Pension Schemes Bill (Eighth sitting)

Rebecca Smith Excerpts

Committee stage
Thursday 11th September 2025 Public Bill Committees

[Kirsty Blackman]

Mr Speaker and previous Speakers have encouraged us as Members not to worry about repetition. Generally, the more we can talk about and highlight issues the better. Part of the point of the new clause is to ensure that the Minister recognises and says from the Front Bench that this is an important issue. Whether or not there is an actual consultation taking place, if we can have that commitment—we will probably ask him for that commitment again and again, given the nature of this place—we would be very happy to receive it.

I agree with the hon. Member for Horsham that the balance is really important. When it comes to guided retirement products, it is key that companies do not worry that the privacy and electronic communications regulations, or any legislation, is going to get in the way of proper communications, but that people are also protected from potential scam communications, and that we are able to crack down on anyone undertaking scams and looking to take significant amounts of money—these are the largest amounts of savings that the vast majority of us will ever have in our lives.

[Rebecca Smith (South West Devon) (Con)]

I have a query off the back of the comments of the hon. Member for Aberdeen North.

We heard in the evidence sessions that there is a danger that overdoing the requirements for marketing will get in the way of providing guidance. That came up directly in the response to some of our questions, I think specifically from Legal and General and Aviva. Companies are already in a position where, if they are not careful, offering guidance is considered marketing. Therefore, they do have their hands tied by existing legislation.

I am slightly intrigued why this new clause has been tabled, given that Liberal Democrat colleagues will have also heard that evidence. More work is needed on this issue than just adding a new clause to the Bill; I heard from the hon. Member for Hendon that there is a consultation.

Although I understand the point about protecting vulnerable customers from scamming, I feel the evidence we heard demonstrates that more work is needed, work that is not included in the Bill, to make sure that pension companies are able to advertise in such a way that they can play their part in the guidance process that we have debated at length, and in how people get that financial education.

I understand the premise of the new clause, but we have many more questions to answer on this. If anything, I think we need to be making it easier for pension companies, the legitimate people in the room, to be able to communicate. There could be unintended consequential issues; we are trying to deal with scammers, but we might inadvertently stop people accessing information that we are trying to help them to receive.

[Torsten Bell]

Let me attempt to offer some words of clarification and then come to what the Government are doing on this issue.

To clarify, pension schemes are covered by the rules on direct marketing already. I think the new clause as drafted would probably have the opposite effect to what the hon. Member for Horsham intends, by carving out pension schemes from the limitations on direct marketing. That would be a loosening of the direct marketing restrictions for pension schemes. There are people in the industry that have been calling for exactly that, so that may be where the new clause is coming from, but I clarify that they are covered; the direct marketing rules prevent pension schemes from behaving in those kinds of ways.

What is the context here? We are obviously aware of concerns that the existing direct marketing rules, which apply to pension schemes, may limit providers’ ability to deliver the new targeted support regime that is being developed by the Government, exactly as the hon. Member for South West Devon has just set out. Under targeted support, FCA-authorised firms will be able to proactively suggest appropriate products or courses of action to customers. That could help people to make decisions about access to their pension, but it obviously needs to be done in the right way.

We have heard the feedback from stakeholders on the interaction between that wish for targeted support and direct marketing rules, which is where most of the debate on this area has been. Because targeted support involves recommending specific courses of action, it could be considered direct marketing. That is the cause of the tension.

There are particular issues for pension providers who administer auto-enrolled members, where the individual has not chosen the pension scheme or engaged with them. As a result of that, they cannot generally satisfy the requirements of what is called the soft opt-in, because the provider has not collected the information from the individual at the point at which they were enrolled—it has gone through the employer.

What are we doing about that? We are examining quite a range of policy options at the moment. That includes legislative change, which can probably be done via secondary legislation. I think that is the right way for us to proceed. When we do that, we need to get the balance between enabling targeted support and making sure that we do not have inappropriate direct marketing within the pension space. I definitely would not want to see a carve-out from all direct marketing rules for the pension sector as a whole, as there are risks that come with that. I hope that gives Members some clarity and an explanation of what the Government are doing to take this issue forward.

Pension Schemes Bill (Fifth sitting)

Rebecca Smith Excerpts

Committee stage
Tuesday 9th September 2025 Public Bill Committees

[Steve Darling]

As Liberal Democrats, one of the key lenses through which we look at the legislation is: how does it simplify the world for those who are not the most financially literate savers into their pensions? As Liberal Democrats, we strongly support the “pot follows member” approach, as it would simplify matters for people. It would ensure a clearer mechanism for savers to be aware of the level of their pension as their life moves on, and allow investments to be drawn together more easily. It would be interesting to hear the Minister’s reflections on that, and on why the Australian model is unsuitable for the United Kingdom.

[Rebecca Smith (South West Devon) (Con)]

It is a pleasure to serve under your chairmanship, Ms McVey. I want to add a few things to what my hon. Friends have said, and to reflect on the Minister’s rejection of our new clause as a significant administrative burden. I think we are talking about two sides of the same coin, because to have to keep hunting out small pension pots is a little like looking for things in the dark.

First, we are effectively advocating for a “Who Wants to be a Millionaire?” approach, where someone banks at each stage. I have done that while moving jobs over my lifetime, but I am fairly financially literate. It would be helpful if there were a box to tick on a form when changing job to say, “Yes, I want to move it to this company,” a bit like we do with our P45—we are quite capable of taking our tax with us from job to job. If there were a way of taking our pension with us as well, that would be helpful.

As my hon. Friend the Member for Mid Leicestershire said, that approach would put ownership in the hands of the employee, and it would mean that they did not have a niggling feeling in the back of their mind that they had missed a pot that they had forgotten about. Anything to enable people to have ownership of that pot, rather than be constantly on the back foot trying to hunt it down, would make significant sense. Allowing people to choose rather than having to accept what is offered to them would be incredibly helpful. Ultimately, it is up to them to do what they wish, but they would at least have the choice.

We heard a lot in the evidence sessions about the challenge of communication. We have seen that with Equitable Life and all sorts of other things to do with pensions. When someone changes employer, if there were a simple way to say, “I wish to take the pension with me to the new job,” that would reduce, not increase, the administrative burden. I appreciate what the Minister said, but although we are not looking to push our new clause to a vote, it is an incredibly pragmatic suggestion that warrants further reflection.

[Torsten Bell]

I thank hon. Members for their reflections. I agree with the sentiment of what everybody has put forward, including the hon. Member for Mid Leicestershire—apart from his worryingly weak patriotism.

Pension Schemes Bill (Fourth sitting)

Rebecca Smith Excerpts

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Mr Peter Bedford (Mid Leicestershire) (Con)]

I want to reiterate a lot of the points mentioned by the hon. Member for Aberdeen North. Financial education is key to unlocking many of the challenges that we face in adulthood, whether budgeting, debt management, saving or planning for retirement. I introduced a ten-minute rule Bill, the Financial Education Bill, earlier this year; I know we already have an element of it in secondary schools, but we need to go further as a country and ensure that everyone, from the very young upwards, has that education to inform the key decisions in our lives.

I take the hon. Member’s point on DB schemes funding those seeking advice for DC schemes, but it is often the case that members have pensions in both DB and DC schemes: people move quite fluidly from a job in the public sector to one in the private sector, and will inevitably have membership in both DB and DC schemes. The Bill would benefit from the amendment proposed by the Liberal Democrats.

I also take the hon. Member’s point on the need for better engagement by employers. I know some large companies offer employees mid-life MOTs on financial education and management. Certainly, FTSE 100 companies that I have worked for offer employees that kind of support as they approach retirement. I am sympathetic to new clause 1, which amendment 3 is connected to, because it is essential that as we get older and plan for retirement, we are fully informed on those decisions. I will support the Liberal Democrat amendment.

[Rebecca Smith (South West Devon) (Con)]

In line with what has been said already, my thought is that plenty of financial education is a good thing; to say that some is worth pursuing and some is not seems a bit at odds with what we have been debating. I echo what colleagues have said about workers who come from a DC scheme into a DB scheme and need that education. I am sure there are many new Members who are in that position—I cannot be the only person who is—and, while I am fortunate enough to have taken pension advice throughout my career, I know many people have not.

For me, this is not something that is mandated, but a suggestion for something that could be done. Providing another alternative and another opportunity for people to receive financial education—particularly people in their 20s, 30s and 40s who have not had it at school, because it was not part of the curriculum at that point—is something we should welcome and not restrict.

The amendment seems to me perfectly sensible. I appreciate why some people might think it does not go far enough, or that the matter will be addressed later in the reporting back that the Government will do on pensions in general, but the emphasis on people around the age of 40 is particularly important, because they still have a good 20 years—or 30 years, potentially; who knows what will come forward from the Government?—to work and to ensure that they maximise returns to achieve adequacy. Having an additional vehicle to do that seems to me a sensible thing, and I put on record my support in the same way that my hon. Friend the Member for Mid Leicestershire has.

--- Later in debate ---

[Mark Garnier]

In a broad sense, we are very happy to support the clause. There are, though, a number of issues, and the point about benchmarking and what performance is being valued against can be rather complicated. We heard from the Liberal Democrat spokesman, the hon. Member for Torbay, a little earlier about his father’s experience of putting money aside and finding himself wanting to take it out in October 1987—I remember it well; I had been a dealer on the floor of the London stock exchange, so a stock market crash was a pretty hideous thing. However, if we look at a chart of the FTSE 100 from the early 1980s up to now and the 1987 crash, although I think it was down 37% at one point, looks like the smallest of blips in what was otherwise a very long-term bull market that continues to this day.

The one thing we do know for sure is that those wanting better performance are likely to be investing in slightly more volatile assets. That can come from investing in equities or higher-growth businesses. There is no doubt that some higher-growth businesses will go bust, because they are taking risks, but ultimately, how many of us wish we had put more money into Amazon, Google or Apple back in the late 1990s? At the time it was not necessarily seen as a brilliant thing, but some of these businesses have done unbelievably well. That said, how can anybody understand how a company like Tesla, which is really a battery manufacturer, is worth more than General Motors, Ford and Chrysler? It does not necessarily make a huge amount of sense, and yet people are still investing in it.

We can find ourselves looking at the value for money framework and come up with a load of benchmarks, which brings us to the point about the intermediate rating. We could find that an intermediate rating is done at a time when there are particular problems in the stock market, yet, looking at the long term, we could have what could turn out to be a stunning performance. We have to be very careful and not find ourselves throwing out the good in favour of the perfect. This will be something quite complicated; I do not necessarily think it is something for the Bill to worry about, but, as we continue the discourse of pensions performance and adequacy, we need to be very careful that we do not become obsessed with ruling out risk.

There is a big argument about risk in our economy at the moment, which, again, is not for this place, but we could find ourselves ruling out risk. The other thing worth bearing in mind is that, by ruling out risk, we could stop money being invested into businesses that may look absolutely bonkers today, but turn out to be the next Apple, Amazon or Google. We just have to be careful about that.

I suspect we shall have lots of debates over this. The Pensions Minister is on such a meteoric career progression at the moment that I am sure he will find himself as Chancellor of the Exchequer before very long—probably quicker than he imagines—but this is something that we need to keep an eye on. As I say, it is about making sure that we do not rule out the good in pursuit of the perfect.

[Rebecca Smith]

My hon. Friend is making an excellent speech with a very good historical analysis of what has happened over the last 30 or 40 years. It is worth reflecting on the risk point, particularly for the wide age range of people who hold pensions. This came up during the evidence session: if we end up avoiding risk, the people who are just starting out in their careers and might only be in their early 20s or 30s could end up with a pension that does not deliver anywhere near what it could have delivered, if we apply those same factors. A thought that came to me in the evidence session was how we can ensure that our system allows for risk at the bottom end, but with a tapering out of risk as people get older. The Minister is the expert in this area, and I am interested to know what might be possible in the future. Ultimately, we want to ensure that value for money is based on the right level of risk for the right stage in people’s careers and the right stage in their pensions journey.

[Mark Garnier]

My hon. Friend makes an incredibly important point. The story that the Liberal Democrat spokesman, the hon. Member for Torbay, told about his father is the most important point here. As we come to the point where we want to cash in the defined-contribution pension, we could find ourselves cashing in at completely the wrong moment. In a stock market crash, although it could be just a blip in a long-term bull market, none the less the hon. Member’s father would have seen a 37% drop in the value of his equities if he was benchmarked to the FTSE 100. If he was in higher growth businesses, he could, as the hon. Member said, have seen a 50% drop. So we have to be very careful.

We can be as risky as we like when we are 21 years old. I cannot remember whether it was Adam Smith or Einstein who said that the eighth great wonder of the world is compound interest. Obviously we want to take risk early but, as we come up to that day when we finally turn our papers in and go home on the last day of work, we need to make sure we have got as much money out of our pension fund as we possibly can. That is why it is important to ensure that the VFM framework does not cause problems.

--- Later in debate ---

[Torsten Bell]

I beg the Committee’s patience, as a number of clauses are grouped here—Members can thank the powers that be for that—and I will run through them all.

Clause 21 enables the Government to introduce a small pots data platform. This platform will be responsible for determining where each small dormant pot should be consolidated. It will ensure that decisions about where pots should go are made consistently, transparently and with the members’ best interests in mind.

International evidence from other countries, such as Australia, with similar pension systems to the UK has shown that a central platform improves consolidation outcomes, rather than just putting duties on schemes to sort it out. This clause establishes the framework to allow for the necessary infrastructure to be built to support data matching and pot consolidation. The Government believe that the infrastructure will be required to support pension schemes to deal with the volume of small pots that left the hon. Member for Wyre Forest aghast five seconds ago, effectively and efficiently.

As Members may know, we recently worked with Pensions UK, who have undertaken a feasibility review to examine and assess the technical requirements of the small pots data platform. The Government will consider that work as part of our next stages in developing the necessary infrastructure and the underpinning legislation. However, before committing to how best to deliver this infrastructure, we must undertake that full and proper assessment of capabilities.

Clause 22 enables the Government to ensure that members are properly informed about any action that is taken to consolidate their small dormant pension pot. Transfer notices will be the key point of communication between the scheme and the member. We have not had the time to make this point yet, but obviously it will be up to members to opt out of consolidation should they so wish.

[Rebecca Smith]

How will members know that they have that opt-out? Will that be clear enough, given all the comments we have been making on financial education? People have got to be pretty engaged, and we know from the history that they are not always that engaged in their future.

[Torsten Bell]

That is an important question. The communication to members will be standardised, by providing the key information that has to be provided and the option of an opt-out—so it will be explicit that they have the option to opt out of the consolidation process—as well as their alternative options, for example moving their fund into another consolidator. I hope that that answers the question.

The notice is of high importance, because receiving that key information is basically the only point at which the member is informed about what is happening to the financial transaction—the Government are not generally in the business of legislating to change people’s financial arrangements without their consent. Clause 22 will ensure that schemes are bound by regulations to send prescribed information that will enable a member to make the decisions, for exactly the reasons that the hon. Lady set out.

Clause 23 will introduce an important safeguard in the broader framework for consolidating small dormant pension pots. It recognises that although automatic consolidation will benefit the majority, it may not be right for everyone and in all circumstances. The Bill aims to streamline pension savings and reduce fragmentation across the industry, but the clause ensures that members’ interests remain at the heart of the process.

Under the clause, a small dormant pension pot may be designated as exempt from automatic transfer if two key conditions are met. First, the pot must satisfy certain prescribed conditions, which will be set out in regulations. Secondly, the trustees or managers of the scheme must determine that it is in the best interests of the individual or a class of individuals in their scheme for the pot to remain where it is.

That is a vital member protection and safeguard. It recognises that although consolidation is generally beneficial, because it reduces administrative costs, there will be circumstances in which transferring a pot may not be in the member’s best interest. The clause provides the ability for the scheme to make that clear and not to transfer in those circumstances.

Pension Schemes Bill (Third sitting)

Rebecca Smith Excerpts

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Kirsty Blackman]

I want to ask the Minister about the comments made on Tuesday in relation to the transparency already required of local government pension schemes. My understanding is that local government pension schemes are already pretty transparent, and that they are required to publish significant amounts of information.

On the amendment and the requirement for annual reporting, the case was made on Tuesday—I forget by who—that a particular moment in time may not give a true picture of what is going on. Investments may not provide an immediate return. In fact, pension funds are not necessarily looking for an immediate return; they are looking for a longer-term return so they can pay out to tomorrow’s pensioners as well as today’s. Pension schemes are one of the best vehicles for the patient capital that we need to be invested in the economy for it to grow, so I am little concerned that a requirement for annual reporting on specific investments may encourage short-term thinking. Can the Minister confirm what transparency regulations there are in relation to local government pension schemes and how they compare with those for other pension schemes?

[Rebecca Smith (South West Devon) (Con)]

I want to build on what the hon. Member for Torbay asked. As a former local councillor myself—I am not part of the pension scheme, I hasten to add, so I do not have an interest to declare—the bit from the evidence session that came out for me, thinking through this bit of the Bill, relates to the equivalent in treasury management. As a council, we often borrowed from the Public Works Loan Board to invest in, for example, a shopping centre to get the income from rent, business rates and so on. What safeguards or requirements will be put in place to ensure that any money spent from a pension fund goes on capital rather than revenue? I appreciate that council tax revenue increases could be used for that, but are there any safeguards to ensure that the money is not just spent and then does not exist anymore?

Pension Schemes Bill (Second sitting)

Rebecca Smith Excerpts

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[John Milne]

Q The DWP argues that the funds are on the public balance sheet and therefore they object to using them for this purpose. Do you think that is fair, given that the funds were not acquired by the taxpayer?

Michelle Ostermann: To clarify the word “using”, as I think it is important, the PPF is an arm’s length body and those assets are ringfenced. Our board has independence over those. It was set up that way—arm’s length—20 years ago to make sure that it was a dedicated protection fund for that industry. It so happens that we do fall under some of the fiscal measures, so both our assets and liabilities do show. However, there is a bit of a conflict there in that we manage them in the prudent, almost in a trusteed fashion, on behalf of our members and all of our stakeholders. But the use of them would have to be prescribed by the board, legislated, and then approved by the board for its affordability, so as to not put at risk the rest of the industry that we are backstopping.

The ability for us to be able to afford that and the risk to the organisation is the primary, most sacrosanct thing that our board does. We have very complicated actuarial models to figure out the affordability of all the risks that we take on in the entire industry. That is why we have gone through quite a bit of work to build, just recently, a much more sophisticated model to estimate both the asset and liability implication to us and have even started to form a plan for how we might implement it. So we stand at the ready, but it is beyond our responsibility to be able to legislate the necessary change for it.

[Rebecca Smith (South West Devon) (Con)]

Q Given the international experience that both of you have in this realm, I am interested to know whether there is either anything in the Bill that you think is a red flag or anything that you think is a missed opportunity and not in the legislation in front of us today.

Michelle Ostermann: That is fascinating. I came to the UK, and back to the UK, because I have so much enthusiasm for the UK and the pension system. I am very fortunate to be the chair of the global pension industry association, so I study pension systems around the world and am quite familiar with many of them. The UK pension system is the second largest in the world by size if you include underfunded pensions. It is one of the most sophisticated, but it is the second most disaggregated. As I think a few of my peers mentioned before we got up here, it has fallen behind, frankly. I think the motives that are in this Bill are exceptionally important—they are foundational. I love that we are speaking on scale and sophistication. These are absolutely key, in both DB and DC. I want to underscore that; it is really key.

One thing that is not spoken of quite as much is the concept of an asset owner and the importance of governance. In relation to the successful countries that I have seen, which have mastered the art of pensions and the ability to translate pensions into growth, it is not a proven model, but there is a best practice such that countries are able to make growth by leveraging pension systems. I think that right now we are trying to solve a problem of two things: reshaping the pension system and trying to solve the need for a growth initiative. They are one thing in my mind; they really are one thing. It is not a surprise that as we have de-risked the pension system over two decades, it has, I suspect, quite directly, but at least indirectly, affected overall economic growth.

Making members wealthier pensioners in general and less dependent on social services is what many countries are trying to do and use their pension systems for. I see that out of the commission that is being started, so I am most excited about the next phase. I think there is a lot of potential, and we at the PPF are doing quite a bit of research and want to be able to feed some global ideas into that.

Morten Nilsson: I come from Denmark originally and I think, to echo some of what Michelle said, scale just matters in pensions. The Danish pension industry has been fortunate to have few and relatively large schemes. One of the things I saw when I came over to the UK 15 years ago was that the industry here is very fragmented, and that fragmentation means also that there are so many conflicts of interest in the market. That in a way makes it quite hard to get the best outcomes, and that of course leads into the governance models that Michelle talks about. So this Bill is something we very much welcome across what it is covering. I think it is a really good initiative, but I think scale matters, and governance really matters. I would not underestimate how big a change it is, in the defined benefit sector, that we are moving from two decades of worrying about deficit into suddenly worrying about surpluses and having very mature schemes, which is the other thing that is important. Most of the DB schemes are closed.

If I talk about the BT pension scheme, the average age is 71, so they are pretty old members and that means there is a risk level, from an investment perspective, that really matters. We are paying out £2.8 billion a year in member benefits. That means liquidity is really important. It is really important that we have the money to pay the members and that we do not end up being a distressed seller of assets.

So there is quite a lot in that evolution we are on, and when we go into surplus management or excess funds—Michelle was talking about this at macro level; we would be managing at our micro level in each scheme— I think it becomes really critical that we have the right governance to manage what is a new era. I would really recommend that the Pensions Regulator issue guidance as soon as possible on all this, because it will be quite uncomfortable for a lot of trustees. It will be quite difficult also for the advisers in how we manage this new era.

[David Pinto-Duschinsky]

Q I am really glad that you both mentioned governance, because that absolutely stands at the heart of this. You also mentioned conflicts. We have not talked much about the role of consultants and things like that, but it is clear that you think the framework laid out by the Bill will be helpful and a key part of mobilising those things.

Conversations that I have had also flag up the importance of culture among trustees. We can give people the tools, the powers and the permission to invest, and we can be clear in the framework we set up, but, culturally, they may still be very risk averse. Of course, some of that is appropriate because they have to safeguard member benefits, but there is a point about whether they are overly cautious and about how one creates the appropriate culture to go with the change. From your perspective, what is needed to create the right culture to go alongside the right governance?

Michelle Ostermann: I have one small observation from when I first came to the UK. I recognise that there is a very strong savings culture, but not necessarily an investment culture, and there is a distinct difference there. I even notice the difference when we talk about productive finance targets. We speak in terms of private assets, but there is a difference between private equity and private debt, and between infrastructure equity and infrastructure lending. All those lending capabilities are here in this country. I feel that the debt sophistication is strong, but where it lacks is the equity.

I am a Canadian. With one of the largest Canadian schemes, we had no problem coming in and buying up assets here in the UK—you may have noticed. We own a lot of it, and with Australia, most of it. The supply was never an issue for us. We brought the scale and sophistication, but what we did not have was a local British anchor. We did not have an anchor investor. We did not have a home-grown Ontario Teachers, a Canada Pension Plan or even an ATP that we could use as the local one. I see that the PPF, NEST and Brightwell can be that. We are still not megafunds. I know that we are referred to as behemoths and megafunds at £30 billion and £60 billion, but the peers with £100 billion, £200 billion and £500 billion are those that are putting in £0.5 billion or £1 billion in one investment. They are not lending, but investing.

That is the biggest difference I notice: the definition of scale and the degree of sophistication. It is even about sophistication in the governance model, and having a board and a management team with that sophistication. It is about having a management team with some power that you are hiring out of investment, and being a not-for-profit and an arm of the Government that is allowed to put in that sophisticated capability, with a board that can properly oversee it so it is not done without proper consideration.

Morten Nilsson: I think it is quite critical that you have trustee boards that are supported well by regulation and guidance, as we talked about before. It would also be helpful to start to focus on the management teams that are supporting the trustees. Cultural change is always very difficult. We must acknowledge that we are coming out of a situation that was really quite difficult for a lot of trustees and sponsors in terms of finding out how to fix the big deficits that schemes had. We must acknowledge that that is where we are coming from and that is the mentality we have had for decades. Regulation and guidance is still all over the place, and we must work through how we move that forward. I really recommend more guidance from TPR and, sooner rather than later, more guidance on surplus extraction. That would help a lot of trustees to take more risk and think in a more balanced way about risks.

Of course, if we are considering allowing excess funding to go back, we need to ensure that we are doing that on a prudent and well-considered basis. It is an educational challenge more than anything, but it is also about the advisers. The market really needs to get comfortable with investing for the longer term. Within that, it is critical that we move away from being obsessed with a mark-to-market, day-to-day obligation. We measure our liabilities on one day of the year and then we might panic if there is a little swing in the market, but we are actually working through quite a long horizon and therefore we can smooth that out in a different way. We need to think about how we look through some of these blips.

Pension Schemes Bill (First sitting)

Rebecca Smith Excerpts

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[John Grady]

Q With DC—defined contribution—schemes, as you know, savers themselves have discretion about where they put their money. The issue we face, illustrated by Dimson, Marsh and Staunton’s regular review of asset returns, is that people are not saving in things that will get them a long-term return, are they? The other issue we face is that there has been a real shift from public markets to private markets over the past 25 years or so. If you are not investing in those, you are missing out on returns that mean more money when you retire. I was just wondering, Ms Clark, if you could just put into context the work you are doing on the advice guidance boundary review and wider advice to savers, and how that will help pension savers and, therefore, help these reforms succeed?

Charlotte Clark: It is important to say that most people who are saving in a pension are probably saving in the default. When you say that they are choosing their investment, most of them are not. Whether it is the trustees of that scheme or whether it is the independent governance committee of that scheme, most people are going into that default, so the importance of the default is really crucial. While it is important to really think about engagement and talk about the advice guidance boundary review and some of the work that is happening there, it is also important that some people will not want to make those decisions. It is only people like us who seem to care about these sorts of things. Getting other people engaged in their investment is quite a challenge.

You are right that we are doing quite a lot of work, largely around the ISA area and the at-retirement area. One of the challenges at the moment is people taking money out of their pension and then putting it in cash. That may seem like a really wise decision if you are 55, but if you do not need that money for 20 years, it may keep track with inflation but you are going to miss out on asset returns, equity returns or other aspects of investment. So, we are really thinking about how we engage with people about those sorts of discussions. How can we make sure they are getting the right support? It comes back to the targeted support programme, which goes live in spring next year. So, working with providers at the moment on how they can support people when they are making these sorts of decisions, and just think about whether, if it is not full financial advice—I understand that can be very, very costly—are there other areas where we can give people help that is not as kind of extreme as that but allows people to think about those decisions in the round?

Patrick Coyne: I would just add that one of the reforms in the Bill around guided retirement is reflective of that default conundrum we face. We have a brilliant system—11 million more savers—but nobody making an active choice. That means that when people approach retirement, only one in five has a plan to access and when they do, as Charlotte said, half are taking it as cash. That cannot be the right outcome. Within the Bill, introducing a guided retirement duty enables those institutional investors to start to guide individuals or cohorts of members into the right kind of products for them, with clear opt-outs for them to choose a different way. As Charlotte said, the type of support and new form of regulated advice could really help inform savers and make good choices at that point.

[Rebecca Smith (South West Devon) (Con)]

Q Obviously, a big part of the Bill is the assumption that mandation is a good idea. I would be interested to know to what extent you agree with the Bank of England Governor, Andrew Bailey, that mandating pension scheme investments is not appropriate?

Charlotte Clark: Following on from Zoe and Rob—I think they have articulated this issue really well—I do not think anybody disagrees with the direction of travel: trying to get more assets into private markets and higher return markets, and making sure there is more diversity within portfolios and that the scale of pension funds in the UK are using that in an effective way on investment. The issue of whether mandation is the right tool to use is ultimately one for you and the Government. There are obviously challenges, which Rob and Zoe have articulated, around how you do that, when you have a trustee in place whose responsibility is to the member, and making sure that is paramount in the system?

Patrick Coyne: I agree with that. I think it is fair to say that there is a degree of consensus in the marketplace, among Government, industry and regulators, that we need to make structural reforms to the marketplace and put value for money at the heart of the system. A big part of that is a move towards fewer, larger pension schemes, because of some of the factors that Charlotte just outlined—the ability to in-house your investments; the ability to consider a broader range of investments, which can sometimes be quite complex; and broader governance standards. Mandation is of course a matter for Parliament, but clearly structural reform is needed within the marketplace.

[Rebecca Smith]

Q We are not all Government Members in this room, so we are quite keen to hear what bits you think might work and what bits might not work. That is where the question came from.

As a supplementary question, do you think trustees and scheme managers should be provided with a safe harbour if they are required to invest in assets that underperform? I think that is probably what a lot of the public would be interested in as well. You do not want somebody to be mandated to put money into something that is doing worse than it was doing before it was moved.

Charlotte Clark: There is an exemption in the Bill, though, that basically says that if you are a trustee and you do not believe it is the right thing for your members then you should not put that money in. That is just going to be a very tricky assessment for the trustees or the scheme manager, and then for the regulators, at the point of addressing why they did not meet those levels. If they believe that it is not in the interests of the member, the Bill allows for that.

[Rebecca Smith]

Q Are there not going to be too many hoops to jump through to prove that the trustee is correct, if they have to prove it to a regulator? I suppose that is what the safe harbour means. Will the trustees have the benefit of the doubt, or are they going to have to be watertight in their belief that they are right, to make sure that they can stand up to the regulator?

Charlotte Clark: The level of that process would be something that we would put into secondary legislation and rules. We would really have to think through what that process looks like.

Patrick Coyne: Yes, absolutely. Implementation is critical here. This will be something that is done with wide consultation with the industry.

[Torsten Bell]

Q It is not right to say that mandation is at the centre of this Bill. There is one backstop power and there are a lot of clauses that we are going to spend a lot of the next few months—

--- Later in debate ---

[Alice Macdonald (Norwich North) (Lab/Co-op)]

Q My question is related to that. Aviva, in your written evidence, you spoke quite a lot about the value for money framework. Could you expand on what you think the benefits and challenges are? You also referred to the Australian regulator’s model, in terms of learning. You have already covered a bit of it, but if there anything you could add on what we could learn from that model about incentivising investments in the right areas, that would be great.

Dale Critchley: What we have heard from Australia is that the thing to avoid is regulator-defined targets, which will probably lead to herding, and can lead to schemes avoiding certain investments. For example, in Australia, property includes social housing and commercial property, but there is one benchmark for everything. So pension schemes do not invest in social housing, because they cannot achieve the benchmark through investing in social housing, as the benchmark is common across all property. Those are things to watch out for.

The other piece is that if you have set benchmarks, people will look to achieve the benchmark and not exceed it—they do not want to be the white chicken among all the brown chickens. Those are the things to avoid, in terms of the value for money benchmarks.

[Rebecca Smith]

Q This builds on something that was mentioned in the previous panel by Age UK—that a lot of the education that will need to be done to ensure that people understand what is going on, particularly with the small pots consolidation, could fall on Government, charities or providers. As pension provider representatives, what is your view on how far into the detail the Bill has gone in terms of who is responsible for that? We have seen in other, similar legislation an expectation put on businesses to provide the service, and it is often done at your cost rather than any sort of Government cost. I would be interested to know what you think about that.

Colin Clarke: I think it is right that the Bill, as I understand it, places the responsibility for member education and member communications on the provider, because ultimately the pension provider will be the organisation facilitating these things and making them happen. As was touched on in the previous panel, the availability of Pension Wise and other services like that is valuable, but I think pension providers ourselves have a responsibility to make sure that we deliver the right guidance and support for members.

Dale Critchley: The only thing I would add to that is that, if we start to edge towards guidance, we can come into an issue around marketing. If we sell the benefits of, for example, the default solution, rather than just say, “This is who the default solution is designed for,” and leave it to the customer to join the dots, we may have a better outcome, but it would be marketing, and we cannot do that, because of the privacy and electronic communications regulations. We would need member consent to deliver marketing communications, even though we are trying to help the customer.

[Rebecca Smith]

Q Are you effectively saying that if you put the customer first, which is ultimately what this entire piece of legislation is trying to do, then, at the moment, other regulations will stop that from happening, so we might want to look at that?

Dale Critchley: Yes.

[Rebecca Smith]

The privacy piece came up earlier this morning as well, so that needs looking at.

Dale Critchley: If we deliver something that looks towards targeted support, where instead of just saying, “This is the solution you will go in if you make no choice,” we say, “This is the solution we think is best for you, and you will go in if you make no choice,” that would edge towards marketing, and we could not say that.

[Sarah Edwards]

Q I want to pick up on the changes around DC, and the fact that there are quite a lot of different things—we have talked about value for money, changes in scale and, obviously, default retirement ages. From your perspective, is there a sequencing that needs to happen to make sure that they work, and is that provided for? What would your guidance be around that?

Colin Clarke: I do not think the Bill itself necessarily has the timescales in it, because it will be left to secondary legislation to look at when all these things actually fit together. A very helpful document was published alongside the Bill, with a potential road map. There is a logical order in which certain things have to happen. For example, the value for money test will require movement of members from historical defaults into something that will deliver better value. To achieve that, the contractual override for contract-based schemes would need to be in place in good time before the value for money exercise happens. Otherwise, there will be constraints that might inhibit the ability to do that.

Similarly, with small pots, a lot of the measures will lead to consolidation at scheme level. That will address some, but not all, of the small pots issue. The road map sets out small pots being at the end, and that is a sensible place to put them, because there will be a lot of other activity that happens first that will solve some of the problems. It does not make sense for small pots to be moved before they are moved again—you could see things moving around a couple of times.

On guided retirement, the potential timing of implementation is quite tight if it is going to be 2027 for certain schemes, when we do not have any secondary legislation yet. It is very important that that is consulted on as soon as possible so that we have clarity. Dale mentioned working on various different solutions. We have been doing something similar at L&G, and they may well be the right thing for members, but we know that we will have to fit them around regulations and make some adjustments, so having clarity on those early would be very helpful.

Pension Schemes Bill

Rebecca Smith Excerpts

2nd reading
Monday 7th July 2025 Commons Chamber

[Rebecca Smith (South West Devon) (Con)]

It has been a privilege to hear so many well-informed and considered speeches this evening. I am sure we would all agree that there is clearly significant expertise in the Chamber.

The heart of this Bill is people doing the right thing by preparing for their future and saving into their pension pots. With auto-enrolment having been introduced by the Conservatives in 2012, there are now over 20 million employees saving into a workplace pension. That is 88% of eligible employees saving into a pension and preparing for later in life, which is a great achievement that I hope everyone in this House can celebrate. However, while the number of people who are saving has increased significantly, engagement has remained low, as we have heard this evening. Less than half of savers have reviewed how much their pension is worth in the past 12 months, while over 94% of pension savers are invested in a pension scheme’s default investment strategy. With people taking the right steps and starting to save for their retirement early thanks to our action, we must now ensure that the pensions market is working for them, so that they get the best returns on their savings and ultimately have the comfortable and secure retirement for which they were planning.

We have heard many contributions this evening. I will briefly mention the hon. Member for Tamworth (Sarah Edwards) and my right hon. Friend the Member for North West Hampshire (Kit Malthouse), both of whom gave us lengthy and very detailed speeches presenting both sides of the argument. [Interruption.] They were very enjoyable speeches—that was not a criticism, just an observation of the way things have gone this evening. Both the hon. Member and my right hon. Friend clearly showed the expertise that they garnered earlier on in their careers and expressed some legitimate concerns, particularly about the consensus that there has perhaps been in the Chamber this evening. Some points have been made showing that that consensus is not entirely guaranteed, certainly among Conservative Members. We support the principles behind the Bill—indeed, much of what we have heard builds on the work that the Conservatives were doing while we were in government. We want to ensure that poorly performing pension schemes are challenged, excessive administration costs are removed, and savers receive the best returns on their investments. Ultimately, that is how we will ensure more people have a comfortable retirement.

However, we have concerns about some specific measures in the Bill, which we will scrutinise further as it progresses. In particular, we have significant concerns about the reserve powers that allow the Government to set percentage targets for asset allocation in core defaults offered by defined-contribution providers. In other words, a future Government could tell pension schemes where they must invest their funds, regardless of whether it delivers good returns for savers. This potentially conflicts with their fiduciary duty to act in the best interests of their members. While I know the Minister will stress that the Government do not intend to use those reserve powers, that neither addresses concerns about what a different future Government could do nor explains why those powers are being brought in. It could be asked why the reserve powers are being created at all.

We want to see more investment in the UK market. While this country is one of the largest pension markets in the world, only around 20% of DC assets are invested in the UK. However, the solution should be to make domestic investment more attractive—to create opportunities that deliver better returns for savers—not simply to mandate investment in assets that deliver lower returns. During our last term in office, we worked with the industry to introduce the Mansion House reforms as a voluntary agreement to boost investment in the UK, but this Bill goes further—it could mandate such investment against the wishes of the industry. Similarly, the local government pension scheme will have a new duty to invest in the local economy. While that is understandable at face value, it raises concerns about returns on investments if there are not suitable local opportunities.

We also have questions about some of the Government’s assumptions, and would like to understand more about how they were reached and the evidence used. For example, why is the minimum value for megafunds just £25 billion? Why is having fewer and larger pension providers better? We recognise the benefits of economies of scale, but what about competition and innovation? It has also been raised by the industry that a significant number of details are unknown, as they will come later in the form of regulations. Can the Minister set out some more details on when the various sets of regulations will be published, and whether that will be before the Bill has passed through Parliament?

Finally, the Bill fails to cover a number of areas, and we would like to understand why. Concerns about pension adequacy have been touched on this evening and whether people are saving enough to have the security and dignity in retirement they deserve. Auto-enrolment was a good start, but it will not be the only solution. Indeed, lots of people are still not eligible. When we passed the Pensions (Extension of Automatic Enrolment) Act 2023, the then Conservative Government confirmed their intention to reduce the lower age limit to 18, as has been mentioned this evening. As yet, the current Labour Government have not done so. Auto-enrolment does not apply to self-employed people, despite just 16% of self-employed people actively saving into a workplace or personal pension. The Bill does not look at whether people are saving enough and early enough, and I would be grateful if the Minister could set out whether that is deliberate and whether further action will be taken.

I briefly draw the House’s attention to my declaration in the Register of Members’ Financial Interests as a serving councillor, but I hasten to add that unfortunately I am not a member of the local government pension scheme. Sadly, I was elected after that provision was scrapped, but an entire chapter is given over to the local government pension scheme in this Bill. Indeed, it is a key element, enabling local authorities to use pension schemes to invest in their local economy. However, as with much of the legislation being taken through Parliament at the moment, the who, what and when remain unanswered. Without the English devolution Bill before us, for example, we are not entirely clear on what form local government will take, nor entirely clear on how compatible this Bill is with that forthcoming local government legislation.

We are in effect being asked to legislate on a moveable feast. Indeed, there is likely to be a considerable transition timetable for local government changes, which all raises questions about how the local government reorganisation transition fits in with the plans in the Bill. Following on from the comments of the hon. Member for Truro and Falmouth (Jayne Kirkham), how will asset pools work under local government reorganisation? Who gets the potential investment benefits or spending power, and where does all that investment take place?

The Bill also fails to mention any reforms to the local government pension scheme, which reached a record surplus of £45 billion in June 2024. One reason for that might be that it is being used to offset Government debt under the Chancellor’s current fiscal rule, which uses public sector net financial liabilities to measure that debt. That is a huge amount of money in local government terms, and it is not going towards local services, business support or regional projects. Can the Minister confirm whether the Government intend to reform the local government pension scheme beyond the measures outlined in the Bill? Finally on the local government pension scheme, I look forward to seeing more detail as to how newly created asset pools will work in practice with the local government pension scheme.

Local government treasury management over recent years has seen local authorities taking advantage of the investment opportunities available to them to acquire properties and the like, but often some distance from their local authority. That is something to tease out in Committee, but when the Government state that they wish local authorities to have finance available to invest locally to bring economic growth, what does “local” look like?

Finally, can the Minister confirm that fiduciary rules regarding investments and how they are assessed will prevail going forward? Overall, we will support a Bill that reduces administration costs, removes complexity for savers and maximises value for members, ultimately helping people who took the right action to save for their retirement to live in comfort and dignity. While this Bill makes the start, there is more to do to get it right, and we look forward to working with the Government to achieve that. There is plenty of food for thought for amendments to take us forward.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Minister.

Mother and Baby Institutions Payment Scheme: Capital Disregard

Rebecca Smith Excerpts

Tuesday 10th June 2025 Westminster Hall

[Rebecca Smith (South West Devon) (Con)]

It is a pleasure to serve under your chairmanship, Ms Jardine. I too congratulate the hon. Member for Beckenham and Penge (Liam Conlon) on securing this debate and on pursuing his private Member’s Bill. It is a pleasure to be here this afternoon.

It is worth reflecting on the stories we have heard. I particularly enjoyed the account shared by the hon. Member for Luton South and South Bedfordshire (Rachel Hopkins) and it is great to see Christina in the Public Gallery. The point about the age profile for compensation was particularly poignant to hear; these are women who have lived their entire lives with that uncertainty. I was particularly interested as well in the account from the hon. Member for Liverpool West Derby (Ian Byrne); I do not have the same community of Irish men and women in my constituency, so it was good to hear of the connection that he has and of the impact and role of the Irish community in his constituency.

The hon. Member for St Albans (Daisy Cooper) has the privilege, if that is the word, of having Philomena in her constituency—

[Daisy Cooper]

An honour.

[Rebecca Smith]

An honour—yes, I like that. It is also great to see Jane and Joshua here.

The hon. Member for Torbay (Steve Darling) always makes very good local connections and shares his own stories so well. This has been a really interesting debate and, although we had the break for the Division, we have been able to hear some good stories.

As the hon. Member for Beckenham and Penge has rightly set out, the mother and baby institutions payment scheme was introduced by the Irish Government to compensate those who had spent time in those institutions in the Republic of Ireland. Today we have heard many of the stories of those who were impacted. Anyone who has watched the tear-jerking film “Philomena”, starring Judi Dench and Steve Coogan—unlike some hon. Members, I have been able to see it, and I admit to having cried—will be familiar with this story. It is very moving to see the impact that the backgrounds of these men and women have had on them for the rest of their lives.

As we have heard, an astonishing 35,000 single mothers gave birth in these homes throughout the 1900s. These women were ostracised and pushed into the homes so that society could forget them. The most infamous case is of Tuam house, where 802 infants tragically died over a 36-year period. Across those 18 institutions in Ireland, 9,000 children died. We are not just talking about the women. Children lost their lives as well: 15% of all the children who lived in those homes. I am sure that hon. Members will agree that that was a travesty.

It is clear that there is agreement across this House on an issue that the hon. Member for Beckenham and Penge has alluded to in his private Member’s Bill. Although no amount of money can replace the loss of a child or atone for the trauma that was inflicted, these single mothers have rightly received compensation that ranges from €5,000 to €125,000, depending on their stay. The question is whether the compensation those women received should have an impact on the benefits that they are entitled to as a UK resident. There are 13,000 surviving inhabitants of those homes who moved here to start a new life free from the judgment of the Irish society that they grew up in. As of April 2025, 6,462 applications had been made, with just 11% from UK residents. That means that 700 of those applications are from UK residents, stripping these women of access to benefits that they would otherwise be entitled to. We have heard that described plainly across the Chamber in this debate.

[Carla Lockhart (Upper Bann) (DUP)]

I associate myself with the remarks made across the Chamber about the travesty and life-changing trauma that so many women and children experienced. Does the hon. Member agree that, if Philomena’s law is applied by the UK Parliament, Northern Ireland should be included as part of the United Kingdom, given that a number of women and children will be living in Northern Ireland and encountering the same problem with benefits?

[Rebecca Smith]

The hon. Lady is a true champion for Northern Ireland. I cannot comment on how that would happen; the Minister is better placed to say whether that is possible. But clearly Northern Ireland is as much a part of the island of Ireland, depending on where one’s politics lie, and it would make sense to include anyone who experienced this. I am not in the position of the Minister in being able to say what might happen in the future.

In this debate we have also well-rehearsed the compensation payments for other well-known scandals: the Post Office scandal, the infected blood scandal, the compensation for victims of 7/7, and the Windrush scandal. We know the argument: those people are all eligible for full benefits and their capital is not regarded. Although I appreciate that a precedent can be set, the difference that makes this situation slightly more difficult is that the payments originate from another country. The situation is unique when compared with the others, but ultimately the precedent is clearly there.

Traditionally, the Department for Work and Pensions has opposed the step of disregarding capital payment from additional financial schemes. However, the scheme was only set in motion in 2021. Now that the dust has settled and it is clear that many are not claiming the money they are entitled to because of that lack of disregard, it will be interesting to hear whether the Department plans on changing its mind.

Although in government the Conservative party did not endorse the introduction of a capital disregard for these compensation payments, the issue was also not discussed to the same extent at that time. That is why the hon. Member for Beckenham and Penge requires our congratulations; we are three or four years into the scheme, the dust has settled, and it is clear that there are problems with people applying—we cannot get away from that fact.

Under the previous Government, the Irish Government expressed that they would press other Governments to introduce dispensation for these capital payments within their welfare systems. However, the then Secretary of State for Northern Ireland, Chris Heaton-Harris, said in March 2024 that no such approach had been made by the Irish Government. One of the questions for the Minister is whether in his time in office such an approach has been made by the Irish Government. One could argue that the onus is on the Irish Government to provide the list of individuals likely to be impacted by this approach. With the consent of those individuals, that information could be shared with the Department for Work and Pensions so that we at least know who might be in line for that support.

More work is necessary to calculate how many people currently in receipt of welfare benefits in the UK might be impacted, because not everyone who can claim compensation falls into that bracket, and the financial pressure that a lack of dispensation places on them. What sums have been done and what are the numbers likely to be? What would the cost be if the capital payments for this scheme are disregarded when it comes to benefits?

This is an extraordinary situation, as I have already alluded to, and I agree entirely with the position. I wait to see what the Minister and the new Government decide. In 2021, the Taoiseach of Ireland, who, as we have heard, was involved in setting up this scheme, said of the report that brought it about:

“This detailed and highly painful report is a moment for us as a society to recognise a profound failure of empathy, understanding and basic humanity over a lengthy period. Its production has been possible because of the depth of courage shown by all those who shared their personal experiences with the commission. The report gives survivors what they have been denied for so long, namely, their voice, their individuality and their right to be acknowledged.”

That, for me, sums up the entire argument. I look forward to hearing what the Minister has to say in response.

Pensions: Expatriates

Rebecca Smith Excerpts

Tuesday 20th May 2025 Westminster Hall

[Rebecca Smith (South West Devon) (Con)]

It is a pleasure to serve under your chairmanship, Mr Dowd. I congratulate my hon. Friend the Member for Farnham and Bordon (Gregory Stafford) on securing this important debate, and I thank everybody who is here to take part; it is heartening to see what is, to all intents and purposes, cross-party consensus on this long-term issue, and I am grateful to be able to speak about it today.

It is worth reminding everyone in the Chamber that, as we have heard, this is a full cross-party challenge that we have faced over the last decades and that, as we have also heard, successive Governments, be they Conservative, Labour or Liberal Democrat, have not grappled with it enough. I am grateful that that point has been raised, because I do not think it would be honest of us to reflect on it in the way that had been done previously.

We have a duty of care to pensioners at home and abroad, and I believe we are all in agreement about that today. However, we have heard much about inconsistencies in how support is delivered and about the ultimate postcode lottery; we speak of postcode lotteries a lot in this place, but this one perhaps wins the prize for being the ultimate postcode lottery. The arguments have been well rehearsed.

The two strongest criticisms of the existing overseas pension system are, first, that most pensioners do not realise that the frozen pension policy exists—perhaps before emigrating to live with their family, as we have heard—and, secondly, that not all British pensioners overseas are impacted by the policy because of reciprocal arrangements, as a result of which, there is a very unequal playing field. Like many here today, until an elector emailed me when I was a candidate in the election, I was not fully aware of this situation.

A large number of overseas pensioners are covered by reciprocal arrangements, which enables us to treat overseas pensioners moving to the UK comparably with UK citizens living abroad. In total, about 60% of overseas pensioners are covered by reciprocal arrangements, which, where possible, is of course the preferred option for pensioners.

However, we have heard some harrowing cases, and Anne Puckridge has certainly got her mentions this morning. That 99-year-old veteran of world war two has lived in Canada since 2001 and is still receiving the £72.50 a week that she has received for 24 years. With 442,000 people receiving a frozen state pension overseas, and often receiving as little as £65 a week or indeed less, the real-life impact of this approach is considerable.

In my South West Devon constituency, I have heard from Denise Bateman, formerly of Ivybridge and now residing in Australia; Gillian Clarke, another Australian resident, who at the age of 87 has seen no increase in her state pension in 27 years; Stephen Mumby, also a resident in Australia; Clive Gray; and Deborah Matthews and Laurie Morbey, who have both raised this issue with me. They are predominantly resident in Australia, but there are also examples in New Zealand and Canada.

As their correspondence highlights, those people could have moved to Turkey or the Philippines, and they would be receiving an unfrozen pension. Yet, they have moved to Commonwealth countries and, despite having worked for many years and contributed to life in the UK, are now faced with a limited pension. Anecdotally, those I have heard from in Australia lived and worked here for far longer than some of those now living in Europe. Indeed, some good friends of mine are retired and have lived in Europe since before I was born, yet they still qualify for the state pension and receive the full pension, having not even worked here in the last 50 years.

As with anything of this nature, the Government need to make sure they properly communicate pension terms to people well ahead of the time they expect receive a state pension. We have seen in the WASPI women campaign the issues that can be caused, and I believe that no one wants to replicate that. British citizens need to know the implication of any move abroad so that they can plan. That is the fairest thing to do, and perhaps work could be done—for example, with well-known employers or organisations in countries that generally support emigration—to help improve the information flows on this topic, in addition to the work that the Department for Work and Pensions and others are already doing.

In 2020, the cost of uprating frozen pensions to 2020 levels was estimated to be around £600 million, and the cost of uprating to today’s levels would be significantly higher. However, as we heard, the End Frozen Pensions campaign has suggested that people do not want the backdating and are happy to see their pension uprated from this point in time, which would cost £55 million. It is worth reflecting that Ministers appear to be having to hunt for cash down the back of the sofa, and I appreciate that the Chancellor has to make the sums add up. That said, the End Frozen Pensions campaign has clearly highlighted that overseas pensioners are in effect net savers for the UK—there is no burden on the welfare system or the NHS—meaning an aggregated saving of around £2,500 per person, as the hon. Member for Strangford (Jim Shannon) highlighted.

As we have heard, the current system of reciprocal agreements ensures there are protections on both sides for countries in the EU or the EEA, and I am happy to support that long-standing and right approach. However, in the light of the new voting rights, which we have also heard about, this is perhaps the right time for the Government to start exploring conversations on further reciprocal arrangements, especially with Commonwealth friends such as Canada, New Zealand and Australia—countries to which my own constituents have moved. We have heard about the diplomatic awkwardness that this issue causes, which should also prompt such conversations.

The Liberal Democrats mentioned the challenges around pensioners and pensions, and we understand the difficult situations caused by the lack of compensation for the WASPI women, the cruel cut to the winter fuel allowance and the fact that the Government pledged to reduce energy bills by £300 without mentioning that we may all have to wait until 2030 for that to be delivered. Pensioners up and down the country are understandably losing confidence in this Labour Government and in the Prime Minister.

We have talked about the 442,000 people receiving a frozen state pension, but what will the Government do about the 10 million pensioners here in the UK who have had their winter fuel allowance removed? I was surprised to hear that an additional 100,000 pensioners accessed A&E departments last winter, compared to the winter before, which is a direct consequence of Labour’s policy to literally leave pensioners out in the cold.

It really does not matter what dedicated campaigners say in this debate, because we all know that when it comes to issues facing pensioners, we could argue that the Government have their fingers in their ears. However, today is a chance to break the cycle, and for this new Government to be the one that makes this change. It sounds as though there would be enormous support in the Chamber if they chose to pursue that.

We need to push for more action to deliver reciprocal agreements, if possible, with allies such as Canada, Australia and New Zealand, where the overwhelming majority of those with frozen pensions currently reside. That should help to provide more security for all those still affected. None of the Front Benchers here has been a Minister before, so we get the privilege of being a fresh pair of eyes, while recognising the lack of action in the past, whether that be under the Lib Dems, Labour or Conservatives, as we have discussed many times. I understand the Minister’s previous expert experience in this field, and he might have a few ideas of his own, which I look forward to hearing.

I appreciate the concerns raised by colleagues about specific cases, and I sympathise with those who committed so much to our country in their early lives, only to face challenges unprepared, when they should have been made aware of them. Information is clearly going to be a large part of the solution, and debates such as this go a long way to raise the profile of issues that do not always get the airtime they deserve. Judging by the Minister’s nods during the debate, I believe that he agrees, and I know from other things he is doing that information is top of his agenda. I hope we will see some commitment to that this morning.

Finally, I plead with the Minister to get the tone right this time. As discussions take place, will he please not treat these pensioners like the WASPI women and those affected by winter fuel payments? He should be honest in the debate, think clearly about the cost and provide constructive solutions that can help reduce the number of pensioners in this position in five, 10, 15 or even 30 years’ time.

Public Authorities (Fraud, Error and Recovery) Bill

Rebecca Smith Excerpts

Report stage & 3rd reading
Tuesday 29th April 2025 Commons Chamber

I remind the House that obtaining information from banks, including relevant bank statements, under this measure is a vital safeguard to establishing an affordable deduction rate where someone has refused to engage. It will prevent further issues for a debtor than the use of courts could bring about—for instance, a county court judgment or court costs—and it will enable the Department to use regular as well as lump sum deduction orders. I look forward to the debate and to responding to colleagues’ contributions in my closing remarks.

[Rebecca Smith (South West Devon) (Con)]

I echo the Minister’s comments about the work of the Bill Committee. We had a constructive few weeks getting into the nitty-gritty.

I have no doubt that the House will agree that fraud is unacceptable, whether against individuals, organisations or the state. The money taken does not belong to those responsible. When it comes to defrauding the Government, money is taken from every single taxpayer. At the same time, however, errors do unfortunately happen. They might be made accidentally by the claimant or by the Department. Although there is no ill intention, errors can still be costly to the taxpayer, and that impacts some of the most vulnerable people in our country.

The question, then, is how best to tackle fraud and error in the welfare state and the public sector. Although we welcome many of the principles behind the Bill—much of which builds on the work of the Conservatives before the general election, as I am sure will be mentioned many times this afternoon—we are concerned that it has been rushed through. On one hand, there are gaps where the legislation is not tough enough. It is not a strong deterrent to make potential fraudsters think again, and it does not sufficiently safeguard public money. On the other hand, parts of the Bill have not been sufficiently prepared, and are incredibly vague and unclear on their implications for those involved and on whether the benefit justifies the cost.

This issue must be considered in the context of a sickness benefit bill that is forecast to hit nearly £1 billion by the end of the decade—even after the Government’s questionable welfare reforms—which is vastly more than we spend on defence, and more than we spend on schools and policing. We have tabled a number of amendments to address those points.

New clauses 21 and 8 seek to tackle the rise in so-called sickfluencers on social media, such as those on TikTok and YouTube who post videos showing people how they might be able to make fraudulent claims for benefits, including the personal independence payment, which requires not medical evidence but self-assessment. As we have heard, the advice offered includes specific buzzwords, template claims and guidance on passing questions at interview stage to inflate the value of claims fraudulently. We do not want to target people who provide genuine advice and guidance to people about how the welfare system and public authorities work, but that is very different from providing assistance and encouragement to commit fraud, which is not acceptable.

We recognise the vital work of not-for-profit organisations such as Citizens Advice—which works right across the country, including in South Hams and Plymouth in my constituency—and groups such as Improving Lives Plymouth. They do much to support those seeking to claim what they are entitled to. However, online sickfluencers must be tackled.

In Committee, the Minister queried our new clause and asked why it provided only for a seven-year prison sentence when similar offences carry a 10-year sentence. We have addressed that in new clauses 21 and 8, which, as the Minister will see, propose a 10-year sentence to bring them into line with similar offences.

[Dr Luke Evans]

In their response to my question about sickfluencers, the Government said that relevant legislation is already in place. If that is the case, how many convictions have there been under that legislation? We could infer from that number whether or not the system is working and what we need to do. My suspicion is that we need these measures to be able to hold people to account.

[Rebecca Smith]

I echo my hon. Friend’s concern that the existing powers are not being used enough. I ask the Minister to give us further information on how those powers are being used and an assurance that they will be used further should our new clauses be unsuccessful.

We believe that creating a specific offence to target such online fraud would send the clear message to sickfluencers that what they are doing is not only morally wrong but illegal—something that clear gives them no alternative than to realise that they will be caught. If the Government continue to oppose our amendments because they believe the powers already exist to tackle such crime, I would be grateful if the Minister set out, at the very least, how the Government will ensure that that legislation is used to the fullest, particularly with regard to the DWP, given that Government amendments 75 and 76 refer to the PFSA specifically. We are keen to see how those powers can be used fully used as the deterrent we need to tackle DWP claims. I want to know that, after today’s debate and vote, sickfluencers will be left in no doubt that the full weight of the law will be used against them, as they actively defraud the state.

Our new clause 9 is on powers of arrest. We welcome measures in the Bill—first announced by the previous Government—to give DWP investigators greater powers to aid with their investigations, such as search and seizure, and there must be appropriate safeguards around that. This will bring benefit fraud investigations into line with tax fraud investigations in His Majesty’s Revenue and Customs, which is very welcome, but we want to go further and address other shortfalls in the DWP powers. New clause 9 would add the power of arrest to the powers given to DWP investigators and resolve the seemingly illogical current position: the Government want to give DWP investigators the power to enter and search a premises, seize, retain and dispose of material, obtain sensible material and use reasonable force, but not to arrest someone if the evidence shows that it is necessary.

In Committee, the Minister highlighted that the police would be able to carry out the arrest function on behalf of the DWP should it ever be necessary, but we question whether that is a sustainable position and believe that our new clause would ensure we do not place an additional burden on the police. This is not without precedent and would bring the DWP into line with the approach taken to serious and organised crime across Government, such as at HMRC and the Gangmasters and Labour Abuse Authority.

Our new clause 10 is on liability orders, because we are concerned about the seizure of assets. We want to ensure that the DWP does everything it can to recover funds fraudulently claimed, even when that money is no longer sitting in a bank account. It cannot be right that someone can use that money to buy expensive cars, flat-screen TVs or other luxury assets, which the state cannot then recover from them. Our new clause 10 would give the Secretary of State powers to apply to the courts to seize assets where someone has been found guilty of fraud and the funds have not been recovered in order to repay the state. In a similar vein to our sickfluencers new clause, we believe these additions are needed to send the strongest message to those who are knowingly defrauding the system that they will be caught and will have to pay.

New clause 10 does not just give powers to seize assets to the Secretary of State; it says that she must use them. The DWP has said that it can already do this, but we know through written parliamentary questions that those powers have not been used in the last five years, albeit the DWP could make use of the Proceeds of Crime Act 2002. We believe there must be an explicit expectation that assets will be seized, and we need new clause 10 to ensure this is achieved.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

It is great to hear that the hon. Member’s party is committed to taking tougher action against benefit fraud after 14 years of failing in office. Does she also welcome longer sentences for fraud in other areas of Government such as covid corruption, including for those Tory donors who committed the crime?

[Rebecca Smith]

I thank the hon. Member for his intervention, but that is not what we are debating; it is certainly not part of my speech.

Our new clauses 11, 12 and 20 are on the impact on banks. We have concerns about the lack of detail in the Bill when it comes to the eligibility verification mechanism and the requirements that will be put on banks and other financial institutions. We do not have the statutory code of conduct. We do not know what it will cost banks. We do not know the results of any pilot schemes, and we do not know whether the amount recovered will be more than what it costs to administer. Madam Deputy Speaker, had you been in our Committee, you would know that the code of conduct was probably the thing most frequently commented on, and the Ministers did a huge amount to reassure us that it was forthcoming—

[Neil Coyle]

And cheesecake!

[Rebecca Smith]

And cheesecake as well—I did not want to say it from the Front Bench, but I have now. Madam Deputy Speaker, you will have to look back at Hansard, but I will never look at a cheesecake in the same way.

The code of conduct was regularly raised in Committee, and we got assurances continually from the Ministers, but we still lack that detail. We have therefore tabled a number of amendments to get clarity, including to require the Government to publish their statutory code of conduct, information on the testing completed to date and an impact assessment on the cost implication of the Bill for banks, as well as an amendment to allow banks to challenge the expansion of these powers if the costs that would be incurred exceed a pre-agreed amount. We know that banks and financial institutions want to help tackle fraud, but measures must be proportionate and not unduly burdensome, or they risk diverting resources from tackling other types of financial crime to meet these requirements. We cannot simply assume that the banks and financial institutions will do what is right; we need to give them an incentive to do it, too.

Our amendments 16, 17, 18 and 19 refer to the need for a first-tier tribunal. The Bill takes significant powers for the Secretary of State, giving them the power to review decisions that they, the Cabinet Office or the Public Sector Fraud Authority made. Amendments 16 to 19 change the appeal body from the Minister for the Cabinet Office to the first tier tribunal, ensuring that there is not just independent oversight but an effective independent channel of appeal against information notices that does not just lead back to the organisation that issued the notice.

--- Later in debate ---

[David Pinto-Duschinsky (Hendon) (Lab)]

I rise to speak against amendments 2, 4, 5, 6, 8 and 9, and new clauses 12 and 15.

Fraud in the benefit system affects us all. It costs us as a country almost £1 million an hour. It takes money from the most vulnerable in society and undermines the legitimacy of and public support for our social security system. However, many of the amendments proposed simply do not recognise the vital need for this legislation. Some, such as amendments 2 and 9, would hamstring the Bill by preventing us gathering key information. Others, such as amendments 8, 5 and 6, would limit the effectiveness of the Bill and make its powers more difficult to use. Others, such as amendments 4 and new clauses 12 and 15, would seek to delay its effects.

These amendments, however differently proposed, all suffer from the same pathology: they fail to take fraud seriously. We have heard a number of speeches today from opponents of the Bill, but we are yet to hear from them any serious practical suggestions about how we might tackle fraud. These opponents say that they are concerned to protect the vulnerable, but I say gently that they can offer no proposals on how to prevent the fraud that is stealing from the neediest in our society.

Many Members are coming from a genuine place of concern about how to strike the right balance between protecting the public purse on the one hand and the privacy and rights of claimants on the other. I think the Bill gets the balance right. The powers it provides are proportionate.

[Rebecca Smith]

Will the hon. Member give way?

[David Pinto-Duschinsky]

I have limited time, so I will make progress.

The powers the Bill provides are proportionate, measured and ringed with safeguards. It is a mark of this that, as we heard from the Secretary of State on Second Reading, the Information Commissioner has stated that the Bill as currently drafted has addressed their previously stated concerns.

As well as being proportionate, the powers are necessary to fight the ever-more sophisticated frauds that we are facing. Over the past decade, financial institutions have extensively overhauled their use of technology and data and their approaches to the evolving fraud threat, yet the Government have not. It is illuminating, but perhaps not surprising, that while social security fraud has risen dramatically post covid, fraud volumes and losses in the financial services sector, including credit card fraud, have fallen according to UK Finance. The public sector has paid a steep price for not modernising its anti-fraud approach and failing to adopt industry best practices. It is a gap that this Bill seeks to address.

Most of all, the measures in the Bill are crucial for protecting the vulnerable and safeguarding the legitimacy of the system itself. Our social security system rests on public consent and a belief that money is fairly spent. Fraud and error chips away at this social contract, and it takes money from those who need it most. The public in Hendon and across the country expect us to take action. There is nothing progressive whatsoever about permitting fraud. The only people who benefit are the criminals who exploit our system and those who wish to undermine its role as a cornerstone of a civilised and fair society.

For the sake of the most vulnerable, the taxpayer, fairness and the system itself, I hope the House will join me in supporting the Bill and voting down those amendments.

--- Later in debate ---

[Madam Deputy Speaker (Ms Nusrat Ghani)]

That is the end of the Back-Bench contributions. We come to the Front Benches and first the shadow Minister.

[Rebecca Smith]

With the leave of the House, I will make a few additional comments. This is the perfect opportunity to respond to some of the points made about Conservative amendments and new clauses.

The hon. Member for Hendon (David Pinto-Duschinsky) was on a short time limit and was not able to take any interventions, but I want to speak to the points he made on including our new clauses—for example, new clause 12. He rattled off the other amendment numbers quickly, so I hope he will forgive me if I did not hear them all, but I believe that new clauses 12 and 15 were included. His implication was that the new clauses we tabled would delay the Bill being put into law. That would not be the case, because each of them is worded for after the Act comes into force. The new clauses would be additional safeguards on the cost implications for banks, annual reporting and the publication of an antifraud and error technology strategy that would make the Bill even better, rather than essentially being wrecking amendments. Regardless of the other amendments included in the hon. Member’s list, ours are certainly not in that vein.

The hon. Member for Aberdeen North (Kirsty Blackman) said that she was slightly unhappy about new clause 21 because those who genuinely help benefit claimants get what they are entitled to may inadvertently be caught by it. That is not our intention. We want only those who push people towards committing fraud to be caught. Citizens Advice and Improving Lives Plymouth, for example, which help people claim what they are entitled to, would not be caught by the new clause, because they would be involved in error only if a mistake were made, rather than through fraud. I appreciate what she said, but that was not our intention. The wording of our new clause covers that.

Concern was raised in Committee about the extent of bank account searches. In our view, other bank accounts used by those who commit fraud would not be checked under the Bill, so we probably need to go further to ensure that fraud is properly tackled. To be more light-hearted for a moment, if I may, anybody reading the report of the debate will see plenty of references to cheesecake, and I think I should explain why. Concern was raised in Committee about the fact that, under the Bill, an account’s individual transactions could be assessed and judged, so everybody would feel terrible if they bought a cheesecake from Waitrose—other shops are available—and that would be a problem in future. If anybody was wondering why we were talking about cheesecake, it related to concern about transactions being checked. At the time, the Minister kindly reassured us that the Bill would not provide for individual transactions to be checked; it would deal just with benefit payments and whether someone has capital that they should not have while claiming benefits. I hope that that is helpful.

[Andrew Western]

With the leave of the House, I thank all hon. Members for their contributions. In the time I have, I will try to respond to some of the points raised. I have listened closely to the concerns set out by Members from across the House, and I will of course ensure that they are taken forward as the Bill progresses to the other place, but today I will resist all non-Government amendments. I will make initial comments in response to several Members, before turning specifically to the nature of the amendments and new clauses.

The Opposition spokesperson, the hon. Member for South West Devon (Rebecca Smith), and the hon. Member for Mid Leicestershire (Mr Bedford), said that the Bill builds on the previous Administration’s work to tackle fraud and error. I have to say, I think that is a fairly generous interpretation of that work, not least because, as far as I can see, the previous Government introduced absolutely no powers for the Public Sector Fraud Authority to tackle fraud across the public sector, and, moreover, nothing on debt recovery. The only evidence we can find of any new powers the previous Government sought to introduce is in the eligibility verification space. I accept that they sought to do that, but they did so in a rather botched fashion, which was subject to significant criticism, and with none of the safeguards and oversight in place. We have now built those into the Bill. I absolutely agree with the Opposition spokesperson that the Government cannot be complacent in tackling fraud—and we will not be—but I say gently that, having allowed fraud and error in the welfare system to spiral to £9.7 billion at the time of the last election, the same cannot be said of the previous Government.

The Liberal Democrat spokesperson, the hon. Member for Torbay (Steve Darling), spoke of a broken welfare system. I do not want to be drawn into a debate on that, but a broken approach to tackling benefit fraud and error is certainly part of any problem that the Department faces.