Jobs Market: Wider Economic Implications

Baroness Bowles of Berkhamsted Excerpts

Thursday 18th December 2025 Lords Chamber

[Baroness Sherlock (Lab)]

I welcome a particularly fine question from my noble friend. I could almost have said that myself; in fact, maybe I will. He makes a really important point. We need to have support in the investment of skills for young people: skills for today and for tomorrow. Simply putting them on to some kind of make-job scheme does not work. We actually need to invest in them, so my noble friend is quite right. At the Budget, we announced £820 million of investment into the youth guarantee to support young people to earn or learn, but there was another £725 million for the growth and skills levy. We are trying to invest in young people so that they will find ways of getting the skills and be inspired to get out there and make a difference.

We also need to understand those who are not engaging. Alan Milburn issued a call for evidence this week. He is asking two questions: what is stopping more young people participating in employment, education or training, and what would make the biggest difference to support more young people to participate? We want to hear from anyone with knowledge, expertise or lived experience, so I urge noble Lords, with all their connections: let us all together try to get the answer to one of the most pressing questions facing our country.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the Bank of England has canvassed for resignations to cut jobs to save £45 million and use more AI, and many other jobs continue to be lost to AI. What strategy have the Government got to ensure that their AI and tech procurements support British jobs? If mandating is okay for pension fund investments, where is it for government?

[Baroness Sherlock (Lab)]

My Lords, I think I might save the pension fund for the extensive debate we will have later, which is my Christmas present from the Chief Whip. That is all I can conclude. The noble Baroness makes a very important point. One of the things that the Government as a whole are doing is looking across the piece. The truth is that it is still quite early days in working out what, in the medium to long term, will be the impact of AI on the economy. There is evidence that jobs may be displaced in some sectors while in others jobs are created. While we are understanding the full impact, the challenge for us is to make sure we equip people with the skills that enable them to compete in the markets that are to come. There is a lot of work going on in my department, but also in DSIT and across government, to monitor this and develop strategies. In particular, there is work on investing in homegrown tech companies to make sure that we have the opportunities here in which we can invest and our young people can work.

Pension Schemes Bill

Baroness Bowles of Berkhamsted Excerpts

2nd reading
Thursday 18th December 2025 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I declare my interests as a director of the London Stock Exchange and of Valloop Holdings Ltd. I also have experience engaging with local authorities and their pension funds, in relation to both funding proposals and policy. I congratulate the noble Baroness, Lady White of Tufnell Park—she is no longer in her seat—on her excellent maiden speech. I welcome her to this House and look forward to her future contributions.

Like other noble Lords, I welcome much of this Bill, and my reflections are directed at what is missing or where small but significant adjustments could deliver real benefits for scheme members. I shall give some examples. When engaging with local authority fund managers on social impact investing, I found that while they valued local options, they also wanted diversity through investing in similar localised assets but beyond their immediate region. An amendment to reflect that flexibility, perhaps in Clause 2, concerning local and localised investments, may be worth considering.

On scale tests and value for money, should there not be some kind of linkage? Presently, some of the best performers in the DC market have assets under £10 billion. If such schemes deliver outstanding benefit for members, as demonstrated in value for money assessments, should they not be allowed to continue? Other issues in this space include whether the definition of “hybrid” is wide enough and whether the focus on forward looking metrics risks dismissing past performance, which surely still has relevance.

I also hope that some solution can be found for the many schemes in the charity and social housing sector that are disallowed from using retrospective confirmation measures due to an ongoing legal review. Concerns also remain about the PPF’s recent pre 1997 increases in the wind up trigger for DB superfunds, which create issues for funding levels and viability. Additionally, gateway test 1—that if a scheme is funded to buyout level it cannot enter a superfund—seems to prevent schemes augmenting member benefits via a superfund. Is that fair?

I turn to trustees’ fiduciary duty. It is undeniable that the Government have opened a Pandora’s box by taking the power of mandation, even if it is intended as a reserve power. I happen to think it is about time Pandora’s box was opened, emptied and hope allowed to get out, at least on interpretation of fiduciary duty. However, it is essential that this be done in primary legislation. Regulatory guidance or an SI is not enough. We are already seeing banks stung for compensation on car loans when lenders followed flawed guidance from the FCA.

Systemic issues such as the resilience of the UK economy and ESG are not abstract considerations; they directly affect pension scheme members’ long term retirement outcomes. Climate breakdown, financial crises and economic instability all influence the value of investments, the type of investments that need to be made in future and the returns available to members over time. They also determine how far pensions will stretch when drawn. These factors should already be integral to fiduciary considerations, requiring trustees to balance risk mitigation with support for long term stability. Yet trustees remain concerned about how to demonstrate alignment with member outcomes, even though investment results of any kind can never be guaranteed. Clarifying in this Bill that systemic factors are legitimate concerns would help.

At the same time, by naming and favouring certain vehicles, the Bill risks going too far and putting trustees in jeopardy. It could cause herding, market distortions and valuation bubbles and discriminate between comparable structures while failing to provide a safe harbour for trustees regarding financial benefit. The only way to achieve definite financial benefit would be through tax penalties for failing to meet mandated allocations, a possibility noted by the noble Baroness, Lady Altmann.

We have already seen the dangers of herding in both DB and DC schemes, driven by regulatory and advisory consensus. Advice focused on global indices, coupled with regulatory encouragement, led to a retreat from UK equities, an overreliance on gilts and the use of nested leverage through repo borrowing, culminating in the LDI crisis. The only accepted defence that trustees have is that they take advice, but it is from unregulated advisers. While many are excellent, some were noticeably reticent when this House’s Industry and Regulators Committee investigated LDI. We found it striking that such influential advice was not regulated, unlike advice to individuals. This should be addressed, perhaps by making it a designated activity under FSMA.

I turn now to the discrimination against listing. The Government mandate investment into private assets but exclude that investment from being via listed entities, despite their ability to provide superior liquidity. Not all listed entities operate in the same way, and I am going to have to explain that later. It is openly acknowledged that the Mansion House provisions reflected in this Bill are tailored to LTAFs, the new long-term asset funds, which are themselves a variation on the EU’s LTIFs—the long-term investment funds developed during my time as chair of the EU’s ECON Committee. At that time, the UK rejected implementing LTIFs, with the Treasury assuring me that we did not need them because we had listed investment funds, also known as investment companies and trusts, which were better. Yet, under this Bill, they are explicitly excluded, even when investing in the prescribed assets, as the alt sector does.

This exclusion is extraordinary. Before the mistaken, and now nearly corrected, regulatory cost disclosure and cost cap debacle, listed investment funds were favoured by local authority pension funds precisely because they financed local UK infrastructure such as schools, hospitals and renewables, and provided venture capital to growth companies. Those local authority pension funds were major investors at IPO and follow on stages, often for the local infrastructure they were subscribing to. Many retail investors hold listed investment funds in their portfolios for similar reasons.

I have recently been told that somewhere in the Treasury there is a belief that listing and then trading shares is not new money. Interestingly, the noble Baroness, Lady Noakes, whom I very much respect and often find myself in common cause with, also made that point. That is not the proper story if you are looking at a listed investment fund. Listing is what keeps the underlying investment funding in place so that it is not sold out for redemptions, as happens with open ended funds like LTAFs. In fact, the way in which money is raised and then put into investments is a similar procedure to that of an LTAF or any other open-ended fund. The only difference is a clever trick: instead of having to sell off the investments if somebody wants to get liquidity and withdraw their shares, the shares can be traded on the market and there is no damage to the underlying investment. That does not seem to have been recognised in the provisions in the Bill.

It is interesting that even some LTAF providers have contemplated investing in listed investment companies because they want the liquidity, and that will enable them to stay listed in productive assets for longer while still having the safety of being able to trade and get their money if they need more money for paying pensions, so why discriminate against them? The fact is they are complementary investments. They are often going to be smaller and local-sized, as opposed to massive. They can be used in combination with LTAFs and it is very foolish and stupid thing to exclude them. I will certainly be tabling an amendment to try to adjust that.

Overall, it is about time that the Government’s discrimination and denigration of listed investment companies end. I say “denigration” because there is damage done to these companies by this wording in the Bill. How many times has this House talked about having to improve the state of our stock exchange, both for listed companies of the operating variety and for listed funds? What do we do at every turn? The Government and the Treasury do not understand and, here, seem to be undoing a lot of the good work they have tried to do in all the listing reviews.

The Bill contains important reforms, but it must not undermine fiduciary duty, encourage herding or exclude proven vehicles that deliver value. With constructive amendments, we can ensure that it strengthens pensions while saving members’ long term outcomes and delivering for the UK economy.

Pensions Dashboards Regulations 2022

Baroness Bowles of Berkhamsted Excerpts

Tuesday 15th November 2022 Lords Chamber

With what I hope are those helpful remarks, I very much welcome the introduction of the dashboard.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I was not expecting to have to do the dashboards but, as the Minister will know, I intervened during the passage of the Pension Schemes Act. I was there for the money and finance bits and discovered that I had a bit of a love/hate relationship with the dashboard. At first sight I love the idea, but then—as has been relatively eloquently explained, and I will not delve further—there are all kinds of problems, ranging from operational ones to the ones that interested me most. I think I am in exactly the same space here as the noble Lord, Lord Vaux, as usual. What happens if it becomes a platform for advertising?

A good starting point is to look at paragraph 14 on page 9 of the impact assessment, which is about the rationale for the intervention and the pensions dashboard. It quite clearly mentions

“potential benefits/efficiency gains to pension providers if consumers are encouraged to keep track of their pensions, save more, potentially consolidate pots, and shop around for decumulation products”,

but those are benefits to the providers, as it says there. We need to be very clear: we want to make sure that the benefits to the providers do not leave out benefits to those with pensions.

Talking about consolidation, I understand that if there are a lot of really small pots, there is probably something to be said for sweeping those together. But having been self-employed for my entire working life, when I set up my own pension schemes I wanted a bit of diversity. I had several because I did not like the notion that one of the funds might go bust and I would be in trouble—if I had loaded it all into Equitable Life or something. Much to my disappointment, they all got consolidated into Aviva through the consolidation of the industry. Actually, that is not quite true; I still have some others. I carefully selected a completely different batch for my husband, but they also ended up all in Aviva.

Some diversity is a very good thing, because you get performance differences. You might want to phase how you take your retirement and it might prove to be more flexible. So the notion that you should force everybody to have one pot is bad news, to my mind, because you are cutting out diversity and the opportunity that that brings.

Like the noble Lord, Lord Vaux, I latch on to the comments made by the Minister about commercial exploitation. That is a very important point. These pensions dashboards will not be cheap to make. If you do one, with all the wonderful data there, you will be very tempted to exploit it in some way; yet we do not have the information in front of us because that kind of thing comes presumably through the FCA route. I apologise that my information is not as full as it should be, as I too was unable to go to the meeting that was arranged. As there are several regulators involved and several parts of this puzzle to be brought together, it would be nice to have that bigger overview instead of having it in bite-sized chunks where you cannot fully see how they inter-fit.

Most of my other points have already been raised by others and I will not go back to them. However, I was slightly curious about delegated access. Again, it was indicated that, essentially, a financial adviser could have the delegated access. When I speak to a financial adviser, I do not necessarily want them to know what I have got everywhere. Again, as I have several different pots, I can get advice about one pot and not another. Assuming that everybody should have the full view is perhaps not the way to go. I do not know whether it would be possible, but it would be good if you could somehow choose which part is visible to somebody and which is not. I would like to have seen that, but it might be rather difficult.

I also wonder what the provisions will be for others, such as family members who may become involved in trying to help some of their older people sort out their pensions. Some people want that, some do not. They will not be regulated. Will they have to have some kind of formal or legally signed document to be able to take that position? Obviously, they can be sitting at your shoulder when you access, but there will be people who are incapacitated. How will their dashboard be accessed and what will be the safeguards?

I think just about everything else has been mentioned. I will just say that I agree with a lot of the questions. In general, I accept that we need this statutory instrument because it paves the way for everything else to come, but it would have been quite nice to see more of the parallel tracks coming to the same discussion. We will have a statutory instrument or something from the FCA, which will be separate from this. It would have been nice to have them as a package, perhaps debated together, so that we could cross-compare for whether there are gaps, how the different responsibilities will be bridged and how the information will be shared. All these things are yet to come.

[Lord Jones (Lab)]

My Lords, I thank the noble Baroness for her introduction—a heroic introduction in the circumstances—and for the department’s lengthy Explanatory Memorandum. The department is clearly trying to help and has put in a lot of hard work to try to throw more light on a complicated subject. My noble friend Lady Sherlock is always up to the mark on complexity, and there is plenty of complexity in these regulations. The pensions paper is 41 pages long, which is not a criticism by any means. Surely these dashboards are positive, helpful and welcome.

Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021

Baroness Bowles of Berkhamsted Excerpts

Thursday 25th February 2021 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I thank the Minister for introducing this statutory instrument. The content is in many ways predictable and, I fear, my comments may be too. Having established the precedent for the qualifying earnings band to align with national insurance contributions lower and upper earnings it is no surprise to see that alignment is retained, and I see the obvious benefit of the simplicity that creates in adjustments for PAYE. It is also no surprise that the automatic enrolment trigger remains at £10,000.

The effect of that over time, as pay and everything else rises, progressively brings more people into pension savings in real terms. Although it seems one reasonable way to do that, I am afeared for the reasons that were just outlined by the noble Lord, Lord McKenzie, with regard to how to get more women saving for pensions. Just relying on, if you like, the indexation effect to mean that £10,000 effectively becomes less does not give sufficient acceleration. I would be pleased to hear more about what might happen in the mid-2020s, because it seems that it will be difficult if it is done in a big jump. But if it is done in incremental stages, we might be here in the 2030s with many people still losing out.

It is a great pity that there is an enlarging gap between that £10,000 and the income tax threshold, and that more people are at risk of being put into the unsuitable and somewhat misnamed net pay enrolment scheme, where they are not getting tax relief. The Government are aware of that problem and the call for evidence on pensions tax relief administration closed on 13 October. Can the Minister enlighten us about whether there have been any conclusions on how to stop the lowest paid being diddled out of a significant chunk of their pension contribution and eventual pension because of the administrative choices of their employers? Are there going to be checks on employers when they choose their system, to see how many employees they might have who would fall into that trap, or are we even going to get a nice surprise in the Budget: that HMRC will make it right? It is not beyond its power to do so.

That probably concludes the things that I have to say, except for one thought. Is it possible to find more ways to encourage those who are near the £10,000 threshold and then fall below it—so that they get unenrolled, then re-enrolled when they go above it—just to stay in, given the benefits of doing so? That is a way in which we can make sure that more people stay in and get their pension. It is also a matter of some urgency to address the age limit at which we encourage people to start saving. I do not see much of a reason for delaying that.

I apologise for my ignorance here, but can the Minister enlighten me about what interaction there is between how benefit assessments are made and pension payments? Is there any account or effect there? I feel I ought to know, but I am afraid I do not.

Social Security Benefits Up-rating Order 2021

Baroness Bowles of Berkhamsted Excerpts

Wednesday 10th February 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

I thank the Minister for her introduction and for the letter circulated previously. As far as I can tell, as a non-specialist, the increases are either as required in statute or as promised, with additional discretionary increases that can apply for one year only. That leaves me slightly confused as to what happens after that one year. Perhaps the Minister could explain, as I have not been part of the teams and meetings with her.

Broadly, I do not quarrel with the SIs. Where there are issues, it is with the underlying structures that, notably through the triple lock, reward at a higher rate than those benefits that apply to the harder up. I appreciate that the increase in the basic state pension in cash terms has been transposed over to pension credit but, given that there are other thresholds in play, are there pensioners who will lose out due to the increase in thresholds being less than the 1.9% cash increase?

Regarding the triple lock, can the Minister advise on where we are with the original catch-up idea, which came about because pensions had fallen behind earnings? We have had unexpectedly low earnings rises, and now again through Covid, and there has been low inflation. Originally it was projected that it would take until 2038 for the state pension to reach 26% of national earnings. Is there a new projected date by which that will be reached?

Once again, it is still unfair that the over-70s get the triple lock on only part of their pension and not the whole of it.

Pension Schemes Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Consideration of Commons amendments & Ping Pong (Hansard) & Ping Pong (Hansard): House of Lords
Tuesday 19th January 2021 Lords Chamber

Moved by

[Baroness Bowles of Berkhamsted]

At end insert “, and do propose Amendment 4B in lieu of the words so left out of the Bill—

4B: Page 117, line 44, at end insert—
“( ) In exercising any powers to make regulations or otherwise to prescribe any matter or principle under Part 3 of the Pensions Act 2004 (scheme funding) as amended by Schedule 10, the objectives of the Secretary of State must include supporting the ability of the scheme trustees to decide the specific funding, investment risk management and diversification strategy that is appropriate for the long-term time horizon, liquidity and employer covenant of the scheme.””

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, we have come a long way since the probing discussions in Committee, when the noble Baroness, Lady Altmann, first raised concern about whether there were steps afoot to cause de-risking of open DB schemes and the effect that that might have of shifting investment to gilts. I was among several noble Lords who agreed with that concern, and I followed up on Report with an amendment, kindly signed by the noble Baroness, Lady Altmann, and the noble Lords, Lord Young of Cookham and Lord Vaux of Harrowden, which was passed.

--- Later in debate ---

[The Deputy Speaker (Baroness Garden of Frognal) (LD)]

My Lords, I have not received any requests to speak after the Minister, so I now call the noble Baroness, Lady Bowles of Berkhamsted, to reply.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I am not normally a speaker on DWP matters—I am usually in the business and Treasury box—but, after a first foray on this Bill, or into this sweet shop, as the noble Lord, Lord Davies, would put it, maybe I should come again.

I thank all those who have spoken in this debate. The issues have already been explained and the Minister in reply has given the reassurances that were sought. Before I formally withdraw the amendment, I thank the Minister for the way in which these proceedings have been conducted, for her geniality and openness and, similarly, thank the officials from the department and the Pensions Regulator, and everyone for tolerating me.

As has been said, the issues are complex and interlinked. I am grateful to hear the Minister say that the debate around this has been influential and has refined thinking. I acknowledge that some employers will abuse the system and, because of its complexity, I accept that the Government do not want to put words into the Bill that are hard to change and which might give rise to unintended consequences. Of course, I would have preferred to see a little something there, but I understand the reasoning. I accept that there will be good consultation around the regulations and that all of us are looking for the same results.

I thank again noble Lords who have spoken today and supported me in my previous endeavours and all those who gave their expertise in earlier stages of the Bill. I am pleased that we are joined by the noble Lord, Lord Davies of Brixton, and think that we will benefit from his presence greatly in future. Others who have also assisted include my noble friend Lord Sharkey from these Benches, as well as the noble Baronesses, Lady Drake and Lady Young. I also thank the various pension schemes that have been generous with their time and information, so we were able to look at the sort of spread of assets and risks that they were talking about and did not come to this debate without a good basis of information; we knew that our arguments were supported.

It has been a good co-operative effort. I doubt that it is the end of the story, as there will be more consultations and things to watch. I hope and expect that the engagement with noble Lords by the Minister and the department and our co-operation with one another will continue. For now, I beg leave to withdraw the Motion.

Motion 4A withdrawn.

Pension Scams

Baroness Bowles of Berkhamsted Excerpts

Wednesday 14th October 2020 Lords Chamber

[Baroness Stedman-Scott (Con)]

It is a great tragedy that these scammers are so clever and such ruthless people. The Government passed legislation in 2015 making it a requirement that all people take advice, and we have banned cold calling, but there is a recognised need for more action to address this issue. It is important that people take advice from the Money and Pensions Service but I am sure that in the Project Bloom activity more communication will come out to people. I hope that this will help.

[Baroness Bowles of Berkhamsted (LD) [V]]

One recommendation in the report is to ensure that victims of fraud are not liable for tax penalties. Will the DWP take that up with HMRC? If HMRC also suffered from the fraud, would greater protections be more forthcoming?

[Baroness Stedman-Scott (Con)]

I referred earlier to tax and the issues that people face as a result of scams. As I said to the noble Baroness, Lady Warwick, the Minister for Pensions is quite prepared to meet on this and other issues, and I will extend that invitation to the noble Baroness so she may raise her point.

Jobseekers (Back to Work Schemes) Act 2013 (Remedial) Order 2019

Baroness Bowles of Berkhamsted Excerpts

Thursday 3rd September 2020 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I thank the Minister for introducing this order. I have read all that there is to read on this statutory instrument and I have no objection to its content or the fact that the Government are using a remedial order rather than primary legislation. This matter has dragged on for a long time and it is right that it be settled; I do not know what has taken the Government so long to start the remedial process in the first place. Nevertheless, I want to say a few things about the circumstances surrounding the issue and about sanctions more generally.

The order puts right the previous denial of a fair trial for those who had started an appeal that is still extant; it establishes that an appeal would have been won and includes a mechanism by which the Secretary of State will revise decisions so that appeals will not have to run their course, thus not wasting any more time and money. I am presuming that benefits withheld under sanctions will be repaid several years after the event, but will there be any other compensation for the harm that may have arisen as a result of benefit sanctions? This could of course include the cost of getting into debt and the consequences of harm to mental health. These are recurring themes when it comes to benefits and about which I will say a little more later.

I am not expecting an answer in the affirmative to my latter questions as this whole exercise, from the Government side, whoever it has been, seems to have been focused on cost savings and leaves the unsatisfactory situation that the law will have been applied differently simply because one party had appealed and another had not. That leaves me with a continuing distaste for retrospective law which leads to disadvantage or, in my view, legitimises the improper, for that appears essentially to be what has been achieved by the 2013 Act.

I feel particularly strongly on this issue because the sanctions imposed could have meant withholding jobseeker benefits for a considerable period of time, up to six months. I want to use some of my time to speak about benefit sanctions more generally and draw attention to a recent report of the House of Lords Economic Affairs Committee on universal credit that was published on 14 July. I am a member of that committee and I note that the chairman, the noble Lord, Lord Forsyth, is listed to speak next; he may have had a similar thought. If so, there is so much in the report that there will plenty left after I have spoken. I also wish to take this opportunity to commend the noble Lord on his leadership and willingness to tackle this and other hard subjects.

I found the evidence sessions on universal credit both harrowing and humbling. I still get choked up thinking about it. I wonder if I would have been able to navigate and withstand the difficulties experienced by many claimants, and I have enormous respect for the way that several of our witnesses not only overcame their own difficulties but took on roles helping others.

Our report found that the original objectives of universal credit are broadly correct, but that there are problems in its design and implementation that do not reflect real-life circumstances and create unpredictable incomes that are hard to manage, especially for people who do not have any savings to buffer them. If nothing else, the five-week wait makes sure that that vulnerability exists.

Although not part of the original design and in fact running contrary to their stated purpose, cuts in funding have, frankly, made the regime cruel and the cause of harm, notably in terms of child poverty and mental health. This is further exaggerated when it comes to conditionality and sanctions which, according to evidence, can end up biting in unjustified circumstances that I will paraphrase as “no real fault” of the claimant. What I found surprising was the cumulative level of sanctions that could be taken from an already inadequate income—far greater than a court would be able to apply when seeking an attachment order to a bank account, for example, and seemingly with no account being taken of what other deductions, repayment of advances or other debts had to be serviced, including those to the DWP itself. This is still going on, even though since 2017 there has been some reduction in use of sanctions and their duration. Cutbacks and sanctions have pushed people into extreme poverty, indebtedness and reliance on foodbanks. This inevitably undermines any opportunity to look for and secure work and gives rise to mental health problems, which in turn must surely rebound on society and become a drag on the public purse in other ways.

An evaluation promised by the DWP in 2013 of the impact of conditionality and sanctions on claimants’ mental health and well-being has not yet appeared, though heaven knows, the evidence is out there already from many sources. Even without sanctions, the pandemic and a more jobless environment will require new resources, so my plea to the Minister is for the department and the Government to take a more holistic view of the costs and societal effects, and of protecting mental health.

Pension Schemes Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 30th June 2020 Lords Chamber

[Baroness Bennett of Manor Castle [V]]

I thank your Lordships’ House for allowing me to speak. I apologise for the earlier confusion. I also apologise in particular to the noble Lord, Lord Balfe, for upsetting the rhythm of his speech. I thank him and other noble Lords for providing an introduction to Amendment 33. I must pay tribute to the campaign group ShareAction, which has done a lot of work on the amendment. I know that it has informed other noble Lords about it.

I moved the amendment in Committee. In response, the Minister pointed to the consultation on the future of trusteeship, which concluded that, due to a lack of consensus on how to address the issue, it would look at setting up, and is setting up, an industry working group to look at the diversity of pension boards. While this is welcome, we need the data to inform that work. I ask the Minister to consider incorporating this into future versions of the Bill.

A further development has happened since we last debated the Bill. There has of course been a great upswelling of frustration and understandable anger, represented by the Black Lives Matters movement. The issue of ensuring that all voices in our society are heard and have decision-making powers is particularly pressing. I urge Members of your Lordships’ House to consider it.

In response to the amendment in Committee, the Minister stressed that she wanted the pensions dashboard to focus on the provision of basic information. That is why the amendment has been amended so that it does not refer to this information being on the pensions dashboard, but rather that it would simply be reported. Information on diversity could be published elsewhere. That might be on the Pensions Regulator’s website, or as an annexe to its planned SIP repository.

Other noble Lords have referred to the level of inequality in our society and the lack of diversity. I will finish by reflecting on what the noble Baroness, Lady McIntosh, said, and the fact that a 2016 survey showed that on average 83% of pension boards are male and that a quarter are all male. That reflects another crucial disparity: we all know that there is a very large pay gap between men and women, but the pensions pay gap, at 40%, is double the pay gap. These inequalities have to be tackled in our society along with levels of inequality and poverty. We have had a lot of discussions about intergenerational fairness, but we must not forget that there are already a lot of people at pension age now who really are struggling to get by in this difficult world.

I thank your Lordships’ House for the debate that we have had thus far and I look forward to further debates.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, like other noble Lords, I appreciate the government amendments to make regulations by the affirmative procedure. Having thanked the Minister for that, I will move on to speak on noble Lords’ amendments.

Amendment 2, in the name of my noble friend Lord Sharkey, would delete reference to negative procedure regulations being used to change the rules around fit and proper persons. It has been laid out how that might change who becomes a fit and proper person. My question is: would it also affect who might not become a fit and proper person and potentially elaborate further if it is found that people are doing things that should disqualify them? I sense that that might be a possibility. Although, under Clause 11(3)(b), regulators can take into account other such matters as they consider appropriate—I presume that that can be in the negative sense as well as the positive—it would be useful to know whether such powers in other areas as well as this are, in general, used. I detect that regulators are often reluctant to go beyond things that they can specifically point to in regulations. If that is the case, maybe the Minister has an excuse to have these powers. That is the area that I am interested in, but it would certainly be a much more significant move for this to be made by the affirmative, rather than the negative, procedure.

The noble Baroness, Lady Altmann, has tabled an amendment about data that I support, but like her I think that it is probably best to have just one debate on data. I will make my intervention on that later.

I also support the intention of Amendment 33 on diversity. I recognise, as the noble Lord, Lord Balfe, did, that it links to the wider issue of how trustees are appointed and where from. Many trustee appointments will link back to present or former workforces and therefore carry through any historical lack of diversity for quite a long time. Despite the fact that there might be costs to professional trustees, I still think that there should be scope to ensure that there are more additional independent external trustees, without necessarily going to people who are so embroiled in the making of regulations. It should be possible to find objective people who are not necessarily charging the equivalent of full professional rates.

Finally, my Amendment 45 is a simple one that says that regulations may not create a regulator. That might not be the intention, but Clause 51(3)(a) says that regulations may

“confer a discretion on a person”.

A discretion to do what: to allow, not allow or approve certain things? What kind of things and what kind of person? That could be wide enough to allow or disallow the doing of things regarded as being a regulator, yet there are none of the constraints in the Bill that would normally appear in such circumstances. I therefore seek some clarification about what “discretion” means and what powers it might conceal or cover.

[Baroness Sherlock (Lab) [V]]

My Lords, I should declare a historical pecuniary interest as a former independent director of the Financial Ombudsman Service. I should also declare that my home is in Durham so I have often visited Barnard Castle, but solely for the purpose of visiting the wonderful Bowes Museum. My eyesight is okay for the moment. I will save my remarks on data issues until a later group, but I will briefly address the other two issues raised by amendments in this group.

On regulations, concerns were expressed on all sides in Committee about the use of Henry VIII powers and the skeleton nature of much of the Bill, especially Part 4, but I am grateful that the Minister has engaged with us throughout this process on these and other issues. I think that it will make for a better Bill in the end.

I am grateful to have had sight of the draft regulations under Part 1, even if I would have preferred to see all the remaining draft regulations before Report. I am very glad to see the government amendments clarifying the scope of some of the regulations and those which make regulations affirmative or confirmatory. If nothing else, it saves me from tabling endless Motions just to ensure adequate scrutiny. However, I will be interested to hear the Minister’s answers to the points raised by the noble Lord, Lord Sharkey, the noble Baroness, Lady Fookes, and the noble Lord, Lord Blencathra, about the retained use of the negative procedure and other matters related to delegated powers.

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Although the evidence that the regulator will take into account is of interest, it does not give or specify that the pensions regulator will have the power to seek a contribution from an employer using or intending to use it as a qualifying scheme to the financial resources available to meet the costs of resolving a triggering event. That is the intent of my Amendment 8 and I beg to move.

[Baroness Bowles of Berkhamsted [V]]

My Lords, I have signed my name to both these amendments, which follow on from significant debate in Committee. I agree with what the noble Baroness, Lady Drake, said about how Amendment 8 bolsters the importance of ensuring adequate finance for the administration of a scheme in all circumstances. It is necessary to have certain requirements specified and agreed in advance rather than to rely on negotiation at what might be a difficult time or, indeed, where it might be impossible. I therefore wholeheartedly support Amendment 8.

Amendment 32 is important and reflects the matter of general fairness and, in particular—although it is not specified—intergenerational fairness, which was discussed in Committee. My noble friend Lord Sharkey will explain further, but I wish to make the point that we should remember that CDCs have shared risk, that their strength is that returns can be more predictable, and that there is intergenerational solidarity so that good times and bad are to some extent smoothed. That solidarity cannot be undermined by allowing market highs to be carried away by those who may chose to leave the scheme. It surely must be possible to devise mechanisms, whether by way of buffers, conservative valuations, a delayed retained part or something else, to prevent the problem that those wishing to transfer their pensions out essentially ruin what is left for everybody else. The point is that fairness has to extend over more than a snapshot in time. That is the only way that you will have fairness in the sense of shared risk to all the members.

[Lord Vaux of Harrowden (CB) [V]]

My Lords, I wish to support Amendment 32, tabled by the noble Lord, Lord Sharkey, to which I have added my name. I should add that I also wholeheartedly support Amendment 8, but I will restrict my comments to Amendment 32.

While there seems to be general support for the introduction of this new type of pension—collective money purchase schemes, or CMPs; I am going to try very hard not to call them CDCs as we go through this—they are not without risk. As we discussed at some length in Committee, one of the greatest risks that is often raised in respect of CMPs relates to intergenerational fairness. Indeed, at the extreme, in a situation where no returns are being earned but pension levels are maintained for existing pensioners, the pensions being paid would be dependent on the funds being put by new joiners, as in a Ponzi scheme. That is very extreme, as I say, but it demonstrates that there is the possibility of one cohort being disadvantaged by the treatment of another cohort. If existing pensioners are paid too much, those currently paying in will suffer, and if the scheme is overcautious in what it pays out to pensioners, pensioners will suffer and current workers will gain.

This is not theoretical. We only need to look at what is happening in the Netherlands to see that the question of whether to cut benefits when returns are not as good as expected is a real and current issue. In a standard defined contribution scheme, the risk is not pooled, so the issue does not arise. In a defined benefit scheme, the matter is dealt with by the employer making up the difference. However, in a CMP, there is no possibility of that happening. If you want to maintain the level of pensions when returns are low, the future pensions of those still contributing will be impacted and vice versa, so the issue of intergenerational fairness is specific to CMP schemes.

It is also worth pointing out that CMPs have implications for not only intergenerational fairness but fairness more generally. For example, as the noble Baroness, Lady Bowles, pointed out, if someone wants to transfer their fund out of a scheme, how do you value their share? The benefits that arise from the scheme are uncertain, being targets only, so if you value a transfer based on the target benefits, which seems to be what is proposed, that will not take account of the risk that those benefits may not be achieved. In that situation, the person transferring out is getting a better deal than those staying, unless that risk is taken into account in the transfer valuation. The issue is complicated further because of the pooling of longevity risk in a CMP. For example, if someone has just a couple of years to live, there would be a strong incentive for them to take their money out to the detriment of those staying in.

Given that fairness is the single most commonly raised risk that relates to CMPs, it is curious that there is no explicit mechanism in the Bill to deal with it. In our previous discussions, we were pointed in the direction of Clause 18 to see how the matter is dealt with, but in fact that clause sets out only how benefits and so on will be calculated and says that regulations will be made in that respect; nowhere does it mention the critical question of fairness. I imagine that that is because it has been based on other pension legislation, which, as I said, does not suffer from this risk.

Amendment 32 introduces as very simple means by which to ensure that intergenerational fairness and fairness more generally must be assessed by the trustees. Given the importance of this issue, I urge the Minister to consider it really seriously.

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[Baroness Neville-Rolfe [V]]

The noble Lord, Lord Vaux, has adapted his amendments to meet some of the concerns that we all expressed in Committee, for which I thank him, but I am afraid that I am still not happy with the two amendments that he has tabled. For example, nearly all pension schemes are in deficit. Amendment 50 would allow the Pensions Regulator basically to stop all buybacks, which is a matter not for this Bill but for a governance Bill—following proper review and consultation—because buybacks can be justified in some circumstances and we have not had a chance to debate that.

The coronavirus measures, with which a parallel was drawn, are unique and different—that has been made clear in parliamentary agreement to them—so it is better to leave the arrangements to ministerial discretion, as the noble Lord, Lord Vaux, suggested. We have to remember that, however good the regulator is, he or she introduces delay and uncertainty, so we need to make sure that the powers are used with care.

[Baroness Bowles of Berkhamsted [V]]

My Lords, I declare my interests as in the register: I am a non-executive director of London Stock Exchange plc, which has a pension scheme of which I am not a member.

I have signed both amendments, which are about getting priorities right on the matter of how a company uses spare cash and the importance of paying down deficits, especially if it is over too long a time. If there is spare cash around, deficit reduction should rank ahead of share buybacks and be balanced with regards to dividends. Both those issues have already been well elaborated, especially by the noble Baroness, Lady Altmann, and the noble Lord, Lord Vaux.

The amendments would not prohibit either of those eventualities; they would make them notifiable events. The regulator could then exercise discretion about whether there were good reasons; for example, checking that, in the circumstances, the quantum of the dividend was acceptable. I am less certain about good reasons for buybacks, but if there were any, they could be discussed. I therefore support the amendment. To deem it excessively cautious would not be to take it as it is intended. Although we say that the matter would need to be investigated, we would expect the Pensions Regulator to be reasonable in all the circumstances. For example, if everybody had fallen into big deficits, obviously the situation would be different, because of what was going on in the markets, from where a company was being a laggard in making up its deficits. However, we must not forget that if those deficits are not repaid and the company is under stress, it will be the workers and the pensioners who lose out in the end. They cannot always be put at the end of the queue.

[Baroness Sherlock [V]]

My Lords, I am grateful to the noble Lord, Lord Vaux, for returning to this issue. We all know that there are some DB schemes with significant deficits and employers who could be doing more to clear them more quickly. Let us not forget the work done by LCP, which showed many firms paying out dividends 10 to 20 times their pension deficit payments, or the regulator’s annual DB funding statement last year, which raised concern about the disparity between dividend growth and stable deficit repair contributions.

The problem will not disappear. As more DB schemes have closed, they will soon be paying out more in pensioner payments, leaving them less to invest and with a need to de-risk their remaining investments.

The Covid pandemic is going to make things worse. The Pensions Regulator reports that, so far, only around 10% of schemes have agreed a temporary suspension or a reduction in DRCs post Covid, but more trustees and employers are in the process of discussing possible requests to suspend or reduce contributions. We all know that the full force of the economic storm has yet to hit us.

The noble Lord, Lord Vaux, mentioned the no-dividend rules for Covid business loans. The regulator’s Covid-19 guidance on defined benefit scheme funding and investment says that, if trustees face requests to suspend or reduce contributions, then they should seek mitigations. It gives an example, saying:

“All dividends and other forms of shareholder distribution to stop throughout the period of suspension and not to start again until the deferred or suspended contributions have been paid.”


TPR will still require trustees to report agreements to suspend or reduce contributions and provide information on the mitigations.

Ministers say that the regulator can chase employers if resources are taken out that should not be taken, but we know what the danger is if action is taken only after a dividend has been paid out. If the dividends are paid out by a UK employer to an overseas parent, it can be very difficult to get them back. It is entirely possible, in these difficult times, that if a company is in trouble and its parent company is based overseas, there may well be a move to repatriate assets to the home state. These amendments seek to tackle that problem not by stopping dividends or even buybacks where there is a deficit but by making them a notifiable event in certain circumstances.

The noble Lord, Lord Vaux, has softened his amendments, but he has still made a compelling case. Therefore, if the Minister does not want to accept these amendments, can he tell the House how he will ensure that the next BHS or Carillion scandal will not be a company with a foreign parent seeking to repatriate assets before abandoning its obligations to the pension scheme? I look forward to his reply.

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My noble friend Lady Stedman-Scott promised to engage with me on low earners denied the tax relief that they are due in a net pay scheme and forced to pay 25% too much for the pensions they are accruing. I know that this has caused data errors which will need correcting over time. I hope that the Government and the regulators—the Pensions Regulator and the FCA—will seriously engage with pension schemes to make sure that they check data, report data errors and can verify that they have been corrected so that a pensions dashboard does not create the same problems for pensioners and pension scheme members as we have seen in the past with situations such as the guaranteed minimum pension, which was left uncorrected for many years so that pensioners ended up having to repay significant sums of pensions received apparently on the basis of incorrect data.

[Baroness Bowles of Berkhamsted [V]]

My Lords, I shall speak briefly to each amendment in this group. The noble Baroness, Lady Altmann, has a series of amendments on data accuracy—there was also one in the first group—which I have signed. It is important to have accuracy, especially when there are matters of significant value and security. Ensuring that records are accurate and are kept up to date should be in-built from the start of operations, and as the dashboard is starting out there is no reason not to take that precaution.

I have expended time and energy tracing and correcting inaccurate records on pensions and with banks. Key causes of corruption and inaccuracy have been that information was not transferred accurately, or sometimes was not entered accurately in the first place but particularly when legacy systems did not join up with a new system. It is immensely important that pensions information is not lost or inaccurate, as that can also open the door to potential scams or other sales pressures built around tracking pensions or correcting pension data.

With regard to the pensions dashboard, I agree with what has already been laid out by the noble Baroness, Lady Drake, so I will not repeat it. Transactions are the dangerous point. They are certainly not where the focus should be as dashboards are set up and their operations tested, but it is going to be very tempting for commercial dashboards. Commercial companies may find a way to get around that, but this information would give the FCA as the regulator a direct guide to what is to be expected so that it could take action against any circumvention of the intentions of the amendment. I therefore support all the amendments in this group.

[Lord Vaux of Harrowden [V]]

My Lords, I support all three amendments. The grouping is slightly odd, mixing the question of transactions with that of data accuracy; there is a relationship but it is only tangential. The noble Baronesses, Lady Drake, Lady Altmann and Lady Bowles, have already explained the reasoning for the amendments so I shall try to be brief.

Amendment 52 would prevent a dashboard service from engaging in financial transactions. The matter has been well explained by the noble Baroness, Lady Drake, so I will just say that the risks around pension-related transactions happening without proper advice are very well known. Dashboards are being created primarily for the purpose of allowing people to obtain better information about their situation. That information will be helpful when deciding whether to carry out some transactions but it does not in any way negate the need for proper advice, so allowing dashboards to become transaction platforms would make ensuring that proper advice had been taken much more difficult. At least until they have been fully established and the implications well understood, it really must make sense to prohibit dashboards from becoming transactional platforms.

The other two amendments along with Amendment 13, which was discussed in the first group, are about establishing appropriate processes to ensure the accuracy of the data on the dashboard. It almost goes without saying that a dashboard containing inaccurate information may actually be more damaging than no dashboard at all; I apologise for the echo of something else there. These dashboards are intended to help people and their advisers to make decisions about their future pensions. Inaccurate data will lead to wrong decisions being made. It is therefore critical that data must be fully and regularly checked and audited, so I urge the Minister to accept these amendments.

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Moved by

[Baroness Bowles of Berkhamsted]

71: Clause 123, page 118, line 4, at end insert—
“(2) In exercising any powers to make regulations, or otherwise to prescribe any matter or principle, under Part 3 of the Pensions Act 2004 (scheme funding) as amended by Schedule 10, the Secretary of State must ensure that—(a) schemes that are expected to remain open to new members, either indefinitely or for a significant period of time, are treated differently from schemes that are not;(b) scheme liquidity is balanced with scheme maturity;(c) there is a correlation between appropriate investment risk and scheme maturity; (d) affordability of contributions to employers is maintained;(e) affordability of contributions to members is maintained;(f) the closure of schemes that are expected to remain open to new members, either indefinitely or for a significant period of time, is not accelerated; and(g) trustees retain sufficient discretion to be able to comply with their duty to act in the best interests of their beneficiaries.”Member’s explanatory statement
The liquidity profile of an open and active scheme that is receiving regular, significant cash contributions is very different from a closed scheme. This amendment seeks to ensure that they are treated differently accordingly.

[Baroness Bowles of Berkhamsted [V]]

My Lords, this amendment revisits the issue of open direct benefit schemes on which discussions started in Committee; I thank the noble Lord, Lord Young, and the noble Baroness, Lady Altmann, for supporting it. Nowadays, those with defined benefit pensions are regarded as the lucky ones, yet there are still millions of people in thriving open DB schemes where, if you start work today, you can join.

However, these are under threat because the Pensions Regulator does not recognise the substantial difference between open and closed schemes. An open scheme is open at both ends. It has no end date and is open to new members, providing a continuing supply of new contributions, including from future members. Cash flow is steady state or positive, giving inherent liquidity and allowing assets to be used to generate returns. A closed scheme is closed at both ends. It does not permit new members. Contributions progressively dwindle to zero and it has a finite end date when everyone in the scheme has died. Closed schemes have a progressively ageing member profile, often or usually negative cash flow and to pay the pensions, the assets must provide liquidity and are progressively consumed.

Examples of open pension schemes include local authority pension funds, the Nuclear Decommissioning Authority and the Railways Pension Scheme. The different classes of open and closed schemes require different investment, risk and liquidity strategies. A low-risk liquid investment strategy is more appropriate for closed schemes where the loss in asset values would impair a model that relies on asset consumption as it moves to its end date. They cannot risk running out of assets too soon and recovery from losses on dwindling assets is difficult.

The same strategy does not need to be applied to open schemes. With a pipeline of new and younger members, assets do not need to be liquid, are not inherently dwindling, and a far longer investment horizon is possible. An investment risk profile of the type generally classed as balanced rather than risk-averse can safely be followed, including real assets such as infrastructure. As an example, the Railways Pension Scheme invested in the Carraig Gheal wind farm in West Argyll and the Sleaford biomass plant, providing both environmental and local community benefits. This type of investment brings higher returns and the contributions from the members and the employers remain affordable. If open schemes are needlessly pressed to have the liquidity and risk profiles defined for closed schemes, it is inevitable that they too will close due to unaffordability: start the run-down, jeopardise employer companies and employees will lose out, pay more, or both.

The reason for this amendment is that, although open schemes and run-on is given as an acceptable strategy in Annex F of the impact assessment, the Pensions Regulator is developing a strategy that requires both open and closed schemes to have a de-risking profile, without adequate recognition of the different natures of the schemes. The regulator’s DB code suggests treating accrued benefits the same in open and closed schemes of the same maturity, which fails to recognise the difference in the models that I have just explained. One open scheme may have a greater or lesser age maturity of its members than another open scheme, but it is not comparable in risk and liquidity terms to a closed scheme of identical member age profile because both ends are open. It is perpetual and new members and cash flows come in.

Amendment 71 would add new requirements on the exercise of regulatory powers by the Secretary of State to ensure that regulations on scheme funding, as provided for in Schedule 10, do not fail to recognise the characteristics of open schemes. Sub-paragraph (a) would require that open schemes are treated differently from schemes that are closed, which means that there should not be a one-size-fits-all policy that disregards the substantial differences that I explained and tries to compare an open scheme with a closed one. It must have its own regime. Sub-paragraphs (b) and (c) list the features of liquidity and investment risk that need balancing with maturity, but also in the light of the perpetual characteristics of open schemes. Sub-paragraphs (d) and (e) specify maintenance of affordability of contributions to both employers and members. Sub-paragraph (f) would require that regulations and principles do not accelerate closures of open schemes—essentially, a do-no-harm requirement. Sub-paragraph (g) states that trustees must

“be able to comply with their duty to act in the best interests of their beneficiaries.”

The effect of treating open schemes as if they are closed would require huge increases in contributions and, at an instant, put schemes in deficit. Dependent on the scheme details, that may not fall only on the employer. For example, the Railways Pension Scheme has a shared-cost approach to funding in which the contributions of the members would substantially increase as well as those of the employer. The Railways Pension Scheme provided me with figures on its strategy, but I understand that other open schemes are similar. For every £1 of pension income received by members, 75p comes from investment gains, with only 25p from contributions. Investments are maintained in a balanced portfolio with equity in the 40% range and only 15% in government bonds, defensive assets and cash. They have consistently met or exceeded investment return requirements.

If that portfolio were switched to gilts, income would crash because the days of 4.5% yields that underpinned conventional wisdom of investing in the long-dated gilts has gone in the wake of global quantitative easing. Where would the Railways Pension Scheme’s missing 75p per pound then come from—a near trebling of contributions? That would lead to closure and worse. The employees cannot afford it, the companies cannot afford it and the fair-paying public cannot afford it. It is not protecting the public’s purse. Why allow that to happen due to an over-simplistic approach? The Government really need to defend open schemes in this Bill. Given that importance, I am minded to press the amendment to a vote. I beg to move.

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[Earl Howe]

My Lords, I am grateful to the noble Baroness, Lady Bowles, for her amendment, which touches on a number of important factors to be considered in the development of secondary legislation, including the factors that it lists. I say immediately that I agree that these are all important factors to take into account when developing secondary legislation for defined benefit scheme funding. However, we do not need an amendment to do that. The amendment includes factors that are all taken into consideration during the whole process of framing policy, legislation and guidance.

One of the greatest strengths of our scheme-funding regime is that it operates on a scheme-by-scheme basis because every scheme is different, and it would be unhelpful and inflexible to treat them all the same. The measures in the Bill build on that approach, as will the secondary legislation. The existing scheme-funding legislation has been drafted to ensure that it is flexible enough to apply to all types of defined benefit scheme—for example, whether open or closed. Equally, the scheme-funding measures in the Bill are flexible enough to apply to all types of defined benefit scheme.

In the protecting defined benefits White Paper we were clear that there are a number of examples for suitable long-term objectives and that running on with employer support would be a reasonable course of action for an open scheme. Whether or not the strategy for ensuring that benefits can be provided in the long term is suitable will depend on the specific context of a particular scheme. Additionally, we entirely accept that schemes with different liquidity profiles and maturity will be able to take different trajectories. This is, and will remain, fundamental to the scheme-specific approach. So I assure the noble Baroness and the House that any regulations will also be formulated with considerations such as those outlined in the amendment in mind, where appropriate.

The big danger with an amendment of this kind is that it creates inflexibility. It remains our aim that the scheme-funding measures in the Bill do not change existing flexibilities but, rather, seek to make best practice universal and ensure that all schemes are planning for the long term. It is good practice for all schemes, including open schemes, to set a funding and investment strategy.

My noble friend Lord Young asked whether I could commit to a meeting along with officials to discuss these issues. Yes, I am happy to do that, and if schemes have concerns with what TPR is proposing they can engage with the current consultation. The Pension Regulator’s current consultation on the defined benefits funding code includes a twin-track compliance process that takes account of scheme and employer circumstances. Indeed, the current consultation has a full chapter on open schemes, and I encourage anyone interested to contribute their views.

Regulation-making powers exist precisely to allow the system to be calibrated effectively to ensure that this balance is struck. While the noble Baroness’s amendment reflects a number of factors that are considered while developing policy, we do not need to specify those in primary legislation and indeed, as I hope I have indicated, it would be unhelpful to do so. We need to leave room for the flexibility that I have emphasised; we must leave enough flexibility in the system to allow it to react effectively to future changes. Indeed, in the light of the current social and economic climate, it is very clear that the economic shape of the future is unknowable.

I hope that the noble Baroness will recognise from what I have said that the Government’s approach is fair and proportionate and that she will accept my assurance that appropriate flexibilities are, and will continue to be put, in place. On that basis I respectfully urge her, and urge her with some emphasis, to withdraw the amendment.

[Baroness Bowles of Berkhamsted [V]]

My Lords, I thank all those who have spoken in this debate. I particularly thank the noble Lord, Lord Young, and the noble Baroness, Lady Altmann, for signing the amendment, for making their contributions and for speaking to the Government. It is clear to see that there is support for the amendment from across the House, and I hope that it is also clearer to everyone why preservation of open DB schemes is in the public interest. We are, in fact, in a rather strange situation where the Minister is in agreement with the policy; it is in government policy, but yet there is a significant danger from what the Pensions Regulator has actually said. That is the sole reason why there needs to be something on the face of the Bill that confirms what is government policy.

The Government have a further opportunity to amend this Bill in a way that they consider is better than my amendment and give guidance in a different way. I would be happy to help, but we have run out of time and I have not heard a suggestion that something will actually be presented at Third Reading. This House does not have any more opportunities with this Bill, and I cannot see anything coming down the track to give us another opportunity that would be in time to make a difference with regard to the Pensions Regulator’s obvious position.

This is not a new argument: I have spent 10 years in Brussels arguing the toss on these things, on the difference between IORPs and Solvency II, and I know where the pressure comes from the former FSA—now the FCA. Part of this Bill, on CMP schemes, is fixing a problem for one newly privatised employer. Why dump others who have found good ways to make their DB schemes flourish and last? If the Government do not make it clear, that is what will happen: they may well end up being dumped.

In the first group of amendments, the noble Baroness, Lady Sherlock, said that she did not want CMP schemes to undermine DB schemes. Without this amendment or something like it, they may well have nowhere else to go. This is not a nice-to-have amendment; it is vital. The issue should not be swept into the corner for these pension schemes to die quietly, and I wish to test the view of the House.

Universal Credit

Baroness Bowles of Berkhamsted Excerpts

Tuesday 2nd June 2020 Lords Chamber

[Baroness Stedman-Scott]

I do not wish to be negative in any way but I have no knowledge of the Government considering that. Therefore, I am unable to say more than I have already said.

[Baroness Bowles of Berkhamsted (LD)]

Does not the mechanics of the whole-month approach to changes in circumstances create arbitrary fluctuations in income that are hard for those on low incomes to manage?

[Baroness Stedman-Scott]

I am not sure that I agree with the noble Baroness about the complexities of the changes. As we have made clear all along, we are trying to make the universal credit system replicate the world of work. However, I am aware that people on low incomes have difficulties, and I assure the noble Baroness that the Government want to do all they can to help them.