Clause 122 - The Money and Pensions Service: the pensions guidance function

Pension Schemes Bill [Lords] – in a Public Bill Committee am 4:00 pm ar 3 Tachwedd 2020.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Work and Pensions) (Employment) 4:00, 3 Tachwedd 2020

I beg to move amendment 16, in clause 122, page 116, line 37, at end insert—

“(2A) Before any other pension dashboard services can qualify under section 238A of the Pensions Act 2004 (qualifying pensions dashboard service) the Secretary of State must lay before Parliament a report on the operation and effectiveness of the pensions dashboard service, including the adequacy of consumer protections.”

This amendment would require the Secretary of State to report on the operation and effectiveness of the public dashboard service (including consumer protections) before allowing commercial dashboards to operate.

Photo of Laurence Robertson Laurence Robertson Ceidwadwyr, Tewkesbury

With this it will be convenient to discuss the following:

Government amendment 8.

Amendment 3, in clause 122, page 116, line 42, leave out “one year” and insert “five years”.

This amendment would extend to five years the period for which the Money and Pensions Service dashboard would have to have been running before commercial operators could enter the market for the provision of pensions dashboards.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Work and Pensions) (Employment)

We hugely regret that the Government are seeking to remove the amendment, introduced by Baroness Drake, that would have required the Money and Pensions Service dashboard to be up and running for a year before other commercial dashboards could be launched. It has always been Labour’s firm position that just one publicly run dashboard would be the best way to ensure that people receive trusted information about their pensions.

The Work and Pensions Committee produced a report on pension freedoms in 2018, in which it recommended a single public dashboard, to ensure that it would be free from commercial pressures and could provide individuals with a reliable source of information about their pensions. As that Committee noted, this would be in line with the examples of Australia, where a single dashboard is hosted by the Australian Taxation Office, and Sweden, where the only dashboard is run by a public-private partnership.

As the report stated, dashboards should first and foremost provide consumers with accurate and impartial information about all their pensions in one place. In a multiple dashboard system, providers would have incentives to use their dashboards to promote their own products or otherwise discourage switching away. There is also a danger that dashboard providers could use different underlying assumptions, producing rival income projections from the same raw data.

The pensions dashboard was conceived as a means of empowering consumers, to promote competition in the product market. There is a risk that in a multiple-dashboard system, providers could instead compete on the information provided. Which? and the Association of British Insurers have argued that regulation would be necessary to ensure that the dashboards were consistent. There is a simpler solution. By providing information on all pension entitlements in one place, the pensions dashboard would be a vital tool in informing and engaging customers, and empowering them to exercise pension freedoms in their own interest. A single, publicly hosted dashboard would be the best way of providing savers with simple, impartial and trustworthy information. However, the Government have said their intention is to progress plans for multiple dashboards.

Rather than preventing the introduction of commercial dashboards for a set period of time, our compromise amendment would merely compel the Government to review the operation of the public dashboard, including the adequacy of consumer protections, before allowing for commercial rivals to operate. If commercial dashboards are to be allowed, there must be strong and proactive regulation of all pensions dashboards and any other organisations involved in the storage, processing and presenting of pensions data. Organisations such as The People’s Pension and Which? have said that clear legal duties need to be placed on the operators of dashboards to act in the best interests of consumers.

The Government also envisage a role for what they call integrated service providers, which will store vast quantities of pensions data. It is not clear whether the Government intend for them to be regulated, or for the Money and Pensions Service, the TPR or the FCA to be able to authorise them and set regulatory standards. Unless the regulators have the ability to set standards and intervene in the operation of ISPs, any problems in the ISPs market will have to be tackled by contacting the individual pension schemes. That would be time-consuming and could lead to long periods of time when individuals’ pensions data is unavailable on pensions dashboards. Any scandals or data breaches that occurred in unregulated ISPs could also have a significant detrimental impact on the reputation of pensions dashboards and the overall framework for people to access their pensions data securely and safely.

The common-sense step proposed in the amendment would allow proper consideration to be given to the risks proposed by private providers. In many ways, the concerns underpinning the amendment are similar to those associated with Government amendment 7—that the introduction of commercial dashboards, paired with the ability to engage in commercial transaction activities, would impact on the reliability of the information presented to savers and open up the risk of people being persuaded into disadvantageous pensions positions.

I would be grateful for the Minister’s views on this matter, which I understand he is keen to share. If he still intends to progress with commercial dashboards, will he announce concrete steps and detail on how and when they will be regulated by the FCA? I am sure he will say a few words about integrated service providers. Will they store vast quantities of pensions data, and will they be subject to regulation and standards that are set by the TPR, MaPS and the FCA?

Photo of Neil Gray Neil Gray Shadow SNP Spokesperson (Work and Pensions)

To follow on from the shadow Minister’s comments about amendments 8, 16 and 3, this debate takes us to probably the greatest area of contention in the Bill, which is contentious because of the Government’s intention to remove the Lords amendments that require a year’s buffer before commercial dashboards can enter the market.

It is not just the SNP, Labour or other Oppositions parties that have concerns, but a great number of stakeholders. The Pensions and Lifetime Savings Association says that

“the Government should ensure the first pensions dashboard will be a single, non-commercial product hosted by the Money and Pensions Service (MAPS) and that no other dashboard should go live until a full consumer protection regime is in place.”

In addition, rushing to introduce transactional capabilities is likely to put savers at greater risk of scams and mis-selling. It would be better to wait a year or two, rather than undermine consumer protection.

The PLSA does not support Government amendments 7 and 8, which would allow dashboards to be used to provide transactional services and remove the requirement for the non-commercial pensions dashboard service run by MaPS to have been established for one year before other dashboards services can provide services. The PLSA supports amendment 16, which would require the Secretary of State to report on the operation of the public dashboard service, including consumer protections, before allowing commercial dashboards to operate. It also supports amendment 3, which would extend to five years the period for which the MaPS dashboard would have to have been running before commercial operators could enter the market for the provision of pensions dashboards.

Similarly, the Institute and Faculty of Actuaries says: “The first dashboard must be a single, non-commercial platform. We think it is important that the first dashboard be non-commercial and hosted by the Money and Pensions Service. Initial non-commercial dashboards will to provide greater clarity for consumers and build confidence and trust in the dashboard ecosystem. It will also make it easier for regulators to learn more about how savers use such platforms, and enable them to adjust consumer protection regulation accordingly. In the medium term, multiple commercial dashboards could be permitted to facilitate innovation and choice. However, these platforms and the communications with savers need to be properly regulated to ensure strong consumer protection. We do not support new Government amendments 7 and 8, which would allow the dashboards to be used to provide transactional services and remove the requirement that the non-commercial pensions dashboard service, run by MaPS, must have been established for one year, before other dashboard services can provide services.”

We are clear that commercial dashboards should not be opened to the market for at least a year and we strongly oppose UK Government attempts to undermine that. We feel that a year’s buffer was a compromise position, as there are many people concerned about having commercial dashboards at all, especially when the Government intend them to be transactional. We tabled amendment 3 to underline our opposition to any watering down of the Bill as it stands.

The Lords amendment was a compromise. The UK Government are now unilaterally forging their own path, breaking the cross-party consensus that otherwise would have existed. As the hon. Member for Wallasey rightly said, it is crucial for good governance and good pensions legislation. It seems the Government are looking to implement both commercial and financial transactions on dashboards, before assessing the risk, before assessing consumer behaviour and interaction with the MaPS dashboard, and before taking full cognisance of the risks of pension freedoms, which we are only just starting to understand. Time is the wisest counsellor of all, Mr Robertson.

We want to empower people to make informed choices about their lifetime savings. The public service pensions dashboard is a welcome step towards that and will transform consumer engagement with pensions over the long term, and reunite individuals with lost pension pots. Pensions dashboards run by commercial operators should not be opened to the market until the publicly run MaPS dashboard has been running for a least a year.

We have a long-standing additional commitment to the establishment of a standing independent pensions and savings commission. The scope of the Bill does not allow us to stretch to that on this occasion, but later in deliberations we will consider whether a commission looking at the terms of this Bill should be established. Such an organisation would first be tasked with looking at when commercial operators should be able to enter the market for the pension dashboards.

In our view, the MaPS dashboard, or public dashboard, is a wasted opportunity unless it is properly marketed and promoted by the Government as a safe, independent and impartial space for people seeking information about their pensions. We feel that it would get swamped by commercial operators seeking to promote their own dashboards and their own commercial interests.

We caution the Government to be canny, to take their time and to learn from the implementation, first of all, of the public dashboard, before they move too hastily and have to play catch-up in the regulatory format, because people fall foul by making poor decisions about what is their greatest financial asset.

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

I accept that the issue is complex. On the one hand the Government are being urged to proceed with the dashboard and it has been rightly pointed out that we have displayed slowness, in some respects. On the other hand, we are being urged to delay in respect of this particular matter. We do not believe that this is the appropriate way forward, as the Lords indicated, and there are a multitude of reasons why that is the case.

I start with the initial 2018 consultation. The principle behind that was that consumers should always have access to a publicly backed service, which we have legislated for, but should also have the freedom to choose to access the information in the way they feel most comfortable. I go back to the point I made to my hon. Friend the Member for West Worcestershire: do we build a service and make the consumer come to us, or do we build a service where the consumer is already comfortable, in circumstances where there are sufficient protections around that?

Consumers have clearly stated that they expect to be able to access a dashboard through a variety of channels. The pensions industry holds an in-depth knowledge of its customer base, and this represents an opportunity for consumer-focused innovation to create platforms that individuals can engage with. We believe that allowing multiple dashboards is the most effective way to drive consumer engagement and really begin to put people in control of their savings.

I want to address the point that the hon. Member for Feltham and Heston made about data because I want to be utterly clear with her that this not about the storage of data. If she thinks that that is what the dashboard is doing, that is a misunderstanding of what it is proposed that the dashboard should do. I want to absolutely nail that, because we made great efforts to ensure that this is not a data repository process but a find-and-trace service that empowers individuals or their IFAs. She asked whether there will be consumer protections, going forward. The answer is yes, and we will discuss some of them under clause 125. Obviously, this will be an activity regulated by the FCA and there is ongoing regulation on a multitude of bases.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Work and Pensions) (Employment) 4:15, 3 Tachwedd 2020

The Minister is right that there will be no storage of data on the dashboard––in a sense, it is drawing in that data dynamically––but could he explain the role of the integrated service providers?

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

I explained this at great length earlier, but I will attempt to repeat what I said. I will jump through the verification hoops. The reality is that an individual gets verification and the information passes from the pension finder service to the connected pension schemes asking them to match the individual’s information. The pension scheme finds a match and confirms it to the pension finder service, which responds to the individual via their chosen dashboard saying that it holds the data. When the individual next logs on to their dashboard, the information from the pension scheme will be viewable by the individual. I drew the analogy of the cashpoint, which, I suggest, is the appropriate analogy, whereby if I bank with Barclays and I withdraw from an HSBC account, Barclays does not know what is in my account. That is the process by which we are trying to proceed.

Photo of Shaun Bailey Shaun Bailey Ceidwadwyr, West Bromwich West

On a slightly parallel point, with the advent of open banking, we had similar discussions on sharing data and the fears around how it might be used commercially. What we have seen is that, with a robust regime and buy-in from many of the stakeholders, it seems to have worked. Many of the fears that were advanced then and that have been articulated today have not really come to fruition. Does my hon. Friend agree that while we can talk about the legislation, it is the buy-in from stakeholders that will ensure that this succeeds?

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

There is no question: we are deliberately learning the lessons from open banking and the process whereby we took all our various bank accounts and made them accessible under a strict regulatory regime so that our rights were not infringed. There is now a massively enhanced consumer programme that empowers the consumer, drives down costs and does all the other things that we know open banking does. With great respect, I suggest that that is a very good example.

The big difference is that in open banking we are dealing with a relatively small number of banks in this country, unlike in, say, America, whereas with pensions we are dealing with 40,000 different schemes. But the principles are exactly the same. We have learned from the regulatory process and I have met the chief executive of Open Banking. My officials and the dashboard delivery team are engaging with them. No disrespect, but the problems that the Committee has rightly identified today are exactly the same sort of problems that were identified with open banking. These are the same consumer protection organisations, and I shall come to the approach of Which?, which is probably the No. 1 consumer protection organisation in the country. It is firmly on the side of the Government and disagrees with the amendment. My hon. Friend drew me to that.

Photo of Neil Gray Neil Gray Shadow SNP Spokesperson (Work and Pensions)

I draw the Minister back to points that he made earlier, when he said that the information provided on the dashboard will be taken sequentially so that it will be added to over time as we test and learn. Why then in this case are we not operating sequentially? Start with the MaPS, the public dashboard, and bed that in as the point of contact where people have the confidence to go for impartial information about what they are getting, without having to be exposed to marketisation. Learn from that, and then move to the position where commercial dashboards can operate. Learn from that experience, and then bring about transactionality through the dashboard in that process.

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

I will delay the introduction of the Which? elements for a moment. Amendment 16, for example, would delay the introduction of other dashboards, which would stifle innovation that could benefit consumers. We feel strongly that the potential exists for the production of a game-changing new system that would enable something that is not possible at the present stage, but that would suddenly be second-guessed and denied, and we will lose much momentum behind the project.

The Committee should not take just my word for it. I will briefly share the comments of Which?, from its submission on Second Reading on this proposal. It addressed this amendment, saying: “This amendment ensures that the publicly owned dashboard will have to be operational for at least a year before commercial dashboard services can operate if the Bill becomes legislation in its current form. Which? agrees with concerns that lessons will have to be learnt on the application of the dashboard, especially with regards to the use of data.

However, we do not believe that this amendment is the answer. It is a precautionary approach, and the risk is that by stymieing the development in this way, the industry will take away its innovation, drive and investment —all of which could benefit consumers. By enabling an individual to access their pensions data safely and securely via non-government providers, this can help to support take-up and engagement with dashboards by increasing the number of channels that individuals can access this information and increasing awareness. It can also help drive innovation to enable individuals to make the most of the information available via dashboards. This will only be possible if dashboard providers are permitted to provide tools and services using this data.

Furthermore, this amendment risks us being left with a dashboard that does not do as much as initially anticipated, resulting in consumers not being as engaged. This could represent a huge missed opportunity. It is crucial to ensure that dashboards are both safe and fully functional to give consumers the most choice and the most exposure to innovation.”

The hon. Member for Airdrie and Shotts will be aware that there is already the Pension Tracing Service and “Check your State Pension”, both existing organisations that address these particular points. There is no question but that the words expressed by Which? adequately address the point that it would be utterly wrong of us to promote and push forward the dashboard in circumstances where, upon its launch, even in its primitive format, we said, “You cannot access the dashboard through the provider or financial adviser you’ve been with for 30 years. You may only go through the Money and Pensions Service.” I therefore respectfully say that this is not the right approach and not something the Government support.

In respect of the delay and the parliamentary scrutiny, I would like to make two points. Parliamentary scrutiny is already taking place through the introduction of secondary legislation, which will be subject to the affirmative resolution procedure. The Money and Pensions Service is already legally required, according to the 2018 Act on this issue, to report annually to the Secretary of State on its objectives and functions. This includes the operation of the dashboard, and that report is laid before Parliament, which can debate it if it wishes.

The development of the pension dashboard does not end at the launch. The pension dashboard programme will continue user testing and research on an ongoing basis. That is the whole point of incremental delivery. The amendments, if passed, would no doubt have the consequence of delaying the production of commercial dashboards for some considerable time—the note on which escapes me, but I will try to remember—by requiring a report to the House of Commons and then a further consultation on user testing, which would effectively put back commercial dashboards, certainly by a year, and potentially by two years.

The five-year proposal that the hon. Member for Airdrie and Shotts has put forward would clearly sound the death knell for any commercial dashboard on a long-term basis. With no disrespect, I think that would be a massive missed opportunity.

Photo of Neil Gray Neil Gray Shadow SNP Spokesperson (Work and Pensions)

Amendment 3 is a probing amendment so that we can set out the fact that our feeling was that the Lords amendment was compromised. By quoting Which?, as the Minister rightly has, he seems to be suggesting that we are arguing against commercial dashboards altogether. We want a reasonable buffer in place, and we do not feel that that year would be lost for innovation or for developing a dashboard. Commercial organisations would be perfectly capable of catching up when the time came. That year would allow the Government to ensure that the MaPS dashboard is properly promoted and utilised by people and used for its intention, which is to inform good decision making for long-term savings and investments for a good return on income.

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

I am not sure that I can amplify or improve upon the comments that I have already made, save to make the point—again, I believe—that commercial dashboards will have to be part of the accessibility of this particular programme, and I genuinely believe it entirely right that they should be part of it from the word go, so that we can go forward together with those two particular products. Quite frankly, we keep coming back to the point that we should go to where the customer is already, rather than forcing the customer to go to some other place.

Photo of Angela Eagle Angela Eagle Llafur, Wallasey

Why, if diversity in the delivery of dashboards is so crucial, do other countries manage with single, publicly provided dashboards?

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

Other countries have done things in different ways—they do not necessarily have the pension system that we have. We have a very substantial private pension system; some other countries will not have such private pension systems—the hon. Lady will have to ask them. It is argued that the right way forward—having looked at what countries such as Israel and Denmark have done—is to have a parallel system and two systems, commercial and public, working together. We already have a public system, whether it is “Check your state pension” or the pension tracing service, that exists with commercial providers. What we do not have is the great capability of dashboard and I believe, with respect, that we are doing the appropriate thing to drive that forward.

Amendment, by leave, withdrawn.

Amendment proposed: 8, in clause 122, page 116, leave out lines 38 to 45.—(Guy Opperman.)

Question put, That the amendment be made.

Rhif adran 8 Pension Schemes Bill [Lords] — Clause 122 - The Money and Pensions Service: the pensions guidance function

Ie: 9 MPs

Na: 7 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

The Committee divided: Ayes 9, Noes 7.

Question accordingly agreed to.

Amendment 8 agreed to.

Clause 122, as amended, ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(James Morris.)

Adjourned till Thursday 5 November at half-past Eleven o’clock.

Written evidence reported to the House

PSB01 Institute and Faculty of Actuaries (IFoA)

PSB02 Freshfields Bruckhaus Deringer LLP

PSB03 Association of British Insurers (ABI)

PSB04 Henry Tapper, Chair, Pension PlayPen and CEO of AgeWage Ltd

PSB05 Alan Stewart, Chair, The 100 Group Pensions Committee

PSB06 Communication Workers Union (CWU) and Royal Mail Group

PSB07 Pensions and Lifetime Savings Association

PSB08 Technical Committee of the Insolvency Lawyers’ Association

PSB09 David Pudge, Chairman of the City of London Law Society Company Law Committee

PSB10 Con Keating, Chair, Bond Commission, European Federation of Financial Analysts Societies

PSB11 Lane Clark & Peacock LLP

PSB12 Richard Butcher

PSB13 Aon

PSB14 James Churcher

PSB15 Ian Cowan, Partner, PKF

PSB16 RPMI on behalf of the Railway Pension Scheme

PSB17 Alistair Rapley

PSB18 Nicholas Chadha

PSB19 PensionBee Ltd