My Lords, Amendment 72 would require the Secretary of State to lay an impact assessment before Parliament, once the Bill becomes an Act, setting out the expected costs of our pension dashboard proposals for businesses, government and not-for-profit organisations. I envisage the assessment covering business pensions, civil service pensions—of which I am lucky enough to be a beneficiary—and other government unfunded schemes such as the old-age pension, which we were discussing, along with funded government schemes, such as the universities pension scheme, and the pensions of non-governmental bodies: charities such as Oxfam or small not-for-profits such as Red Tractor, which I chair.
I start by thanking the Minister for the helpful briefing that she arranged with the Bill manager and the DWP team on the Pension Schemes Bill 2020 impact assessment. They have tried hard to respect the spirit of impact assessment, which allows Ministers and Parliament to address costs alongside the case for new legislation. The page numbering is confusing, but I found the document, particularly the section on dashboards, which is more than half way through, timely and informative. That is not always the case with the legislation that we scrutinise, so well done.
My concern today is that not enough attention is being given in our discussions to the costs of the new dashboards and that all the debates so far in this Committee—everything stretching from the climate change provisions debated last week to the long list in Amendment 46 in the name of the noble Baroness, Lady Bowles—are likely to increase them further.
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Let me try to summarise my concerns. We are talking about costs—both once-off and ongoing—amounting to at least many hundreds of millions of pounds on a discounted basis. We are dealing with large and growing sums, the burden of which must fall somewhere; of course, as we have heard, some of a new regulatory regime is in the hands of the FCA, whose requirements are notoriously—and often rightly—burdensome. There is a substantial cost to business. Then we need to add the costs involved in making governmental information on pensions available electronically in the dashboard. They are more modest but the money must still be found by the public sector.
Where schemes have the resources to be professionally run, as is the case with bigger schemes—that do a lot to clean up their data—which cover about 90% of pension members in the private sector, administration of the dashboard system will be relatively easy. However, there are uncertainties that will carry administrative costs, which I am not sure we have allowed for. For example, what is to be done with staff who have worked overseas or staff who benefit from overseas schemes, such as the parallel ones in the Netherlands and Germany?
More significant is the problem of small players. As with much new legislation, where bodies are small, concerns pile up and the cost imposes a much bigger relative burden. I know from my work with small business that it is always kept busy with a plethora of demands and cost pressures. For today’s purposes, I have in mind not only small and micro-companies
but smaller charities and micro-employers, such as plumbers or an independent coffee shop. Some of us will remember the debates about how small groups could deal with the challenges of the data protection laws. I have similar concerns here, and I am not sure how they are being addressed.
On data protection, there is the threat of the large fines required under the EU law we were implementing. Here, the penalties are self-imposed. It is not entirely clear how all this will be organised, nor exactly how enforcement will work. I credit my noble friend the Deputy Leader, who gave us some useful information on how the enforcement system will work. The trouble is that although every new burden may be justified in some sense, as we have heard, they pile up, erode our competitiveness and job creation, and hit small operators.
New burdens must also be well communicated and explained with time to adopt them. I know that the Minister will learn from the hostility we saw towards the introduction of auto-enrolment, which was important, from the groups that I have described. We need to take steps to minimise the fear of bureaucracy, cost and fines in this kind of change.
I am speaking today because I want the department to be under pressure to maximise simplicity—my noble friend Lord Howe made a rather positive point about that earlier—and minimise costs as far as it can. The costs of the dashboard are substantial and will be paid for largely by pension schemes, and therefore often by pensioners themselves in due course. That is what one has to remember. In aggregate, the total costs over 10 years now feel to me to be likely to be closer to the £2 billion mentioned by my noble friend Lady Noakes—a well-known accountant—at Second Reading than my earlier estimate of £1 billion.
There are of course benefits in bringing pension information into one place, but I am not convinced that they are commensurate with this huge compliance cost, and one perverse effect, unfortunately, could be that more retired people will be encouraged to take money out of their schemes—the equity release that my noble friend Lord Young referred to earlier—to give it to their children, perhaps lose it or, as my noble friend Lady Altmann, suggested, run it down completely. This could compound the long-term problem that we have in society of unaffordable care for the elderly.
We have to be careful about how we tackle the dashboard issue and make sure it is as cost-effective as possible. One cannot help wondering whether a single government-run scheme might, after all, be the simplest and cheapest way forward. It might at least be best to prioritise this to try to get the dashboard off the ground in a simple, cost-effective way.
I have tabled an amendment which would require Ministers to review the estimated costs in the light of the forthcoming consultation on the dashboard detail and to publish a new impact assessment six months after the passage of this legislation, once the future details are clearer. I look forward to the Minister’s comments on this area.