PIP Back Payments

Nigel Mills Excerpts

Tuesday 30th January 2018 Commons Chamber

[Sarah Newton]

Of course I would delighted to meet the hon. Gentleman and his colleagues. I hold regular sessions in Parliament—teach-ins on PIP and ESA, which any Member of Parliament and their caseworkers may attend, bringing their casework along, so that we can have a really good dialogue. However, if the hon. Gentleman would like to have a specific meeting about the situation in Northern Ireland and what we can do to support him in doing his very important job of representing his constituents, I would be delighted to do so.

[Nigel Mills (Amber Valley) (Con)]

Would it be helpful to create a specific phone number that affected claimants or their advisers could contact to suggest that they think they ought to have a change of decision, rather than requiring them to wait while the Department searches through 1.6 million records to try and find them?

[Sarah Newton]

I thank my hon. Friend for his question but, no, I think that by far the best thing is to say that we will contact the people affected. I am concerned that if people started doing such a thing, it would be a distraction and could use up the resources that I want to put into ensuring that we get this sorted as soon as possible.

Oral Answers to Questions

Nigel Mills Excerpts

Monday 13th November 2017 Commons Chamber

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

Those matters are being considered and will be addressed in the new year.

[Nigel Mills (Amber Valley) (Con)]

T7. Can the Minister update the House on progress with the pensions dashboard and confirm that all pension schemes will be required to release the comprehensive data required to make that system useful?

[Guy Opperman]

I am firmly committed to delivering the pensions dashboard. Its introduction will clearly transform how people think about retirement. I will make a statement in the spring that will tackle some of the delivery challenges, including the point that my hon. Friend raises. There is an ongoing feasibility study and there will be a stakeholders’ meeting on 11 December, which I urge him, as well as many interested stakeholders, to attend.

Pensions

Nigel Mills Excerpts

Wednesday 19th July 2017 Commons Chamber

[Mr Gauke]

As a country we spend very large sums—something like £50 billion a year—on support for people with health and disability issues, and we will obviously continue to do that. That is the best way of supporting people who have health difficulties, rather than by having a lower state pension age, which would be unaffordable.

[Nigel Mills (Amber Valley) (Con)]

I thank the Secretary of State, although perhaps with not too much enthusiasm, for delaying my retirement by a year. I think I am in exactly the range of people whose retirement has just been delayed. What plans does he have to learn from the issues that arose from previous increases in the retirement age about communicating to people that this change will affect them?

[Mr Gauke]

First, I should say that the longer we can delay my hon. Friend’s retirement, the better that will be all round.

In terms of communicating with those affected, we are giving something like 20 years’ notice today, but as we legislate in due course, it will of course be necessary to communicate properly with those who are affected. [Interruption.] It will be done properly. It is proper that we communicate with those people, and we will do so.

Jobcentre Plus: Closures

Nigel Mills Excerpts

Thursday 6th July 2017 Commons Chamber

[Mr Gauke]

It is the case that there are sites in Chesterfield and Mansfield, which are within half an hour by car from the site that the hon. Lady mentions. It is anticipated that at least 75% of the staff—probably more—can be redeployed to other sites and will not be in a position in which redundancy is relevant, and of course the DWP is seeking to ensure that that number can be maximised.

[Nigel Mills (Amber Valley) (Con)]

Does the Secretary of State agree on the importance of getting jobcentre staff to work outside jobcentres, in places such as food banks, to ensure that we are getting the right welfare claims in the right way?

[Mr Gauke]

There is an important outreach role that jobcentre staff can and will perform. It is simply not the case that all work is done within jobcentres themselves. Staff can provide outreach services in other sites as well, as indeed they will increasingly do.

Housing Benefits (18 to 21-year-olds)

Nigel Mills Excerpts

Tuesday 7th March 2017 Commons Chamber

[Caroline Nokes]

We looked very carefully, under the public sector equality duty, at the impact this policy would have and we have shared that information with the Social Security Advisory Committee. I am under no obligation to publish it.

[Nigel Mills (Amber Valley) (Con)]

Will the Minister explain how the policy will apply to young people on apprenticeships, who may be earning below the national living wage?

[Caroline Nokes]

My hon. Friend makes a really important point in apprenticeship week. Absolutely: apprentices will be exempt from this policy.

Personal Independence Payments

Nigel Mills Excerpts

Tuesday 28th February 2017 Commons Chamber

[Damian Green]

As I say, an improvement plan is in place, which lets the hon. Lady know that things need to improve. They are being improved, as I explained in answer to the question from my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst). I hope the hon. Member for Wallasey (Ms Eagle) can be reassured by the fact that we are recruiting a team of health professionals to help us to scrutinise the suppliers’ training and assessments. Both suppliers have their own improvement plans in place as well. We will be trialling audio recording of selected assessments from the beginning of next month to understand better how assessments can be improved.

[Nigel Mills (Amber Valley) (Con)]

As part of the improvement plan the Secretary of State refers to, will he ensure that those who need assessments in their own homes will be able to get them from both providers?

[Damian Green]

Yes. That point has been made by a number of non-governmental organisations, as well as colleagues on both sides of the House. We are looking at it very seriously.

Pension Schemes Bill [ Lords ] (First sitting)

Nigel Mills Excerpts

Tuesday 7th February 2017 Public Bill Committees

[Alex Cunningham]

It is a pleasure to serve under your chairmanship, Mr Rosindell, and I am sure it will continue to be so throughout this Committee stage.

Before I get into detail of Labour’s first tabled amendments, 22 and 23, it might be helpful if I set out how we plan to approach Committee stage. As I said on Second Reading, we broadly support what the Bill seeks to do, but we have serious concerns about what the Bill does not seek to do, the issues in the pensions landscape that it fails to address, and the significant sections of policy detail pushed into secondary legislation.

I note that my new clause 5, which is designed to introduce pension credit for women born in the 1950s and whose retirement age has been accelerated, has not been selected. I say only that it is lamentable that the Bill is not broader. I am also concerned about the dependency on secondary legislation because the Government are not yet in a position to share the detail of their intentions. I know that not everything can be in the Bill, but the Constitution Committee wrote to the Government expressing strong concern about the lack of information provided in primary legislation. I hope that the Government will take the Select Committee’s caution seriously and that we can ensure that in this case the primary legislation properly sets out the Government’s intentions.

Amendment 22 raises the question why single-employer occupational schemes are excluded from the scope of the Bill and why connected employers are therefore effectively treated as a separate entity. As it stands, the Bill’s provisions regulate neither single nor connected employer arrangements. We appreciate that a line must be drawn somewhere in attempting to develop a suitable regulatory framework in the face of a wide array of occupational pension arrangements. The amendment offers the Government the opportunity to clarify the bounds of their new regulatory environment and to justify their decision to draw the boundaries where they lie in the Bill. We want the parameters of the regulatory framework to be clear.

We accept that the master trust regime is focused on schemes with particular risks, but does there not have to be consistency across the piece? The definition of a master trust covers an array of different arrangements and there is nothing simple about it—getting my head around it has taken me some time. It can cover schemes set up by unregulated businesses as well as those set up by regulated businesses, such as insurance companies or investment managers. It can also cover what are described as “white label” master trusts, which are set up by a pension providers, with commercial or non-commercial partners being allowed to brand their sections of the trust. Others may have partnering arrangements with large employers whereby each employer gets its own section of the master trust but does not make any profit from it. Schemes that are included can be industrywide, can include two or more unassociated companies, and can be in the university, charitable and religious sectors. Given the broad range of different situations, on what basis do the Government believe that it is appropriate to draw the line to exclude single unconnected employer arrangements?

The probing amendment would also delete from the definition of a master trust the exclusion of those schemes that are to be used only by connected employers. In the debate in the other place, I believe the Minister clarified that when a single group employer takes on a non-associated one and it is intended that all will participate in the scheme, the scheme will then fall under the regime. Will the Government confirm that that remains the case?

It would also be good to have further clarification of what the position would be when a joint venture has run its course and the scheme reverts to being used only by connected employers. In that instance, how do the Government justify the juxtaposition of a connected group of employers being outside the scope of the Bill whereas another connected group of similar size but with just one small associated employer would presumably be inside it? The distinguishing line is very thin.

Do the Government envisage circumstances in which clause 41 would be used to bring within the scope of the Bill a single employer occupational pension scheme? Clearly, the Bill provides that power to the Secretary of State. In fact, the power set out in the Bill is very broad, so I look forward to the Minister’s response on those issues.

I note that in amendment 32, the hon. Member for Amber Valley has sought to address the lack of access for self-employed people. I picked up that theme in new clause 4, which addresses both that and other groups currently excluded from master trust scheme membership. I look forward to the hon. Gentleman’s speech.

Amendment 23 is a probing amendment to elicit clarification regarding what happens to non-money purchase benefits in master trusts. Clause 1(1)(a), taken together with other clauses, means that the Bill applies only to money purchase benefits provided through a master trust and excludes non-money purchase benefits. As I am sure the Minister is aware, the exclusion of non-money purchase benefits would mean that members’ benefits provided by those schemes, including retirement products, are excluded from key protections in the Bill. That does not seem fair or sensible, given the Bill’s intention to provide stronger protection for scheme members.

Master trusts currently provide a range of services both to employers under auto-enrolment and to individuals exercising pension freedoms. Those can include annuities, guaranteed drawdown and investment products, which include some form of guaranteed rate of return. One example could be when annuity payments are paid to the member while the annuity supporting those payments may be held as an asset of the scheme, rather than in the name of the member. Pension freedoms are beginning to transform the market radically for guaranteed income products, but pension savers will still have an appetite for some form of guaranteed product. The Bill will not apply to non-money purchase benefits, so it is unclear what happens to those benefits and, importantly, the assets backing them when a master trust fails.

In the other place, my noble Friend Baroness Drake raised an example of a trust that allows members to add in other savings and assets such as ISAs and property used for funding retirement. Everybody I meet acknowledges Baroness Drake to be a pensions expert in every sense. She believes that of the approximately 100 master trusts, only 59 are being used for auto-enrolment, with others having developed out of the pension freedom reforms.

Regulation should anticipate that master trusts will expand further into the decumulation market of retirement products. With that in mind, the exclusion of non-money purchase benefits from the primary legislation raises a number of questions. It is not clear what happens to the treatment of all non-money purchase benefits and the assets backing them in the event of a wind-up or other triggering event occurring. Will those members’ benefits be protected against funding the costs of a triggering event? How and where will they be transferred on exit?

In the other place, the Minister suggested that there is already extensive regulation to ensure that members’ non-money purchase benefits are protected. He called further regulation in this regard “unnecessary and disproportionate”. It seems odd that in this instance the Minister seems intent on minimising duplication, yet the Government continue to require duplication of regulation in some cases around the separate legal entity. The boundary line of the legislation appears a little murkier.

We note that in Government amendment 20, Ministers have acknowledged the lack of clarity around money purchase benefits and non-money purchase benefits raised by my noble Friend Baroness Drake, but we are a little disappointed that the amendment does not seek to provide greater protection to non-money purchase benefits under mixed schemes. Instead, it merely clarifies that the Bill protects only money purchase benefits within a mixed scheme. That is deeply disappointing for us for the reasons I have just outlined. I therefore request that the Government confirm absolutely that members of master trusts providing them with non-money purchase benefits face no additional risk as a result of that gap.

Will all retirement products with an element of guarantee be covered by the Pension Protection Fund regime? Master trusts are not regulated by the Financial Conduct Authority, so where does the saver look for protection? Secondly, the continuity strategy required under clause 13 in the event of a wind-up will have to set out how the interests of members of a scheme in receipt of money purchase benefits are to be protected in a triggering event. Currently, it will not have to set out how members in receipt of non-money purchase benefits will be protected. Such a requirement would at least clarify what range of member benefits were in the master trust.

Will the master trust be required to set out how members with non-money purchase benefits will also be protected if a triggering event occurs? I am sure that the Minister will recognise these very genuine concerns and I look forward to his response.

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to serve under your chairmanship, Mr Rosindell, and to follow the shadow Minister. My remarks will be in a similar spirit to his, trying to probe the Government on how exactly they see master trusts being used, how they see the pensions landscape and how the two will mesh.

Amendment 32, which stands in my name, relates to how we deal with self-employed people who may end up in a master trust. That starts out as a technical question—as the Minister may know, I like to ask technical questions of legislation to see whether he has read it all and can trace it all through, because these things can be chased around. Under the definition in the Bill, a master trust must be an occupational pension scheme, which takes us back to the Pension Schemes Act 1993. An occupational pension scheme has to provide benefits in respect of earners with a qualifying service in an employment—such schemes do not provide benefits to earners who are self-employed in that situation. Therefore, on a high-level reading, if a scheme is providing benefits for people who are self-employed, technically it should not be an occupational pension scheme.

I assume that the answer to that particularly technical point will be that if in a master trust there are 5 million people who are employed and there are 10,000 who are self-employed, it does not get suddenly blasted out of being an occupational pension scheme and out of the regulations and drop back into the personal pension scheme regulations. I assume that the National Employment Savings Trust, which I think already markets itself to the self-employed, will not somehow have a change in its regulatory position by serving a few self-employed people.

It is not hard to foresee that the landscape might change, and it is pretty clear that we would quite like the landscape to change quite dramatically. We have a big problem with the lack of pension provision among people who are self-employed and, sadly, that problem is going the wrong way. Auto-enrolment has enrolled millions more employed people than ever before in a pension, but over the course of this century the number of people who are self-employed and actively in a pension scheme has decreased from about 1.2 million in 2002-03 to 380,000—and that is as the number of people who are self-employed has risen to more than 3.5 million. That is going completely the wrong way. Far more people are self-employed, yet far fewer of them are saving in a pension. That is not a healthy situation for them and their prospects in retirement, and it is not a particularly healthy position for us, considering how people will be able to look after themselves when they reach that age.

It is pretty clear that we need to find solutions that encourage more self-employed people to save into a pension and to take the various tax advantages that that provides. Hopefully, when the Government conduct their auto-enrolment review later in the year, one issue they will look at is whether we can extend, tweak or amend auto-enrolment to get to those many millions of people who are self-employed. Let us be honest: probably quite a large number of them would like to be employed or think they are employed—or perhaps we think they are legally, in substance, employed, yet their non-employer is somehow tweaking the rules to treat them as self-employed. How do we get those people to realise that pension savings is important to them? How do we get them into a simple scheme that is easy to administer?

It looks like auto-enrolment master trusts are the obvious vehicle that could cope with the scale of several million more people, who are probably generally on relatively low earnings, joining a pension scheme. They have the infrastructure and it is not hard to see how self-employed people could self-manage such schemes via online portals. It looks like, as a matter of policy, we would quite like to encourage all the big master trusts out there to start taking people who are self-employed. I suspect we would like to find a way.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

The hon. Gentleman is making some important points that I fully subscribe to. As much as I welcome the Bill and its overall thrust, is this not perhaps a little bit of a missed opportunity? We could have made sure that the review of auto-enrolment came alongside it, which would have informed our present debate on how we deal with self-employed people, and indeed those under the earnings threshold. We want people to be investing in pensions for the long term.

[Nigel Mills]

I am grateful to the hon. Gentleman, and I can see the attraction of that. Given that we have effectively auto-enrolled millions of people into master trusts, I am not sure I would support a delay in the regulations coming into effect. We need the powers in the Bill available to ensure that the people we have strongly encouraged into the schemes have all the protections we think they ought to have. I suspect that the review of auto-enrolment will be long, and in some ways it will probably be difficult to work out the right balance to strike in increasing the level of savings without encouraging people to leave the schemes completely. I am not sure that waiting for a resolution of that issue would be a sensible idea.

May I raise another technical point about when a master trust scheme ends up with a large proportion of self-employed members, up to 10%, 20% or whatever percentage of the scheme? Will it have to change its regulatory position and move from being an occupational pension scheme to a personal pension scheme or some other sort? I accept that there is a lot of regulation of such schemes, which may not be the end of the world, but perhaps the Minister will set out how the Government are tackling the big self-employed pension gap, where many fewer people save much smaller amounts and end up with much smaller pension pots as they approach retirement. As our employment markets change, that will be a significant challenge for us as we try to make pensions effective for everyone in the country. I look forward to the Minister’s remarks.

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. I thank you for the clarification of the rules concerning hot beverages, with which I am happy to comply.

The attitude that the Opposition, the Scottish National party and all of us have taken towards the Bill is to discuss it widely among ourselves and to agree as much as we can, which is positive. Our disagreements are honourable, and no one is playing politics or at opposition for the sake of it. I wanted to make that clear, Mr Rosindell, because I have served on Bill Committees, as I am sure you have, where that has not been the case.

The Opposition amendments and those of my hon. Friend the Member for Amber Valley were tabled in the correct spirit. We had considered all the points in advance of the Bill being introduced and therefore in advance of the House of Lords proceedings and Second Reading in the Commons. Master trusts have been around for a long time, but they have grown exponentially in number over the past two years. The legislation is therefore a response not to a fundamental problem with master trusts, but to their exponential growth, pushed by auto-enrolment, and the industry seeing them as an area with a less stringent regulatory regime than other parts of the pension system. For example, insurance companies and personal pensions are regulated by the FCA under long-standing rules, and the non-master trust system is very different, because those trusts have one clear sponsoring employer and there are lots of rules and regulations under the Pensions Regulator.

The legislation is therefore meant to fill a gap. We are not filling the gap because of a disaster or problems that have arisen; we are trying to see what problems might arise. That has been the scope of discussions between the Government, Opposition and individuals, which has included some positive opposition in the other place. I hope that that will be true for most of our proceedings.

Opposition amendments 22 and 23 and the amendment of my hon. Friend the Member for Amber Valley seek to change the Bill’s definition of a master trust. Amendment 22 would extend the definition to all schemes that offer money purchase benefits, which would include schemes used only by a single employer or by employers connected to each other. The proposal would extend the scope of the definition significantly and, therefore, of the authorisation regime disproportionately.

As the debate in the other place indicated, there is general acknowledgment that further regulation of master trusts is desirable and necessary. As I explained in my opening remarks, master trusts have developed into structures that are often very different from traditional occupational pension schemes offered by single employers or the more traditional group of connected corporate employers. They offer compelling benefits to employers and members. They spur competition in the market and allow for economies of scale, providing value for money. They are also an efficient solution for smaller employers for whom setting up an individual pension scheme for employees would be difficult, onerous, impractical and expensive.

We accept, however, that those qualities also bring about new risks. As I explained, those risks are less likely to be present in single employer or connected corporate defined contribution schemes. The authorisation regime is intended to address those risks. For example, in a single employer scheme—a traditional trust scheme—the employer is usually closely involved in the running of the scheme and has an active relationship with the trustees. In a master trust, the employer’s participation is often largely limited to paying the employer contribution, which is probably the most important part. I do not take that lightly, but the responsibility for the running and administration of the trust is clearly different from a single trust for a single employer. Additionally, in a single employer scheme, the employers determine the terms of the scheme, whereas in a master trust it is done for them, with the person or organisation setting up the scheme doing it.

Those differences highlight why the purpose of the Bill is to require authorisation and provide member protection in respect of master trusts. The risks are specific to this kind of scheme and it is therefore important that the definition reflects such schemes and does not extend beyond them. The clause establishes the proper scope of the Bill and ensures that its regulation is proportionate to the issues arising.

Amendment 23 was clearly explained by the hon. Member for Stockton North. It would amend clause 1(2), which provides that the Bill’s provisions apply to a master trust scheme only in so far as it provides money purchase benefits. That would mean that the provisions of the Bill would apply in relation to the scheme as a whole, and not just in relation to the parts of it that apply to money purchase benefits. Most master trusts will only provide money purchase benefits—that is the purpose of the vast majority of them—but it is fair to say that a number will provide money purchase and non-money purchase benefits. I agree with him that master trusts can do that legally and properly. It is not the norm but some do.

As I have already set out, the authorisation regime is intended specifically to address certain risks that apply to members in master trusts that relate to the structure and funding of such schemes. In particular, the Bill is focused on the risk around money purchase benefits, and we have been open about that. In answer to the hon. Gentleman, the Bill is focused in that way because there is already extensive regulation in relation to occupational pension schemes providing non-money purchase benefits—regulation already exists. Applying the authorisation regime to them would create duplication of regulation. He warned us about duplication, but the amendment would create duplication of regulation and add unnecessary costs and burdens to the running of those schemes, with little purpose in terms of protecting members, so far as we can see.

In addition, authorisation requirements are intentionally targeted at the risks relating to money purchase benefits. Conflict and confusion might arise if those requirements are applied across the board. For example, the provisions requiring the transfer of member benefits and wind-up of a scheme might have a detrimental impact on members if applied in relation to non-money purchase benefits. It is important that the members of schemes with mixed benefits have the same standard of protection as members of schemes that only have money purchase benefits. That is why the authorisation regime applies to the money purchase aspect of such schemes. Extending authorisation to types of benefits for which it is not designed and where the risks do not arise in the same way would not be appropriate.

To answer a question asked by the hon. Member for Stockton North, I can confirm that the Government intend to include decumulation schemes—the decumulation products that he mentioned in his speech—in clause 41.

--- Later in debate ---

[Richard Harrington]

I smile, but not out of disrespect for the hon. Lady—quite the contrary. I knew that she would manage to bring in her favourite subject and I am grateful for the indulgence of the Chair in not declaring it out of scope, because she makes a relevant point. I nearly said “you”, Mr Rosindell. You would probably make it as well, if you were invited to speak on the subject.

The communication point that the hon. Lady raises has to do with the state pension. Generally, things have moved on dramatically—not just from a regulatory point of view, but with communication generally. We just have to look at the state pension side—before you rule us out of scope, Mr Rosindell. Millions of people look on the internet every year to see what the position is with their state pension. The same will apply—to bring us within scope—to private pensions. The younger generation of people do not just wait for something to come. They are aware the whole time; they see the information on their pay packet. My younger son started work after graduation in September. They sign up for the pension, it is explained and they are interested. They think it is years away, obviously, but they are interested. That is why I do not take the communication point lightly, and I will do my best now to talk in more detail about it.

We have mentioned the automatic enrolment review. That is critical—this is not just a way of sidetracking the point—because it will consider how individuals engage with their workplace pension scheme and how that can be developed so that members are better able to understand and maximise their savings. That is probably the most relevant change that we have to try to bring about—we as a Government are going to do this, but I am sure that any Government would—to get people really involved. We have appointed an external advisory board, including members that represent consumer interests as well as pension provider representation. We will lay a report before Parliament before the end of 2017. The relevant point, to bring us back to the Bill—you have been very patient, Mr Rosindell—is that it will take into account these findings. We will take them into account when considering the regulations under clause 12—that is the relevant clause—which I referred to a moment ago.

[Nigel Mills]

I did try to warn the Minister about this sort of question. The very first line of this clause says:

“The trustees of a Master Trust scheme may apply to the Pensions Regulator for authorisation.”

Will he explain why that does not say “must apply”? We do not envisage any master trusts that are not obliged to register. Is it because they can form themselves, and before they start operating they have to apply, or does he expect them to be formed only after they have been authorised?

[Richard Harrington]

Master trusts may apply. Exactly. My hon. Friend’s point is correct, but if they wish to be in a master trust in the market, they must apply. If they do not, they may say, “We’ve looked at this regulation, we call ourselves a master trust now, which we are, but the regulatory hurdles are not for us so we’ll leave the market.” We had to leave the flexibility in, and maybe many will. I do not know. Maybe entities will say, “It’s not for us, we are going to do it another way,” given the regulations, an extra burden of regulation or a different type of regulation, but if they are to be a master trust—if they are to continue as one—the “may” effectively becomes a “must”, because they have to apply and regulate. We had to leave the possibility in. It may not happen, but I think some of the smaller ones will find that it is not for them. I hope I have answered that question satisfactorily. I hope, too, that I have said enough to reassure the Committee. The Government sympathise with the intention of the amendment. We take member engagement seriously. There is no simple answer.

The Bill is about protecting those people saving in master trust schemes by addressing the key risks that arise in this type of scheme. While member engagement is important, I do not believe that the Opposition have made an effective case that these issues constitute a key risk that needs to be addressed through setting out explicit requirements in primary legislation. That is the critical point. We will consider the area further as we go through the AE review, and we will develop and consult on the regulations under clause 12. As I have explained generally on the regulations, there will be time for both Houses to go through them. On that basis, I kindly invite the hon. Member for Stockton North to withdraw his amendment.

--- Later in debate ---

[Richard Harrington]

No, I confirm that that was not the Minister’s intention at all. As we get through the regulations for this Bill, it is precisely that kind of case that we need to take into consideration, and there may be others. An IFA, of course, would be regulated and deemed to be a fit and proper person by the FCA. I am not very familiar with those rules, because they are outside my area of responsibility, but I think that they are pretty stringent and that they might be directly comparable to those under the Pensions Regulator. However, it is a fair point. In fact, most companies in the position to which my hon. Friend refers usually have to go to a professional adviser to be able to make that decision, because they have neither the time nor the experience to make the decision themselves, unless they are a very large company with suitable employees.

The regulation-making powers are needed to respond to developments in the market where the structures of master trusts might evolve to include other functions. There is a regulation-making power that enables regulations to specify matters that the regulator must take into account when assessing whether someone is a fit and proper person. As with other provisions in the Bill, we intend to work closely with industry, regulators and Her Majesty’s Revenue and Customs in developing these regulations, as well as conducting formal consultation.

The clause also gives the regulator a discretion to take into account other matters as it considers appropriate when carrying out the fit and proper person test, including matters related to a person connected to the person being assessed. That will give the regulator the flexibility to ensure that it can be fully satisfied that the criteria for a fit and proper person have been met and not avoided on technicalities.

The fit and proper person criteria are a key part of the new regime for master trusts. They relate to the competence and propriety of those responsible for the pension savings of thousands workers.

[Nigel Mills]

Will the Minister confirm that he expects this to be a high bar; that he wants people to be able to show that they are knowledgeable, competent and have the training to be a trustee and run a pension scheme, and not just that they can pass a check that they have no criminal convictions for fraud? They have to show positively that they can run these pension schemes well, not just that there is no historical evidence that they cannot.

Pension Schemes Bill [ Lords ] (Second sitting)

Nigel Mills Excerpts

Tuesday 7th February 2017 Public Bill Committees

[Richard Harrington]

As I explained, there are criteria that a master trust must meet to be authorised by the regulator, one of which is that the scheme has an adequate continuity strategy. The clause sets out the requirements for that continuity strategy. It must set out how the interests of scheme members will be protected if the scheme experiences a triggering event—that is, an event that could put the scheme’s future at risk.

The aim behind the clause and the related measures is to ensure continuity of pension saving for the members of the scheme when that scheme experiences an event that could put its future at risk. That also benefits employers using the scheme, particularly those using it to meet their automatic enrolment legal obligations. An adequate continuity strategy would demonstrate that careful consideration had been given to what the scheme would do if it were at risk of failing. That should make the closure of master trusts more orderly and managed, which is good for members and employers. We all agree that chaotic and unplanned closures would likely be detrimental to them.

The reasons for and circumstances that could lead to a master trust failing may be different from more traditional occupational schemes. The risks for members and employers are different. That is of particular significance because master trusts tend to have a relatively high number of employers and members, and therefore tend to be less engaged than when an employer has a single scheme for their own employees.

That means that winding up a master trust may involve a lot of work and take a lot of time, and be complicated, difficult and expensive. Regulations under the clause will set out what the strategy should include and what actions the scheme will take to manage and protect the assets. The Government believe it essential that master trusts have adequate continuity strategies.

[Nigel Mills (Amber Valley) (Con)]

I have a quick question. Subsection (9) says that the strategy must be sent to the regulator within three months of being revised. Given that that must mean the strategy has been revised and finalised, why would we not want the regulator to get sight of it much quicker, in case there is something in it we are concerned about?

[Richard Harrington]

I believe the three months was reached after discussion with the regulator, taking the worst case into consideration. That is a long stop—it would generally be quicker than that—but it came out of discussions with the regulator.

We believe it is essential that master trusts have those continuity strategies and I hope clause 13 will stand part of the Bill.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

List of authorised schemes

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Richard Harrington]

I am sorry, I just wanted to make sure. I thought that was the case.

The clauses make provision for a new supervisory regime for master trust schemes. One of the great strengths of the authorisation regime is that its requirements are ongoing. An authorised master trust will have to ensure that the Pensions Regulator remains satisfied, and is not just satisfied at the beginning, that it continues to meet the authorisation criteria to continue operating in the market. The clauses ensure that the regulator receives and can request the information it will need to be satisfied that the authorised schemes continue to meet the authorisation criteria, and it can withdraw the authorisation if that ceases to be the case. I believe they are very sensible clauses.

Clause 14 requires the regulator to maintain and publish a list of authorised master trust schemes. This provision will help employers looking for a scheme for automatic enrolment purposes and ensure that there is transparency about which master trusts have achieved authorisation. Clause 15 requires the trustees and scheme funders of authorised master trusts to send the scheme accounts and the scheme funder’s annual accounts to the regulator annually. This information is necessary for the regulator’s ongoing financial supervision of the scheme. We believe that it will play a key role in the regulator’s consideration of the reasonableness and accuracy of the estimates set out in the business plan, which I mentioned before, and about the running costs, sources of income and profit and loss in relation to the master trust’s activities.

The clause will also require each master trust scheme funder to provide its accounts to the regulator on an annual basis. Those accounts are also required as part of the authorisation application at the beginning, but the clause ensures that they have to do it on an ongoing basis. Taken together, that will enable the regulator to risk-assess the solvency of scheme funders and the strength and enforceability of their commitment to providing funds for the master trust.

[Nigel Mills]

I have another boring techie question, I am afraid. The clause specifies that the scheme funder’s accounts must be provided within nine months of the end of the financial year, but for the actual master trust scheme accounts it says

“no later than two months after they are obtained by the trustees.”

Is there some other provision that creates a backstop date when the trustees have to get those accounts or could we be waiting, in theory, forever to get the actual accounts for the scheme? I guess there must be a provision somewhere.

[Richard Harrington]

If I may, I will return to that point. I am a little confused by it, although I am not saying that my hon. Friend is trying to confuse me. If I may, I will continue in full flow and will do my best to answer it by the end of my comments or apologise to him.

The measure will enable the regulator’s assessment of the financial sustainability of the master trust to take that information into account, to the extent that it effects the financial position of the scheme. The combination of the information from the scheme accounts, the scheme funder’s accounts, the business plan and supporting documents will support the regulator’s ongoing financial supervision of a master trust.

Clause 16 provides that the regulator may, by notice in writing, require the trustees of an authorised master trust scheme to submit a supervisory return. The Government recognise that the requirement means additional work for trustees. Therefore, the clause provides that a supervisory return can be requested only once in any 12-month period at most, and that trustees are given at least 28 days to compile and submit the return. It may be appropriate for the Government to specify the information that can be requested through such a return. The clause allows the Secretary of State to make regulations to that effect.

Clause 17 provides that the regulator must be notified in writing if significant events occur in relation to an authorised master trust scheme. Those events will be defined through regulations. I will briefly explain what the Government intend to capture by the term “significant events” and give an example.

We intend that the list of significant events will capture events that could affect the ability of an authorised master trust scheme to continue meeting the authorisation criteria. I should like to be clear that the occurrence of a significant event in a master trust scheme will not necessarily have an impact on the ability of that scheme to meet the authorisation criteria, but it may have such an effect. For example, the scheme may have a change of trustee. As the fitness and propriety of a trustee is linked to the authorisation criteria, the regulator must be informed of such a change so that the new trustee may be assessed against the relevant standards—the regulator may well do that, and that would not affect the scheme’s authorisation status. Equally, there could be an impact. The clause sets out who will be subject to the reporting duty, and again the regulator can issue a civil penalty for failure to comply.

On clauses 18 and 19, for the first time, the regulator will have the function of authorising a pension scheme before the scheme can operate in the market, as I mentioned. The implications of the decisions that the regulator will have to make are major, and we must be satisfied that we have given the regulator the tools it requires to ensure that such decisions are fully informed. It is therefore important for the Bill to make provisions that allow the regulator to gather the information it needs about the master trust schemes. The clauses will ensure that the regulator can use all the information-gathering powers effectively in relation to master trusts and the new authorisation regime.

Clause 20 gives the regulator the ability to withdraw a scheme’s authorisation if it stops being satisfied that it meets the authorisation criteria. The clause is fundamental to the Bill; without it, there would be no consequence for a scheme that becomes authorised and then lets standards slip, or if events occur that materially impact whether the regulator remains satisfied that the authorisation criteria have been met.

The regulator seeks to support and assist those involved in running pension schemes before it comes to sanction them, but if a scheme no longer satisfies the regulator, the regulator must have the power to withdraw authorisation from the scheme. We will come to discuss the consequences of a decision to deauthorise a master trust scheme in due course, because such provisions are made later in the Bill. The clause simply provides a necessary power so that the regulator can make such a decision. Without that, the authorisation regime would be reduced to little more than a one-off check at the beginning and would not work to protect the interests of master trust pension schemes.

I will think about the point made by hon. Friend the Member for Amber Valley and either write to him overnight or bring a response to the next sitting. I apologise, but my mind has been on these matters and I will have to think about his point, which was a very good one.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clauses 15 to 20 ordered to stand part of the Bill.

Clause 21

Triggering event: duties of trustees

Question proposed, That the clause stand part of the Bill.

Pension Schemes Bill [Lords]

Nigel Mills Excerpts

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

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for Oldham East and Saddleworth (Debbie Abrahams). It is probably a fair sum-up to say that we might have liked the Bill to address most of the things that she complained about and most of the things that I might not like, rather than the measures actually in it, which I think get a broad and generous welcome. None the less, this is a necessary Bill that contains the right measures, and we hope it will have a speedy passage through this House.

I want to start by saying that the master trusts, or the more extensive use of them, are a welcome development in the pension landscape. It is hard to see how auto-enrolment would have worked if we had not had the extensive use of master trusts, because what we would not have got is especially small employers setting up their own pension scheme and trying to manage and administer it, or at least act as trustees of it. What we had to see in this situation was much larger trusts in the market that employers could effectively sign up to but not incur the ongoing costs and complexity of trying to be involved in their day-to-day running. So these things are attractive, but it is right that we make sure they are well regulated and we do not create situations where savers are disadvantaged by them.

It is probably quite brave in the pension world to have tried voluntary regulation or self-regulation, but that is effectively what we have had since 2014 with the master trust assurance framework. I perhaps should declare a sort of interest. The framework was drawn up by the Pensions Regulator with the Institute of Chartered Accountants in England and Wales, of which I am a member. It is disappointing that, having had that assurance framework in place, so few of the master trusts in the market signed up to it and followed all the requirements. Indeed, very few of them went through the full audit process required. So it was clear that we had to move to full and proper regulation set out in statute for these master trusts.

This is particularly important in a situation where effectively we in Parliament and the Government are perhaps not quite forcing people to save into these trusts, but strongly encouraging that, and two thirds of those who have been auto-enrolled have ended up in one of these trusts. It is therefore key that we make sure they are in high-quality schemes that look after their interests and we do not let them either be ripped off or just be a victim of a poor-quality trust that delivers poor returns. While there has perhaps been no sign of that from the major master trusts, anyone who has experience of the pensions industry will know that if we do nothing they will eventually become a problem. So it is absolutely right that the measures in this Bill ensure that trusts are set up and operated by people who have the skills and expertise to do that, and that there is a process for managing trusts, checking their performance, and making sure no issues arise as the years go on. That is because it is not realistic to think that either the employers that have signed up their employees for these schemes or the members themselves will have the skills, the ability, the time or the inclination to be doing that ongoing monitoring. That needs to be done by qualified people. That again is an advantage that master trusts have over insurance-based products. There are some skilled people here whose job is to represent the members. The advantage of having a trust is that there is at least that protection: when decisions need to be taken, there are some people who should have the right skills to act in the savers’ interests.

It is timely to be moving forward with these proposals as we suspect that by the time we get them fully in place we will have completed the first phase of auto-enrolment. We might find in the industry that people have set them up but do not have the number of members they thought and therefore not the level of income they thought. Perhaps the charge cap means that they do not have the income to be sustainable, or perhaps the changes that give people choice when they retire mean that they will not hit retirement date and then move their money into an annuity—that they will just leave the pot and not draw it down for a while. That would still be a cost on those schemes which needs to be addressed.

[Julian Knight]

My hon. Friend is making the important point that we have to avoid zombie funds being created as a result of the master trusts, and one way of doing that is through the role of the Pensions Regulator. Does my hon. Friend agree that the fact that a master trust will have to prove that its business model is sustainable is key to that interaction with the Pensions Regulator?

[Nigel Mills]

Yes, that is the point I was trying to make. Even master trusts that have been set up entirely properly and with the best of intentions could find, by the end of auto-enrolment, that they were not going to be viable in the long run. We need to ensure that there is a clear, well managed route so that, rather than having zombie funds sitting around delivering a poor return, we can get them moved into the higher quality, better performing ones. We need to ensure that this market works for everyone.

One element that people might not have considered is that we have not yet found a solution for people who end up with multiple very small pots spread across the landscape. I suspect that that could present a cost to the system that we will want to manage our way out of in order to create a sustainable situation. Overall, master trusts are a good thing, but they will need to be well regulated if they are to create confidence in the system and ensure that savers do not get a bad deal.

There are a few other things that I think I can just about sneak in as being within the scope of the Bill. We have ended up with slightly different arrangements for master trusts and insurance-based products, and I wonder whether it is sensible to have so many different regulators in the industry trying to do the same thing. Should the Pensions Regulator really be responsible for regulating all pension schemes, however they are structured, rather than letting the Financial Conduct Authority do some? Should we try to get equivalence between schemes that are trying to do the same thing but end up having subtle differences? Perhaps it would be better to say to all savers and all members of pension schemes, “Your scheme is regulated by the Pensions Regulator. Yes, there will be a cut-off with the FCA at some point.” That would be better than having uncertainty about who is responsible for which scheme.

Looking at master trusts more generally, there is a need to think through the position in the decumulation phase. The market might already be seeing that master trusts can be used for decumulation as well as accumulation. Decumulation is a very different model, and it is perhaps harder to see the business case for that than for the accumulation phase, with its ever-growing pots and more income. With decumulation, we have ever-dwindling pots and seemingly less income from the fees. We need to think through whether master trusts are intentionally aimed at the decumulation phase where members treat them as a kind of bank account from which they can draw money when they want to. The secret will be to ensure that savers have access to the right advice, and it is a pity that the Bill does not address the future of the various advice schemes, but I am sure that we will get to that at some point. In summary, this is a welcome and necessary Bill, and I am sure that it will be very effective. I look forward to its making progress in the House.

Oral Answers to Questions

Nigel Mills Excerpts

Monday 9th January 2017 Commons Chamber

[Richard Harrington]

As the hon. Gentleman will be aware, the Government have given £1.1 billion of transitional relief for WASPI women. The issue has been discussed in this House very many times and the Government have no plans to do anything further in that respect.

[Nigel Mills (Amber Valley) (Con)]

T9. Will the Minister reassure Leonard Cheshire Disability, which has a base in my constituency, that the welcome move to the Work and Health programme will not result in a large reduction in funding to help disabled people get back into work?

[Penny Mordaunt]

I can give my hon. Friend those reassurances. We are absolutely committed to closing the disability employment gap. We are picking up the pace on the programmes we are running, and asking businesses and employers to do more.