Pension Schemes Bill [Lords]

Debate between Debbie Abrahams and Simon Kirby

2nd reading: House of Commons
Monday 30th January 2017 Commons Chamber

[Debbie Abrahams]

I am grateful for that ruling, Madam Deputy Speaker. Although we have made significant improvements in terms of pensioner poverty, I have to say it is a disappointment that there are still outstanding problems. Under our pension system, of which we should be guardians, one in seven pensioners still unfortunately lives in poverty. We are the fifth richest country in the world, so we should be able to ensure that our pension system provides dignity and security in retirement. Currently, it does not. For me, this a significant failure of our pension system and highlights a particular failure in the Bill.

I could also talk about the missed opportunities surrounding the Cridland review of the state pension age, which has not been brought to this place, and there are lost opportunities when it comes to the defined benefit Green Paper. It was due later this year, but it has now been decided that it will not be brought to this place for scrutiny in connection with this Bill.

I will move on, Madam Deputy Speaker, because I know I am testing your patience. [Interruption.] That is a bit unkind. Closer to home and in relation to the Bill, it does very little to build—[Interruption.] Do any Conservative Members want to intervene? Okay, I will carry on.

The Bill does very little to build on the success of Labour’s auto-enrolment policy by ensuring that saving into master trusts is accessible and encouraged for a number of groups currently excluded from auto-enrolment provision. I recognise that the Government have announced a review of auto-enrolment, but again, why is this not in the Bill?

Let me speak briefly about the issue of low-income savers’ access to saving in master trusts. Under the policy of auto-enrolment developed by my party, working people would be automatically enrolled in a master trust scheme once their earnings hit the trigger of just over £5,000. The logic of this proposal was that people would begin to save towards an occupational pension at the same earnings level at which they began to pay national insurance contributions. The coalition Government increased this earnings threshold to £10,000, denying millions of low earners the automatic right to save towards a relatively low-cost occupational pension through a master trust. Given the generational crisis developing in our pension system, we believe that more needs to be done to include low earners in savings provision and encourage retirement planning.

That is also true for the self-employed. Self-employed people currently make up to 15% of the workforce, and since 2008 have accounted for over 80% of the increase in employment. There is much evidence to suggest that the self-employed are not saving as much as other sectors of the workforce. Research by the Association of Independent Professionals and the Self-Employed found that four in 10 self-employed people did not have a pension. Despite that worrying evidence, there is little obvious means by which a self-employed person could begin to develop a savings pot within a master trust. Once again, this is not sorted out in the Bill. There are other examples, such as people with multiple jobs and carers, of those who do not have access to, and the benefit of, an occupational pension scheme.

The Secretary of State has just announced that there are gaps in the Bill, relating to its failure on a number of different issues. We are shocked by the vast amount of detail missing from the Bill, when that detail is necessary to achieve what the Government have set out to do. The Secretary of State mentioned that secondary regulations will not be laid before the end of the year. Once again, the Government are, in respect of some important protections, presenting a skeleton Bill, with much of the detail left to secondary legislation.

Although we generally support the Bill, despite its narrow scope, there are a few aspects that we will look to strengthen and a few gaps that we believe need to be plugged. These can be considered broadly under three themes: improved governance, strengthened member engagement and greater transparency. The Bill includes a number of clauses that provide a framework for the effective governance of master trusts. We welcome, in particular, the authorisation criteria set out in the Bill. However, it does not address a number of core principles, the first being scheme member representation.

Unlike defined benefit schemes, defined contribution schemes provide for the risk of saving and investment to be borne by the scheme member. On that basis, we believe that scheme members should be represented among the trustees of master trust pension funds. It is, after all, their money, and they have a direct interest in ensuring that a sound and sustainable investment strategy is delivered at good value. That surely stems from the basic democratic principle that those on whose behalf decisions are being made should have a say in those decisions. It would also be a necessary step towards greater transparency in the pensions system, which the Under-Secretary of State for Pensions himself confirmed that the Government would pursue following Labour’s campaign.

Furthermore, providing for a certain number of member-nominated trustees would not be a particularly new or unique arrangement. Mandated member representation already exists in the pensions system: trust-based pension schemes are required to ensure that at least a third of the board of trustees is member-nominated. Why should master trusts not be subject to the same requirement, especially in the light of the increased risk borne by scheme members?

Let me say something about transparency. For too long, people have been encouraged to put their faith—and, perhaps more important, their money—in a distant savings pot, and have been given very little information about where the money is invested, the performance of their savings, and, importantly, how much the investment is costing, in terms of the costs and charges that they will incur. Neither the scheme trustees nor the scheme members have been able to ascertain adequately whether they are getting value for money. I remember that in 2015, the former Financial Secretary to the Treasury promised the Work and Pensions Committee that if there was not openness about costs and charges, the Government would introduce legislation. Well, it has come a little bit late. Why has it taken so long?

In almost any other market, people wishing to purchase goods or services are given basic information about performance and costs before they do so. That basic principle is a necessary requirement to ensure that they receive value for money, but it is not operating in our pensions system. The Financial Conduct Authority has therefore published an interim report, which recognises a number of significant failings in the competitiveness of the asset management market. Its recommendations have important implications for the transparency of pension funds, especially in relation to the costs and charges being extracted from pension savings by investment managers.

We are pleased to see that part 2 of the Bill attempts to prevent excessive fees from being applied should a scheme member wish to take advantage of the Government’s pensions freedom reforms. However, the Bill does not refer to transaction costs, the charges applied by asset managers when they are making new investment decisions. There is a great deal of work to be done to tackle the problem of opaque and excessive costs and charges being extracted from workers’ savings by investment managers. Currently, the Bill merely scratches the surface. It must become a stronger vehicle for change in this regard.

We believe that, alongside member-nominated trustees, a member engagement strategy is required to ensure that master trusts are communicating properly with those whose money they are investing, and that they play their part in driving informed saver choices on a bedrock of transparent information. The Pensions Regulator’s voluntary code of practice for defined contribution schemes asks trustees to provide “accurate, clear and relevant” communications for scheme members as good practice. We believe that proper member engagement should not merely be a voluntary requirement placed upon trustees, but should form part of the regulatory framework. That would help to ensure that scheme members can make rational and informed choices about their pension savings, creating a more sustainable system.

There are other elements in the Bill whose purposes we want to strengthen or clarify: for instance, the definition of the scope of a master trust, what happens to non-money purchase benefits under this Bill, a number of issues relating to the pause clause, and the status of the scheme funder as a separate entity.

We welcome the Bill, but we see it as a wasted opportunity. So much is being introduced after the event. There will be no opportunity for another pensions Bill; the provisions will be delegated to statutory instruments.

[The Economic Secretary to the Treasury (Simon Kirby)]

How do you know?

[Debbie Abrahams]

That is what we have been told. That is what we have been led to believe by the Government. Given how long overdue this Bill is, this is likely to be the only opportunity that we have to raise this, and it should have been brought to this House.

We need to develop a sustainable and secure pension system that drives down pensioner poverty and delivers dignity in retirement for all, and I am afraid that this Bill falls well short of that.

Office for Budget Responsibility (Manifesto Audits)

Debate between Debbie Abrahams and Simon Kirby

Wednesday 25th June 2014 Commons Chamber

[Debbie Abrahams]

Certainly not the last bit. Last month’s elections were a wake-up call for all of us, and if we do not heed it, the future of politics will not look good. Far too many people feel completely disfranchised from politics and do not trust politicians. Too many people either stayed at home or cast their vote for a protest party. That is why I fully support the motion for the OBR to independently audit the spending and tax commitments of the main political parties in next year’s general election.

Undertaking that analysis would be a major step forward to help increase openness and transparency in politics. It would enable proper scrutiny and debate on the spending plans of all political parties, and enhance the democratic process. Ultimately, it would contribute to informed decision making, which is surely what we should all want. We are here as public servants to reflect issues in our constituencies and to develop policies that respond to those issues. Communicating our policies is part of our job. That is certainly the form of politics that Opposition Members want to develop.

This proposal is part of a process of addressing the major power imbalances and associated inequalities in our country, and we are absolutely determined to tackle it. We will continue to stand up to powerful vested interests, from media barons to the big energy companies. Information is power, and having information about how the Government or political parties intend to spend public money is very powerful.

[Simon Kirby (Brighton, Kemptown) (Con)]

Will the hon. Lady give way?

[Debbie Abrahams]

I am sorry, but I do not have time.

To deny information to the public is absolutely shameful, and that is where the problem lies. Other parties do not want to change; they want the status quo. They want to preside over a country where there is growing inequality. The average person will have £1,600 a year less in their pocket next year compared with 2010, and the average family has lost £974 since 2010 because of the tax and benefit changes, but bank bonuses have soared and the top-to-bottom pay ratio for FTSE 100 companies stands at 300:1. The Government are presiding over such inequalities.

[Debbie Abrahams]

Absolutely. That is my major argument. I cannot understand any party not wanting to provide information to enable people to make informed decisions.

[Simon Kirby]

Will the hon. Lady give way?

[Debbie Abrahams]

Go on then. The hon. Gentleman has enticed me to give way.

[Simon Kirby]

Why does the hon. Lady suppose that we did not have an office for budget responsibility during the 13 years of the previous Government to provide the very transparency and credibility that she is now so keen on?

[Debbie Abrahams]

I am very grateful that we have an OBR now, but we should focus on how we use it.

To return to the current and growing inequalities under this Government, recent research on life expectancy has shown that people in Manchester are twice as likely as people in Wokingham to die early, and the figures are getting worse. My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) famously said:

“Inequality in health is the worst inequality of all. There is no more serious inequality than knowing that you’ll die sooner because you’re badly off”.

That is what is happening under this Government.

This Government are grossly unfair and unjust: they protect their own self-interest, they are out of touch and they are out of time. Should we be elected in 2015, we have said that we will not borrow more for day-to-day spending. In stark contrast to this Government, our decisions on how we spend resources will be based on fairness, justice and evidence.

We want our spending plans to be independently verified to make sure that they are robust. After all, that is what happens not just in the US, but in Canada, Australia and the Netherlands. I invite those who wish to enhance the democratic process and not to stifle it, as well as those who want a Britain for the many and not for the few, to join us in the Aye Lobby.