"It is unusual for the government to be defeated so many times on what has until now been seen largely as a non-controversial piece of legislation."
The Government was defeated four times in the House of Lords last night in votes on the Pension Schemes Bill.
Two of the defeats were on the provisions for a pensions dashboard, one was on the new style ‘collective’ defined contribution (CDC) pensions, and one was on the framework for regulating the remaining open Defined Benefit schemes.
- That pension dashboards should not be ‘transactional’ – that is, it should not be possible to transfer or consolidate funds via the dashboard;
- That commercial dashboards could not be up and running until a publicly provided/not-for-profit dashboard had been running for a year;
- That trustees of CDC schemes would have to report on the ‘fairness’ of the scheme to all members;
- That a separate regulatory approach be taken to ‘open’ DB schemes, including not acting in a way that would accelerate their closure.
When the House of Lords completes its consideration of the Bill it will then be sent to MPs in the House of Commons who will consider the Bill line-by-line.
For each defeat, the Government can accept the amendments in full, offer an alternative amendment which would seek to address some of the issues of concern, or reject the amendments and send the Bill back to the Lords unamended.
Because the government has a majority of 80 in the House of Commons, it is likely to win most votes in the Commons, so may be tempted to reject all amendments at this stage. Peers would then have to decide whether to vote against the government a second time, or to give some ground on some of the issues.
Steve Webb, former pensions minister and partner at LCP, said: “It is unusual for the government to be defeated so many times on what has until now been seen largely as a non-controversial piece of legislation. This suggested that they have misjudged the mood on some of these issues and have failed to listen.
"The government now needs to address the concerns raised by members of the House of Lords so that this important legislation can progress. In particular, it needs to make sure that the new funding regime proposed for open Defined Benefit schemes does not have the effect of driving them to close. It also needs to make sure that the Pension Dashboard is set up in a way that protects the interests of consumers and makes sure they are not at risk of scams.”
Kate Smith, head of pensions at Aegon, commented: “The purpose of pension dashboards is to let savers see all their pensions online in one place. This will be a valuable way of savers keeping track of their pensions. But once they have found their pensions, savers may wish to start consolidating these into modern schemes which tend to have not only lower charges, but also better engagement tools to help them plan for retirement.
“Pension scams are on the rise, and this is a risk well-recognised within the pensions industry, which is why we’ve called for regulations to protect savers using pension dashboards. All dashboards must be regulated and meet high standards to protect members from scammers. This should include having the ability to stop transfers when suspicious activity is triggered by warning systems.
“We want pension dashboards to be successful in terms of encouraging members to sign up and use them so they can find out how much they’ve saved in a pension and what more they need to do.
“Pension savers are more likely to use a pension dashboard with their current pension provider, as they have an existing relationship with them and an established level of trust. The dashboard can also be incorporated into the overall customer experience to form a core part of a customer’s savings journey. This can be complemented by online planning and support tools from their provider which is likely to help with improving pension engagement levels. The sooner pension dashboards are up and running, the better.”