Pension Schemes Bill

Report (3rd Day)

Amendment 120

120: After Clause 96, insert the following new Clause— “Report on the impact of pension market consolidation(1) The Secretary of State must, within 12 months of the day on which this Act is passed, publish a report on the impact of consolidation in the occupational pensions market.(2) The report must include an assessment of—(a) the level of market concentration among pension scheme providers, including trends in the number and size of schemes;(b) the effects of consolidation on competition, innovation, and consumer choice in the pensions market;(c) the potential barriers to entry and growth for small and medium-sized pension providers;(d) the adequacy of existing regulatory and competition safeguards in preventing anti-competitive behaviour regarding—(i) exclusivity arrangements,(ii) exit charges, and (iii) pricing structures;(e) the role of The Pensions Regulator and the Competition and Markets Authority in monitoring and responding to market concentration;(f) the merits of policy or regulatory measures to support new market entrants.(3) The Secretary of State must lay a copy of the report before both Houses of Parliament.”Member’s explanatory statement This new clause would require the Government to report on the impact of market consolidation on competition and new market entrants.

My Lords, in leading once again on this Bill, I say that this group is bound together by a simple question: is the pensions system working as it should for its members and do we have the evidence to judge this properly? The proposed review is on consolidation, access to impartial pension advice, injustices experienced by scheme members, communications and data accuracy. It all goes to trust, fairness and whether savers can navigate the system with confidence.

From these Benches, we think these are legitimate concerns. Consolidation may bring efficiencies but could also reduce competition and choice if left unchecked. Better access to impartial advice is plainly in members’ interest, especially at key decision points. If data is inaccurate or communications unclear then even a well-designated, well-designed system can fail the people it is meant to serve.

I am pleased to have raised in my amendments the issues of competition, access to impartial pensions advice, and injustice experienced by scheme members. These are matters that I raised in Committee and I appreciate the time of, and the response from, the Minister and her colleagues in government. With all the pressures on us, I will not use any more of your Lordships’ time and bring my remarks on my amendments to an end. I beg to move.

My Lords, briefly, I support Amendment 120, in the name of the noble Lord, Lord Palmer. It is important to look at the issues he rightly raised that relate to the market. Indeed, Amendment 165 is particularly important, given that the injustices, some of which we will come on to in later groups, seem to have few redress routes. For a good pensions system, it is incumbent on us to have a better system to identify and remedy occupational pension injustices.

I will briefly speak to my Amendment 160, which would require a review to ensure that data in pension schemes must be accurate. Currently, there is no legal requirement to ensure that the amounts of money being paid into pension schemes for auto-enrolment workers or anyone else—I am particularly concerned about auto-enrolment—are correct. The Pensions Regulator has to make sure that pension contributions are being paid, but there is no requirement to make sure that this money is the correct amount.

I suggest amending the Pensions Act 2008 so that the section on “quality requirements” includes something that confirms regular checking of pension contributions; the regulations in Section 33 on “deduction of contributions”

“must require employers to obtain confirmation from the trustees or managers … that the amounts … paid into a scheme … are regularly checked … recorded and corrected as quickly as possible”;

and Section 60 on “requirement to keep records” would require schemes to provide confirmation that regular data accuracy checks and contribution verification, including for tax relief and national insurance relief, are correctly reported.

I have so often seen pension scheme records riddled with errors. It is surprising that there are no requirements in the legislation to make sure that the amounts of money going in are correct. I am interested to hear the Minister’s comments on the Government’s thinking as to whether they would consider this.

My Lords, I will speak broadly in support of these amendments. They reflect a thoughtful and welcome focus from across the House on some of the most important structural issues in our pension system. In particular, I welcome the attention given by noble Lords to the effects of consolidation on competition and market entry, and to the importance of robust data accuracy checks. A market that consolidates without sufficient scrutiny risks reducing innovation and choice, while poor data integrity undermines trust at its very foundation. These are therefore welcome points of focus, and I thank the noble Lord, Lord Palmer, and the noble Baroness, Lady Altmann, for raising them.

However, I will speak primarily to Amendment 169 in my name and that of my noble friend. This amendment would require a review of pension communications and financial promotion rules, examining whether the current framework unduly restricts providers from communicating clearly with members, particularly in relation to risks, guidance and comparative information. This is, I believe, a profoundly important issue. The reality is this: pensions are complex, technical and often opaque. For many people, they are also distant—something to be thought about later rather than now—but that distance is illusory. The decisions made or not made today will shape financial security decades into the future. Knowledge in this area is power, yet too often, individuals lack both the information and the confidence to engage meaningfully with their pensions. Communications can be overly cautious, overly technical or constrained in ways that make it difficult for providers to present information in a way that is clear, comparative and genuinely useful.

We have heard several times in our discussions with industry that professionals can be hesitant to provide what would be sound and helpful advice, because of concerns that rules like those set out in the Privacy and Electronic Communications (EC Directive) Regulations 2003 can impose significant uncertainty and burdens on pension providers and make it more difficult to provide scheme members with timely and helpful information. The result is confusion, disengagement and, in turn, poorer outcomes. Our amendment asks fundamental questions. Are we striking the right balance between protecting consumers and empowering them? Are the rules enabling clear, accessible and honest communication, or are they inadvertently limiting it? If we are serious about building a pension system that works for everyone, we must ensure that people are able to understand it and that the rules do not prevent them receiving timely and helpful advice from experts. Engagement and understanding must be enabled, and it can be enabled only if individuals and professionals are given the tools, information and clarity they need to take ownership of their financial futures.

This amendment is therefore about more than communications; it is about trust, transparency and, ultimately, outcomes. I will therefore be listening carefully to the Minister’s response to the issues that I and other noble Lords have raised in this group. I provide notice that I will seek to test the opinion of the House on Amendment 169 when it is called.

Is the noble Lord, Lord Palmer of Childs Hill, going to contribute to this debate?

He has spoken already.

Okay. This demonstrates the clear fact that I am still suffering from my cold, which is so bad that it kept me from attending the second day of Report.

There is an important issue that needs to be highlighted, and that is addressed in Amendment 165. I want to say a word on behalf of the members of a number of different schemes—NatWest is one, but there are others—who feel aggrieved because they were not properly informed of their rights under their scheme. Their major complaint is that when they reach state pension age, they suffer a diminution in their benefits. These rules were introduced in all good faith, and I participated in such negotiations myself, but it is the failure of the employer to ensure adequate information for members that has led to the complaint.

Do I have a different grouping from everyone else? I am speaking to Amendment 165, which is in the first group—is that correct?

Yes.

Okay; good. As I say, I am still suffering from my cold, and I hope the House will indulge me. But I think it is important to make the point on those members’ behalf.

My Lords, I am grateful to all noble Lords who spoke. I think the noble Lord, Lord Palmer, decided not to dwell on a number of his amendments because there is more to come, I suspect, in later groups. I had a nice long speech written in response to all these, but I may spare the House parts of that and concentrate on the issues raised during the debate.

Briefly, on consolidation, I think in general we all agree on the importance of understanding and monitoring the impact of the reforms presaged in this Bill. The Government have already taken steps to do this. A comprehensive, green-rated impact assessment was produced and an updated version was published as the Bill entered this House, with details of our monitoring and evaluation plans, including critical success factors and collaboration across regulators and departments. We have published a pensions road map, setting out clearly when each measure will come in. So the kind of review envisaged in the first amendment would not be helpful.

Amendment 160 from the noble Baroness, Lady Altmann, would give new powers to the Secretary of State to require employers and pension providers to undertake regular data accuracy checks in relation to contributions paid into workplace pension schemes. I completely agree about the importance of ensuring that members get the contributions they are due. However, I do not agree that the additional requirements proposed are necessary or proportionate, given the robustness of the current regulatory framework. Compliance with automatic enrolment duties remains high. The Pensions Regulator—TPR—runs a proportionate and effective compliance regime, underpinned by detailed guidance.

As I explained in Committee, employers, together with the trustees or managers of pension schemes, are already required to keep certain records. That includes details of both employer contributions and deductions from members’ earnings for each relevant pay reference period. Employers have to keep payment schedules and contribution records for six years and opt-out information for at least four. TPR has issued codes of practice setting out clearly how trustees of DC schemes and managers of personal pension schemes should monitor the payment of contributions. These also cover the provision of information to scheme members, enabling them to check that their contributions are made correctly, and they establish clear expectations around the reporting of material payment failures.

Can the Minister confirm for the House whether there are any checks or reporting on accuracy of the contributions? There is a requirement, but is anybody actually checking whether the amounts are correct?

I invite the noble Baroness to come back in at the end if she feels I have not answered that. I would say two things to her. One is that the duty is on the trustees or managers. If they become aware that the appropriate things are not being done by employers, or that an employer does not appear to be taking adequate steps to remedy a situation where things have gone wrong—for example, if there are repetitive or regular payment failures—they have a duty to report it to the regulator.

But crucially, the proposed value-for-money framework introduces an assessment of quality-of-service metrics, which directly addresses the accuracy and promptness of core administrative functions, including the secure, timely and accurate processing of contributions. Metrics related to saver engagement will be phased in at a later date, but schemes will be required to disclose how often they review and correct both common and scheme-specific data as well as the proportion of members with complete and accurate records. They also will have to report on the timeliness and accuracy of core financial transactions, such as paying in contributions.

We are currently considering the feedback received from industry on the latest VFM consultation in order to make sure that we develop a VFM regime that will drive greater transparency and higher standards around data quality and contribution accuracy. I hope that is exactly what the noble Baroness wants, and that that has encouraged her. These measures demonstrate that there is a well-established and effective framework that, together with the VFM measures, will make all the things she wants come into place.

I will not dwell on Amendment 163 from the noble Lord, Lord Palmer, about universal pension advice; we gave that a fair outing in Committee. I simply say that we completely share the view that we want to make sure that people get the appropriate advice at the time they need it. But there is already a very large amount of support out there. Being realistic, the option proposed in his amendment would probably, at the best guess on first estimates, cost around £2 billion and require us to double the size of the financial advice sector. I know he is not pushing that, but he is pushing the important underlying point: to make sure that people have access to the support they need. We believe that, between what is available at the moment and what is coming on stream—Pension Wise, stronger nudge and guidance, and targeted support and guided retirement—there is a lot out there that will do that job.