The first debate in the House of Lords on the Pension Schemes Bill took place last night (January 28) with peers pointing to a number of issues including the failure to implement the department for Work and Pensions' own automatic enrolment review proposal to lower the starting age from 22 to 18.
Lord McKenzie of Luton said: “A number of commentators have expressed disappointment that the opportunity has not been taken to implement the changes to auto-enrolment recommended by the 2017 review: namely, to extend the application to workers aged 18, and to remove the qualifying earnings deduction and the earnings threshold.”
Baroness Donaghy agreed that more needed to be done to improve auto-enrolment so that more people could benefit.
She said: “The government should include an increase in auto-enrolment minimum contribution rates. They should support those in multiple occupations, so common in the gig economy, so that their collective earnings can be counted towards eligibility for auto-enrolment.
“They should expand auto-enrolment to include the self-employed, allow 18 year-olds to join and remove the lower earnings limit, which in turn would solve the problem in relation to multiple occupations. This would lead to an additional £2.5bn in savings.”
During the debate, which lasted for over four hours, peers raised concerns about the lack of detail on pension dashboards and criticised the lack of progress on the project and the potentially limited scope of information that would be featured on it.
There were also differences of opinion on whether multiple dashboards were preferable to a single publicly run dashboard. Currently the bill allows for multiple dashboards to be run by providers and one by Maps.
Lord Sharkey said: “The question in my mind is whether it should be ‘dashboard’ singular or ‘dashboards’ plural. Should it be a dashboard provided only by Maps (Money and Pensions Service), or should it be many dashboards, provided by Maps and other qualified organisations?
“On the assumption that there will be very tight restrictions on how dashboard information is presented, and that future projections will not be allowed much variation, I see the merit in multiple dashboards.
“It seems to me that the key argument is one of reach. Allowing many dashboards will get more people to take notice and use dashboards. Restricting dashboards to Maps risks a much smaller take-up.”
But Baroness Neville-Rolfe argued a single dashboard would be better suited to drive down costs.
Baroness Neville-Rolfe said: “The pensions dashboard is a great digital idea. Matt Hancock would be proud of it. However, there is another problem that we will have to debate in committee: the substantial cost, and whether that is borne by employees, employers or other beneficiaries.
“I have to say that the impact assessment for the bill is impressively fat, but, unfortunately, it is difficult to understand. The various dashboard costs appear to me to tot up to well over £1bn, which is a lot of money. We must try to keep that cost down.
“Can we work up a single, secure and simple dashboard system in order to do so? Is this another area where we could see a draft statutory instrument and debate the options? And is there a case for some state help for the smallest and poorest schemes?”
Another major concern was the lack of detail of how collective defined contribution schemes would operate with some saying rules governing these schemes were left to subsequent regulations.
The DWP minister who opened the debate, Baroness Stedman-Scott, said the House of Lords would be able to see ‘illustrative’ regulations before the next set of debates on the bill.
CDC schemes differ from DB pensions in the sense they do not guarantee certain incomes in retirement. Instead, CDC have a target amount they will pay out, based on a long term, mixed risk investment plan.
These schemes also differ from the traditional defined contribution (DC) plans in that they do not produce individual pension pots. Instead they invest savings in a larger collective pot, which provides an income to individuals during their retirement.
Steve Webb, director of policy at Royal London said: "The general thrust of this bill is widely welcomed but there are still serious concerns about both what is in the bill and what is left out.
“The bill [...] 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’.”
amy.austin@ft.com
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