Financial Guidance and Claims Bill [HL] — House of Lords, 2017-09-06
Topic: Labor
George Young (Conservative, Centre-right): My Lords, I begin by thanking the noble Baroness, Lady Greengross, for her amendment, which seeks to add an additional requirement to Clause 3. She has a formidable reputation for campaigning on behalf of those of above average age. For as long as I have known her, she has taken a particular interest in housing, so there is a lot of force behind her amendment. Clause 3 specifies that as part of its pensions guidance function, the single financial guidance body must provide information and guidance to help a member of a pension scheme make decisions about the options open to them as a result of the pension freedoms. This requirement replaces the current duty on the Secretary of State for the DWP to take steps to ensure that people have access to guidance on the pension freedoms. It ensures that the single financial guidance body will continue to meet the guidance guarantee made by the Government when they introduced the pension freedoms legislation back in 2015 In its recently published interim report on the review of the retirement income market, the Financial Conduct Authority identified some emerging issues. For example, the review found that draw-down of defined contribution pots is becoming much more popular, and accessing pension pots has become the "new norm". The FCA is now working with the Treasury, the DWP and other stakeholders to fully understand all the emerging themes and to develop ways in which any issues can be addressed. Without reopening some of the earlier debates, that shows the FCA is able to respond to concerns about consumer interests At Second Reading the noble Baroness raised questions about the adequacy of saving into a pension scheme at the levels required by automatic enrolment. The amendment she proposes would make it a statutory requirement for the body to provide guidance on other sources of retirement income, including housing wealth. While I agree with her that it is important that people plan for retirement, no matter what they age they are, and that they consider all their retirement income options, I hope to persuade her that her amendment is not necessary As part of its pensions guidance and money guidance functions, the body will provide general information and guidance to members of the public about the benefits of saving towards retirement, and the range of products available to provide income in retirement, including the products that the noble Baroness mentioned in her speech. I think the noble Lord, Lord McKenzie, came up with the answer before me: these services are already provided by the Money Advice Service and the Pensions Advisory Service. For example, the MAS website has information on what equity release is and on other products, such as home reversion plans. In establishing the single financial guidance body, the information and guidance about sources of retirement income that are currently spread across all three existing bodies will continue to be delivered but will be much more joined up—for example, there will be just one website instead of three—making it easier for people to access and consider in the round. That will also make it easier for the new body to assess any gaps in the provision, quality or impartiality of the information and guidance available Reverting to the debate that we had before the dinner break, the body will not provide advice on specific products. Its role is to provide general information and guidance on the options open to people so that they can make their own more informed financial decisions. It is not in the remit of the body to provide financial advice. In some instances, though—this was touched on during our debate—it may be that the body would need to refer an individual to an independent financial adviser, who would be able to advise them which products were the most suitable in their circumstances; I think that is what the noble Baroness, Lady Kramer, was implying. That in itself is a helpful service; we know that often, people are reluctant to seek financial advice or unsure of where to go. The body and its partners can play a role in breaking down those barriers, enabling people to understand when it will be beneficial or necessary for them to seek financial advice Housing wealth, as the noble Baroness knows better than anyone, is a complex area. Equity release schemes, as an example, may be a suitable option for some, but it is important that people are made aware of the associated risks. The FCA’s ageing population study, to be published later this year, will consider how lending in retirement can be made to work better for older consumers—again, evidence that the FCA is conscious of its responsibility to consumers. That study will consider product innovation and building upon existing industry initiatives to facilitate mortgage lending to older consumers. The Government are clear that anyone considering equity release should seek independent financial advice to ensure that the product is appropriate to their individual circumstances The noble Baroness, Lady Finlay, raised a number of issues. I may have to write to her about the transparency of exit charges. In a nutshell, though, so far as equity release is concerned, the FCA, as I think she said, has responsibility for the regulation of equity release products and advice on these. The Equity Release Council is the industry body for the sector and sets out rules and guidance that all members have to comply with. All customers must receive independent legal advice before taking out an equity release product. I hope that addresses some of the issues the noble Baroness raised about undue pressure being exercised by family members with an interest. The borrower has to provide a written suitability report, and the FCA requires the borrower to be provided with a "key facts" illustration for each product. Independent solicitors must also verify understanding before proceeding, and the customer must signal receipt and acceptance of the written suitability report. That report explains why they believe that equity release is suitable and why a particular product is being recommended to that customer. I think the noble Baroness raised the issue that people do not have to get regulated advice. I would like to reflect on that and perhaps drop her a line So while the body may provide general information on these schemes, that is an example where it would be best placed to make people aware that they should be speaking to regulated advisers, and signpost them to the appropriate place. As I explained, the body is required to provide guidance to replace the pension guidance guarantee. That is because we want to ensure that the move to a single body in no way reduces the guidance on offer for those who wish to consider exercising their pension flexibilities To conclude, the SFGB’s money guidance and pensions guidance functions already enable it to provide people with information and guidance on retirement planning, saving in a pension scheme, different sources of retirement income and, where appropriate, to signpost them to regulated advisers. These are all services which MAS and TPAS deliver now, and the body will continue to do that but in a more joined-up way for customers Against that background, I ask the noble Baroness to withdraw her amendment.