Pension Schemes Bill — House of Commons, 2015-02-24
Topic: Labor
Steven John Webb (Liberal Democrats, Centre to centre-left): I hope that I can respond helpfully to the two sets of issues that the hon. Gentleman raised. I thank him for using the attractive word "dovetailing" to describe what is happening between DWP and HM Treasury legislation The hon. Gentleman asked about the second line of defence. I think that there might have been some confusion in what he said. I apologise if the speed with which I went through my remarks put him off the scent. I had assumed that nothing I said would affect what he was going to say, which is why I went so quickly. To clarify: the second line of defence, which is the requirement on providers to ask searching questions of people choosing to do things with their pension pot, is not in the Bill at all. The amendments that refer to advice—as in independent financial advice and regulated advice—are the safeguards for people who are transferring from a defined benefit pension into a defined contribution pension with a view to accessing the flexibilities. The Bill requires them to have taken independent financial advice, and the amendments help to specify exactly what that is. I hope the hon. Gentleman is not confused. The amendments relate to the advice safeguard, which is about things such as DB to DC transfers. But he is right that the issue of a so-called second line of defence is an important one. The Government have listened. We anticipate that the Financial Conduct Authority will bring forward its detailed rules on how that should work in practice and we will be working with the trust-based pensions sector to do the same through the pensions regulator. I agree that those who raise such important issues both within and beyond the House deserve credit for doing so. I am grateful to him for the credit that he gave to the Government for listening to those concerns The second set of issues that the hon. Gentleman mentioned were those raised by Baroness Hollis in another place about the interaction with means-tested benefits. He will know, I hope, that my noble colleagues met Baroness Hollis before Third Reading in the Lords, and another meeting is planned to ensure that her concerns are properly addressed. I can tell him that it is largely business as usual. The intention is that the principles of the current rules relating to the treatment of pension funds will remain in place after April 2015. Obviously, we are in a new world, and we will have to consider carefully the impact of pension flexibilities and freedoms on income-related benefits and social care, but the Government want to ensure that someone’s decision to use a flexible pension product does not have a significant effect on how their means-tested benefits or social care charges are assessed The hon. Gentleman asked one specific question. I might have some cash in an ISA that the Government would account as capital, whereas if it were in a pension fund they might not, so why not just shove it into a pension fund? It is fine for someone to transfer money from an ISA into a pension pot for the sole purpose of improving their retirement provision, as we do not mind people putting money into a pension to retire on, but if they have done it with the intention of increasing their benefit entitlement we can still take account of the money. That mirrors existing provisions. In other words, if someone has some money in the bank, blows it on a foreign holiday or a sports car and comes along and claims benefit without the capital, one thing we will ask is where the money went. We have deprivation of capital rules so that if someone has artificially engineered their finances to get within the scope of means-tested benefits, we can deem them still to have the money. In the example the hon. Gentleman gave, if someone takes their ISA balance and flips it into a pension simply so they can get more pension credit we can simply say that we will treat them as though they still had the cash We think it is right to treat ISAs and pensions differently. ISAs are immediately accessible and are not long-term savings vehicles, so we think that that distinction is important. I can confirm that we will continue to have our conversations with the noble Baroness to ensure that we have addressed her concerns, but the spirit of what we are doing is that of business as usual, with the same broad approach as we had before the reforms were introduced. I hope that that responds to the hon. Gentleman’s concerns and I commend Lords amendment 10 to the House Lords amendment 10 agreed to. Lords amendments 11 to 117 agreed to.