Pension Schemes Bill second reading completed; 'serious concerns' persist

The Pensions Scheme Bill has now been committed to a Grand Committee following a four hour long debate in the House of Lords, though "serious concerns" remain.

Peers raised concerns during the second reading yesterday (28 January) about a number of issues covered by the bill, including proposals around new criminal sanctions, the scope of collective defined contribution (CDC) legislation, and the lack of detail around the pensions dashboard.

The pensions dashboard proposals faced a number of criticisms, with queries raised around data security and implementation, as well as the choice to implement multiple dashboards.

Baroness Stedman-Scott highlighted the consultations and research already undertaken in designing the dashboard legislation, and emphasised that multiple dashboards would "meet the varied needs of the 24.5 million people" with pensions and savings.

However, she added that this was an area that was likely to see “extensive discussions” both before and during the committee stage.

CDC also dominated much of the debate, with concerns around intergenerational issues and member understanding raised by members of various political parties.

Stedman-Scott, however, emphasised that the government would ensure that CDC schemes are “clear and transparent” around risk, also highlighting that “fairness between age cohorts” had been a key consideration throughout the drafting process.

The proposals around the new criminal sanctions were another area of focus during the debate, as Lord Sharkey expressed concern about the “number and scope of the delegated powers” as well as the absence of any draft secondary legislation.

However, concerns were also raised that the proposals may not go far enough, with Lord Vaux of Harrowden highlighting that the payments of dividends will not be a notifiable event.

Stedman-Scott explained that this was a conscious decision within the bill, and explained: “Government intervention to block dividend payments could discourage investors and weaken the business, further reducing the security of the defined benefit scheme."

Referencing the queries around the scope of the regulators proposed powers, Stedman-Scott added: "The majority of employers want to do right by their scheme.

"However, we must ensure that sufficient safeguards are in place to protect members’ pensions from the minority who are willing to put them at risk".

Peers also raised concerns around a number of omissions from the bill, such as the failure to implement the Department for Work and Pensions (DWP) automatic enrolment review proposal of lowering the age for auto-enrolment to 18.

Commenting on this, Stedman-Scott recommitted to a mid-2020s timeline and emphasised that the expansion of auto-enrolment would focus on younger people and lower earners.

There was also disappointment at the lack of a consolidator regime, with Labour Lord McKenzie highlighting that superfunds could provide a “new and affordable” options for those schemes looking to consolidate.

He added: “Like CDCs, they would require a robust authorisation and supervisory regime. We trust that the Minister, Mr Opperman, has not spent all his capital on CDCs.”

However, peers also raised concerns around some of the broader issues impacting pensions, with McKenzie raising concerns about retirement provisions for those in self-employment.

The Stedman-Scott confirmed that the government were “committed to carrying out research trials to form the evidence base and future policy” for a potential self-employed pensions solution, but highlighted that one solution would not necessarily fit all in such a “highly diverse group”.

Baroness Bryan of Partick also raised the “stark problem of gender inequality”, which was echoed by Baroness Janke and Lord McKenzie.

Stedman-Scott emphasised the work that the government had already done to close the gender pay gap, such as the Government Equalities Office gender equality road map and the impact of auto-enrolment.

However, Baroness Drake stated: “I do not disagree with [the] description of what is happening with women in the eligible population for auto-enrolment, but it is the millions not in the eligible population for auto-enrolment whom we are particularly concerned about and whom those figures do not address.”

Whilst Bryan also raised queries around plans to increase the state pension age, Stedman-Scott confirmed that this was not government policy.

Experts in the pensions industry have encouraged the government to listen to the concerns raised by the peers, with Royal London director of policy, Steve Webb, highlighting the “serious concerns” that remain.

Webb added: “Peers on all sides pointed out that the new powers to jail people when company pension funds go badly wrong could bring in a much wider group of people than ‘bad bosses’.

“This could in turn discourage lay people from being willing to serve as trustees, which would be a serious backward step.

"The bill also fails to implement important changes to the pension landscape such as bringing more people into automatic enrolment and legislating for the vehicles for consolidating smaller pension schemes.

“Whilst the DWP can ultimately use its majority in the Commons to ‘ram through’ pretty much any legislation, the pension system would be better if it listened carefully to the concerns raised by peers and amended its own bill".

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