Social Fund Winter Fuel Payment Regulations 2024

Baroness Altmann Excerpts

Wednesday 11th September 2024 Lords Chamber

Moved by

[Baroness Altmann]

That an Humble Address be presented to His Majesty praying that the Social Fund Winter Fuel Payment Regulations 2024 (SI 2024/869), laid before the House on 22 August, be annulled because they would significantly reduce state support for pensioners without sufficient warning and without a proper impact assessment, and because they present a significant risk to the health and wellbeing of many pensioners on low incomes.

Relevant document: 2nd Report by the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[Baroness Altmann (Non-Afl)]

My Lords, I would like to say from the start that I believe the noble Baroness opposite is a very, very good woman and I hope that the House will forgive me in some way for bringing this before your Lordships. But I have spent my life trying to stand up for people who have no voice and trying to do what I believe is right. On this particular occasion, with a heavy heart, I believe I must do so.

Let me read some of the words of those people from whom we are taking away £200 or £300 this winter. These are the poorest pensioners. We will hear that the Government is protecting the poorest. It is simply not the case. I apologise, but that is the reality. “I do not qualify for pension credit. I live on my state pension and one small occupational pension that pays me the cost of a couple of bags of carrots and potatoes a month in an annuity. I receive just a little over the qualifying limit and fall into that group of pensioners who are in limbo. I am 75 years old and not in great health. I will be trying very hard not to turn my heating on this winter. I have only a few pounds a week for food, toiletries, insurance or any other repairs. Why is this being done? I always turn off the lights and am very careful, but I don’t know how I will get through the cold weather this year. I have arthritis and COPD and need to keep warm for my health.”

Another says, “I am 82 years of age and live alone. I am on £220 a week state pension and therefore £2.85 a week over the pension credit limit. Since the cost of living crisis, I have not been able to afford any central heating for the last two winters. I did not put on my gas central heating and I will not be putting it on again this year. My welcome winter fuel payment went towards my electricity bill, which increased due to the single room heater I used. I work on the ‘heat the person not the room’ principle. I fall into that group of pensioners who do not qualify for pension credit, and I am not sure how I can economise further”.

One more example says, “I am 91 years old and my husband and I struggled to keep our home warm enough last winter. The fuel bills rose so much, and even though our home is small we were spending so much on heating that we only had the heating on in the sitting room and our bedroom. He had Parkinson’s and I have had cancer, but we looked after each other. We spent our time in the one room downstairs and used lots of blankets, as well as often having three cardigans on. We went to bed early so we could turn off the heating, and would try to keep the heating off in the bedroom most of the time, but we would cuddle up together to keep warm. My husband passed away a few months ago and I don’t know how I will manage this winter. I don’t have enough money to warm the house more, and my small pension has put me over the limit for pension credit”.

This is the reality of the statutory instrument we are debating. I agree with the Government’s aim of removing a tax-free payment from millions of people who do not need it. Indeed, I have called for that to be done for a long time, or for it at the very least to be taxed: it could perhaps be rolled into a higher state pension but then become taxable.

I would support this measure if it was dated 2025 instead of 2024, giving time to put in place some mitigation and protection for these poorest pensioners. Those on pension credit are not the poorest as they get extra help—as the Minister herself has said, some get thousands of pounds extra. It is those who are just a few pounds a week above the limit or those who are eligible but do not claim or receive it who are the poorest. Nothing in these regulations will ensure they receive the money they expected, which has been withdrawn from them with no warning or time for them to economise in time for November, when it was due, or for the colder weather this winter.

I believe that the Government do not want to hurt these people. I do not expect that the needs and situation of these very poorest pensioners were really considered when this announcement was made. The aim, which I fully endorse, was to take the winter fuel payment away from the quarter of pensioners who have assets worth £1 million, and from those higher up the income scale, who clearly can manage without it. But that is not the impact that I am concerned about if we pass this measure today.

I am particularly concerned because of the wording in the statutory instrument document itself:

“A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, public or voluntary sector is foreseen”.


If that had been the expectation, since that publication the voices of Age UK, Independent Age, Silver Voices and the trade unions have all warned clearly that what the Government perhaps did not foresee is indeed foreseeable and potentially about to happen.

The Government’s Explanatory Memorandum says:

“No consultation was undertaken ... Whilst making the necessary Exchequer savings, it retains support for pensioner households on the lowest incomes”.


This is simply not correct, and I am trying to help the Government see that what I believe they do not wish to do, they may not need to do. I understand that there are pressures on the public finances, and I completely support the idea that a universal payment to those who do not need it, especially one that is tax-free, should not be made. Why not work out a system whereby they do not receive it, but the consequence of taking it away is not that we also have to take it away from perhaps 3 million of the poorest pensioners in the land?

The Secondary Legislation Scrutiny Committee has brought this issue to the attention of the House:

“We are unconvinced by the reasons given for the urgency attached to laying these regulations and are particularly concerned that this both precludes appropriate scrutiny and creates issues with the practicalities of bringing in the change at short notice”.


That is the problem I have, the short notice. It is not the aim of the policy that I query: there is no time to prepare, no time to increase pension credit—although that is a worthy aim, and I hope a few extra people will claim it. According to the Government’s own figures, more than 800,000 households are eligible but not claiming. The idea that they will receive the money this winter, having gone through the 243 questions on the application form, be approved and start receiving it, is simply fanciful. With the best will in the world—and I believe the Government have the best will to try to increase take-up—even if half the households were to receive it, the savings the Government say are so essential to make will be wiped out. This argument does not make sense. It is not logical to say that we have to take it away from the poorest because we want to take it away from the well-off.

Taking this money from people is, effectively, a 3.4% state pension cut this year. For anyone on the old basic state pension who is over 80, £300 is 3.4% of the money they received from the Government last year. This measure was introduced in 1997 and it has been an essential part of the state pension support package for pensioners ever since. No Government have said it will be removed; indeed, that was suggested and rejected time and again. I believe there could, and will, be a way of dealing with this. For example, to save money, you could tax it rather than axe it; or you could just say that anyone paying higher rate tax will have their tax coding adjusted and the money will be taken back from them. If you pay 40% or 45% tax, of course you do not need it.

--- Later in debate ---

[Baroness Stowell of Beeston (Con)]

My Lords, I commend my erstwhile noble friend the noble Baroness, Lady Altmann, on her powerful opening of this debate. I agree with the arguments she put forward, as well as those of my noble friend on the Front Bench. There is very little for me to add to what they have already said about this decision that the Government have made and for which they have no mandate. They have not even had the respect to set out a proposal in a Budget in a much more rounded way, as put forward by my noble friend Lady Altmann.

I want to make a bigger point. What a lot of people find quite hard to take at the moment is that, alongside this decision, the Prime Minister has the gall to say that his Government are acting in a way which will restore public trust. He seems not to understand that all of us in the political class over the last few years have lost public trust—himself included—because of our disregard and disrespect for what the electorate have been demanding from us. For this Government now to take decisions that affect people so directly without any notice—believing that such decisions can be justified because the Prime Minister and his Chancellor are convinced that they know best—damages public trust further.

Of course, the impact of this politically on the Labour Party is a matter for it, but I urge the Minister and the rest of her Government to accept the arguments put forward by my noble friend Lady Altmann today. I hope that she does not mind me calling her my noble friend; she will always be “my noble friend” to me.

[Baroness Altmann (Non-Afl)]

Absolutely. She will always be my noble friend.

[Baroness Stowell of Beeston (Con)]

I also urge the Prime Minister to drop his misplaced belief that he and his Government are somehow morally superior and are acting in a way which will restore public trust. On the basis of this decision, they are not.

--- Later in debate ---

[Baroness Altmann (Non-Afl)]

My Lords, I too welcome the noble Baroness to her position on the Front Bench. She brings huge expertise and value to that position. I hope that we can work together in the future on other pension-related issues—but on this issue, I have listened carefully to all noble Lords who have spoken and I have not heard any reasonable justification at all for the hurry to take this money away from the poorest pensioners this year. I have heard a marvellous case for changing it, and about the excellent work that is being planned to try to improve the take-up of pension credit and maybe to help people get the support fund, but none of these off-sets the loss for the possibly 3 million of the poorest pensioners—I repeat, the poorest pensioners, who are not the ones who are already on pension credit or might have a chance to receive it with the current take-up increase plan. This year they are at risk in their homes. This is the last chance to protect them and help them keep warm this winter.

For me this is about policy, not politics. I do not welcome any of the undertones or overtones that have tried to look at politics in this. There is none for me. My whole pensions policy life’s work has been about the idea that pensions are about not just money but people and giving them a better life in retirement. On that basis, I have not heard how the Government can possibly protect the poorest this winter.

We have heard about the triple lock. A triple lock increase of 4% on the basic state pension next April will give pensioners—many of whom, demographically, will not survive that long, regardless of the winter fuel payments—an extra £6.80 a week. They will not recoup a £300 loss until about February 2026. They need the money for their bills this winter. As I said, if the Government were to talk about this for next year, I would not be here—and believe me, I wish I was not here.

I know how hard it is to defy a Whip. I also know, though, as the noble Baroness, Lady O’Loan, said, that the conventions of this House are just that: conventions. We are the only mechanism left to protect the poorest pensioners and help them keep warmer this winter. With a very heavy heart, I believe that I must now test the opinion of the House.

UNICEF: Child Poverty Rankings

Baroness Altmann Excerpts

Wednesday 28th February 2024 Lords Chamber

[Viscount Younger of Leckie (Con)]

I come back to the point that it is important to have statistics that are grounded. The noble Baroness will know that, over many years, we have used our own statistics for poverty, which are cross-government. The Government prefer to look at absolute poverty, as the noble Baroness knows, rather than relative poverty, as the latter can provide counterintuitive results. The absolute poverty line is fixed in real terms, so it will only ever worsen if people are getting poorer and will only ever improve if people are getting richer.

[Baroness Altmann (Con)]

My Lords, I know that my noble friend, who is an excellent Minister, is very concerned about this issue. I apologise for questioning him further, but it remains a struggle for unpaid carers of working age, who perhaps have children as well, to stay in or find work. What more can the Government do to support this important group?

Pensions (Extension of Automatic Enrolment) (No. 2) Bill

Baroness Altmann Excerpts

3rd reading
Monday 18th September 2023 Lords Chamber

Moved by

[Baroness Altmann]

That the Bill do now pass.

[Baroness Altmann (Con)]

My Lords, I congratulate and thank my honourable friend Jonathan Gullis on initiating this Private Member’s Bill in the other place. I also thank my honourable friend the Pensions Minister, Laura Trott, my noble friend Lord Younger, the Lords Minister, DWP officials and the Bill team, the Public Bill Office, the Lords Library and the Lords clerks.

This Bill reflects the strong cross-party support in both Houses and continued political consensus on auto-enrolment. In that regard, I thank the noble Baronesses, Lady Sherlock and Lady Drake, whose work on the Pensions Commission recommended automatic enrolment, and the noble Lords, Lord Davies and Lord Palmer, for their speeches supporting the Bill, which paves the way for half a million younger people and at least 2.5 million older workers to build bigger pensions, particularly for the low paid. I look forward to the promised early consultation to confirm the details and timing of the regulations, which will see the provisions of the Bill implemented by all employers. I beg to move.

[Baroness Sherlock (Lab)]

I thank the noble Baroness, Lady Altmann, for piloting the Bill through this House and I share her thanks to the Minister and his team, and all noble Lords who participated. Auto-enrolment is a much-loved child with more than one parent. As the noble Baroness said, the work came from the Pensions Commission, set up by the last Labour Government and on which my noble friend Lady Drake and the noble Lord, Lord Turner, served with such distinction. The coalition Government implemented it in 2012, and there has been a welcome growth as a result in the number of people saving for a pension. We can all celebrate that—but, as we noted at Second Reading, pensions adequacy is still an issue, so we need to look at continually improving auto-enrolment and addressing the question of the gender pensions gap, which remains a matter of serious concern.

This simple, permissive Bill would allow the Government to make progress in fulfilling their commitment by implementing some of the 2017 review measures, namely reducing the lower age limit for being auto-enrolled and removing the lower earnings limit. The Minister confirmed at Second Reading that the Government were still committed to doing that in the mid-2020s. Without wishing to be depressing, as 2023 begins its descent towards the sea, I wonder if the Minister can give us any hint as to whether 2024 might be the year, or is this gently rolling into the grass beyond the election?

The Opposition fully support this Bill. I thank again all those involved in proposing it and look forward to its passage.

Reducing Parental Conflict

Baroness Altmann Excerpts

Thursday 20th July 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

Very much so. The noble Lord may know that we had a first challenge fund, and we now have a second challenge fund with eight interesting initiatives as part of RPC. For example, one of the challenge funds is looking at the digital side. This has a particular focus on ensuring that those who are not particularly digitally aware can be. The results of that will come out in due course, but I hope that answers directly the noble Lord’s question.

[Baroness Altmann (Con)]

My Lords, I am delighted to hear about all the work that my noble friend and the department are doing and that they have recognised how important the role of stability and the family unit is in creating family cohesion. Does my noble friend agree that it is also important to include the role of grandparents and intergenerational aspects? What are the Government doing in this respect on policy and actions?

[Viscount Younger of Leckie (Con)]

My noble friend makes an excellent point about the role of grandparents because I think, and I am sure that the Government think, that for stability within families—which now come in all shapes and sizes, and we must recognise that—the role of grandparents is incredibly important to feed down to their grandchildren certain lessons in life. The family test, which the House will know about, was introduced by the Government in 2014. It aims to bring a family perspective into policy-making, and various tests are used. This is something for which we are responsible in my department, particularly looking at the guidance and the raising of awareness about this initiative.

Pensions (Extension of Automatic Enrolment) (No. 2) Bill

Baroness Altmann Excerpts

2nd reading
Friday 14th July 2023 Lords Chamber

Moved by

[Baroness Altmann]

That the Bill be now read a second time.

[Baroness Altmann (Con)]

My Lords, I am delighted to sponsor the Bill before the House today. It brings to fruition the hard work of dedicated colleagues across the Chamber, who have advocated tirelessly for the improvement of workplace pension coverage and adequacy, especially for younger workers and low earners.

I thank and pay tribute to my honourable friend Jonathan Gullis MP, who championed the Bill in the other place and saw it through its stages there earlier this year. His hard work paved the way for the Bill to come to us today and has been praised fulsomely, with cross-party support welcoming these improvements to retirement provision for millions of our fellow citizens. I also pay tribute to my noble friend the Minister, who I am very pleased to see today, and to my honourable friend the Pensions Minister in the other place, Laura Trott MP, and the department officials who have done so much work and are supporting the Bill.

The Bill has two main objectives: first, to pave the way for extending auto-enrolment to workers under the age of 22, the current minimum age for automatic enrolment to a workplace pension; and, secondly, to allow the Government to abolish the lower earnings limit of the qualifying earnings band, which will increase the overall amounts being saved, as pension contributions under auto-enrolment will be calculated from the very first pound of earnings rather than from £6,240, which is the case now.

Auto-enrolment into workplace pensions has been a celebrated success, bringing 10.9 million more people into pensions since the programme started in 2012, with 2.2 million employers complying with their duties and an extra £33 billion being invested in pensions in 2021, relative to 2012. I pay tribute to the noble Baroness, Lady Drake, for the seminal work she contributed in the Pensions Commission in 2008, which led to auto-enrolment in the first place.

It is now time to move on to the next stage of this successful programme. In 2017 there was a year-long major review of the policy, which recommended, among other things, the two measures put forward in the Bill today. The aim is to allow the Government to help improve people’s private pensions. There are several benefits of extending auto-enrolment to workers under the age of 22: it will improve inclusivity and will give younger generations longer to benefit from the power of compounding long-term investment returns, giving them a chance to build bigger pension funds. It can also simplify the administration of workplace pension schemes, which will save money and reduce the risk of errors if a minimum age is no longer in place—although that will be determined in due course by regulations.

The Bill should also help lower the likelihood of 22 year-olds opting out of an employer pension scheme, which is the risk at the moment, as their take-home pay suddenly falls due to pension contributions starting to be deducted as they pass their 22nd birthday. It is expected that 600,000 private sector workers aged 18 to 21—and, as I said, there could be more if the age is somewhat lower—could benefit from these measures. I hope that the consultation for regulations will include not a minimum age of 18 but a removal of the limit altogether, so that every worker, even those who leave school at 16 and start work at that age, can start a pension.

There are also significant benefits from removing the lower earnings limit, the other important strand of the Bill. Employer contributions for lower earners who want pensions will be significantly higher as a result. Currently, those who are under 22 also have to request to join their employer pension and do not benefit from the powerful behavioural nudge that sees those over 22 automatically enrolled into the pension scheme. While younger workers can ask their employer to join, the estimates suggest that only 32% of those eligible workers are actually paying into a pension at work—far less than the nearly 90% of eligible workers over 22, who are building a pension at work after being auto-enrolled.

There will also be the opportunity to help people to start the pension habit earlier, establishing even more clearly the principle that workers in this country can expect their employer to cover tax, national insurance and pension for them. This Bill will therefore particularly pave the way to help underpensioned groups, including lower earners, women, people from ethnic minorities, the disabled, multiple job holders, young workers and those in the gig economy.

Helping to narrow the gender pensions gap is an issue that many of us across this House have been exercised with for some time and is another reason to support these measures. Of course, this alone will not close it entirely. The ABI estimates that, at the moment, the average woman aged 65 has a pension pot worth just one-fifth of the value of that of a man of the same age. Due to lower-paid work, lower lifetime earnings, interrupted careers and more part-time jobs, women have always lost out on this earnings-related private pension system. By ensuring that all their earnings are used to calculate contributions in future, even lower-earning women will build much bigger pensions. Instead of someone on, say, £10,000 receiving contributions on just £3,760 of her earnings, she will—once this Bill and subsequent affirmative resolutions are hopefully passed—be able to receive nearly twice as much again, as the full £10,000 will be used to calculate her and her employer’s contribution. This means that, instead of receiving £300 a year into her pension, it will be £800 a year.

The Bill provides regulation-making powers to amend the automatic enrolment framework set out in the Pensions Act 2008. The Secretary of State for Work and Pensions will be required to carry out a public consultation on the proposed use of these powers to lower the minimum age and abolish the lower earnings limit, with the findings having to be reported to Parliament before regulations are made. It is promised, I believe, that the consultation will be later this year, so I do not think that we will have to wait too long. All noble Lords will therefore be able to consider and vote on the detail of the proposals for secondary legislation before they become law. I hope that noble Lords will therefore be able to support these enabling measures in the Bill today.

Colleagues across the House may have concerns about bringing more people into pensions and increasing contributions for lower earners if they are going to be put into pension schemes that administer tax relief by the net pay system. However, the Treasury has announced a new system, which will make top-up payments to low earners in met pay schemes—many of whom are women, of course—to address the net pay and relief at source anomaly. This is planned to be introduced for contributions from the 2024-25 tax year onwards, so should time well with the start of measures provided for in this Bill, following the laying of regulations. I am therefore delighted that the Bill before us today will set us on the path to the next successful chapter—I am sure—in the story of automatic enrolment. It will bring undoubted benefits of pensions savings to younger people and to those hard-working, lower-paid workers, including women with caring responsibilities, who deserve the opportunity to build a more secure retirement for themselves and their families.

As the Government have promised, this measure will be in place—or the intention is that it will be in place—by the mid-2020s. Of course, there is more to do, including extending auto-enrolment to workers with earnings in any one job below £10,000 as well, but that can be covered elsewhere, and to the self-employed. However, these measures are an important start. I welcome the improvements, and I hope that noble Lords across the House will do so. I commend the Bill to noble Lords.

--- Later in debate ---

[Baroness Altmann (Con)]

My Lords, I am grateful to all noble Lords and to my noble friend for their contributions to this excellent debate. I have just a few brief words.

The noble Baroness, Lady Drake, expressed her concerns about younger workers perhaps being off-payroll. She is right in the warnings that she has put on record, and about the issue of the national minimum wage for a part-time female worker, for example, who might still be excluded because of the £10,000 trigger. Indeed, the issue of small pots will grow as a result of these measures. I know the Government will look at ways to solve that. I urge my noble friend to proceed with the measures currently under consideration and the consultation.

The noble Lord, Lord Davies, is absolutely right to raise the issue of the gender pensions gap, which I think all noble Lords who have spoken will have concerns about. He is right that more women being on low pay means that fewer women will have as good pensions as men, but I hope he might be persuaded that the fact that we will be taking earnings contributions from pound zero will make a difference. It might be a small one, but it will make a difference in the right direction to the gender pensions gap. As I said, someone on £10,000 per year, who is more likely to be a woman than a man, will suddenly have £800 going into their pension instead of £300. That will help to build a better amount over the long term, but he is clearly right that more can and should be done.

The noble Lord, Lord Palmer, is right that there is more to do on auto-enrolment, but I appreciate the welcome for these measures. I also welcome him to our merry band of pension Peers. As he pointed out, it is always the same individuals across the House.

The noble Baroness, Lady Sherlock, is right to celebrate the success of auto-enrolment. She asked about the opt-out rate. As far as I am aware, the DWP published some research in August 2022 which suggested that there was a slight uptick in the auto-enrolment opt-out rate for newly enrolled workers, rising to 10.4% from 7.6% in January 2020. In contrast, for the workers who stopped contributing once they were in, there was actually a reduction to 3.1% in August 2022, down from the figure of about 5% that she mentioned. As a previous Pensions Minister, Steve Webb, has written, the auto-enrolment programme so far seems to be remarkably robust, but we clearly had not had the worst of the cost of living crisis in 2022. This needs to be monitored, but I am pleased that the DWP is doing that.

My noble friend the Minister is right to say that the Secretary of State can review the trigger each year. Therefore, there is a potential for those earning below £10,000 a year to also be included at some point.

I thank all noble Lords who have spoken today.

Bill read a second time and committed to a Committee of the Whole House.

Pensions Dashboards (Amendment) Regulations 2023

Baroness Altmann Excerpts

Wednesday 12th July 2023 Grand Committee

[Baroness Drake (Lab)]

I thank the Minister for so clearly setting out the purpose of the regulations. I enjoyed the reference of the noble Lord, Lord Young, to his previous contribution in the debate on this issue, which was well made. My position is that it is not disappointing that the Government’s enthusiasm for such an early launch has been tempered; I always considered that it would be a very complex project and I am delighted that there is now a much greater focus on the complexities and ensuring what is delivered. I never really wanted it delivered two years ago because I did not think that it would be well delivered then. It needs to be well delivered, because of the scale that it covers.

These regulations replace the pension schemes staging profile, staging deadlines and connection window with a single common deadline for connection of 31 October 2026. I want to reflect on the guidance to schemes on a new connection staging timetable.

The DWP’s description of the purpose of that guidance has varied according to which document is read—there is not an absolute consistency. The documentation ranges between encouraging schemes to meet the new timetable to threats of a breach of the regulations if they do not, and “having regard to” the guidance is a concept that is a little unclear. Can the Minister clarify what exactly is the status of that guidance and when a breach—and a breach of what in regulation terms—would be triggered?

I will move on to an issue that we probably have not debated a great deal in previous discussions of the dashboard. The Explanatory Memorandum refers to the monitoring and review of this legislation, saying that the approach to be adopted is

“to put in place a multi-strand evaluation strategy, the details of which are being explored”.

This strategy will

“ensure the critical success factors can be successfully tested with learning helping to further develop dashboards over time”.

The plans include research into dashboard usage, outcomes from that usage and information provided by providers. However, I cannot see any reference to key pensions public policy outcomes in those critical success factors. I did not see them when the previous regulations came with the Explanatory Memorandum and I cannot see them now.

To take it at its most basic, if, for example, as a result of dashboard usage, greater numbers of people took out more of their pension savings in their 50s or early 60s, is that a success because they have engaged, or undesirable because more people will have a lower income when they get to state retirement age? We have to be very clear what are the public policy aspirations we are seeking from that greater usage. Clearly, it is not set out, as far as I can see, in the critical success factors and the multistranded evaluation strategy—although I recognise that that is work in progress. Will any of those critical success factors identified in the Explanatory Memorandum be benchmarked against desired public policy outcomes over the long term?

Staying with that concept, what long term do we want as the outcome—not only from dashboards but a whole range of other things, although dashboards are before us today? Yesterday we saw eight papers on pensions, including analysis, consultations and consultation responses, all published in one go. I cannot let that moment pass without asking the simple question of the Minister: was any consideration given to how those eight papers and sets of proposals would impact on the multistrand evaluation strategy for the dashboard? I appreciate that the Minister may not be able to answer that today but it is an important question that needs answering.

For me, the decision by the department and the FCA to proceed with a gross investment performance metric in the proposed VFM framework, as announced yesterday, rather than net of all costs and charges, together with the continued dithering by the FCA over the transparency of costs and charges value reporting in decumulation products, is a backward step which does not resonate with the pension savers’ interest and informed decision-making. That was a deeply disappointing element of that VFM framework to read. We know from the FCA’s own findings that a wide range of charges are applied in the decumulation market, which should be rigorously assessed in a joint FCA/DWP/VFM framework. That has just been sidestepped.

Yesterday, the Chancellor referred positively to the Australian supers, but I point out that they have a tough regulatory requirement to report investment returns net of fees. If the Government are going to promote private market investment, where charges are higher, transparency of returns net of fees is essential if the saver is not to end up paying back the excess returns to the industry. The link to the evaluation strategy and the dashboard is: what information will be provided, what influences on behaviour are we expecting and how will that produce better outcomes? I must admit that, when I read that VFM framework, I thought it disappointing and rather contradicted the idea that members using the dashboard will make more informed decisions. I did not want the moment to pass without making that point.

[Baroness Altmann (Con)]

My Lords, I, too, thank my noble friend for his clear exposition of the regulations. I am very supportive of them and I think they have general support around the Committee. Indeed, they are pretty essential, as my noble friend described. If we do not pass them, there is a danger that schemes currently required to load data to the dashboard by the end of August will be in breach, and there will be nothing they can do.

Replacing the statutory staging timetable with a single end date of October 2026 is understandable. It is also welcome that the reference date for the dashboard requirements of pension schemes is being moved to 2023-24 so that it can include some of the newer pension schemes, which will then have to go on to the dashboard. However, I would be grateful if my noble friend could help me with a few questions. It is fine if he would like to write to me; I do not expect him necessarily to have all the answers, although he may not be surprised by the questions.

My first question relates to the Government’s intention to publish a new timetable in the form of guidance. When will it be published? Also, my noble friend said that it will not be mandatory, although trustees must, as the noble Baroness, Lady Drake, said, have regard to the guidance and will get at least six months’ notice. What is the penalty for non-compliance with the guidance, if it is not mandatory? If it is struggling, a scheme may simply say, “We’re not going to do it because the amount of money we need to spend to get on the dashboard is not worth our while”. The customers and members of those organisations would then not benefit from the dashboard.

My second question relates to the vital issue of data accuracy, which is essential for dashboards. I hear what my noble friend said about accuracy requirements in the GDPR. Following our briefing meetings, I was grateful to him and his officials for a follow-up letter that clearly explained that the Pensions Regulator has set out in guidance expectations on data quality, record-keeping, measuring data once a year and trustees ensuring that processes and controls are in place so that data standards are of good quality. Master trusts are supposed to have processes for rectifying errors they have identified and then reconciling them. This is all in place and is most welcome, but I have to ask my noble friend: where does responsibility lie for checking the data, ensuring its accuracy and then correcting and reporting back that those data have been assessed and corrected? If that does not happen, on whom would penalties fall? To whom can members and the dashboard turn to ask, “Are you sure these data are correct?” Who is ultimately responsible for signing off on that or carrying responsibility for penalties if that does not happen?

I have another question, in the light of the comments from the noble Baroness, Lady Drake, about the number of releases we have just had from the DWP. I admire the work that has been done by the department—it has clearly been extremely busy—and a lot of it is really useful. However, how will the dashboard dovetail with the reforms proposed for small pots? The Government rightly want to help people—as is part of the intention of the dashboard—to merge pots and not leave small amounts of money in legacy schemes. What are the plans for integrating the dashboard rollout with the small pots reforms?

Pension Funds: Investments and Tax Relief

Baroness Altmann Excerpts

Thursday 29th June 2023 Lords Chamber

Asked by

[Baroness Altmann]

To ask His Majesty’s Government, further to tax relief provided to pension funds, what assessment, if any, they have made of the actions taken by pension trustees to ensure their investments (1) effectively manage climate risk, and (2) comply with treaties on human rights.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, the Government have introduced legislation and published guidance alongside the TCFD requirements to help pension schemes improve the quality of governance and manage climate risk. DWP committed to review the requirements in late 2023. These reviews will utilise insights from the regulator’s review of early reports and will also consider clarifications of fiduciary duty. DWP also launched an industry-led task force on social factors, which aims to produce a guide for industry by this November.

[Baroness Altmann (Con)]

I congratulate my noble friend the Minister and the Government on their work so far, but as at least 25% of all pension fund assets originated from taxpayer reliefs, does he agree that the Government have ample justification to expect pension funds to invest responsibly, supporting national objectives? Does he share my concern that this seems not to be happening? For example, Corporate Adviser magazine’s February 2023 ESG report shows that the three largest pension providers invest in cluster munitions, even though the UK is recent president and signatory of the international agreement to end their use, and that investment in domestic companies and green projects has been weak. Will the Government encourage or ensure that more of the taxpayer contribution to all pension funds helps UK markets and supports UK sustainable growth and climate and nature protections, to meet social or national objectives?

[Viscount Younger of Leckie (Con)]

I hope I can answer a number of the points that my noble friend made. On her general push, she is right: there is a lot more we need to do to encourage pension funds to invest in net zero. The introduction of the TCFD reporting requirements for pension schemes was pioneering; these regulations are still relatively new and it would be premature to judge their effectiveness, but a lot more is happening in this space, as my noble friend will be aware. As well as the task force, we have a stewardship review, which will assess the effectiveness of the guidance, and alongside this the Financial Reporting Council, which works alongside the FCA, my department and the regulator.

State Pension Underpayment Errors

Baroness Altmann Excerpts

Tuesday 16th May 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

Of course they are important. Any underpayment is incredibly important, as I am sure the noble Baroness would agree. The department became aware of issues with state pension underpayments in 2020 and, as mentioned earlier, the issues go back several decades and through different Governments. We have taken immediate action to investigate the extent of the problem and are carrying out highly complex scans of computer systems. Correction activity commenced on 11 January 2021; I say again that this is an important matter and we are moving at pace.

[Baroness Altmann (Con)]

My Lords, as the exercise is focusing on women, and women’s state pensions are still noticeably lower than those of men, are those who are entitled to arrears also entitled to some kind of compensation or consolation payment? How is my noble friend’s department prioritising the work?

Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023

Baroness Altmann Excerpts

Wednesday 26th April 2023 Grand Committee

Finally, is it possible to update the Committee on the DWP’s view on the maturing of the PPF, which is a kind of shift in its position? I appreciate that it may not be possible to make a verbal response to that, but a written response would be helpful.

[Baroness Altmann (Con)]

My Lords, I congratulate the noble Lord, Lord Davies, on securing this debate; it is an important one. At the outset, I say that I believe that the Pension Protection Fund has done and is doing an excellent job, and member experience in the PPF seems to be very positive—for me, that is one of the big tests of whether this is working well. The administration is very efficient, and the amount of compensation being paid is reaching those who need it, and are entitled to it, well.

I also congratulate the noble Lord on his foresight in 1995. I recall first becoming involved with Allied Steel and Wire and the various other pension schemes whose members had lost their entire pension very close to the point at which they were expecting to start receiving it, together with all their other life private savings —in those days, if you wanted to have any extra pension contributions you had to put all of it into your employer’s pension scheme. I remember reading about the proposals for a central discontinuance fund and thinking, “If only”. It informed my conversations with the No. 10 Policy Unit, the Treasury and the economic advisers to the Prime Minister at the time as to which way we needed to go to improve the situation the country faced. Over the subsequent two to three years, more and more pension schemes failed, and more and more members started losing their pensions; it was a serious and heartbreaking time. Members, having been told that they were fully protected, would have expected that all their money was safe. They were told that, regardless of what happened to their employer, their money was safe and that their pension was protected—but it turned out not to be the case.

Instead of the proposal from the noble Lord, Lord Davies, of a central discontinuance fund, we got the actuarial profession’s minimum funding requirement. Unbeknown to members—and, indeed, to most pension professionals outside actuarial circles—that was designed to deliver only a 50:50 chance of people receiving their full pensions, and yet members, trustees and employers were told that, on that basis, their fund was fully funded or in surplus. Unfortunately, what happened subsequently, around the end of the 1990s, with the market crash, was that those surpluses melted away. It looked as though the benefits had been secure but, suddenly, the market crash made that position unsafe. We saw that those so-called surpluses were in fact buffers against bad markets, rather than real surpluses—you could judge that only with hindsight in the end.

This is my concern about the Pension Protection Fund. I absolutely want to try to ensure that anyone who has a pension insured by the Pension Protection Fund receives as much as possible. If there were a secure way of ensuring that they did not fall behind while we are suffering this cost of living crisis, I would be the first to support it. My thinking has perhaps been coloured by my experience during those dreadful years, before we got the Financial Assistance Scheme sorted out in 2007—it started around 2008—of seeing people who thought that their pensions were in surplus and that their position was secure finding that, because markets had moved suddenly and unexpectedly and in a way that had never been properly forecast, their pension had disappeared.

I also believe that, although the PPF looks as though it is in surplus now, we need to address what happens should there be a severe economic dislocation causing some of the huge pension schemes, which currently seem safe—and even some of the open schemes —to fail and fall into the same problem. This is an insurance policy rather than a pension, which, for me, is an important distinction.

I would love the Government to find a way to underwrite more generous increases for the Pension Protection Fund. I am particularly mindful of the fact that, before 1997, benefits had no inflation protection at all, yet many schemes—but by no means all—offered full inflation linking, or at least up to 5%. In that pre-1997 period, the older the member was when their scheme failed, the more pension they lost as a result of the failure, because they would have had more accrual.

I support the concept that the noble Lord, Lord Davies, is promoting: that in a time of economic difficulty, with inflation roaring away, we do not want to leave pensioners behind. It is clearly the case that the Pension Protection Fund is, to some degree, leaving pension members behind in real terms. To some degree, it was modelled on the American PBGC, the Pension Benefit Guaranty Corporation. Generally speaking, in America there is no inflation protection at all on these DB schemes, so the UK has always been a little unusual in that regard. Having said that, it makes sense to look at the structure of the levy and I echo the questions for my noble friend about plans for the future management of it.

Charitable Sector: Food Provision

Baroness Altmann Excerpts

Monday 27th March 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

I fully understand that some people prefer to use cash, and that is certainly possible. I will have to write to the noble Baroness on the spread of where cash can be used.

[Baroness Altmann (Con)]

My Lords, I do congratulate the Government on all the work that they have done in this area to try to help the most disadvantaged. I know that my noble friend cares deeply about these issues. Of course, the working poor have a real need, but can my noble friend tell the House what evidence there is that pensioners are using food banks, and what action the Government are taking to address pensioner poverty?

[Viscount Younger of Leckie (Con)]

My noble friend will not be surprised to hear me say that we are committed to action that helps alleviate levels of pensioner poverty. In answer to one of her questions, the HBAI statistics recorded that fewer than 100,000 pensioners were living in households where a food bank had been used. However, despite those figures, there is more to do.

The figures show that there are 200,000 fewer pensioners in absolute poverty than in 2009-10. Pension credit provides a vital financial support to pensioners. This is one of the actions that has been and is being taken by the Government, and it is proving to be very successful, with a 73% uptake in the last 12 months.