Table of contents
1.1 Re-introduction of universal credit ‘managed migration’
Universal credit (UC), introduced in 2013, replaced six ‘legacy benefits’ with a single means-tested benefit payment. All new benefits claimants automatically apply for UC, along with claimants of legacy benefits who have a change in their circumstances which triggers a new benefits claim. This is sometimes known as ‘natural migration’ to UC. Full service rollout of UC to new claimants was completed by 2018.
Managed migration involves the Department for Work and Pensions moving claimants of legacy benefits onto universal credit despite no change in their circumstances. Provision for pilot schemes of managed migration was introduced in 2019 via secondary legislation and the number of benefits claimants in the pilots was capped at 10,000. A pilot scheme was started in Harrogate in 2019, but it was suspended in 2020 at the start of the coronavirus pandemic.
Managed migration to UC has been controversial, with Citizens’ Advice highlighting concerns that some households may be made financially worse off. In 2020, the House of Commons Work and Pensions Committee also expressed concerns about the managed migration process. It said that the claimants involved often include people with “complex needs”, including the severely disabled, those with chronic health conditions, and the long-term unemployed. The committee also raised concerns about the five-week wait that UC claimants can experience for their first payment. The committee said that for claimants who were part of managed migration because their circumstances had not changed “we see no reason why their transition to a new benefits system should not be seamless”.
On 25 April 2022, the Government announced that the managed migration process would restart on 9 May 2022 and all benefits claimants would be moved to UC by the end of 2024. The Government has published estimates of the impact of managed migration. The Government said that of the 2.6 million households still on legacy benefits:
We estimate around 1.4 million (55%) would have a higher entitlement on UC, 300,000 would see no change and approximately 900,000 households (35%) would have a lower entitlement.
In a statement to the House of Commons on 25 April 2022, the Secretary of State for the Department for Work and Pensions, Thérèse Coffey, said:
We are resuming [managed migration] under existing regulations, though I intend to bring forward to Parliament amendments to the UC Transitional Provisions Regulations, following their consideration by the Social Security Advisory Committee.
The Government has published the draft regulations it intends to use to reintroduce managed migration. The Social Security Advisory Committee, which is an independent body of the Department for Work and Pensions that advises on social security issues, said that it had sufficient concerns about the draft regulations that it was launching a full, formal investigation of them. The committee concluded that “one aspect in particular required closer examination”: the removal of the 10,000 claimants cap for managed migration pilots. The committee said it believes:
There is a need to further consider the potential consequences of such a change, and that greater clarity is required on how the process (at key points of the migration process) will be scrutinised, and what success measures are considered to be.
On 27 April 2022, the chair of the House of Commons Work and Pensions Committee, Stephen Timms, wrote to Thérèse Coffey expressing concerns about the re-introduction of managed migration. He said that the Government’s intention to lift the 10,000 claimants cap before passing new regulations creates “a significant risk to claimants and the Department, and weakens the ability of this Committee and other organisations to scrutinise the process”.
1.2 Reform of terminal illness benefit rules
If someone has been diagnosed with a terminal illness, their entitlement to certain benefits can be fast-tracked and paid at a higher rate. This is known as the ‘special rules’ for terminal illness. For some benefits, such as UC and the employment support allowance (ESA), the special rules require that the claimant must have been diagnosed with less than 12 months to live. For other benefits, the eligibility requirement is six months to live.
In July 2021, the Government announced that it would be implementing a blanket “12-month end-of-life approach” and that the special rules would be amended accordingly. The Government subsequently used secondary legislation to amend the rules from six months to 12 months for UC and ESA. Those changes came into effect from 4 April 2022.
On 10 March 2022, in a House of Commons written statement, the Government confirmed that amending the special rules for the personal independence payment, disability living allowance, and attendance allowance would require primary legislation. It said it would make the amendments “when parliamentary time allows”.
There has been cross-party support for reforming the terminal illness rules. In a House of Commons debate on the terminal illness rules in 2021, Labour MP Jessica Morden said:
The six-month rule is flawed and urgently needs to change […] [The] six-month hard deadline is too much to ask of carers and claimants. It creates a completely understandable resistance to applying [for benefits].
Ms Morden introduced a private member’s bill in 2020 which sought to make similar changes. However, it fell at the end of the 2019–21 session.
Under the Pensions Act 2008, employers must automatically enrol all jobholders into a pensions scheme if they are aged at least 22 and have earnings above a qualifying earnings threshold.
In 2017, Theresa May’s Conservative Government undertook a review of pensions auto-enrolment. The outcome of the review recommended that the minimum age for auto-enrolment should be reduced to 18 and the lower qualifying earnings threshold should be removed. The proposals have not yet been implemented.
Boris Johnson’s Government has said it is committed to implementing the changes. In September 2021, Guy Opperman, the Minister for Pensions and Financial Inclusion, stated:
We are committed to implementing the 2017 automatic enrolment review ambitions in the mid‑2020s, lowering the age for being automatically enrolled from 22 to 18 and abolishing the automatic enrolment lower earnings limit, so that contributions are payable from the first pound of earnings.
In January 2022, Richard Holden (Conservative MP for North West Durham) introduced the Pensions (Extension of Automatic Enrolment) private member’s bill. The bill sought to implement the 2017 review proposals to reduce the minimum age to 18 and remove the lower qualifying earnings limit. However, it did not receive a second reading and fell at the end of the session.
Also in January 2022, in a Westminster Hall debate on automatic enrolment, the Shadow Minister for Pensions, Matt Rodda, outlined the Labour Party’s support for reforming auto-enrolment in line with the findings of the 2017 review. He asked the minister when the changes would be implemented given that the Government’s deadline of the mid-2020s “is fast approaching”.
In response, Guy Opperman reiterated the Government’s commitment to implement the reforms. On the timetable for legislation, he said:
It is not for me to decide what is in Her Majesty the Queen’s speech, either this year or next, but clearly there are a variety of ways in which we can progress such legislation. First, there is a private member’s bill. That is not impossible, but it is complicated for Government business for primary legislation on a large matter, particularly given the timings of this session. I welcome [Richard Holden’s] ten-minute rule bill, but it comes very late in this session […] Secondly, we are clearly looking to bid for a third or fourth session pensions bill that can take these matters forward as normal Government business. My intention is to bring forward the legislation, subject to all the usual provisos about being a minister with larger collective responsibility.
2.2 Removing employer-related restrictions on investment for master trusts
In March 2022, the Government published a consultation response on pensions reform, Facilitating Investment in Illiquid Assets. The response also included details of a new consultation on employer-related investments. Introducing the paper, Guy Opperman stated that the Government intended to introduce legislation to reform the way in which large occupational pensions schemes (master trusts) can invest in the employers that use the scheme (known as ‘employer-related investments’).
Master trusts are occupational pensions schemes that are used by multiple employers which are not connected to one another and are not public service pensions schemes. The Government has said that the master trusts market has expanded significantly in recent years due to the success of automatic enrolment. The Government stated:
In the 1990’s, legislation was introduced to restrict the extent to which trustees of occupational pension schemes could make investments that are connected with employers that sponsor or participate in the scheme (known as “employer-related investments”). This was to reduce the risk of a sponsoring employer misappropriating the schemes funds through loans and investments from the pension scheme.
As master trusts did not exist at the time that the legislation was passed, the Government has argued that the current restrictions for master trusts prevent them from making loans and investments to the employers that use the scheme. The Government believes this may deter the pension scheme from investing in markets that could produce a benefit to the pension holders.
In the ministerial foreword of the Government’s consultation response, Guy Opperman stated:
We are […] proposing to bring forward legislation this year to reduce burdens on trustees and open up private markets further. We propose doing this by removing certain employer-related restrictions that currently apply to large authorised master trusts making compliance significantly easier. We believe this will ensure proportionate member protection is maintained whilst disproportionate red tape is removed, simultaneously reducing the costs of investment in private equity and debt.
The consultation response provided a copy of draft regulations which the Government intends to use to make the changes. The Government has also published an impact assessment on the draft regulations. The assessment said that the main intended effects of the changes would be:
- A reduction in costs to schemes in scope could be passed on to members through lower charges on pension savings.
- Greater flexibility in scheme’s investment strategies mean schemes face fewer limits on where they can allocate member’s funds, no longer limiting the value of returns members receive on their investments.
- Greater diversification of investments, reducing risk of concentration in a narrow range of asset classes.
The consultation on employer-related investments closes on 11 May 2022.
3. Read more
- House of Commons Library, Universal Credit: A Reading List, 4 May 2021; Accessing Benefits with Terminal Illness, 1 March 2022; and Pensions: Automatic Enrolment—Current Issues, 8 March 2022
- House of Lords Library, ‘Queen’s Speech 2021: welfare and pensions’, 5 May 2021
Cover image from pxhere.