whether in DB or DC schemes. That should remain the focus of pension policy. Sadly, there are still far too many workers in the UK—many millions—who are either not saving for their retirement at all or are seriously undersaving. This is still a subject that we in this House and in Parliament as a whole should keep under careful review, because we cannot afford complacency.
I also welcome the fact that the Bill has been the subject of extensive consultation, as the Minister said in her opening remarks, because that helps build consensus, which is important if these reforms are to be allowed to work over the long term. I welcome particularly the clauses providing for collective money purchase schemes and the new pensions dashboard. I do not believe that collective money purchase schemes are a panacea or somehow represent a miracle cure, but they give employers a new option. These schemes are designed to focus on levels of retirement income, which is entirely right, but without the significant costs and risks faced by employers in respect of defined benefit schemes, which, as we all know, have almost entirely disappeared from the private sector in the UK. Collective money purchase schemes add a new string to our bow, and it is right that we should debate these provisions in more detail.
The pensions dashboard will contribute towards greater knowledge and awareness for pension scheme members and is an important part of the Bill. There is some evidence from the Netherlands that dashboards can help increase engagement with pension savings, and the FCA highlighted the need for this in 2016. The details are going to be set out in regulations under the Bill, and obviously we will need to take the greatest care in establishing how this can best be done. The Minister said in her opening remarks that she wanted to present draft regulations covering Part 1 of the Bill for Committee stage. That is a noble and brave offer, and I hope that she will be able to do that for Part 4 as well, because this will be very important indeed.
I echo many of the comments in this debate about the importance of doing no harm to consumers in the process of setting up these pensions dashboards. The obvious way to avoid that is for there to be a publicly funded dashboard service. If there are going to be multiple dashboards driven by commercial interest, it is crucial that we establish an overarching duty on the part of those providers to act in the best interests of savers. There is no hint or sign of that in the Bill as currently drafted.
I also understand and support the need for the new criminal offences in the Bill, because I think that they are fully justified. However, as has been referred to by a number of speakers, the scope of the proposed new offence in Clause 107—what will be new Section 58B of the Pensions Act 2004—goes significantly beyond the criminal sanction proposed in the consultation which preceded the Bill. The original framing of this offence was going to criminalise
“wilful or reckless behaviour in relation to a pension scheme” and was targeted, so we were told, at a small minority of employers and connected persons. In fact, the wording “wilful or reckless behaviour” was used by the Minister in her opening remarks. The problem is that the Minister’s words do not appear in the Bill.
By contrast, the wording in the Bill is much wider, as it covers anything that
“detrimentally affects in a material way the likelihood of accrued scheme benefits being received”.
It is clear that not only is the scope of this new offence much wider than what was originally proposed but it is also very possible that it could operate at a much lower level—criminalising the existing material detriment test, which forms part of the contribution notice regime, and bringing into its net persons associated with scheme management and administration. I really do not think the case for this extension has been made.
The use of the word “likelihood” in this context is also an intriguing concept. Would it bring, for example, corporate investment decisions or taking on new corporate debt within the range of the new offence? I really do not think that it should, but these are things we will have to examine in Committee.
There is also a strong argument for saying that the parameters for any new offence such as this, where there is considerable room for interpretation, should be clearly set out in a statutory code of practice—to define those parameters in advance so that people know where they stand. That is exactly what Parliament decided to do with the Bribery Act 2010; when there was a new offence which was quite extensive in its scope, it was accompanied by extensive Ministry of Justice guidelines.
Before I leave this part of the Bill, the other thing that troubles me is that, the way it is currently drafted, there are three prosecuting authorities: the Secretary of State, the Pensions Regulator and the Director of Public Prosecutions. I do not think that is appropriately drafted at all. I do not want to see the Secretary of State bringing criminal proceedings where, for example, the Pensions Regulator or the DPP might have decided not to do so.
There is much to welcome in this Bill, but it is also quite clear that there is much work to be done in Committee.
My Lords, it was with some trepidation that I put my name down to speak in today’s debate, given that my experience in the field of pensions is extremely limited—mainly as a trustee of charities, where I have found the discussions, particularly on the potential ending of defined benefit schemes, both difficult and complex. It is with even more trepidation that I stand to speak given the expertise and experience that have been evident in other contributions. I now bitterly regret—I see the noble Lord, Lord Young of Cookham, in his place—that I was not in my place in the Chamber of another place some 44 or 45 years ago and taking notice. I may have been, but I fear I have to tell him that I have no recollection of that particular speech, from which I could undoubtedly have benefited.
Noble Lords may well therefore ask why I am contributing at all. The clue comes in my declaration of interests. I co-chair the House of Lords cross-party group Peers for the Planet, which looks at the climate crisis. I should also declare that my youngest son works for a new organisation called Make My Money Matter, which aims to allow savers and investors to align their investments with their values. Unlike the noble Lord, Lord Sharkey, I have indeed spoken to him about the Bill.
“This Bill is notable more for the things that have been left out than for what it contains.”
It is on one of the issues that has been left out that I will speak briefly tonight: the environment, climate change and sustainability. There is no reference in the Bill to the environmental, social and governance responsibilities of pension funds, although they now have a responsibility to report on those issues. It will simply not be sustainable—if I can use that word—if in 2020, the year in which the UK will be hosting COP 26 and which brings in the decade in which the global community must respond to the challenges of the climate crisis, which is of pivotal importance to the future of our planet, we as parliamentarians do not challenge all policies and legislation on their impact on these issues.
Pension funds and schemes are particularly relevant in this area for two reasons. One is simply the amount of resources involved: $2.9 trillion. It is enormous, and the size and influence of pension funds mean that they can have a vital role to play in ensuring that the UK meets its climate commitments, as the Environmental Audit Committee of another place noted its Greening Finance report. The Pensions Minister himself put it very well last year when he said that
“pensions schemes ought to be thinking about the assets which help drive new investment … which deliver the sustainable employment, communities and environments which all of us wish to enjoy.”
Pension funds could have huge impacts on and give new impetus to a new green economy and the Government’s zero-emissions target.
As others have noted, the Long Title of the Bill is very short—but it is also very wide. I would like to see the Bill include provision for pension schemes to align their portfolios with the Paris Agreement objectives and report against the framework of the Task Force on Climate-related Financial Disclosures. This is not an issue simply of environmental benefit; it is an issue for investors and the safety and protection of beneficiaries. As Mark Carney, the outgoing Governor of the Bank of England, has made crystal clear, the financial and economic risks parallel the climate risks. Again, this has been acknowledged by the Pensions Minister, who said:
“The financial risks from climate change … were too important to ignore.”
So, although it goes much wider than the contributions of other noble Lords, I hope that the Minister will give some encouragement to the views of her department about taking the pensions industry along this line.
I have a more specific question on Clause 119 and the dashboard provisions in the Bill. There is much evidence that savers and investors would like to invest responsibly. For example, a recent DfID report showed that 68% of UK savers said that they would like their investments to take impact on people and planet into consideration, alongside financial factors. As I understand it, the proposals for the pensions dashboard are aimed at giving savers more information so that they can make better choices about their pensions. Is it possible—the noble Baroness, Lady Drake, referred to this—that issues far wider simply than those that have been spoken about so far, such as the environmental, social and governance information that the new pensions investment regulations welcomely require schemes to publish, will also be made available to people looking at their personal dashboard?
I will not apologise for diverting Peers from more specific and technical issues. As I said earlier, it is of immense importance that, as parliamentarians, we look at all the issues that are in front of us through the lens of the overwhelming issue of climate change.
My Lords, I am delighted that my noble friend Lady Stedman-Scott is piloting the Bill through all its stages, and I wish her and the Bill itself all possible success. I say to my immediate predecessor, the noble Baroness, Lady Hayman, that it was a refreshing change to look at this from an entirely different angle, which is also worthy of further consideration.
On the Bill itself, clearly, pensions have had a chequered career so far, and it may not be altogether plain sailing in the future. However, I cast my mind back to more than 100 years ago when there were no pensions of any kind. Many of the poorest people in the land faced the prospect of destitution if they did not have a family to support them, if their work gave up on them because they were unable to carry it out, or if they were suffering the infirmities of old age. We have come a long way from then, thank God. None the less, obviously we still have things to do, but I am delighted that the Bill is taking us further forward. Like the noble Baroness, Lady Hayman, I have no particular expertise in this subject, and if she was feeling some trepidation, I share the feeling.
I welcome the part which the noble Lord, Lord Hain, talked about as the third way for pensions, in particular that it has brought together Royal Mail and a major union—the Communication Workers Union. I can recall a time when employers and trade unions appeared to be totally at loggerheads—positively at war —and I am delighted that we have come to a pleasanter era, in which the trade unions can do a valuable job for their members. I give this union full credit, and I hope that it will be the forerunner of others.
Of course, we regret the gradual—or maybe rather fast—decline of the defined benefits scheme, but I do not know that anyone, through the Bill or through any other means, can force employing organisations to continue with it if they feel that it is not for them. Therefore, surely it is better that we have another scheme, which may not be as good but is infinitely better than nothing in particular.
On the regulator, I take the point that was made about not having such fierce penalties for errant employers that you put people off becoming trustees—I fully accept that. I hope that the draconian powers are intended only as a last resort for people who have gone completely beyond the pale. However, the proper emphasis should be on those other powers of the regulator, to make sure that employers and schemes do not get into that dire position and so that there are reins to hold them back. I hope that that is the intention; perhaps my noble friend the Minister can tell me that that is what the Bill has in mind.
On delegated powers I always twitch a bit, as I was both a member and later chairman of the Delegated Powers Committee, and I am immediately suspicious when faced with regulations yet unknown, particularly when there seems to be a vast number of them. Other Members have detailed that, so I will not repeat it. I am glad that the Minister herself mentioned delegated powers and has offered kindly to try to give us some indication of the scope in Part 1.
However, I am also interested in Part 4, on the dashboard. I hope that the Minister might be able to bring forward some draft regulations on that basis. That is probably asking a great deal. But I recall that, when I chaired the Delegated Powers Committee, we held a short inquiry into what one might call the birth of Bills. We were told that there was a Cabinet committee, through which a proposed Bill had to pass to ensure that it was fully operational and all right before it was let through the gate. The fact is that a lot of them escape through the gate without that serious consideration of all the details. I would have supposed, with a Bill of this kind—which is in its second incarnation and which has been the subject of full consultations, which I fully applaud—that somewhere in the background, some of these regulations and powers should have been sorted out. As we all know—it has become a cliché, has it not?—the devil is in the detail. It is therefore extremely important that we have some idea of what the Government have in mind before we get to the point when regulations are laid before us and, as I rather crudely put it, you either swallow them whole or spit them out. I do not want to get to that stage.
Incidentally, how did the dashboard scheme come by that curious name? I presume that it refers to the driving of a car with the dashboard in front of you. However, as far as I am aware, no car I have ever driven could rely on the dashboard alone. But that is by the by. It seems to have acquired that name. I welcome it, and I would have done so years ago when I had several pensions. I had done my utmost to make sure that I had provided as well for myself as possible. However, I have to say that I was one of those people in their 50s who have been referred to, and I did not know what I would get at the end of it. I would certainly have welcomed that sort of information, which will be very useful for people today. Although it gives just basic information, how much easier will it be if you want to go to a decent, reputable finance adviser and they have that information on which to work? I think it is a good idea.
Like my noble friend Lord Young, who is not in his place, I query why we want one main public dashboard and a series of commercial ones. I would have thought that, at the very least, one would start with the public one and, if it seemed necessary at a later stage to introduce commercial ones, so be it. I am blessed if I can see why we have six, seven or whatever number when one would do. Again, perhaps my noble friend can enlighten me on this point.
That said, the measure is welcome. I hope that it might be simple to start with, to obviate the point made by another noble Baroness that it could be extraordinarily expensive; in fact, I think that two noble Baronesses made this point. I take that entirely. Perhaps we can start with something straight and simple and work up from there; otherwise, it may be 10 years before we have sight of this noble enterprise if it becomes too complicated. In fact, part of the problem sometimes is that something that starts as a good, simple idea is then elaborated on and has further layers added to it until, in the end, it bears no resemblance to the straightforward, simple scheme we all thought we had.
On that basis, I conclude my remarks since the hour is late and I do not have the expertise of so many of those around me.
My Lords, I think I can claim to be the most intimidated speaker in having to follow the noble Baroness, Lady Fookes, who spoke for eight minutes without a note in front of her. I will proceed to read my contribution.
Although I welcome some of the Bill’s aspects, like other noble Lords, I am sorry that the opportunity to address some outstanding concerns around pensions has not been taken. I want to keep some of them on the agenda by raising them today. The Bill could have introduced controls on the level of profits that pension companies can make from annuities schemes. Secondly, as has been mentioned, it could have addressed the stark problem of gender inequality in pension provision. Lastly, it could have included provision for women born in the 1950s whose pension rights were hit so hard by the rush to equalise the retirement age: the WASPI women.
First, I congratulate the Communication Workers Union on its campaign, which resulted in Part 1 of the Bill enabling collective defined contribution—CDC—pension schemes. It has been said by many speakers that although CDC schemes do not provide all the certainties of defined benefits, they are in many ways preferable to defined contribution schemes. I also congratulate the Fire Brigades Union on its successful challenge to the discrimination against its younger members, who were not given the same conditions in their pension scheme as older members. These two examples demonstrate the importance of the collective strength that comes from the trade union movement.
As others have done, I declare an interest as someone who receives a pension through a defined benefit scheme. Like others, I looked on in horror as friends and family members were transferred to defined contributions schemes with all their uncertainties, particularly in purchasing lifetime annuities.
Patrick Collinson wrote this in the Guardian last year:
“Annuities have turned out to be fabulously profitable for Britain’s pension companies – and something of a disaster for many of those forced into them”.
He explained that the pension companies based their annuity rates on projections of how long people were likely to survive—but they got their projections wrong. It turns out that we are not living as long as they expected. Actuaries have now reduced the life expectancy rate, making it 13 months lower than they predicted in 2015. The money set aside for those pensions has been released—however, to be paid not to the pensioners who built up that fund but to the shareholders of the pension companies. The amount released is already more than £1 billion and is likely to be £4 billion over the next seven years. The Bill could have improved the regulation of these annuities to ensure that pensioners who have saved so hard are not overcharged and that, where there is excess, it is paid to pensioners rather than distributed to shareholders. We must always remember that pensions are deferred wages, not a gift or an unearned benefit.
I know that the Minister has rather a lot to do today but I hope that she will take the time to reassure the House that there are no plans to increase the retirement age. The suggestion by a previous Secretary of State for Work and Pensions that the state pension age could be increased to 75 is outrageous, particularly as we are now seeing an end to the rise in life expectancy and its reduction for people on lower incomes. The life expectancy for men in Glasgow is in the low 70s, but even in areas with higher life expectancy, it is a cruel prospect for people in their later years. I do not believe that anyone proposing further increases in the retirement age really expects people to work until they are 75. They simply want to reduce the number of years that people will be entitled to the state pension. Instead, people would have to face their old age as benefit claimants or through scraping by on a workplace pension. Any further increase would mean that more people would die without ever receiving a penny of the state pension that they had contributed to throughout their working lives.
Pension contributions based on earnings will inevitably favour men as long as we have a gender pay gap. As my noble friend Lady Drake pointed out, women are far more likely to take time off work or work part-time while caring for children or elderly or sick relatives, and they usually cannot recover those missed contributions. The pay gap is a disadvantage to women throughout their working years and continues into retirement, making a substantial difference to their final pension. It is not surprising that women of all ages are more likely to opt out of auto-enrolment than men.
The treatment of the WASPI women is also likely to make all women more sceptical about pensions. I imagine that Ministers blush when they talk about the importance of pensioners being able to predict their income in later life or their aim to build greater trust in schemes. This is what the WASPI women expected and trusted in from their state pensions. They thought that they could predict their pensions but suddenly found that their circumstances had been changed without giving them enough time to make adequate alternative provision. Is there any possibility of the Government making an act of good faith to the women who were misled over their pension entitlement? Legal avenues are still being pursued against the Government, whose own lawyer had to fall back on the defence that
“legislation carries with it no duty of fairness to the public.”
Following what appears to be an admission that their treatment of these women was unfair, I hope that the Government will feel honour-bound to do the right thing and give the WASPI women the compensation that they are entitled to.
My Lords, I echo the comments made by my noble friend Lady Neville-Rolfe about my noble friend Lady Stedman-Scott. I also make the point that my noble friend Lady Fookes spoke not only without notes but with enormous common sense in this difficult territory. I thank her. I also agree very much with what my noble friend Lord Young and the noble Lord, Lord Hutton, had to say.
The most important aspect of this Bill is, as we would probably all agree, the introduction of pension dashboards and of CDCs as a new option. Dashboards are important because they should enable more individuals to look up and thus know what pension savings they have. I declare an interest as a consultant to TISA, which is itself a consultant to the savings industry, where we have campaigned for dashboards over quite a long period and have been in liaison with the Government on the subject.
Since pension saving has become largely the responsibility of individuals after having simply been provided by the employer—a crucial point of change which I do not think is necessarily for the better—it has been a challenge for them to know what pension savings they have. The Which? research carried out in 2016 found that nearly half of people aged over 50 in employment were unsure of the value of their pensions, while over a third of those approaching retirement found it difficult to keep track of their pensions, as well as a fifth who said that they had never checked how much they had in total. It really is an area that needs a bombshell under it in terms of letting people know what they have.
The Bill is a good start but there are areas where Which? and others are correctly looking for further commitments from the Government to ensure that all the key information that consumers need will be shown on dashboards, that commercial dashboards are properly regulated, that the state pension is fully integrated, that there is full coverage of pension schemes and a clear timetable for their delivery. It would also be nice if at some point equity release assets could be included. It has been pointed out that these are becoming an increasing source of income in retirement. Inevitably, one of the key issues is who is going to pay for the dashboards. Which? has pointed out that the whole project could cost between £1 billion and £2 billion when taking into account the related costs as well as the direct costs. The pensions industry has warned the Government that it is not willing to bear all the costs.
The key clauses enabling dashboards are Clauses 119 and 121. They set out that the Secretary of State and the FCA can require all necessary pension scheme information for dashboards to be provided. It is not yet clear whether such information is to include pension charges and income projection figures, which would clearly be helpful if they were included. The Bill appears to leave a lot of specific information requirements to the secondary legislation, but the Government should clarify whether it is their intention for dashboards to include both pension charges and income projection figures. Consumers need to know what they have paid and where charges can have a significant impact on investment returns. An increase in fees from 0.5% per annum to 1% per annum requires contributions to increase by 10% to achieve the same retirement income.
The FCA’s Financial Lives survey found that 71% of respondents with defined contribution pensions are not aware of the charges incurred. Charges need to be shown on the annual dashboard statements. It is clear that people are not saving enough for their retirement. A single retired person needs an income of some £20,000 per annum to have a comfortable retirement lifestyle. Under the current auto-enrolment system, a middle income earner should be able to save £114,000, but they would not expect this to deliver an income of more than £13,450.
Dashboards will also show the retirement income projection as part of the annual benefits statement. The objective is that by providing the necessary information in a readily digestible package, individuals will be motivated to follow it and to save more for their retirement. It is also necessary to ensure that adequate regulations are put in place to prevent the potential misuse of commercial dashboards by providers, and obviously to prevent fraud. Which? thinks that the legislation does not go far enough on this and that it should make the provision of a pension dashboard a regulated activity, but as several noble Lords have said, in many ways the proposals go too far and may discourage people from serving as pension trustees. There is also a risk that at least some commercial dashboard providers will use the opportunity to present information designed to attract custom. If dashboards remain outside FCA regulation, protection for customers if something goes wrong depends solely on the providers. There is a clear and strong case that the FCA should set standards, monitor compliance and ensure that providers are subject to its complaints and handling rules.
I agree with the comments of my noble friend Lord Kirkhope about penalties being excessive. The Bill enables information about the state pension scheme to be shown on dashboards, but it does not prescribe in what form. State pension information needs to be fully integrated as it forms a significant share of most individuals’ total retirement income. It is to be hoped that the Money and Pensions Service will give priority to designing the government-backed pensions dashboards, which could provide a model for the private sector.
Decisions also need to be taken on whether or not the provision of dashboards should be an activity regulated by the FCA, the Pensions Regulator or both. It is clear that there will be trouble ahead in the form of rivalry between the regulators if this is not sorted out. We need to see how much information about an individual state pension will feature on dashboards. Should it be required that all pension schemes provide information to dashboards? Will the Government set out time deadlines for pension schemes to provide dashboards?
The introduction of pension dashboards requires the creation of a supporting infrastructure enabling consumers to access their pension information. The design and development of this infrastructure is a task for the new industry delivery group working with the oversight of the Money and Pensions Service. Recent high-profile insolvency cases in relation to defined benefit pension schemes such as BHS and Carillion have, not surprisingly, damaged confidence in our pension system. It is difficult not to conclude that dashboards should be FCA regulated. Official policy now seeks to provide greater protection for scheme members by strengthening the pensions regulators’ powers, including new civil and criminal sanctions. However, there is clearly an issue as to what should be done by the FCA and what by the Pensions Regulator.
Another major aspect of the Bill is the provision of a framework for collective defined pension contributions, and in fact this takes up half of the Bill. These are a new concept for the UK. As others have pointed out, they provide members with a variable income in retirement by the pooling of investment and longevity risks. CDC pensions also have the potential to remove risk from employers’ balance sheets as there is no guarantee about the level of income to be provided. I agree very much with what the noble Lord, Lord Hain, had to say about CDCs.
The Bill is drafted to ensure that schemes are set up on a sound footing, that members will get good quality communications, and know that if things go wrong, their rights are protected. Schemes will have to satisfy the Pensions Regulator that they should be authorised and subject to ongoing scrutiny. CDCs may also prove to be a useful vehicle for master trusts.
Part 5 of the Bill introduces four other measures, all of which are essentially protective of pension schemes. Opposition parties have had little to add and indeed there has been broad political agreement on this legislation. Labour has welcomed pension dashboards and the CTC legislation, which should resolve the Royal Mail dispute. Labour and the SNP have argued for compensation for women affected by the raising of the state pension age. In the 2017 general election, the Liberal Democrats advocated the establishment of a review to consider introducing a single rate of tax relief for pensions that is more generous than the current 20%. Former Minister Steven Webb expressed the view that the Bill is notable for things that have been left out rather than for what it contains, as has already been mentioned. I think that is a little harsh. He pointed to a lack of measures advocated by some in the industry, such as expanding auto-enrolment saving—clearly something that has to happen—and the regulation of direct benefit superfunds. There are a few other anticipated measures not yet in the Bill, such as remedying the discrepancies in the tax treatment of relief-at-source schemes versus net payment schemes and the unintended consequences of pension taxation rules for higher earners.
All in all, this is a necessary piece of legislation. A reasonable amount needs to be added to it and sorted out. It is positive that there is cross-party political co-operation on this legislation.
My Lords, it is a pleasure to follow my noble friend Lord Flight. He mentioned equity release, and about 20 years ago he assisted me with a major chunk of equity release when I moved from a house into a flat. I am very grateful; it certainly eased my way to comparatively old age.
Of course, I come from the defined benefit era. I would have had an interest to declare, being trustee and chairman at various times of several pension schemes, and I have a SIPP—probably about the purest money purchase scheme you can possibly have. There are no contributions from anybody else except the Chancellor of the Exchequer and the taxpayer, and those contributions were immensely welcome.
I will concentrate on Part 1, which is welcome. The pooling of assets has a very long history, all the way back to tontines. It is a framework Bill; I suppose we have become quite used to framework Bills. Yes, there are a lot of regulations—about 30 in Part 1. Only one of them has a “must”—most have a “may” and some are silent—so I suppose we can take some guidance from the master trusts Act, which was on a similar scheme, and from my noble friend, whom I welcome on the Front Bench. She has just arranged to send a 120-page document to the Delegated Powers Committee setting out all the proposed regulations and the reasons for them, so I am sure we will return to that and find out more about how this part of the Bill will be implemented and over what time.
There seem to be a lot of people involved: predominantly the employers in this case; the union; the trustees; the members; the Secretary of State with his many powers, some of which I suspect are to be held in reserve—sort of “if it happens” powers—the Pensions Regulator; the Financial Reporting Council; the Institute and Faculty of Actuaries; the Money and Pensions Service; and potentially the Prudential Regulation Authority. I hope these bodies do not trip over each other. I rather agree with the noble Lord, Lord Hutton, that there is quite a possibility that they will.
I will concentrate on the actuary, a shadowy body not much mentioned in the Bill and not much referred to in this debate. I have a memory; of course, as my noble friend Lord Young of Cookham may find out, memories are quite risky. I recall an actuary saying to a board of trustees, which then informed the employer: “You don’t have to make any more contributions for a considerable number of years.” This was in a defined benefit scheme, and its investment experience had been very good. However, some short period afterwards, the same actuary came and said: “Things have changed. Not only do we need to continue with contributions, but I want a one-off special contribution from the employer.” The reason was that outside intervention had entirely altered the business plan of that organisation and put it in a completely different position. If it had not been for the professionalism and strong-mindedness of the actuary, the correction might never have been made.
Of course, in those days and perhaps—I do not know —even now, sometimes employers agitate for positive changes. It may be that they would like the rules of the scheme improved because they see it as a recruiting tool. They go to the trustees, who go to the actuary, and the actuary says: “I hope you all realise how much this will cost and what this might mean to the contribution rate.” That applies in defined benefit schemes.
As has been much referred to today, all sorts of negative things may happen that the actuary has to assess and report on. The actuary’s job is complex, important and difficult. In the Bill, the two phrases he has to bear in mind as he gives his advice to trustees are
“the available assets of the scheme” and “the required amount”. In those few words, you have what he has to try to do—and, of course, he is doing it over a very long timescale.
I admit that I have been a member of a pension scheme for 65 years—not the state pension scheme but a private one. I have no intention of doing so, but if I were—rather belatedly—to marry somebody 30 years younger than me, I suppose the timeframe would become 100 years in today’s circumstances. That is a very difficult period of time for anybody to deal with when they sit down to work out
“the available assets of the scheme” against the rules of the scheme, and “the required amount”. In that period, there are huge social changes, enormous economic changes and all sorts of unexpected events.
Although sometimes things can be done positively with the rules of a scheme, sometimes you run into negative circumstances such as a market disappearing. Let me cite deep-mined coal as an example. All the firms that used to supply a lot of equipment to the deep coal mines of this country no longer have a market in this country. In these circumstances of rapid and complicated change, there is always tension between the employer, the trustees and the actuary. The actuary is in the most difficult position of the three, because he is a paid servant of the trustees and has to nerve himself on some occasions, I suspect, to convey some of the news that he needs to convey as he does his professional calculations.
Recently, there has been much comment and criticism of the present arrangements for actuaries. Following a report written by Sir Derek Morris in 2005, action was taken and a memorandum of understanding entered into between the Institute and Faculty of Actuaries and the FCA. That is coming on for 15 years ago, and in 2018, a powerful report was produced by Kingman, who said that the memorandum of understanding is not going well. He made radical proposals for reform, in the sixth chapter of his report, entitled “Other Matters”. It is quite short, but he thinks that the system for regulating the actuaries and for taking responsibility for measuring their performance should be moved from where it is now to part of the Bank of England. In response to Kingman, the Government said—motherhood and apple pie—that they would reflect on these recommendations and bring forward proposals in due course. Will my noble friend on the Front Bench tell me where this is getting to?
My experience, as a trustee of pension schemes, is that the actuary was the most important person, and the one with whom I spent most time to assess whether or not our scheme really was in a circumstance with which we could be content for the time being—and only for the time being. It seems to me that there is a strong argument for saying that the actuaries are unlikely to be in the best place at the moment to discharge their complicated responsibilities and ensure accountability for performance. I look forward to hearing why this has not been included in this current pensions legislation—2018 is a fair time ago. What is the Government’s intention?
My Lords, I intend to speak relatively briefly. I welcome the Bill and echo the excellent points made by my noble friend Lord McKenzie in his opening statement. I agree with many of the points made by noble Lords around the Chamber this afternoon. Like the noble Baroness, Lady Hayman, I do not claim to have any expertise in this matter and, also like the noble Baroness, I will concentrate my remarks on the environmental impact of pension investments and the lack of controls in the Bill. The noble Baroness mentioned Peers for the Planet, so perhaps I should say that I have had some involvement with it. I do not know whether we have to formally declare that, because in an ideal world all noble Lords would be members of Peers for the Planet and it would be a badge of honour. Perhaps we should aspire to that.
I believe that this is a lost opportunity to use the pensions dashboard, and the powers of the Pensions Regulator, to address how pension schemes are meeting the challenge of the climate change emergency. As things stand, we are currently on track for an increase of 2 to 4 degrees centigrade of global warming by the end of the 21st century. This will have profound consequences for the global economy, and therefore for the investments and financial returns of occupational pension schemes.
The Bank of England Governor, Mark Carney, has stated that pension fund investments held by millions of people could become “worthless” unless the financial sector reacts quickly to the climate change crisis. As the noble Baroness, Lady Hayman, said, the Environmental Audit Committee produced an excellent green finance report last year, which recognised that, due to their size and influence, pension investment portfolios have a vital role to play in delivering our climate commitments. At the same time, recent polling by the charity ClientEarth has shown that the majority of savers want to move their money away from fossil fuels and would consider moving their pension to another provider if they found out that their fund had significant fossil fuel investments.
This is a rare opportunity to align pension funds with the Government’s stated commitments in the Paris Agreement, which will be reviewed and updated at COP 26 in Glasgow later this year. We can do this through the Bill by requiring pension funds to disclose information about their investments to individual savers via the pensions dashboard. We can also require trustees to align their investment and stewardship activities with the objectives of the Paris Agreement.
The new pensions dashboard will quickly become the primary means through which savers will obtain information about their pension fund. Obviously, it is an important step forward to empower savers with details of fees and charges, the benefits of their scheme and other issues we have debated this afternoon. But full transparency requires more than this. Very few savers have a good understanding of the steps their pension fund is taking to manage climate change risks. Obtaining this information is time-consuming, slow and difficult. Given the potential high impact and the systematic nature of climate change risks, reporting through the dashboard would enable savers to judge whether the risks are being properly mitigated. It could also help build trust and stronger engagement between savers and pension fund providers. Does the Minister accept the principle that savers should have easy access via their dashboard to information about how their fund is mitigating the damaging effect that climate change could have on their savings?
There is also a wider challenge for pension funds to play their part in meeting our obligations under the Paris Agreement. Increasingly, evidence shows that the long-term best interests of savers are most likely to be met where global warming is held as close as possible to 1.5 degrees centigrade. As stewards of a significant portion of the UK’s capital, pension funds clearly have a critical role to play in shaping corporate business plans so that they de-risk their capital investment by switching to green alternatives. Some are already playing their part and rising to the challenge, but we clearly need a level playing field for consistency across the sector. This can be achieved only if it is done not on a voluntary basis but under an obligation to comply with our Paris Agreement promises.
Given the acute nature of the climate change emergency, does the Minister accept that this Bill could be used to require pension funds to align their investments with Paris-compliant business models? Does she agree that the regulator’s role could be enhanced to ensure compliance with these objectives? I very much hope that, when she replies, she accepts that the Bill would indeed be an excellent vehicle for achieving these objectives. I look forward to hearing that she agrees with those views.
My Lords, I intend to be very brief indeed. Having sat through most of today’s proceedings, I am not sure that I have all that much original to say. I agree with the earlier comments of the noble Baroness, Lady Stedman-Scott: this Bill is designed to help people plan for a secure future. We make judgments about what government does in the light of that statement, which I very much agree with.
It has been far too long since we last considered pension reform in your Lordships’ House—quite a considerable time, as I recall. In my judgment, it should be much more regular. I humbly suggest that a five-year review maximum should be put in place.
I very much agree with the noble Baroness, Lady Neville-Rolfe, on the use of the dashboard. She was exactly right, and I very strongly support the use of the dashboard so that people can keep track of their savings and pension entitlements and, very importantly, understand what their financial situation is.
Finally, I will suggest one novel recommendation. Schoolchildren should also benefit from education about financial planning and entitlement, and, indeed, fund management. Many leave school without the vaguest idea about planning their financial resources. With that, I conclude my remarks and sit down.
My Lords, I rise with the rather dubious proposition that, as the last Back-Bencher to speak in the debate, I should be brief. I will have to take a bit of time because I will talk about something that has not really been discussed this afternoon and I hope to persuade the Government to add something to the Bill that is not already there.
The issue I wish to raise is that of senior doctors’ pensions, where anomalies in the pension taxation system are resulting in doctors having to reduce significantly the contribution that they are willing to make to the NHS, sometimes by retiring early and sometimes by reducing the time they are willing to devote to NHS work. The problem is caused by the tax charges many senior clinicians incur due to exceeding their pension threshold and which can result, in some instances, in them in effect paying to go to work.
Let me illustrate the problem that the current pensions taxation situation has caused with some figures provided by the Royal College of Physicians from a survey of nearly 3,000 members. Of these members, 45% of respondents reported that in the past two years they have decided to retire at an earlier age than planned. In the past two years, 38% of clinicians aged 50 to 65 have reported having had an annual pension tax charge due to exceeding their pension threshold. These numbers are rising, not diminishing. Once the decision to retire is taken it is much less likely to be reversed. We know that senior doctors told the royal college that they are doing so as a result of these tax charges. Some 62% of senior clinicians said that they were avoiding extra paid work such as waiting list initiatives or covering for colleagues; 43% are bringing forward their own retirement; 25% have reduced the number of programmed activities they work. Similar data is available from the Royal College of Surgeons and the Royal College of Emergency Medicine.
I know from my conversations with the BMA—as an ex-Health Minister I still have a reasonable relationship with the BMA—that its members have the same concerns, with the most recent BMA survey of more than 6,000 doctors from hospitals and general practice across England, Wales and Northern Ireland revealing that 42% of GPs have already reduced the number of hours spent caring for patients because of actual or potential pension taxation charges. In addition, 34% of GPs now plan to reduce their hours. Some 30% of hospital consultants have already reduced their hours and 40% have told the BMA that that was also their intention. Data from an earlier BMA Scotland survey had similar findings.
The impact of the pension tax charge is hitting direct patient care. A recent survey by the British Society of Gastroenterology showed that 40% of its consultant membership had dropped at least one endoscopy list. This resulted in 74% reporting a rise in two-week waits for endoscopy for patients suspected of having cancer, with 22% saying that the increased wait was an extra four weeks. It is now the case that figures for cancer waiting times, routine care waiting times and A&E performance are the worst since records began and 11 million patients are waiting more than four weeks for GP appointments. A lot of this is directly related to the pensions problems.
These are big numbers and they relate to an experienced group of doctors that the NHS relies on very heavily. We are seeing losses of senior doctors on a scale not seen before, seriously damaging the NHS and putting patients at risk. These doctors realise that they are in society’s higher earnings band, but even high earners can reasonably expect to be paid for their labour rather than working for nothing or, in some cases, paying to go to work.
In the time available to me I have struggled to find out who is to blame for this mess. It is somewhere in the territory of the Government and employer failure to understand how these tax arrangements would impact many public sector workers, not just doctors. Whoever is to blame, it certainly is not the fault of doctors. They have often been presented with an unexpected tax bill at the end, or even after the end, of a tax year. As far as I can judge, doctors were given too little advance explanation and warning about the tax and pension changes to plan their finances in advance and to mitigate the financial risks. As a result, doctors are now taking understandable steps to limit their financial exploitation.
The profession’s leaders have made all this information available to the Prime Minister, the Chancellor and the Health and Social Care Secretary as part of the ongoing review led by the Treasury. However, in the meantime, senior doctors continue to leave and cut their workloads. Waiting times lengthen. Unless something is done urgently, we will soon reach the end of another tax year and another tranche of senior doctors will receive a tax charge. They will add themselves to the growing numbers deciding to retire early or cut their hours working for the NHS. Every month that passes without a government solution being implemented, the more experienced doctors leave the NHS.
I expect the Minister will tell me that this is a very complicated matter and that a review is under way in time for an announcement in the Budget. However, we are now on to not our first but our second review. So far, the Government have produced just a couple of modest tinkering moves, including a temporary scheme for refunding annual allowance payments at the point of retirement, so doctors can put off paying the debt. The catch about that is that they also charged 5% a year for the pleasure of doing so. These measures have not convinced anybody that the Government are serious about fundamentally resolving this problem.
In contrast to such totally inadequate tinkering is the solution, supported by, among others, the Royal College of Physicians, the BMA and the Treasury’s own advisory body, the Office of Tax Simplification, that the Government should remove completely the annual allowance, including the taper in defined benefit schemes. I recognise that this might cause convulsions in Great George Street and I suggest that maybe a more modest approach would be to require the Secretary of State immediately after the Bill’s Royal Assent to make regulations that enable doctors and NHS workers in the NHS Pension Scheme to pass for payment by the scheme any such transfer of payments tax charges from HMRC, with any such payments attracting no interest or detriment to the scheme’s participants.
Before deciding what to do in Committee, I would welcome the Minister’s response to my two suggestions. One way or another, the Government will have to remove this unplanned tax burden from scarce senior doctors. If they do not, even more patients will suffer and NHS England’s long-term plan will not be delivered. I wish to hear what the Minister has to say.
My Lords, the three strands of the Bill contain proposals that have been broadly welcomed across the sector and across this Chamber.
My noble friend Lord Sharkey spoke about secondary legislation and Henry VIII powers, on which large parts of the Bill are dependent. As other noble Lords have said, in this House we are suspicious of such measures. We are reluctant to delay this long-awaited Bill, but we would like assurances from the Minister that the substance of measures not included on the face of the Bill, if not the actual letter of the legislation, will be made available to us in good time. As my noble friend Lord Sharkey said, this is a skeleton Bill with random use of affirmative and negative procedures. I thank the Minister for her recognition of these issues and very much hope that the illustrative regulations she spoke about will be substantive and informative.
CDCs—collective defined contribution schemes—have been supported across the parties, and the provisions in the Bill will enable these pensions, in the first instance as requested by Royal Mail and the Communication Workers Union. The Minister suggested that other employers who still have open defined benefit schemes are watching closely. Nevertheless, she has said that the Government will wait to see how the scheme beds in. Unlike defined benefit pension schemes, there is no hard pension promise or guarantee. However, unlike a defined contribution pension scheme, there is a pension target, which makes it easier to plan for retirement. If things do not go well, everyone in the scheme suffers collectively. In retirement, longevity is pooled. As I said, there is cross-party support, and the Bill builds on legislation passed in 2015 to enable risk sharing and risk pooling in workplace pensions.
Noble Lords have raised questions about safeguarding the interests of members of the scheme, in respect of, for example, transfer of rights and the destinations of transfers in the light of poor advice. Several noble Lords raised the issue of whether this should be an opportunity to prevent fraud, for example by making such transfers conditional on advice or levels of information—the noble Baroness, Lady Altmann, and my noble friends Lady Bowles and Lord Sharkey all raised that point. Other issues include intergenerational fairness, losses caused by market fluctuations or through transfers from the scheme, and the need for a capital buffer if the employer becomes insolvent. As the ABI has said, the success of CMP schemes will depend on their financial strength, combined with robust governance and regular reporting and disclosure. Careful thought must be given to how best to communicate to scheme members the crucial difference between a guaranteed and a targeted income. These are questions that many of us will have considered when reading the Bill.
As far as increasing the powers of TPR, the question of whether those powers are strong enough has been raised by a number of noble Lords—particularly the noble Baroness, Lady Drake—as have the issues of early intervention, how TRP can become aware of issues concerning pension funds and whether there should be growing duties on the Pension Regulator to become familiar with some of these very large schemes.
On the whole business of criminality, which was raised by the noble Lords, Lord Kirkhope and Lord Hutton, and the noble Baronesses, Lady Drake and Lady Noakes, this needs to be looked at again by the Minister. On the scope, to whom do the new criminal offences apply? Is it not only directors but also trustees and any other party who may be involved in an action that could have an intended knock-on effect on a pension scheme, even though they were trying to do the right thing? Is the intention of the policy that the new criminal offences should apply to activities and events that are much wider than the “wilful and reckless behaviour” described by the previous Minister? Are they to include day-to-day business activities that get caught accidentally but which are without wilful intent? The Bill needs to be looked at again, and some redrafting needs to be done.
The noble Lord, Lord Vaux, highlighted the different treatments of the shareholders and the pension holders and whether it is appropriate to pay a dividend when there are constraints on the pension fund and questions about its viability. Noble Lords asked whether the new measures will lead to people like Philip Green facing a criminal charge. I think the general view is that it is unlikely. My noble friend Lady Bowles wanted greater penalties. I think that people would support that if it was clear that the people getting those penalties had seriously offended and, as the previous Minister said, had wilfully brought ruin or damage to the scheme.
The pensions dashboard has received a lot of attention. The noble Baronesses, Lady Neville-Rolfe and Lady Noakes, drew attention to such issues as the cost, the importance of engagement with the public and how much care there needs to be in making information available about an individual’s personal circumstances. According to the ABI, already one in five adults have lost pension pots. The DWP estimates that 50 million pension pots will be lost or dormant by 2050. People are also highly vulnerable to fraud and scams. We believed that multiple dashboards with robust regulations, as proposed within the Bill and endorsed by Which?, is the right road to take.
Obviously, consumer engagement will be key to making this work. The noble Lord, Lord Young, mentioned the whole business of accessibility and security measures—and the time that this has taken—and other noble Lords mentioned the online banking model, which has proved so successful, and whether this could be a better model.
Like other noble Lords, I wish to talk about some outstanding issues. The DWP review recommends extending auto-enrolment; the noble Baroness, Lady Neville-Rolfe, mentioned what a success this had been. The noble Baroness, Lady Donaghy, agreed that it should be extended, particularly by reducing the lower age limit to 18 and removing the lower earnings limit. This could have a powerful impact on many people.
Noble Lords, particularly the noble Baroness, Lady Bryan, have mentioned the 1950s women. Might this Bill be an opportunity for the Government to give fairness and justice to these women, who have lost out on so much as a result of government policy?
The noble Baroness, Lady Altmann, mentioned the gender pay gap, which is a matter of great importance to many of us in this Chamber. This Bill could provide another opportunity to look at that. The qualifying earnings deduction operates against workers with multiple part-time jobs, particularly low-paid workers, including woman.
The noble Baronesses, Lady Hayman and Lady Jones, mentioned the duties to climate change and the importance of investment in sustainable businesses and the duties which could be placed on pension funds, which we are very supportive of.
Finally, the noble Lord, Lord Warner, spoke about the BMA. Has the Minister considered the briefing sent to us by the BMA? Have the Government plans to address that issue as part of this Bill?
As we have all said, there is great cross-party support for the measures in the Bill but a feeling that there are opportunities for action on a broader pensions landscape which could bring significant benefit to many people. I hope they will not be missed. We support the Bill and look forward to taking some of these issues forward in Committee.
My Lords, this has been an interesting and thoughtful debate and I have learned a lot during the evening. I now know a lot more about doctors’ pay, thanks to the noble Lord, Lord Warner, and more about actuaries, thanks to the noble Viscount, Lord Eccles. I should draw the attention of the House to an historic interest: I am former senior independent director of the Financial Ombudsman Service, to which I will refer later. I, too, look forward to my first Bill with the Minister and her team and I look forward to engaging with them in the weeks ahead.
I thank the noble Baroness, Lady Fookes, for reminding us of what the world was like without pensions and how important it is to get this right. I am grateful to her for that piece of context.
Labour is in broad agreement with the aims of the Bill, but we will want to see clarifications, assurances and improvements. As we have heard, this is a framework Bill with many delegated powers—a point made very elegantly by the noble Baronesses, Lady Fookes, my noble friend Lady Donaghy, the noble Lord, Lord Sharkey, and others. I am delighted to hear that the Minister will bring forward some illustrative regulations—I am not sure what they are but I look forward to seeing them —for Part 1. I hope she will heed the recommendations from her noble friend, the noble Baroness, Lady Fookes, my noble friend Lord Hutton and others that other areas will also need this detail. I refer in particular to Part 4 which, essentially, is simply the granting of powers to Ministers to do things by regulation. If we see those regulations not, we know not what those things are. So I encourage the Minister to draw those together before we get much further.
I have many questions for the Minister, but this is in fact an attempt to be helpful. If some of them can get dispatched, we will not need to spend too long in Committee, and at the moment we have only four days in Grand Committee.
Let me look at the main provisions of the Bill. First, on CDC schemes—I will try to learn to call them CMPs but I am not there yet—Labour broadly welcomes the proposals and my noble friends Lord McKenzie of Luton and Lord Hain have made the case for the Royal Mail scheme. But we are also concerned to see protections for existing public sector DB schemes—a point referred to by the noble Lord, Lord Vaux, and others.
My noble friend Lady Drake raised the crucial issue of the sustainability requirement and of the potential difference between the way in which that may operate here and the way it operates in master trusts. I will be interested to hear the Minister’s response on how that will work in CDCs.
A number of noble Lords made reference to the fact that, although a CDC scheme may give a better pension than the alternatives available, of course it is not guaranteed. So I look forward to the Minister telling us how workers will properly be informed about the risks and potential changes in what is coming their way.
The noble Baronesses, Lady Noakes and Lady Altmann, expressed concerns about the way in which pension freedoms operating in CDC might impact back on the scheme and the shared risk of those remaining in the scheme. I am also interested in how that might affect the person wanting to move out because, as far as I can see, there is no requirement for someone to take advice when transferring out of a CDC scheme. Why not?
I read somewhere that Julian Barker, the DB lead at DWP, said at a meeting in the other place that the Government intend to introduce a £30,000 advice threshold similar to the one that operates in DB transfers some time in the future. Is that definitely happening and, if so, at what point in the future might we look forward to it? Will the FCA be responsible for creating new rules for financial advice on CDCs in that context?
Let me turn now to the pensions dashboard. The case for a dashboard was made by many noble Lords, including the noble Lords, Lord Flight, Lord Young of Cookham, and Lord Freeman. The big question is who is going to run it or them? My noble friend Lady Drake made a strong case for this, because my understanding of the Bill is not simply that there will be many dashboards—many flowers will bloom, one of which will be bloomed out of the Money and Pension Service—but that there is no requirement that I can see that there should be a public-good dashboard. Can the Minister tell us about that? It seems obvious that that should be the place to start, but it seems that there is not even a requirement there should be one. I may have misread this, and I would welcome the Minister’s clarification. However, that is my reading of the impact assessment.
If that is the case, are the Government seriously planning, as my noble friend Lady Drake said, to compel all pension schemes to release data on £7 trillion of assets and 22 million people, and then tell those people that they can access their own data only in a commercial setting? We do not know how many dashboards there will be. Can the Minister tell us how many have been tested? We have heard concerns about how the dashboards will be used in commercial settings. How are the Government going to protect consumers against the misuse of commercial dashboards by providers when the Bill does not contain, as my noble friends Lord Hutton and Lady Donaghy pointed out, even a legal duty on operators to act in the best interests of savers?
I shall listen carefully to the Minister’s response to my noble friend Lady Drake, who said that transactional dashboards specifically should not be allowed without further legislation. Imagine the position of the Government if a misselling scandal were to ensue in a market created by the Government having compelled the release of data on individual pensions. If that happens, we will not be talking PPI; Ministers will not simply have failed to stop a scandal, they will have legislated to create it. So I ask the Minister to think carefully before moving any further down this road.
There were a number of questions about other issues such as data quality, as raised by my noble friend Lady Donaghy. Some interesting points were made by the noble Lord, Lord Young of Cookham, about identification and access by widows and widowers. I will be interested to hear the Minister’s response.
I have a few other questions. How much transparency will there be around the FCA’s criteria and process for authorising dashboards? Who will oversee dashboard complaints? Will it be the Financial Ombudsman Service or somebody else? There are clearly already demands for more information on the dashboards, whether from the noble Baroness, Lady Altmann, on other savings holdings, or the points made by the noble Baroness, Lady Hayman, and my noble friend Lady Jones of Whitchurch, about the crucial information relating to the climate emergency the savers will want to see. What are the Government doing to plan for those developments.
On the powers of the Pensions Regulator, my noble friend Lady Drake again made a clear assessment. The two questions are: first, are the regulator’s powers currently being used adequately and appropriately; and, secondly, does it need more powers? Those are the two things to hold on to. We have had pushes from both sides—from those who think there are not enough powers and from those who think the powers are too strong—but I take the view that, if you read the reports from the Select Committees on BHS and Carillion, it is hard to conclude that the chief danger facing the pension sector is an over-zealously interventionist regulator. So we should look carefully at how we decide to get that balance right as we move forward.
Having said that, Committee here will be a good point to probe some of the questions about drafting and scope. There are some important questions. Is there a risk that the Bill as drafted could criminalise minor actions or ordinary business activities? Could it catch third parties such as banks and trade unions who interact with the sponsoring employer? Could it even, in theory, catch government entities that contract with a private pension scheme? We will need to explore those questions in Committee.
The Bill also proposes that the regulator will additionally be able to issue a contribution notice in new circumstances where an act or failure to act materially reduced the resources of the employer or materially reduced the debt likely to be recovered from an employer in the event of an immediate insolvency. One can see in recent history where the inspiration for those came from, of course, but contribution notices have rarely been issued. Do Ministers expect that these changes will increase the likelihood of the regulator using the moral hazard powers. Will these new triggers for contribution notices be easier to activate, as it is currently a long and developed process with many stages?
The Bill also creates new duties on employers and others to notify the regulator about certain events relating to the sponsoring employer of a scheme—the noble Lord, Lord Vaux, mentioned this—and there are certainly questions to be asked about what those circumstances are. We will want to understand that more in Committee in order to get a sense of the range of circumstances and what it is intended to be, while understanding that it is impossible to nail everything down, even in regulations.
As the Bill substantially increases the role and powers of the regulator, what is the Government’s thinking about whether it will need additional resources to enable it to do its job? We need to make sure that it is able proactively and effectively to use the powers it has been given to implement the law and ensure that it is enforced.
The killer question is this: are the Government confident that this new legislation plugs the holes in the regulator’s powers that were highlighted by the failures of BHS and Carillion? The Minister should think carefully, because that is one of the questions they have to answer, otherwise they have failed.
Finally, some broader points were raised in the debate. Auto-enrolment was raised by my noble friends Lady Drake and Lady Donaghy, the noble Baroness, Lady Janke, and others. I would be interested to hear why the Bill has not addressed issues such as minimum contribution rates, age thresholds, income thresholds or the extension of auto-enrolment to the self-employed.
My noble friend Lady Bryan of Partick made another passionate plea for the WASPI women born in the 1950s who lost out so much when the state pension age was equalised so sharply. My noble friend Lady Drake raised the important issue of the lack of a credit for carers in auto-enrolment. I will be interested to hear the Minister’s reply. My noble friends Lady Warwick of Undercliffe and Lord McKenzie of Luton raised the important issue of the role of superfund consolidators. As noble Lords will know, they offer to take over DB schemes, thereby relieving the sponsoring employer of any future responsibility, but at a cheaper price than entering the more secure insurance buyout market. That of course poses a risk of regulator arbitrage. Can the Minister update the House on the Government’s current thinking on DB scheme consolidation? This is an issue now and it will become more so.
My noble friend Lady Donaghy, the noble Viscount, Lord Eccles, and others talked about wider issues around the changing nature of the pensions landscape: inequality, the climate emergency and other issues and the way future policy is shaped. I thought the noble Viscount’s comments about the 100-year time span and his future matrimonial plans were interesting. It is a reasonable guide to what we are thinking about and how challenging it is. Have the Government given thought to the best way to shape pensions policy going forward, given how long-term it is? Is a pensions commission the way forward, or are there other ways in which they should do it? I will be interested in their thinking.
We have much to explore in Committee, and I urge the Minister to come armed with detail. Concerns were expressed in the House last week that the Government had refused to engage with any amendments to the EU withdrawal Bill. We all hope that that was a Brexit thing and that now we are on to other legislation we will not see a similar response. It really matters because this is precisely the sort of legislation on which this House adds real value. There is broad agreement on the principles, but there are huge dangers lurking in the detail. That is what we are for. It is almost the definition of a revising Chamber such as this. Those dangers have to be flushed out before the Bill is sent to the other place. So I urge the Government to listen as they may find that, once again, in those circumstances, this House serves not only to protect consumers but to protect the Government from themselves. I look forward to the Minister’s reply.
My Lords, this has been an excellent debate with excellent contributions. I thank noble Lords for the time they have spent preparing and delivering those contributions. I thank everybody who has taken part. It has been encouraging to hear the positive responses to the measures this Bill proposes. Noble Lords have certainly laid down the challenges we need to address.
The noble Baroness, Lady Sherlock, asked me about our confidence in the Bill. We will have confidence in it if we all work together and turn every stone to make it fit for purpose. I pledge that the Government will do that, and I see no dissention from us working together to achieve that.
I shall deal first with delegated powers and the commitment I made to your Lordships that we will bring forward some examples in relation to Part 1. I do not use the word “trepidation” in conjunction with my noble friend Lady Fookes—it is quite the other way round—but I have her point about Part 3 and the point made by the noble Baroness, Lady Sherlock, about Part 4. We have a wonderful Bill team who are working incredibly hard, and if they tell me they will have them, they will have them.
I understand the concerns raised by some noble Lords in this debate that there are important legal principles at stake before the proposed delegated powers can be exercised properly. In many instances the Government have promised to consult further on the technical substance, particularly in relation in Part 1. There are also instances where there may be a statutory requirement to consult because of a connection to existing legislation. Where there is an intention, promise or legal requirement to consult on the substance of secondary legislation, the legal position is clear: the Government cannot prejudge the outcome. In opening this debate, I said that I have listened to what noble Lords have been telling me, and we are preparing illustrative regulations relating to Part 1 which will be available before Committee. I also pledge to meet noble Lords before Committee to discuss them and all the questions that I will not have time to answer. Noble Lords can see that I have them, so I am not trying to get out of doing the job.
I want to put to bed very quickly the question asked by the noble Baroness, Lady Bryan, about whether we have any plans to increase the state pension age to 75. This is not government policy. The recent independent report recommending raising the state pension age to 75 is not a government report. I hope that gives her comfort.
The multiple dashboard point was raised by numerous noble Lords. The noble Lord, Lord McKenzie, made the point that there should be a single, government-run, non-commercial dashboard to protect consumer interests. We agree that there should be a dashboard that has no commercial aspect. The Money and Pensions Service has made a commitment to deliver such a dashboard.
The noble Lord, Lord McKenzie, asked whether the CDC is just a backdoor to allow employers to close defined pension schemes and impose collective pensions. CDC schemes are unlikely to work well unless the employer and employees are comfortable with the approach. I am sure that employers with open defined benefit schemes are well aware of that. The CBI’s response to our consultation on CDC makes interesting reading. It said that CDC has advantages for both employers and employees and welcomes the opportunity that CDC presents to help fill the gap between defined benefit and current defined contribution schemes.
The noble Lord, Lord McKenzie, was very busy in this debate. He asked why we have not implemented the 2015 Act. Our approach to CDC schemes has developed since, and after much scrutiny we concluded that new primary legislation is necessary to ensure that we get the CDC exactly right for the United Kingdom.
The noble Lord, Lord McKenzie, and the noble Baroness, Lady Warwick, asked why our superfund is not in the Bill. Developing the new regulatory framework for superfunds is a complex task and we are working hard across government and with relevant stakeholders to build consensus on the right approach. We aim to publish shortly our response to the consultation which will set out in more detail our proposals for a future legislative framework. Once this work is completed, we will legislate as soon as we can.
The noble Lords, Lord Sharkey, Lord McKenzie and Lord Vaux, and the noble Baronesses, Lady Donaghy and Lady Janke, raised intergenerational fairness. Fairness between age cohorts has been one of our key considerations from the beginning of our work on CDC schemes. That is why we intend to bring forward scheme rule requirements using regulations under Clause 18. This will ensure that all members, whether active, deferred or pensioner, will share the effects of investment outperformance and underperformance in the same way every year. Should a scheme’s rules not be compliant, it will not be authorised to operate by the regulator.
The noble Lord, Lord McKenzie, and my noble friend Lady Noakes asked how many employers are considering CDCs. It is true that only one company is, namely Royal Mail. However, others are interested. We want to make sure that CDCs work before any future increase.
The noble Lord, Lord McKenzie, asked about automatic enrolment and what the Government are going about the gender pensions gap. Automatic enrolment has been a great success and is already having an impact on the gender pensions gap. Participation in pension saving among eligible women in the private sector has risen from 40% in 2012 to 85% in 2018, which is equal to the figure for men. We have made great progress on that.
The Minister is accurate. I do not disagree with her description of what is happening with women in the eligible population for auto-enrolment, but it is the millions not in the eligible population for auto-enrolment whom we are particularly concerned about and whom those figures do not address.
The noble Baroness, Lady Drake, is absolutely correct and I am glad that she pointed out the difference to me. I would like to meet her before Committee to address that issue, if she is happy to do so.
The noble Lord, Lord McKenzie, asked why the Government have not legislated for the measures in the 2017 automatic enrolment review in this Bill. The Government have set out their ambition to lower the age at which people are automatically enrolled from 22 to 18 and to abolish the AE lower earnings limit in the mid-2020s. Our approach will be to expand the coverage and increase the amounts put into retirement savings by millions of working people, focusing on younger people and lower earners.
The noble Baroness, Lady Donaghy, and the noble Lord, Lord McKenzie, raised the subject of the self-employed. The 2017 automatic enrolment review concluded that the current automatic enrolment framework is not suitable for the self-employed. They are a highly diverse group and one solution will not necessarily fit all. The Government have committed to carrying out research trials to form the evidence base and future policy.
The noble Lord, Lord Sharkey, asked what the Government are doing to tackle investment scams—an issue raised by other noble Lords. These scams are outrageous. The Government are committed to raising awareness about pensions scams to help protect consumers. As part of this, the Financial Conduct Authority launched its ScamSmart campaign to raise awareness of the steps that people can take to avoid investment scams. During the campaign, 173,000 users visited the ScamSmart site, and 376 users were warned about an unauthorised firm.
The noble Lord, Lord Sharkey, raised the need for a stronger nudge towards guidance, as provided for in Sections 18 and 19 of the Financial Guidance and Claims Act 2018. In that Act, we committed to test different approaches to providing a stronger nudge towards Pension Wise guidance. Pension Wise began this work on Royal Assent of the Act and it was picked up at the launch of the Money and Pensions Service. Trials commenced in October 2019. We are on course for those trials to finish and for qualitative work to be undertaken ready for the publication of the evaluation report in the summer.
Many noble Lords raised the question of whether there should be one dashboard or multiple dashboards, and the views on that were mixed. My noble friend Lady Fookes asked why there should not be just one, but I was interested to hear the noble Lord, Lord Sharkey, say that multiple dashboards will give consumers more choice in where they access pension information. Multiple dashboards will help to meet the varied needs of the 24.5 million people with pensions and wealth. I am sure that this is a topic on which we will have extensive discussions prior to and during Committee.
The noble Lord, Lord Vaux, made the point that the payment of dividends will not be a notifiable event. It would be disproportionate to require every dividend payment to be notified to the regulator. Hindering dividend payments could affect pension schemes, as many are shareholders in companies with DB schemes.
The noble Lord also raised the Dutch scheme. Despite communication issues in Holland, for generations the Dutch scheme worked as though it were a DB scheme. Where adjustments needed to be made, these came as a surprise. We will ensure that in communications to members, particularly at key points throughout a member’s pension scheme journey—on joining and annually, and before and during retirement—CDC schemes are clear and transparent that benefit values may go down as well as up.
The noble Lord, Lord Vaux, asked what safeguards there are to ensure that transfer values are fair. The cash equivalent transfer value represents the actual calculated cash value of providing members’ benefits within the scheme. Legislation provides a framework for the calculation of transfer values that trustees must follow.
The noble Lord also asked why companies should not be stopped from paying dividends if their pension schemes are in deficit. We do not believe that it is sensible to stop companies paying dividends to shareholders, even when a scheme is in funding deficit. Government intervention to block dividend payments could discourage investors and weaken the business, further reducing the security of the defined benefit scheme.
The noble Lords, Lord Vaux and Lord Sharkey, and others raised a lot of questions on that subject. It is not that I am not trying to give an answer; it is just that I am unable to do so at the moment, but I will get back to them.
My noble friend Lady Altmann asked what the sanctions will be for pension scheme providers who do not comply with compulsion. If a pension scheme provider fails to comply, it might be subject to penalties, including fines. The regulator will have a range of powers, including issuing compliance notices, penalty notices and fines.
My noble friend also raised the question of simpler annual benefit statements. The industry delivery group will consider the outcome of the consultation on simpler statements when making recommendations on the information to be included on dashboards.
I pay tribute to my noble friend Lady Altmann, whose tenacity on net pay allowance and tax relief is legendary. She has taught me everything that I know about it. That was a matter raised also by the noble Lord, Lord McKenzie. I am not trying to get out of anything here but it is a matter for the Treasury. However, the Government recognise the different impacts of the two systems. To date, it has not been possible to identify any straightforward or proportionate means to align the effects of net pay and relief at source. However, as announced in our manifesto, the Government will conduct a comprehensive review of how to fix this. We say that we will do it.
My noble friend Lady Altmann asked whether the new scheme’s funding requirements support the plumbing pension scheme. I am afraid that I am not able to give a response to that at the moment but I would love to meet her and give her the information that she requires, as well as making it available to other noble Lords.
I am taking a moment to look through my responses in an attempt to be fair to all noble Lords, although I do not think that I am doing a great job.
The noble Baroness, Lady Drake, raised the important point of carer’s credit and the family carer top-up. The Government recognise the valuable role of carers and the fact that they are disproportionately women. The Government Equalities Office gender equality road map, published in July 2019, set out plans to support carers. They included helping people to return to work after taking time out for caring. We are working closely with colleagues in the Money and Pensions Service to empower people to take informed decisions about saving throughout their lives. I am sure that we will revisit this very soon.
We have talked about the gender pay gap—a matter raised by the noble Baronesses, Lady Drake and Lady Bryan. As I said, automatic enrolment has helped lots of women—I have given the statistics. We want to empower them to take informed decisions about saving throughout their life, but we have made progress in bridging the gap.
The noble Baroness, Lady Drake, talked about the consumer protection regime. The Government recognise that the regulation of dashboard providers is critical to maintaining public confidence. My department has been working with HM Treasury and the FCA to decide how best to ensure that the regulatory regime is appropriate and robust.
The noble Baroness, Lady Drake, also raised the important issue of the security of data on pension dashboards. Ensuring the security of data is key to establishing consumer confidence in the dashboards. The Government are committed to ensuring that the infrastructure includes a level of identity assurance that satisfies the good practice established for national cybersecurity.
The noble Baroness, Lady Drake, and my noble friend Lady Noakes raised the subject of the Pensions Regulator. They questioned the impact of the new criminal offences and wondered whether their scope was too wide. We do not want to stop legitimate business activity, such as lenders taking security for normal financing activities. The Government are clear that businesses must be allowed to make the right decisions to allow them to develop and grow.
The majority of employers want to do right by their scheme. However, we must ensure that sufficient safeguards are in place to protect members’ pensions from the minority who are willing to put them at risk—I mention no names. The Government are committed to the Money and Pensions Service providing a dashboard, and MaPS committed to providing a dashboard in its 2019-20 business plan.
I turn to the contribution of my noble friend Lord Young. His powers of foresight are legendary; I am envious, and I am sure that many in both Houses would like to have them. The same is true of his oratory powers; he is very eloquent and his Front-Bench contributions are much missed in this House. We will meet before Committee. Time is really getting on now. I will respond directly to my noble friend Lord Young on the points he raised, and will have an answer to the point raised by my noble friend Lord Flight on equity release.
My noble friend Lady Noakes asked whether there are adequate appeal processes. The answer is yes and I would be very happy to talk her through those at a later time. Her description of a “half-baked dashboard” is interesting. We undertook a significant consultation and got more than 120 responses. These were published in April 2019 and were taken into account during the development of the legislation. We will continue to seek all views as we develop regulations.
The noble Baroness, Lady Donaghy, raised a point about holders of multiple part-time jobs. Currently, where an individual does not earn more than £10,000 per annum in a single job but earns more than the lower limit of the automatic enrolment qualifying earnings band, they can opt in to a scheme in one job and receive the mandatory pension contribution from their employer on earnings over that level.
The noble Baronesses, Lady Hayman and Lady Jones of Whitchurch, talked about climate change. This is a subject close to our hearts and I will meet with them both to talk in more detail. The Government are absolutely committed to tackling climate change and recognise the concerns that have been raised. We have already introduced legislation to require pension schemes to state their policy. In building on this, the DWP continues to work with the industry.
On dashboards, we expect that initially there will be no more information than is already available; to start with, simple information will become available. The delivery group may make recommendations for adding more detailed information as the needs and interactions of users develop.
Before the Minister sits down, would she be willing to talk to us a little more about the detail of the subordinate legislation on dashboards? She kindly said that she would do that on the first part of the Bill, but several noble Lords are interested in the subordinate legislation on the dashboard.
Of course, I will do that as soon as possible. This is an important Bill with a far-reaching impact on people. We will all work together in the House to get the legislation as we want it. I extend my invitation once again to all noble Lords who may wish to discuss any further issues before Committee. Our door is always open. I thank noble Lords for their contributions today. I commend the Bill to the House and ask that it be given a Second Reading.
Bill read a second time and committed to a Grand Committee.