Guy Opperman: We are making your pension safer, better and greener. Here’s how.

7 Oct

Guy Opperman is the Minister for Pensions and Financial Inclusion, and is MP for Tynedale and Ponteland.

Over the past decade, Britain has made great progress in boosting pension power and delivering better outcomes for savers.

The introduction of automatic enrolment in 2012 is undoubtedly one of the greatest long-term policy success stories of the Coalition Government, which has now been taken forward by this Conservative Government. More than 10.5 million employees are auto-enrolled into a workplace pension, saving eight per cent a year.

Today, our Pension Schemes Bill returns to the Commons, after clearing the Lords earlier this year. It is a Bill that delivers pensions for the next decade. It will make your pension safer, better and greener. This is how: 

Safer  

Pensions are a life asset, built up over decades. When we save for a pension, we expect that money to be there for us in retirement.

This Bill cracks down on the callous crooks who put people’s pensions at risk through their reckless behaviour. In future, reckless bosses who plunder people’s pension pots to line their own pockets will go to prison.

We have all heard the stories of cruel pension scams, too. I don’t like to call these crooks scammers, because they are thieves who rob victims of their hard-earned savings. Last year, we banned pension cold calling, but this new Pension Schemes Bill strengthens the powers of the Pensions Regulator to prevent scams happening, making your pension safer.

Better  

If you’ve ever tried to check how much you have saved for retirement, it can often involve emptying out draws in the hunt for lost paperwork.

Thirty years ago, many of us had just two or three jobs throughout our entire lifetime. Research shows the average millennial now expects to have an average of 12 jobs, and with auto-enrolment meaning more of us are saving for retirement than ever before, keeping track of pension pots from multiple employers can be tricky.

The Pensions Dashboard aims to change that by creating one single place – just like any other app on your phone – to see all your pension pots.

Dashboards will unite billions of pounds in lost, unclaimed pensions with their rightful owners, and users will be able to clearly see how much they have saved through information that is easy to access and understand.

Privacy is crucial, so dashboards put you in control. You can decide how and when your data is accessed, and who has access to it. This new technology puts consumers in control, and undoubtedly makes your pension better.

Greener  

The 2019 Conservative manifesto pledged to get Britain to Net Zero by 2050. As the Prime Minister made clear yesterday in his brilliant conference speech, we can do it with investment in clean energy solutions, like wind, solar, and hydrogen.

With trillions in assets under management, our pensions have a crucial role to play.

When you save into a pension, your provider invests that money to provide long-term returns on your savings. If your savings are invested sustainably and ethically in green infrastructure and new technologies, your pension can play its part in getting Britain to net-zero. The evidence is also clear that this still ensures a safe and good return on your investment.

Last year, I introduced new Environmental, Social and Governance regulations – ESG. These require pension funds to take due account of climate risk when making investment decisions.

This Bill goes one step further, requiring pension schemes to take the Government’s Net Zero targets into account, as well as the goals of the Paris Agreement. This helps manage climate risk. and makes sure you know if your pension is invested sustainably.

Some have argued that we should simply divest pension funds away from high-carbon stocks. I am afraid this is a fundamentally flawed idea. Selling assets to others without the same environmental concerns is unproductive and will do nothing whatsoever to get Britain to Net Zero.

Instead, a partnership with business is the way forward, so we can deliver the innovative change required. By investing in the right assets, trustees can nudge, cajole and vote firms towards lower-carbon business practices.

I have seen this in practice across the country. Since last year’s general election, I’ve visited inspiring businesses and innovative organisations that are helping lead us to Net Zero.  I met with BP and visited their solar farm in Angus to see how their organisation is evolving from an oil and gas company to a modern sustainable energy company. I’ve also had the opportunity to see how the team from Logan Energy is making hydrogen commercial, working to transform energy systems across the country, including in Teesside under the leadership of its Mayor, Ben Houchen.

The Pension Schemes Bill will transform our pensions system for decades to come, by cracking down on bad pension bosses, utilising new technology to put the consumer in charge, and making sure pensions are playing their part in getting Britain to get to Net Zero. I hope the Bill gets widespread cross-party support from across the Commons at Second Reading later today.

Richard Walton: The Government must act to prevent Coronavirus fraud

12 Jul

Richard Walton is a Senior Fellow at Policy Exchange and a former Head of Counter-Terrorism Command of the Metropolitan Police.

In normal times, the NHS loses £1.27 billion a year to fraud, which is the equivalent of fulfilling the Conservative Party’s manifesto pledge of employing an additional 50,000 nurses. New research by Policy Exchange in a paper entitled Daylight Robbery – Uncovering the true cost of public sector fraud in the age of COVID-19 has found that fraud and error during the Coronavirus crisis will cost the Government an eye-watering sum about three and half times that – in the region of £4.6 billion.

Fraud is only exacerbated in a crisis, such as the pandemic we are facing now. It has been well documented that disasters are a magnet for fraud, as crisis management involves an outpouring of government aid, typically accompanied by low levels of due diligence to allow funds to reach recipients quickly.

In a foreword to the report, David Blunkett warns that criminals will use the Covid-19 crisis to “dip below the radar in order to be able to take advantage of unusual and unforeseen circumstances, and bank on attention and resources being focused elsewhere”.

Detecting and preventing fraud is a key element of sound public finances, and should therefore be a priority for this Government. It is not reasonable to expect the public to hand over a share of their income month after month if it’s not responsibly managed. Considering the pressure that will emerge after the Coronavirus crisis to keep costs down, reducing fraud will be one of the most equitable and achievable options available and will help the Government to achieve other objectives, such as levelling up the UK economy.

Unlike Covid-19, there is a dangerous perception that fraud does not have much impact on victims. There is a particular tendency to see public sector fraud – fraud committed against the government – as a crime that doesn’t affect ordinary people.

This is wrong. It affects the future of children when income tax is diverted from their education and is funnelled towards organised crime networks. It affects the most vulnerable in our society when they have to wait longer to receive benefits, because the Department of Work and Pensions is busy filtering through the almost one in five Universal Credit applications that are fraudulent.  It can even result in substandard treatments from an NHS doctor who lied about his qualifications on his CV. The Government believes that fraud and error cost the taxpayer anywhere between £2.8 billion and £22.6 billion in 2017-18 alone. This level of fraud is damaging to the fabric of society and cannot be allowed to continue.

While the Chancellor’s rapid action to save the economy has been a welcome necessity, the generosity and speed with which support schemes were introduced has left them open to exploitation by fraudsters. Furthermore, the increased use of third parties and digital channels have raised the opportunities for fraudsters to infiltrate the system.

For example, the speed with which Bounce Back Loans are approved (82 per cent of loans approved compared to 50 per cent for the Coronavirus Business Interruption Loan Scheme), and the potential to make multiple applications poses a particular fraud risk, which is compounded by the poor quality of Companies House data.

When face-to-face assessments for Universal Credit (UC) were suspended in July 2018, there was an almost 15,000 jump in the number of monthly referrals of suspected advances fraud over the course of the following year, costing up to £150 million. We can therefore expect the decision to suspend face-to-face assessments again due to Covid-19 to have a similar effect.

The Government has implemented a range of measures to try and tackle this, with the Cabinet Office forming a Covid-19 Counter Fraud Response Team and the NHS Counter Fraud Authority, the Home Office and the National Cyber Security Centre offering advice.

Nevertheless, over the course of the Coronavirus crisis, HMRC has already received 1,800 reports of furlough fraud and the NHS has been subject to numerous PPE scams. Last week, the HMRC Fraud investigation team arrested an individual in the Solihull area as part of an investigation into a suspected £495,000 fraud of the Coronavirus Job Retention Scheme.

The issue of tackling fraud is compounded by the difficulty of detecting it, and the complex nature of recording and reporting it. According to the Crime Survey for England and Wales, almost two thirds of fraud goes unreported, and the Government believes that it is currently detecting less than two per cent of public sector fraud. The services available to report fraud are linked to a complex web of organisations, which must be streamlined to become more effective. Even when fraud is eventually detected, it is underreported as unwittingly complicit employees fear the stigma around fraud, while government departments are wary of the negative media attention it attracts.

Fighting fraud effectively is expensive, but it is imperative that the Government continues to invest in this field, regardless of other fiscal pressures. It will be essential that the Government conducts thorough post event assurance in the wake of this crisis, a process that should be overseen by a new ‘Covid-19 Economic Crime Hub’, run by the National Economic Crime Centre, with a Minister for Economic Crime appointed and accountable for the outcomes.

According to Sajid Javid, who also backed the report, “now is a good time to join up counter fraud measures to keep it to an absolute minimum”. Technology will play a critical role in enabling investigators to operate at a sufficient scale and the Government must make use of the latest innovations in anti-fraud technologies, while ensuring the Covid-19 Economic Crime Hub has access to cross-government data.

Looking beyond the pandemic, it will be vital that the Government learns the lessons from this crisis, which has exposed weaknesses in the UK’s digital infrastructure. In particular, the limitations of public sector identity assurance systems has enabled fraud at a larger scale than necessary.

The Government should therefore accelerate the creation of digital identity solutions, such as the Departmet of Work and Pensions Confirm My Identity scheme. Furthermore, the use of AI and Document Review Technologies, which are the most promising counter-fraud measures available, should be encouraged. In one Serious Fraud Office case, these saved 80 per cent of the costs and time required for an investigation, which settled for £671 million.

However, these programmes rely on high-quality data to operate effectively and their success will also be dependent on improved public and private sector data-sharing practices. The constantly evolving nature of fraud will require continuous investment and commitment from the Government to fighting it.

Chris Greany, a former UK National Police Coordinator for Counter Fraud & Economic Crime described to Policy Exchange the scale of the challenge of public sector fraud as needing a joined up effort with “real bite”  to “recoup lost funds, prevent further crime and deter others from this unlawful and immoral behaviour”. The Government will need to act quickly to prevent fraud scandals emerging from the embers of the Coronavirus crisis.