Pension Schemes Bill [HL] — House of Lords, 2020-01-28
Topic: Labor
Jean Lesley Patricia Drake (Labour, Centre-left): My Lords, I draw attention to my interests in the register. I too welcome this Bill, but I believe that parts need strengthening The Pensions Regulator protects pensions from the moral hazard of employers avoiding their responsibilities, but the BHS and Carillion cases raise two questions of public interest to tackle today: is the regulator deploying its existing powers in an effective and timely manner, and are the powers in the regulator’s armoury sufficient to prevent employers avoiding their responsibilities The regulator’s recent activities have focused on using and testing the full range of existing powers. This Bill strengthens them—which is welcome—extending when an employer can be required to contribute money into a scheme, and enhancing powers to collect information and sanctioning those that mislead on corporate activities During the Work and Pensions Select Committee inquiry into BHS, documents from the regulator revealed that on 9 March 2015 the chair of trustees advised the regulator that they were still awaiting from the company information needed to make the moral hazard assessment. Two days later the company was sold Clause 107 introduces new civil and criminal sanctions. I welcome the Government’s intention to address what they describe as plundering by "reckless bosses". But concerns have been expressed, including by the Association of Pension Lawyers, that a power designed to prevent future BHS and Carillion-type situations has been drawn incredibly widely, such that it could criminalise minor actions or ordinary business activities and expose third parties such as banks and even trade unions to sanctions, giving rise to consequences not properly considered. I certainly support stiffer sanctions, but these concerns should be probed, given the range and credibility of the people expressing them. Will the Government give consideration to the concerns expressed Part 5 provides for more enforceable scheme funding standards. One important supporting amendment—referenced by the noble Lord, Lord Vaux—was also captured well by the Government Actuary in evidence to the Work and Pensions Select Committee. The committee’s report said that "the average ratio of deficit recovery contributions to dividends has declined" over the last five years for FTSE 350 companies, meaning that more than half of these companies paid out "Ten times more … to shareholders" than to their DB pension scheme—largely due to the significant increase in dividends over the period, without a similar increase in contributions Financial technology can deliver a pensions dashboard and make a real difference to savers, finding their lost pots and allowing them to see in one place their total pensions savings, state and private, to assist them in making important decisions. A finder service could search the records of all schemes to identify data matched to an individual, which could be presented to the individual to view, transforming accessibility for more than 22 million people. But public good cannot be traded off against commercial interests. Notwithstanding future government decisions on commercial dashboards, there must be a public good dashboard, the governance, control and ownership of which must be with a public body The CEO of the Pensions Regulator appeared to be with me in that view, and he emphasised to the Work and Pensions Select Committee on 25 June 2019 that "there must be a public dashboard." It would be extraordinary if the Government compelled all private, public and state schemes to release the data of over 22 million individuals and £7.6 trillion of pensions assets, when individuals can access their own data only in the commercial marketplace because the Government have denied them access to a safe space in a public good dashboard The public are with me on this. Surveys of public attitudes conducted by the Money Advice Service, the DWP, the ABI, ComRes and others all found that the public wanted an accessible public good dashboard, publicly owned, which they would trust more than a commercial dashboard. The DWP feasibility study on dashboards in December 2018 stated that "evidence would suggest that starting with a single, non-commercial dashboard … is likely to reduce the potential for confusion and help to establish consumer trust." In April 2019, in response to the consultation, the Government altered their view and referred to simultaneous testing of commercial dashboards and an openness to further functionality, taking multiple dashboards beyond their initial find and view purpose. The impact assessment states: "Option 2: Government to legislate: (the preferred option). Government supports the coordination of an industry-led dashboard … This will lead to the creation of dashboard service designed, developed and owned by industry, facilitated by Government" This is a remarkable statement. There is no public dashboard mentioned, only a commercially owned pensions "dashboard ecosystem", with no limit on its functionality. There is a reference tucked away in paragraph 50 to the industry being expected to create a non-commercial dashboard—a loose expectation, undefined Equal in importance to ownership is consumer protection. The provisions in Part 4 are far too weak. As Which? argued in its briefing, "it is absolutely crucial that there are strong regulations in place to prevent potential harm against consumers from the misuse of commercial dashboards by providers. The bill does not go far enough to mitigate against this harm, and should be amended." The Bill must establish a high bar for consumer protection at the heart of the dashboard which hardwires the best interests of the savers and the resolution of conflicts of interest in the sole interests of members and beneficiaries. Transactional dashboards should not be allowed without further legislation; they open up a new market, with very significant potential for consumer detriment. We need to understand market and consumer behaviour, with legislation being brought forward before dashboards become transactional As has been mentioned, there is also public interest in data standards, the information to be provided, how it is presented, who can hold it and how, and so on. A priority is getting schemes’ basic data fit for release—for many it is not—but demands for further information will come, such as where investments are held and whether they align with the Paris Agreement on climate change If the Government compel the release of the data of 20 million to 30 million individuals to commercially owned dashboards, while simultaneously denying the public the right to access their own data through a public good dashboard not owned by the industry, and failing to implement a tough consumer protection regime, then they will fail in their obligation to millions of people. The technology is great and it should be available to people, but in a way that protects their interests Efficient ways for workers to share risk are to be welcomed. The Bill allows these collective money purchase schemes to be set up by a single employer or group of connected employers. However, like master trusts, these CMPSs will have to meet a financial sustainability requirement and demonstrate that they have sufficient financial resources to run the scheme for a period of time in the event of a scheme failure, such as employer insolvency and a loss of contributing members, administrative failure or removal of authorisation. As the noble Baroness, Lady Altmann, referenced, it is important to probe how this protection will work and the extent to which the employer who set up the CMP scheme has to financially contribute to the sustainability requirement. This is the issue not of funding the benefits, but of resources to manage a potential failure in a CMP scheme I am conscious of the time, so I will be brief. I completely support the noble Baroness, Lady Altmann, in her campaigning on the way the tax system can really disadvantage not only consultants but a large number of low-paid women. I was disappointed that the Bill does not address the gender pension gap. I compliment her on the work she has done, but I want to raise an issue that I keep raising: I will take advantage of my last minute to do so again There should be a carer’s credit paid through the social security system towards a private pension, complementing the carer’s credit in the state pension system. Prior to the flat rate state pension introduced in 2016, carers were credited with entitlements in both the first-tier basic state pension and the second-tier state second pension. Now that the second-tier has been totally transferred to the private pension, carer’s credit should not be lost. Prior to 2016, public policy accepted that caring was an economic contribution credited for the first and second-tier pension. Until that crediting is rightly restored, our reforms will have disadvantaged carers.