Baroness Sherlock (Lab)

My Lords, I thank the noble Viscount, Lord Younger of Leckie, for introducing his amendments. I should have said at the beginning of the previous group that I thank him for his support for this policy. I recognise that he has tabled his amendments in the spirit of exploring how best to make this work. Let me start with the proposed amendments to Clause 24, which is a key part of the framework to enable the consolidation of small dormant pension pots. It sets out requirements for transfer notices: communications that inform members when their pot is due to be moved into an authorised consolidator scheme. These notices are an important safeguard, ensuring transparency and giving members the opportunity to opt out if they wish to. Amendment 84 proposes that the transfer notices must be clear, concise, accessible and so on and must be provided in prescribed alternative formats for digitally excluded or visually impaired members. I fully support this principle, but we think the amendment is not needed because the objectives are already embedded in the Government’s approach. The Bill provides powers to set detailed requirements for transfer notices in secondary legislation, and we have committed to consult to ensure that notices are simple, jargon-free and easy to understand. Moreover, existing regulatory standards and guidance already require schemes to provide communications in accessible formats for vulnerable members, including those who are digitally excluded or visually impaired. We do not think that overlaying additional prescriptive requirements in primary legislation is helpful, but the underlying point is very strong. We need a framework that can evolve as technology and members’ needs change. Locking rigid requirements into the Bill could hinder that process, so we think the right place for these detailed standards is in guidance and regulation, where they can be updated as best practice develops. Amendment 85 would require the Secretary of State to record and report annually on the number of transfer notices issued and the outcomes arising from them. Again, although I understand the intent, we do not think this amendment is proportionate, given the administrative burden that it would impose. The DWP already has robust mechanisms for monitoring the implementation and effectiveness of pensions policy, including through regular engagement with the Pensions Regulator and industry reporting. We will continue to publish updates on the progress of small pots consolidation as part of our wider reporting on pensions reform. The focus should remain on ensuring that the policy delivers better outcomes for members, reducing fragmentation, improving value for money and supporting a market of fewer, larger schemes. We believe that this can be achieved through existing oversight arrangements and targeted evaluation, rather than setting rigid reporting requirements in primary legislation. I recognise that the Clause 31 stand part notice has been tabled to probe the extent and scope of the small pots regulations enabled by this clause, with particular focus on the powers conferred on the Pensions Regulator to levy fees. For clarity, Clause 31 does not create new powers beyond those already set out within the small pots measure. Its purpose is to provide clarity and detail on how those powers can be exercised to deliver the small pots consolidation framework effectively. This mirrors the approach taken with the authorisation of master trusts, for example, under the Pension Schemes Act 2017, where fees were introduced to ensure that the costs of regulatory oversight are borne by those seeking authorisation, not by the taxpayer. This is a well-established and proportionate mechanism that supports robust regulation while maintaining fairness. As already discussed elsewhere, we believe that the clauses within this chapter strike a careful balance. They ensure that key regulations get full parliamentary scrutiny through the affirmative procedure, while allowing the Government to act quickly on minor or technical changes via the negative procedure when necessary. Clause 31 sets out the circumstances where the use of a Henry VIII power may be required. To be clear, this is about ensuring that the legislation delivers a workable and proportionate framework. The Henry VIII power provides necessary flexibility to apply existing technical and procedural legislation to small pots regulation in order to ensure the effective implementation of the small pots regime. I shall give an example. It may be necessary to make consequential amendments to the Pensions Act 2004 so that the Pensions Regulator’s existing administrative powers can extend appropriately to the small pots framework. An example in the Bill is the amendment to Section 146 of the Pension Schemes Act 1993 to ensure that the remit of the Pensions Ombudsman is broad enough to investigate complaints or disputes in relation to the destination proposer, but this cannot be legislated for before final decisions around the delivery model are made. That is a good example of why this would work. Of course, any regulations made under this power will be subject to the affirmative procedure. We think that that flexibility is essential for the effective implementation of the small pots regulations. Any regulations made under this power will be affirmative, but it is also worth noting that, given what I have said, removing Clause 31 would reduce the clarity for members and pension schemes on how the power to make small pots regulations may be used. Finally, I will address the proposed amendments to Clause 32. Clause 32 is essential to maintaining trust and integrity in the small pots consolidation framework. It ensures that the Pensions Regulator can take direct action to uphold compliance with the regulations, protecting members and supporting the volume of transfers required accurately. Amendment 86 seeks to remove subsection (2) as a means of probing the expansion of regulatory powers conferred on the Pensions Regulator. Subsection (2) provides transparency for stakeholders by setting out the types of enforcement tools that may be included in regulations, such as compliance notices, third-party compliance notices and penalty notices. These are not new concepts; they align with the Pensions Regulator’s existing practices and procedures in other areas of pensions regulation. Removing this provision would not prevent enforcement powers being introduced in regulations, but it would remove clarity for schemes and members. Without it, we risk creating ambiguity and undermining confidence in the framework. This clause is not about overreach, but about ensuring that the regulator can act proportionately and effectively where schemes fail to meet their legal duties. Finally, Amendment 87 seeks to remove Clause 32(4) to probe the rationale behind the maximum penalty limits. Subsection (4) provides clear, proportionate caps on financial penalties: £10,000 for individuals and £100,000 in any other case. These limits have been increased compared to existing frameworks to reflect the importance of compliance in this area. As pension schemes grow in size, it is vital that the fines we impose on schemes carry real financial weight. This ensures that compliance and enforcement remain effective, safeguard members’ interests and maintain confidence in the system. These amounts align with the wider compliance regime across the Bill. Without this subsection, regulations could still introduce penalties, but without any statutory cap. That would create uncertainty for schemes and could lead to disproportionate outcomes. By contrast, the current approach provides transparency and safeguards, ensuring penalties are significant enough to deter non-compliance but not excessive. It also enables appeals to the First-tier or Upper Tribunal, guaranteeing procedural fairness and accountability. In conclusion, Clause 32 is not about granting unchecked powers; it is about providing clarity, proportionality and effective enforcement to protect members and deliver the outcomes this policy is designed to achieve. Removing this provision would create uncertainty and risk undermining confidence in the system. The noble Baroness, Lady Altmann, asked me a question that I think related more to the previous group, but let me see what I can do. Why do we need small pot consolidation if we have the pensions dashboard? I think her question was slightly underpinned by the question, why do we need this at all, why can we not just use dashboards? We think they serve different but complementary roles in strengthening the system.