Pension Schemes Bill [HL]

Lord Vaux of Harrowden Excerpts

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

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Baroness Janke (LD) [V]]

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

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

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

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

--- Later in debate ---

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

My Lords, we had lengthy discussions on Report around the concern that a one-size-fits-all derisking policy could render uneconomic otherwise healthy defined benefit schemes which remain open, and which are not close to maturity. The noble Baronesses, Lady Bowles and Lady Sherlock, have already described the issue in better detail than I ever could, so I will not repeat the case, but it would be a great shame if a laudable intent to derisk had the unintended consequence of leading to the premature end of healthy, well-run defined benefit schemes, which are of particular importance to lower-paid employees. I know that this is not the intention of the Government, as the Minister has just restated; I am confident that the Minister will be able to set our minds at rest by confirming the points asked by the noble Baroness, Lady Bowles, and that Divisions on Motions 4A and 4C will not be necessary.

As this is likely to be the last time I speak on the Bill, I hope the House will not mind if I take the opportunity to put on record my thanks to the Minister for her open and collaborative approach throughout its passage. She and her team have been extremely generous with their time and I am very grateful to them all. I am also grateful to all noble Lords for their patience as I have fumbled through my first involvement in amending a Bill; I have learned a lot from them. The Bill has been an excellent demonstration of the depth of expertise that resides in this House and of how well the House can work across parties to improve legislation. As the Minister said after Third Reading

“we collaborated, we talked, we listened and we made the Bill better.”—[Official Report, 15/7/20; col. 1671.]

I agree with her and, as I said earlier, I very much look forward to that same collaborative spirit continuing into the discussions on the regulations that will put the flesh on to the skeleton of this Bill.

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

Noble Lords in the Chamber have indicated that they wish to speak. I call the noble Baroness, Lady Altmann.