Pensions Bill

Public Bill Committee, 25 June 2013.

Martin Caton (Labour, Gower)

Before we begin, I want to make a few preliminary announcements. Will members of the Committee please ensure that all electronic devices are turned off or switched to silent mode during sittings? As a general rule, I and my fellow Chair do not intend to call starred amendments that have not been tabled with adequate notice. The required notice period for Public Bill Committees is three working days. Amendments should be tabled by the rise of the House on Monday for consideration on Thursday, and by the rise of the House on Thursday for consideration on the following Tuesday. Therefore, this Thursday is the deadline for amendments for the first day of line-by-line consideration on Tuesday of next week.

Not everyone is familiar with the process of taking oral evidence in Public Bill Committees so it might be helpful if I explain briefly how we will proceed. The Committee will first be asked to consider the programme motion on the amendment paper, for which debate is limited to half an hour. We shall then proceed to a motion to report written evidence and a motion to permit the Committee to deliberate in private in advance of the oral evidence session, which I hope we can take formally. Assuming that the second of those motions has been agreed, the Committee will then move into private session, at which point non-Committee members will be asked to leave the room for a short while. Once the Committee has deliberated, the witnesses and members of the public will be invited back into the room, and our oral evidence session will begin.

Martin Caton (Labour, Gower)

Copies of written evidence that the Committee receives will be made available in the Committee Room.

Examination of Witnesses

Martin Caton (Labour, Gower)

We will now hear oral evidence from Age UK. Before calling the first member of the Committee to ask a question, may I remind Members that questions should be limited to matters within the scope of the Bill? We must stick to the timings in the programme motion agreed by the Committee. Generally, I will interrupt mid-sentence if a session is still continuing at its scheduled finish time. Hon. Members should declare any interest before the start of each panel if that interest is relevant. I welcome the witnesses to our proceedings. Please introduce yourselves.

Mark Reckless (Conservative, Rochester and Strood)

How closely do the Bill’s provisions match your expectations—perhaps desires—for a reformed pension system?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

What key concerns have been expressed to your organisation by the public about the move to a single-tier pension?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Jane, what is your view?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Do you find that the majority of people find it difficult to plan for their retirement and their pensions? Do you find that they suddenly work out what they are going to do in the last five or six minutes before it comes up?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

What do you think about the bereavement support arrangements in the Bill?

Mark Reckless (Conservative, Rochester and Strood)

What do you think of the move to a 35-year period for full qualification and the minimum of 10 years to build up any eligibility at all?

Mark Reckless (Conservative, Rochester and Strood)

Do you believe that the Bill could be the foundation for the stability that you wish to see?

Andrew Selous (Conservative, South West Bedfordshire)

I want to ask for your views on the position of those with derived and inherited rights to the state pension, and whether you think protections for them are sufficient? Do you have any suggestions in that area, or any concerns?

Christopher Pincher (Conservative, Tamworth)

You rightly said that some pensioners will receive a bigger pension than others. Do you have any concerns about the starting level of the STP, which the Government say will be set above the pension credit standard minimum guarantee, which is £135.40 per week for a single person? If you do have concerns about the starting level, what do you think it should be set at? If you think it should be set at a higher level, how do you see the increased costs being met?

Andrew Griffiths (Conservative, Burton)

Ms West, in your last answer you touched on means-tested pensioner benefits. Will you give us a bit of a wider view on how Age UK thinks the reforms will affect those benefits?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Do you think the abolition of the savings credit will be balanced out by the benefits of the single-tier pension?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Do you think there are other groups of pensioners who will be affected by this? Can you specify some groups of pensioners who will be badly hit by this?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Yes.

Andrew Selous (Conservative, South West Bedfordshire)

Can I ask you about the future increases in state pension age? Do you think the current timetable gives people sufficient time to adjust to the future changes?

David Simpson (DUP, Upper Bann)

You may have touched on this broadly in some of your evidence, but what other groups will face the most difficulty with the increase in the pension age? You have dealt with individuals and couples, but what other groups do you believe will face difficulty?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

May I turn briefly to the private pension aspects of the Bill, before returning to the state pension issue? Age UK has, as I understand it, a very clear position on the transfer of small stranded pension pots. Will you comment on the Government’s proposals regarding small pot transfer?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Sally, do you want to say a little on why stranded pots is such an important issue in the first instance? Why does it matter so much?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Is it fair of me to say to you that most of the pensions world has doubts about the pot-follows-member model?

Richard Graham (Conservative, Gloucester)

Sally, Age UK calls for current and future older people to have sufficient income from state and private sources to live comfortably. What do you think is sufficient income, and what do you think the split between state and private sources should be? Secondly, do you think the combination of the new single-tier pension and the introduction of auto-enrolment effectively incentivises the non-state element of savings and meets your requirement of measures to maximise private savings?

Richard Graham (Conservative, Gloucester)

Would it be fair to say that sufficient income is broadly what the new single-tier pension aims to achieve, and the comfortable living aspiration will depend on the amount of private savings, through auto-enrolment and other occupational schemes and so on? Is that broadly what the Age UK position is moving towards with the Bill’s changes?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

With the Chair’s permission, I will pick up a few points that have been mentioned so far. May I start, Jane and Sally, with the issue of the Pensions Bill being cost-neutral? Would you care to comment on the increased national insurance contributions, from the end of contracting out, going to the Treasury every year from 2016? Do you believe that, in that context, this is a cost-neutral Bill, or does it include a transfer of several billion pounds a year to the Treasury?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Is your understanding of the Bill as it stands that the Government are committed to making sure that that money is put back into the pensions system?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

That is something for the Committee to tease out a little more. I was fascinated by your observations on the potential impact, with some groups—married women and widows—being perhaps worse off, and your elaborating on who the winners and losers are. Can you say a little more about that? You mentioned, for example, married women, who would need 16 years of contributions in their own right not to be worse off under the new system.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

That is really helpful. Can I ask both of you to elaborate on the means-testing aspect? I was struck by what you said about the projections for a reduction in means-tested entitlement. Are we looking at the abolition of the savings credit being the driver, rather than the move to the single-tier pension? Is that a fair assessment of what your evidence has shown?

Mark Reckless (Conservative, Rochester and Strood)

May I probe a little further on the issue of the automatic transfer and the small pension pots? Do you see any better way of doing that than the Bill currently provides for?

Mark Reckless (Conservative, Rochester and Strood)

If that were a single scheme, wouldn’t it come to dominate the pensions system and be quite clunky, and difficult or expensive to manage and to move assets around within?

Steve Webb (Liberal Democrat, Thornbury and Yate)

It is helpful to hear the alternative proposition described, because in a sense any of these solutions is imperfect, and we are comparing degrees of imperfection. In the model you describe, you have your pension with your current employer, you have small pots with an aggregator from a set of aggregators, and you have medium-sized pots that are still stranded with your previous firm because they are not too small to be small, but they are not big enough to bother moving. Is that correct? So do you still have a lot of fragmentation?

Richard Graham (Conservative, Gloucester)

Just on that last point: as to the business of economies of scale, I think we would all agree; but doesn’t that argue for an economy of scale of putting all the little pots into one pot, which is easier for the individual to track and easier for them to be aware of, and at the same time gives greater economies of scale? What have the experiences of your members been on that? There are figures showing large numbers of small pots lying around not being looked at, unknown and everything else. Wouldn’t it be simpler just to have one?

Richard Graham (Conservative, Gloucester)

But the concentration of marketplace risk is a separate issue. That depends on the individual choices that the pensioner has made in each scheme. When they are aggregated together there isn’t an arbitrary decision on suddenly putting the whole lot into, let us say, UK equities. It is just a combination of all the different investments that are there.

Richard Graham (Conservative, Gloucester)

So is your case based on what is in the best interests of the employer, or what is in the best interests of the future pensioner?

Andrew Griffiths (Conservative, Burton)

Just to pick up something you’ve said a couple of times, Jane, about the risk of a pension pot being moved from a good scheme to a less good scheme: what evidence do you have that that is more likely than the opposite—that someone could find that their pension is moved from a bad scheme to a good scheme? Don’t you agree that from an individual potential future pensioner’s perspective, they are more likely to be aware of how their scheme is operating and, therefore, be keen to try to influence that, if it is all in one pot rather than a fragmented pot?

Martin Caton (Labour, Gower)

Order. I am sorry to interrupt you, Ms Vass, but I am afraid that that brings us to the end of the time allotted for the Committee to ask questions of you as witnesses. I thank you very much on behalf of the Committee. We will now hear oral evidence from the TUC.

While the new witnesses come forward, I should mention something that it was remiss of me not to have mentioned before. If Members have any relevant interests related to our panels of witnesses, they should be declared.

Richard Graham (Conservative, Gloucester)

Should they be declared verbally or in writing?

Martin Caton (Labour, Gower)

Orally would be fine.

Richard Graham (Conservative, Gloucester)

I am never quite sure what a declaration of interest is, but the Register of Members’ Financial Interests states that I am the recipient of a small defined benefit pension. If it is remotely relevant, I also chair the all-party group on pensions. If either of those interests is declarable, I am happy to do so.

Martin Caton (Labour, Gower)

It is always better to declare than not to declare.

Martin Caton (Labour, Gower)

I welcome our new witnesses. For the record, please introduce yourselves to the Committee.

Michael McCann (Labour, East Kilbride, Strathaven and Lesmahagow)

In the interests of transparency, I am a proud member of the GMB trade union. May I ask you a very broad question? Do the provisions of the Bill match your expectations for a reformed state pension?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

What is your view on the eligibility criteria for the single pension?

Andrew Selous (Conservative, South West Bedfordshire)

What sort of estimate have you made of the impact on public finances if we were to keep the contribution limit to 30 years, which would be typically somebody working from, say, the age of 20 to the age of 50? Given the increase in life expectancy, what study have you made of the impact of that on public finances, given that you have problems with extending it to 35 years?

Mark Reckless (Conservative, Rochester and Strood)

It would not be a significant fiscal impact if everyone were to get their single-tier pension after 30 years rather than 35.

Mark Reckless (Conservative, Rochester and Strood)

Which groups are you most concerned about in terms of the ending of contracting out?

Mark Reckless (Conservative, Rochester and Strood)

Is not this a pretty good deal for public sector workers to the extent that they will have benefited from contracting out—sometimes for a very long time—yet in as little as nine years they will be able to build up a full entitlement to the higher single-tier pension?

Richard Graham (Conservative, Gloucester)

Phil, you mentioned that pension expenditure by the state in the UK is lower than in other EU countries. Why do you think that is more relevant than, say, comparing the relative costs of total pensions and welfare as a percentage of public spending or as a percentage of GDP as a whole? Have you done such research?

Richard Graham (Conservative, Gloucester)

I take that to mean that you have not really considered whether the point I raised is as relevant or more relevant and that you have not done the research as such.

Richard Graham (Conservative, Gloucester)

Craig, you mentioned that private savings can be “complex and risky”. I am sure everyone would agree with that, but what role do you see for private savings in preparation for retirement? Do you see pensions as one aspect of savings, or do you see a state pension as something that should be a large percentage of people’s total savings pot? What role do you see for private savings, and what do you think of auto-enrolment as part of this?

Steve Webb (Liberal Democrat, Thornbury and Yate)

On the protected persons issue, schedule 14 and clause 24 provide for an override for protected persons, but also for an exemption for protected persons, so the Bill allows us to go either way. Can I give you a chance to respond to what employers’ organisations have said on this issue? They said that if you employ a former privatised worker in the transport industry or the energy sector, you already have a two-tier work force—a set of people with protected persons and a set without. They said that if we do not override the protected persons, recouping the employer national insurance increase will fall entirely on the unprotected workers, and that is unfair within the work force. What is your response to that?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Chair, I should say that I am a member of two TUC-affiliated unions, Community and Unite. Phil, you mentioned that TUC wished to sit down with employers to sort out the problem. Would an amendment to the Bill saying that schemes could not be overridden without trustees’ consent help in that process?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

On Second Reading of the Bill and today, there has been much discussion of the importance of the incentive to save. Craig, you picked up on that in particular. Can you elaborate a little on what the TUC would like the Bill to do to encourage saving, particularly through auto-enrolment?

Christopher Pincher (Conservative, Tamworth)

Can I split my question into two parts? Phil, you said that the policy of the GMB is to resist any increase in the state pension age while there are huge disparities in longevity, but I think you would accept that on average, there has been a significant increase in longevity. What disparity in longevity would you think to be reasonable in order to make the change?

Christopher Pincher (Conservative, Tamworth)

Okay, but in all practical circumstances you will not accept an increase in the state retirement age.

Christopher Pincher (Conservative, Tamworth)

We have heard what Age UK thinks. Can you tell us, from your perspective, of any specific groups of workers or your members who are likely to be disadvantaged by an increase in the state pension age?

Christopher Pincher (Conservative, Tamworth)

What mitigation measures do you see to get around that problem without massively increasing the estimated cost?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

First, I would like to say that I am a member of Community trade union, an affiliate of the TUC, and I am a former Community organiser. You touched on it there, Craig, briefly, but do you think that the Bill and the Government have done enough to take into account recent economic trends in terms of zero-hour contracting?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

What are your views, Phil?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

I have a brief second question. Have you got any information or research in relation to the discrepancy of longevity between, say, the average shift worker and the average non-shift worker?

Pamela Nash (Labour, Airdrie and Shotts)

I, too, declare that I am a member of the Community and Unite trade unions. You have spoken a bit about your views on the state pension age—you do not want it to increase—but is there any evidence from your members and workers about the effect of the acceleration of the increase in the state pension age that has affected women recently?

Richard Graham (Conservative, Gloucester)

Phil, earlier you suggested that the Government should increase their spending on state pensions by 2.5%, which is the difference, on your figures, between the UK spend and that of the rest of the OECD. What would the cost be of an annual increase in expenditure by the Government?

Richard Graham (Conservative, Gloucester)

That was roughly what you implied. I think that your figures were something like: UK 6.4%—

Richard Graham (Conservative, Gloucester)

What is your estimate of the cost of that?

Martin Caton (Labour, Gower)

We can all work it out for ourselves. I call Andrew Selous.

Richard Graham (Conservative, Gloucester)

I had not quite finished, Mr Caton.

Martin Caton (Labour, Gower)

We are running out of time, Mr Graham. I will call you again if we have time.

Andrew Selous (Conservative, South West Bedfordshire)

You said that you had concerns about the increase in the state pension age. We all understand that people who do physically and emotionally demanding jobs cannot necessarily do those same jobs all the way up to retirement age. What steps is the TUC taking to try to help workers reskill and retrain for different types of work towards the end of their careers? Is that an area in which you are engaged at all? If not, will you start to look at that?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I have a couple of related questions on the private pensions part of the Bill. First, does the TUC share the Work and Pensions Committee’s view that the Government’s idea of a pot follows member policy for stranded pots is the wrong way to go and that, in fact, an aggregator system would be better? If so, why? Secondly, what is the TUC’s view on clause 34, which gives the Secretary of State a general power to exempt employers from auto-enrolment?

Martin Caton (Labour, Gower)

Certainly.

Martin Caton (Labour, Gower)

A large number of members have caught my eye, but unfortunately we are down to the last three minutes of questions to this panel and the next question is probably going to be the last. I am going to move on to automatic transfers. David Simpson.

David Simpson (DUP, Upper Bann)

We have briefly touched on the automatic transfer. Craig referred to it in one of his answers. Could you elaborate a little on your concerns or otherwise in relation to the transfer of funds?

Martin Caton (Labour, Gower)

I am afraid that that brings us to the end of the time allotted for the Committee to ask questions of you. On behalf of the Committee, I thank you for your evidence. We will now move on to hear evidence from Cruse Bereavement Care and the Childhood Bereavement Network.

Martin Caton (Labour, Gower)

Welcome to the Committee. For the record, please introduce yourselves.

Andrew Selous (Conservative, South West Bedfordshire)

What is your view of the changes to bereavement benefit and of the introduction of the new bereavement support payment in the Bill?

Steve Webb (Liberal Democrat, Thornbury and Yate)

Thank you both for coming in. This is not an issue that has had a lot of attention so, partly for the benefit of the Committee, on the issue of losers you will understand that we are increasing the lump sum from £2,000 to £5,000 for families with children, and then paying a monthly amount of about £400 for a year. Obviously, the figures are not in the Bill; it is the structure that we are debating.

We do not recognise the 90% figure that you give, on the basis that if someone gets £5,000 not £2,000, that is an extra £3,000. If they get £400 per month for a year, which is roughly similar to the current rate, the extra £3,000 is gain, and therefore the only bereaved families with children who will get less will be those who would otherwise have been on the benefit for several years and, as you rightly say, this is focused on the immediate bereavement. Could you just talk us through why you think 90% lose, when we just do not recognise that?

Steve Webb (Liberal Democrat, Thornbury and Yate)

I think that that may be a misreading of the numbers. Clearly, if you are bereaved when you have a newborn and would otherwise have got 16 years’ worth of benefit—clearly, you would get far more under the current system. That is clear, but we know that, typically, people flow off the benefits for bereaved parents after three or four years—that is the median—so is it not a misunderstanding of our assessment to say that only those who are on for a couple of years gain and that is hardly anybody?

Steve Webb (Liberal Democrat, Thornbury and Yate)

Perhaps I can offer to sit down with you and go through this, because the 90% number that you wrote in your letter to The Times is, I believe, wrong. We will publish our own analysis very shortly with some quite different numbers.

On the wider issue, you will understand that, at the moment, bereavement payments are taxed and are knocked, pound for pound, off your means-tested benefits.

Steve Webb (Liberal Democrat, Thornbury and Yate)

No, the current weekly ones. We are proposing that, for example, the lump sum will be tax free and that because these payments look more like a death grant than a weekly benefit, we can disregard them for universal credit, so have you taken account of the fact that as well as—on top of—a bigger lump sum and a substantial amount in the first year, people can have quite significant universal credit?

Richard Graham (Conservative, Gloucester)

Thank you, Di, for the detailed e-mail from Alison Penny. In case other colleagues have not had it, I should say that it contains your specific estimates of those figures that the Minister was discussing with you. It will be very useful.

Richard Graham (Conservative, Gloucester)

That would be very helpful. It would probably enable the DWP then to make its calculations based on some of those elements of tax-free lump sums and so on that the Minister was referring to.

On the broad principles of what is proposed in the Bill, could you both say whether you think that it will help the system to be more understandable on the one hand—I am talking about simplification—and, on the other, whether you think that it will be fairer to those who have no children, who arguably are slightly disadvantaged by the current system? Lastly, could you say whether you think that a single contribution is the right sort of approach?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Thank you very much for coming to see us and for giving up your time to come here and help us. The new benefit will be paid, as I understand it, to bereaved spouses and civil partners, but those who are not married, in some form or another, will not end up with it. Does that concern you at all?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

I represent a constituency that is a naval garrison town, and I have a lot of people who come to see me and talk about some of these issues, especially for stepchildren as well, who find that their mother’s partner, for example, might have gone. That is an issue, too, but thank you for that.

Mark Reckless (Conservative, Rochester and Strood)

Remarrying will no longer affect payment of bereavement support. Is that something you see as a positive change?

Mark Reckless (Conservative, Rochester and Strood)

Do you accept that in the system there is now, having that financial pressure—almost a penalty—for getting remarried is a negative element in the current system that will not be present in the new one?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Overall, how many of those who currently would be entitled to the support will end up losing it under the new system? Can you go back over the numbers? There was a disagreement with the Minister about 90%. Can you clarify that for the Committee?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

If I understand you correctly, once people are claiming the bereavement payment for, say, more than three years, they are losing under the proposed system. You are talking about only those who make claims for less than three years. On the Department’s figures, how often do people on average or in the medium term claim bereavement payments?

Steve Webb (Liberal Democrat, Thornbury and Yate)

Just for the Committee’s information, under the current brief on widowed parents’ allowances, the average length of claims is about four years. Only one in 14 last more than 10 years. Clearly, yes, if you are pregnant when you are bereaved and you go on claiming for 16 years, you would get a lot less of this payment, but you would get universal credit for that whole period. You said in your response that that makes it more complicated, but it is cash to live on. It is a substantial addition, whereas current bereavement benefits replace other benefits. It would be cash to live on. You are getting intensive help early on and long-term support if you have no other source.

The levels are not in the Bill—the £5,000; the £400 and all the rest of it. A future Government will decide the levels. We are giving them indicative levels. Let us park the levels. Can you say a little more about the structure? What bereaved families said to us and what your organisation has to some extent said to us in our consultation was that bereavement is a real financial hit. The original proposal was for all of the money to be a huge lump sum. People then said, “No, we couldn’t cope with a lump sum. We would spend it all,” so they ended up with a big lump sum and 12 monthly instalments. Do you have some sympathy with that direction of travel as opposed to quite a small lump sum and a stringed-out benefit?

Martin Caton (Labour, Gower)

If hon. Members have no further questions for the witnesses, may I thank you very much on behalf of the Committee?

Anne Main (Conservative, St Albans)

We will now hear evidence from the National Association of Pension Funds and the Association of British Insurers. Thank you for coming. Before calling the first Member to ask a question, I remind Members that questions should be limited to matters within the scope of the Bill.

Heather Wheeler (Conservative, South Derbyshire)

I am an associate of the Chartered Insurance Institute, but do not practise anymore. I do not know if that is a declaration of interest that I need to make.

Anne Main (Conservative, St Albans)

It is noted, thank you.

I also remind Members that we must stick to the timings in the programme order the Committee has agreed. I hope that I do not have to interrupt any of our evidence givers mid-sentence, but I will do if need be. For the record, please will the new witnesses introduce themselves to the Committee?

Anne Main (Conservative, St Albans)

Thank you very much. I call on Mr Andrew Selous to ask the first question.

Andrew Selous (Conservative, South West Bedfordshire)

Good afternoon, and thank you for coming before us. May I ask you about the revised implementation date that is in the Bill, and whether you think it gives employers and pension schemes enough time to make the necessary changes?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Welcome, and thank you very much indeed for giving your time to come to see us. Are you satisfied with the provisions in the Bill that would allow employers to amend pension scheme rules to take account of the ending of contracting out, or the statutory override, as it is called?

David Simpson (DUP, Upper Bann)

Are you satisfied with the proposed new arrangements for the Government to review every six years whether increases need to be made to the state pension age?

David Simpson (DUP, Upper Bann)

Do you agree, Mr Philp?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

May I ask the panellists about their views on the Bill’s provisions on and the Government’s approach to stranded small pots—how to transfer pension pots automatically? What is the NAPF’s position on pot follows member and what is the ABI’s position on that?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I am entirely relaxed.

Steve Webb (Liberal Democrat, Thornbury and Yate)

You mentioned the costs to industry, but you will have seen our impact assessment, which shows very substantial net savings to the industry for not having to hold tens of millions of pots. I am interested to know whether you think that that is fair or not.

Can I probe the NAPF line on multiple aggregators? It is very helpful through evidence sittings to hear an alternative proposition. The Bill has a favoured proposition that we have not really seen fleshed out. Have you set out what a multiple aggregator model would look like? Presumably every member of the public has to be tied up to their own aggregator; they also have their current pot and their previous pots of a middle size that were not small enough to be auto-transferred. Do you think you would get the consolidation and engagement that we need?

Heather Wheeler (Conservative, South Derbyshire)

Can I take you to clause 32, which is about short-service refunds? The clause removes the facility to refund pension contributions to employees who leave a scheme after a short period and for the employer’s contributions for retained within the scheme. Do you regard that change as potentially detrimental to pension schemes? A short no would be fine.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Can I pursue the small pots aspect and relate it to wider aspects of the private pensions part of the Bill? The NAPF did a piece of research on pot follows member and the potential costs and benefits of that approach. Can you say a little about it?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Dr Braun, so you recognise the figure in the NAPF’s research of a potential 25% reduction in pension pot size? Is the NAPF research a robust piece of research?

Anne Main (Conservative, St Albans)

This will have to be the last question, Mr Graham.

Richard Graham (Conservative, Gloucester)

It is nice to see the NAPF and ABI with us today. I will ask a few round-up questions.

Do you have any particular queries or concerns about short-service refunds under clause 32, the ban on consultancy charges, which was a recommendation of the Select Committee, and above all clause 42, which deals with the new objective for the Pensions Regulator to

“minimise any adverse impact on the sustainable growth of an employer”?

At an earlier sitting of the all-party group, there was a suggestion that you felt this needed fleshing out in a bit more detail. Would you like to comment on any of the aspects that the Committee should consider?

Anne Main (Conservative, St Albans)

Will the witnesses make brief comments, as we have to finish at 3.15 pm?

Anne Main (Conservative, St Albans)

Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions of this panel of witnesses. I thank both of you, on behalf of the Committee.

Anne Main (Conservative, St Albans)

We are now to hear oral evidence from the Pensions Regulator. Will the new witnesses please introduce themselves?

Pamela Nash (Labour, Airdrie and Shotts)

Previous witnesses were concerned that the timing of the change to STP from April 2016 may be a bit tight. Can you share your views on that? Do you think April 2016 allows enough time for pension schemes and employers to get ready for the change?

Pamela Nash (Labour, Airdrie and Shotts)

Has the fact that the date has changed caused any confusion?

Mark Reckless (Conservative, Rochester and Strood)

On statutory override, do you think the right balance has been struck of flexibility for employers to make changes versus some security of expectation for employees in the schemes?

Mark Reckless (Conservative, Rochester and Strood)

Does it make sense to provide for that override for private sector schemes, while not having that as an option for public sector schemes?

Andrew Griffiths (Conservative, Burton)

What is your view on the proposal in the legislation to review the pension age every six years?

Andrew Griffiths (Conservative, Burton)

We have heard in both evidence sessions today concerns about people who currently have a good scheme being forced automatically to go into a scheme that is more expensive or not performing as well. What is your view of people’s likelihood of ending up in a poor scheme under the new proposals, compared with what we currently have? Is it more or less likely, or about the same?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Building on that conversation, Bill, how great a regulatory challenge do you believe it will be to ensure that all schemes are of such a standard that no one, as their pension is automatically transferred, pot to pot, from one scheme to another as they move job, is transferred into an inferior scheme?

Steve Webb (Liberal Democrat, Thornbury and Yate)

You mentioned the Australians who, looking back, realised that they had got this wrong. Would you share with the Committee the model that the Australians are going for to address that problem?

Secondly, the database is clearly complicated, difficult and expensive on one level, but do you see any potential upside, either in terms of driving up data quality in schemes, which is something that I know you care about as a regulator, or through virtual aggregation, bringing all your pension information into place and smooth-lining transfers? Is that somewhere where we always ought to have gone?

Steve Webb (Liberal Democrat, Thornbury and Yate)

Australia?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Clause 32 removes the facility to refund pension contributions to employees who are only in the scheme for a very short time. The employer’s contribution will be retained within the scheme. How much damage will that do? Do you think that it will do any damage to the pension fund as a whole?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

All I am saying is that, if there were to be a reduction in the amount of money actually in the pension fund, it could have difficulty as far as pay-out is concerned in the future.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

At the moment what happens is that the refund of pension contributions can actually take place. That will not happen. It will actually protect the pension fund, will it not?

Heather Wheeler (Conservative, South Derbyshire)

Do you have concerns about other technical changes to workplace and occupational pension scheme regulation as set out in the Bill, including those affecting automatic enrolment schemes?

Richard Graham (Conservative, Gloucester)

This is a marvellous opportunity to ask the question to which unfortunately we did not quite hear the answer from the previous witnesses. Bill, as the pensions regulator, you will now have an additional task: to minimise any adverse impact on the sustainable growth of an employer. How do you feel about this? Is it clear enough? What concerns, if any, do you have?

Richard Graham (Conservative, Gloucester)

Are there any types of employer for whom a growth target may not necessarily be appropriate? I am thinking, for example, of charities’ defined benefit schemes.

Andrew Selous (Conservative, South West Bedfordshire)

The Bill makes some amendments to pension protection arrangements. Do you believe these amendments will improve the safeguards for scheme members?

Andrew Selous (Conservative, South West Bedfordshire)

I was just looking at what changes to the arrangements are in the Bill. Perhaps you would like to comment on the safeguards you see for pension protection arrangements at the moment.

Andrew Selous (Conservative, South West Bedfordshire)

That is helpful. I was referring specifically to clauses 37 to 43. My colleague, Richard Graham, referred to clause 42 in his previous question. I think you have covered that but if you want to come back, having had a quick glance at clauses 37 to 43, that would be helpful.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

The previous witnesses, particularly the NAPF representative, set out a view of how in the next decade or so the scheme side of the pensions industry will consolidate. You, if I have picked up on your comments correctly, think that is likely to happen too. First, am I correct in thinking you believe there will be consolidation on the scheme side? If so, what do you think the implications of that consolidation are for auto-enrolment in particular?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Australia was mentioned by the Minister, in particular. The Cooper review underpins the Australian Government’s new approach, and in it Cooper said that pensions are not a cottage industry. Do you agree with that statement?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

We see that in the Government’s direction of travel in local government pension schemes, where there is a lot of talk about scaling them up for precisely this reason. Would that be a fair analogy?

Anne Main (Conservative, St Albans)

If there are no further questions for the witnesses, thank you very much for coming and presenting to the panel today.

Anne Main (Conservative, St Albans)

Before we take evidence from the next witnesses, I must say to the room that we are expecting a Division, which may be earlier than the 4 pm that we anticipated. We will take a certain amount of time, depending on whether there is more than one Division. You will have to bear with us if we all quit the room.

We will now hear oral evidence from Dr Ros Altmann and Dr Hari Mann. For the record, will the witnesses please introduce themselves to the Committee?

Andrew Selous (Conservative, South West Bedfordshire)

Good afternoon, thank you for coming. I would like to ask you both a large general question. How do you see the Bill matching your expectations for a viable reformed state pension system overall?

Andrew Selous (Conservative, South West Bedfordshire)

That is very helpful, thank you. Dr Mann.

Andrew Selous (Conservative, South West Bedfordshire)

That is very helpful, thank you.

Pamela Nash (Labour, Airdrie and Shotts)

There are significant changes in the Bill, including the new 10-year minimum for contributions and the increase to 35 years’ contributions in order to get a full STP state pension. Do you think that that will adversely affect some pensioners, and are there any particular groups that you would single out as being affected? You look as if that is a yes.

Mark Reckless (Conservative, Rochester and Strood)

Dr Altmann, I think that you accepted that it will be less unfair to women but that some women, to whom you drew attention, will still lose out. How does that compare, actuarily speaking, with the fact that on average, women live significantly longer and draw pensions for that longer period?

Mark Reckless (Conservative, Rochester and Strood)

In light of that, what do you think of the balance that the Bill has struck in terms of protections, particularly transitional arrangements for derived or inherited rights, which again may affect women in particular?

Anne Main (Conservative, St Albans)

We will continue where we left off. Dr Altmann was addressing Mr Reckless, but can Mr Reckless refresh Dr Altmann’s memory of the exact question posed? Dr Altmann has to leave at 10 minutes to 5, so if questions can be kept concise, we will get through everything.

Mark Reckless (Conservative, Rochester and Strood)

Dr Altmann, in light of the discussions we were having about pension provisions for women—the inequalities and whether they balance out—would you assess the protections and transitional measures that are there for some of the inherited and derived rights? Does the Bill strike the right balance?

Richard Graham (Conservative, Gloucester)

In a way, that question and answer has anticipated much of what I was going to say. Ros, in your evidence to the Select Committee, you said that most women would be better off and that men are unaffected, even allowing for the contracted-out element. As you have said, the issue that you have identified is more to do with older women than those coming later, after 2017. What would you do differently if you were the Minister? What else could be done on that within the cost-neutral overall?

Richard Graham (Conservative, Gloucester)

My supplementary is to Hari. You heard what Ros said, so what do you think could be done differently if you were designing it from scratch? Do you think there is any rebalancing that could or might be done?

Richard Graham (Conservative, Gloucester)

On this particular issue, really. Once you have a single-tier pension there is the inevitable business of winners and losers. You have the winners, who are the younger women, and potentially you have the relative losers, who are the older women.

Richard Graham (Conservative, Gloucester)

So from your point of view it does fulfil the key objective, which is that saving always pays?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

May I take up the thread of the conversation that has just taken place? Hari, Mr Graham referred again to the incentive to save, which has been part of the discussion since Second Reading. I know the RSA has done a lot of work on private pensions and on how to ensure that those who are encouraged to save more into private pensions are saving into high-quality schemes, to which previous witnesses have referred. Do you care to comment on how we get to that situation?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

If Madam Chairman is happy for me to pursue that line of inquiry, my memory is that the RSA report on this subject had some pretty striking numbers on the information disclosed by private pension providers. Could you give the Committee some of that?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Does that create an issue? Is it your view that the view abroad is that the incentive to save is important, and a flat-rate state pension is largely about encouraging that incentive to save, so we need to get the two halves of the reform right?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Are you satisfied with the proposed technical changes to workplace and occupational pension schemes, including automatic enrolment schemes, which are set out in the Bill? Do you have any specific areas of concern?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

There are, but perhaps you could deal with one or two issues you are concerned about—the top priority ones.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

That is one, and auto-enrolment.

Anne Main (Conservative, St Albans)

Order. In accordance with Standing Order 83C(11), I exercise my power to extend the time for questioning by 15 minutes.

Andrew Griffiths (Conservative, Burton)

On the timetable for future changes to pension age, do you think that gives people enough time sufficiently to plan for their future?

Steve Webb (Liberal Democrat, Thornbury and Yate)

This morning we had the GMB trade union saying we should not increase state pension age at all. You have urged us to be bolder. I take it from that that we are probably about right. What would being bold mean? How far could we and should we go?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I wanted to ask Hari in particular, given your work on private pensions, about the issue of small pot transfers and stranded pots transfers, whatever their size. There has been a lot of discussion today about the merits and demerits of pot follows member versus an aggregator system. Could you set out, from the RSA programme’s point of view, your view on small pots?

Anne Main (Conservative, St Albans)

Dr Altmann, can you answer Mr Graham’s supplementary question, if you do not have to rush away?

Richard Graham (Conservative, Gloucester)

On the point of perhaps using NEST as a way to both consolidate the small pots and bring down charges because it has a clearer charging mechanism, do you anticipate, if that were to be encouraged, any reaction from the private providers who might consider that the Government were effectively enabling a monopoly position for themselves? Would that encourage the free competition that we otherwise want to see?

Anne Main (Conservative, St Albans)

Thank you. If there are no further questions from hon. Members to the witnesses, I thank Dr Altmann and Dr Mann for giving evidence. It brings us to the end of our business for today. The Committee will hear further evidence on the Bill at 11.30 am on Thursday 27 June.