Motion on Amendment 1

Pension Schemes Bill [HL] - Commons Amendments – in the House of Lords at 1:32 pm on 19 January 2021.

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Baroness Stedman-Scott:

Moved by Baroness Stedman-Scott

That this House do agree with the Commons in their Amendment 1.

1: Clause 27, page 17, line 38, leave out from beginning to end of line 40 and insert “The notice must specify—”

Photo of Baroness Stedman-Scott Baroness Stedman-Scott The Parliamentary Under-Secretary of State for Work and Pensions

My Lords, before turning to the Commons amendments, I will take a moment to remind the House of what the Bill does, as a lot has happened since it was last here.

If enacted, the Bill will affect the lives of millions of people throughout the country. It will make pensions better by creating a new style of pension scheme that has the potential to increase future returns for millions of working people, and by delivering pensions dashboards that will help individuals to make informed decisions about their financial futures. It will make them safer by helping to prevent scams and by clamping down on those who recklessly try to plunder the pension pots of hard-working employees. It will make them greener by requiring pension schemes to take the Government’s net-zero climate targets into account in managing their own climate risk. I know that your Lordships agree that this is a worthwhile and important piece of legislation, and it has received cross-party support in both Houses. I hope that we are now at the final stage of its passage, and that we can agree and allow it to move on for Royal Assent.

I turn to Amendment 1. We welcome the strong interest shown in both Houses on ensuring that CDC schemes treat their members fairly and, in particular, operate in a way that is intergenerationally fair. As we explained in both Houses, requiring trustees to assess fairness is likely to generate confusion, as the concept means different things to different people, and there would be uncertainty about what was required. That is why we have intentionally avoided referencing fairness in such a way within any of the CDC provisions. Instead, following consultation, we intend to use these regulations to set out clear principles and processes that schemes must follow to ensure that different types of members are treated the same where appropriate—for example, when accruing and calculating benefits and making adjustments to benefits. These requirements will form part of the authorisation process for CDC schemes overseen by the Pensions Regulator.

For example, we intend that regulations under Clause 18 will require CDC scheme rules to ensure that there is no difference in treatment when calculating and adjusting benefits between different cohorts or age groups of scheme members, or between members who are active, deferred or receiving a pension. This is a clear and effective approach to delivering fairness in practice that is not only easy to understand, but also easy for members and trustees to apply, because it avoids a subjective interpretation of what is fair. We are all pleased that Royal Mail agrees with our approach, and it is for these reasons that we do not consider the amendment to the Bill necessary.

I will move on to Commons Amendments 2 and 3. Pension dashboards will help to revolutionise the pensions industry and bring it into the 21st century. This innovative programme will help to reconnect consumers with their otherwise lost pension pots and engage millions of UK citizens with their pension savings in a safe, secure and convenient way. These amendments on delaying the introduction of dashboards from other providers and preventing transactions through dashboards were overturned in the other place. This was in recognition of the approach taken to ensure that consumers were protected as part of the development of dashboard services. In respect of multiple dashboards, it has always been the Government’s belief that individuals should be able to access information about their pension savings from a service of their choosing. I am delighted that, following the changes that we made in this House, consumers will be able to access a dashboard service that is publicly owned, provided by the Money and Pensions Service. I restate the commitment that was made by my noble friend Lord Howe in this House on 30 June last year that

“the Government wholeheartedly agree that such a dashboard should be available to all users from day one, alongside dashboards offered by other organisations.”—[Official Report, 30/6/20; col. 668.]

We will not allow any qualifying dashboard to be launched before that of the Money and Pensions Service. However, we remain firmly of the belief that allowing other properly regulated dashboard providers to operate is the best way to drive engagement, reaching out to consumers where they may already interact with digital services, and unlocking innovative potential. I have said before that dashboards will launch with a simple find-and-view capability; this remains the case. However, enabling transactions through dashboards can provide an innovative way of safely giving people more effective control of their pension savings. Functionality on dashboards will be increased only as a result of user testing, after careful review and with the right level of consumer protections in place. It is important that we maintain the ability to meet the needs of the user by not prohibiting functionality that can put individuals in control. The ability to have this type of functionality in the future could bring real and significant benefits for consumers—for example, when consolidating small pots of pensions savings.

Dashboards are a hugely exciting innovation that will benefit and empower millions of citizens. We should support the development of dashboards so that they reach their potential and change the way that people interact with their pensions savings by placing them in control of all their pensions.

Finally, Commons Amendment 5 removed the privilege amendment made in the Lords, as is the norm in these cases. I beg to move.

Photo of Lord Vaux of Harrowden Lord Vaux of Harrowden Crossbench

My Lords, as there are no counterproposals to these Commons amendments, I shall try to brief, but there are a couple of points I would like to make in relation to Commons Amendments 1, 2 and 3.

Throughout the passage of the Bill, we have had lengthy discussions around the risk of unfairness, intergenerational or otherwise, that is inherent to collective money purchase schemes, or CDCs as they seem still to be called. I regret that the Government chose not to accept the amendment which required trustees to make an assessment of the extent to which a scheme is operating in a manner fair to all members; it has been removed by Commons Amendment 1. That seemed a fairly uncontroversial concept. However, the Minister has been very clear that the Government acknowledge the risk of unfairness, that they intend to learn from experiences in other countries, such as the Netherlands, and that they intend to deal with this issue in the regulations that they will publish in relation to Clause 18.

Commons Amendments 2 and 3 remove the amendments your Lordships agreed to in relation to pensions dashboards which required that there should be a period during which pensions dashboards are initially restricted to the MaPS dashboard and that they should not become transactional platforms without primary legislation. On the second point, I remain quite uncomfortable with the idea of a pensions dashboard becoming a transactional platform without very serious thought and experience. However, these matters will also be dealt with by regulations and I am confident that the Minister has heard the concerns that have been raised, even if she does not agree with the proposed method of dealing with them.

The Minister has been very generous with her time and commendably willing to meet to listen to and discuss concerns throughout the passage of the Bill. As a result of changes made to the Bill as it passed through your Lordships’ House, most of the regulations that will follow will be subject to the affirmative procedure. However, even under the affirmative procedure, it will not be possible to amend regulations. I therefore urge the Minister to continue her constructive and collaborative approach in relation to the regulations that will now follow by consulting across the House before draft regulations become set in stone. That way she will be able to take advantage of the very deep pensions knowledge and experience in this House and the regulations will be all the better for it.

Photo of Baroness Janke Baroness Janke Liberal Democrat Spokesperson (Work and Pensions), Liberal Democrat Lords Spokesperson (Work and Pensions)

My Lords, I thank the Minister for her clear presentation and her response to the issues raised during the passage of the Bill, as expressed in these amendments, which were based on concerns about protecting members of the public from criminal scams and malpractice and about minimising potential risks and threats to the value of pension schemes.

The amendments sent to the other place for consideration related, first, to the wish to ensure fairness, particularly to younger and newer members of the new CMP schemes; and, secondly, to the protection of pension scheme members from scams and exploitation in the operation of the dashboard by preventing financial transactions on it and by allowing the operation of the public dashboard for one year before allowing private sector models.

I understand from the Minister’s opening remarks that the concerns of the movers of those amendments have been at least partially addressed by Ministers. However, I support the proposal from the noble Lord, Lord Vaux, about consultation across the House before the regulations are drafted for consideration. Once the Bill is passed into law and these measures come into operation, we expect that they will be closely monitored and that if further concerns arise they may be reconsidered during the passage of regulations at a later stage. In view of this, we are not proposing to pursue these amendments further.

The fourth amendment concerns the need for different treatment of open and closed schemes and is the subject of further amendments today. My noble friend Lady Bowles will address the important issues raised when this amendment is considered in the next group.

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions) 1:45, 19 January 2021

My Lords, I, too, am grateful to the Minister for explaining why the Government asked the Commons to reject the amendments passed in this House. We have come a long way since the Bill had its First Reading in this House on 7 January—more than a year ago, although it seems more like a lifetime. The Bill now makes some important changes, creates CDC schemes, legislates for the pensions dashboard and strengthens the regulatory environment on pensions.

During the Bill’s passage through this House, the Government have made some welcome concessions. For example, we ran an amendment to require a public dashboard from the outset. The Government brought forward amendments requiring that, and I am grateful for the confirmation that the Minister has given today. We ran amendments saying that the FCA should regulate the provision of dashboard services, and the Minister has confirmed that that will happen. We ran an amendment to say that using the dashboard to see your own data must be free, and the Minister has confirmed that it will remain free.

The Bill initially made no reference to climate change, but my noble friend Lady Jones of Whitchurch, the noble Baroness, Lady Hayman, and Members from across the House worked together to persuade the Government to amend the Bill to require trustees and managers to take the Paris Agreement and domestic climate change targets into account in their overall governance and their disclosure of climate change risks and opportunities. This is the first time that the words “climate change” have featured in domestic pensions legislation.

This is a better Bill than it was when it started, and I am grateful to all noble Lords who have worked so hard on it, especially my noble friend Lady Drake and Dan Harris in our Opposition Whips team. I am also grateful to the Minister for engaging with our concerns and to the Bill team and all the officials who have engaged with us.

That said, the Government have rejected the amendments which this House voted for. On CDC schemes, I hope they will review the intergenerational impact of any schemes as they are developed and will keep an eye on that. I am particularly disappointed that our amendments on the pensions dashboard system were rejected. They would have put in place two essential safeguards: that the MaPS public dashboard should be in operation for a year and that the Secretary of State should lay a report before Parliament on its operation and effectiveness before commercial dashboards enter the market, and that the delegated powers in the Bill could not be used to authorise commercial dashboards to engage in transactions.

Like the noble Lord, Lord Vaux, I remain deeply concerned about the risks to consumers. Those amendments were especially important given the sheer breadth of the delegated powers the Bill grants and how little we know at the moment about how the dashboards will work. We still do not know how many dashboards there will be, who will run them, what information they will have, how it will be displayed or how consumers will respond. We do not know where liability will lie for each link in the chain or how consumers will be compensated if they lose out. We do not know what the charging model will be or how data security, identity verification or third-party access will be managed.

Given all those things that we do not know, I have sought to persuade the Government to come to Parliament to allow us to debate the proposals they make before the regulations are published. I regret that I have not succeeded in that. Given that this remains a very high-risk programme and that parliamentary scrutiny would surely be an advantage not an impediment, I hope that in her reply the Minister can give us some assurance of our continued involvement in debate on this process. I look forward to hearing her reply.

Photo of Baroness Stedman-Scott Baroness Stedman-Scott The Parliamentary Under-Secretary of State for Work and Pensions

First, I thank the noble Lord, Lord Vaux, and the noble Baronesses, Lady Janke and Lady Sherlock, for their contributions. I think it is right to say that we have listened, we have engaged and we have valued and appreciated all noble Lords’ contributions, and I assure noble Lords that that will continue.

I reassure the House that the Government are fully committed to continue transparency and engagement through the development, delivery and operation of pensions dashboards. We greatly value the insight and input from colleagues from across the House in shaping, testing and ensuring the proposals and want that to continue throughout the more detailed stages of development. The pension dashboards programme is committed to publishing six-monthly progress updates, the most recent of which, in October 2020, outlined the work undertaken to define the data standards and the work towards finalising the requirements for the digital architecture and the identity service. It also set out an indicative plan for delivery.

Future updates, in advance of the launch of dashboards, will provide greater detail, engagement opportunity and assurance on key areas of specific interest. These will include the digital architecture and identity service; user consents and permissions, including delegated or third-party access; the consumer protection regime, including the liability model; and further work on how data will be presented to consumers, based on a growing body of user research and a greater understanding of user needs.

I facilitated a meeting between noble Lords and the pensions dashboards programme team just before Christmas. As promised at that meeting, I will ensure that these regular meetings continue. They will provide your Lordships with the opportunity to have meaningful discussions directly with the programme team at the publication of each progress update report and a chance to scrutinise this work at an early stage of development. I will ensure that copies of these reports are placed in the House Library on their publication.

I recognise the concerns that many have expressed about the broad nature of the delegated powers within this area of the Bill. There is a statutory duty on the Secretary of State to consult before making regulations for pensions dashboards. Consultation will cover proposals across the range of areas which are critical to the safe, secure and effective delivery of dashboards, and give all those interested the opportunity to influence the detail before the regulations are laid in draft in this House under the affirmative procedure.

I know that some of your Lordships have asked whether we can go even further, requiring the Government to lay a report before Parliament for debate in advance of draft regulations being laid. I do not believe this to be the right way forward, as the consultation on the Government’s proposals for regulations will already have taken place.

I have listened further to the noble Baroness, Lady Sherlock, and, although we have not always been in agreement, we are together on Peers having ongoing future involvement, and we are prepared to engage, engage and engage. Therefore, in addition to updating the House in the usual manner, I am prepared to commit to the Government tabling Written Ministerial Statements during the consultation phases, prior to the debate on the proposed dashboard regulations.

I reassure the noble Baroness that I will continue to work with her collaboratively in the way we have done throughout the Bill’s progress. On the matter of facilitating further debate on the issue, I am sure that the Chief Whip has heard our debate today, and, when the Written Ministerial Statements are laid, I will draw them to his attention for him to consider further discussion in the usual channels.

Some concerns have been expressed about governance of the dashboard service going forward. The Money and Pensions Service has responsibility for delivery of the dashboard architecture and ongoing oversight and control, and it is clear that our focus for the foreseeable future must be on the development and implementation of the service. Meeting the demands of the scale and complexity of this challenge comes first. Reaching a live and steady state of operation will take a number of years, as set out in the pensions dashboards programme activity plan. As such, I confirm that the Government have no plan to move ownership of dashboards architecture away from the Money and Pensions Service.

My department has clear governance arrangements in place to ensure the delivery of dashboards. As well as the regular published updates that I mentioned earlier, there is an existing legislative requirement, in the Financial Guidance and Claims Act 2018, for MaPS to report to the Secretary of State annually on the exercise of its functions, which includes its responsibilities for pensions dashboards. This report is laid before Parliament.

Chris Curry, the senior responsible officer for the pensions dashboard programme, and Sir Hector Sants, chair of the Money and Pensions Service, regularly report progress to Ministers. The department also undertakes formal quarterly accountability reviews with the Money and Pensions Service. We recognise the importance of effective evaluation, including monitoring of consumer behaviours and outcomes. My department is responsible for overall evaluation of the policy and is working with the pensions dashboards programme and regulators to develop a comprehensive evaluation plan.

Research will also be undertaken with providers and users alike throughout the project life cycle. This will include user testing to understand likely reactions and behaviours, and research to understand the impact that dashboards will have on the market. My department is developing a joint set of critical success factors to complement delivery and measure the success of policy objectives. These are relevant to all stages of the programme and will give insights on, among other things, usage of the service, delivery and compliance. Review of the critical success factors will also play a part in evaluation and service developments.

I finish by repeating the commitment that I made in my opening remarks. We will not allow any dashboard to which schemes are required to supply data to be launched before that of the Money and Pensions Service. On the point raised by the noble Baroness, Lady Sherlock, about a review of intergenerational impact and fairness, we will of course review how CD schemes operate and will monitor how different groups are treated.

I hope that my comments reassure noble Lords that the Government are acting diligently and responsibly in the delivery of dashboards.

Motion on Amendment 1 agreed.