Pension Schemes Bill — House of Lords, 2015-01-27
Topic: Mixed Topics
Richard Newby (Liberal Democrats, Centre to centre-left): My Lords, I will come to that. I shall deal with the amendment first because it raises an important point in itself before we get to some of the broader issues As I say, the FCA consulted on the guidance standards last year, and published its policy statement in November. The near-final FCA standards make certain specific requirements with regard to both collecting relevant information and providing certain types of information. Ensuring that consumers consider factors which are pertinent to their retirement decision, as relevant to them, is an important part of that which the standards capture. The standards require that, according to consumer needs, people are encouraged to provide relevant information about their financial and personal circumstances and their objectives to ensure that they can get maximum value from their guidance experience. In terms of financial information, this might include pension pots or benefits, other sources of wealth or income, including where the individual has a spouse or partner, tax status and debt. In terms of personal circumstances, this might include whether an individual has dependants, or a spouse or partner, and the state of their health and potential long-term care needs. In terms of objectives, this might include the consumer’s plan for retirement, so they can identify their income needs The noble Lord, Lord Bradley, spoke to this issue in Committee and asked about the effects of the new flexibilities on eligibility for income-contingent benefits and social care. That has been the burden of other speeches today. This is an extremely important issue and one to which the Government have given, and continue to give, detailed consideration. It is important that the treatment of such products is clear for claimants and for decision-makers, as noble Lords have pointed out. On guiding principles, the Government want to ensure that someone’s decision to use a flexible pension product does not significantly impact on how their means are assessed for social security purposes or social care charging purposes Our intention is for the principles of the current rules to remain in place after April this year. At the last Autumn Statement we announced a change to the notional income rules for benefits from April 2015, so that 100%—rather than 150% as now—of the income that an equivalent annuity would offer is taken into account. This will therefore be a more generous calculation than under the previous rules. Guidance will be tailored to an individual’s circumstances and give consideration to issues such as welfare, the need for and future likelihood of social care, and levels of savings and debt. However, where it is clear that consumers need specialist help, they will be directed to relevant specialist guidance and information as appropriate. In the case of social care needs, the guidance service will direct people to their local authority, which, under the Care Act, is obligated to direct them to sources of information and advice Benefits entitlement will be one issue for individuals to consider in making their choices, but it is only one of several important factors, such as tax consequences and personal circumstances. As we discussed on tax, there is a special requirement on pension providers to discuss with customers the potential tax implications of the course that they might follow. I can also reassure the House that the guidance service will ensure that consumers also consider relevant issues related to pension decisions, such as state pensions, debts, and other assets, wealth and income. The Government are committed to ensuring that individuals are equipped and empowered to make informed decisions on how to use their pension savings and to take account of these wider circumstances On the amendment, the guidance will include benefits. The problem that the noble Baronesses so eloquently described, particular concerning ISAs, is that there are a number of extremely detailed interactions between the savings options and the benefits and tax consequences that will need to be dealt with as part of the guidance. The concern expressed by the noble Baroness, Lady Hollis, which I completely understand, is that the Treasury and DWP will not get their act together and are not up to the job of doing this. Unsurprisingly, I am significantly more confident than she is. She has begun a correspondence with the DWP on the ISA issue; an e-mail from her to the department is awaiting a response. I can give her an assurance that she will get a detailed response in writing to the questions she has raised between now and Third Reading I am not seeking in any way to diminish the fact that potential areas of confusion might arise in particular cases. The challenge that we have accepted, and hope that we can rise to, is to ensure that the guidance and the people providing it will be able to guide people through some of these thickets. If it were not complicated, we would not need to go to such lengths to set up a guidance system in the first place. We are confident that we will deal with these issues, and that people, as they take up guidance, will get the information they require to enable them to make informed choices.