Financial Guidance and Claims Bill [Lords] — House of Commons, 2018-01-22
Topic: Domestic Commerce
Neil Charles Gray (Scottish National Party, Centre-left): May I say on behalf of those on the Scottish National party Benches what a pleasure it is to see you back in the Chair where you belong, Mr Deputy Speaker? Welcome back I am pleased to have the opportunity to speak for the SNP in this debate, and I should say at the outset that we broadly welcome the Bill’s aims and will not oppose its Second Reading By way of background and context, I should say that the Bill sets out in part 1 the proposal to merge three Government-sponsored guidance services—the Money Advice Service, the Pensions Advisory Service and Pension Wise—to create a new single financial guidance body. The UK Government hope that this will help to "ensure that members of the public can access good-quality, free-to-client, impartial financial guidance and debt advice." The SFGB is expected to be set up and operational from late 2018, as predicted during the passage of the Bill through the House of Lords Part 2 will make changes to the regulation of claims management companies. CMCs provide advice and services to assist people in making compensation claims in various sectors, such as personal injury and financial products such as payment protection insurance The Government have expressed concern that "there is evidence of malpractice" in the industry. In March 2016, following an independent review, the Government said that they would change the regulatory system for CMCs. Under the Bill, the regulatory responsibility will pass from the Ministry of Justice to the Financial Conduct Authority Also under part 2, complaints handling will be transferred from the legal ombudsman to the Financial Ombudsman Service, and the FCA will be given the power to impose a cap on the fees that CMCs can charge for their services. Ahead of that, an interim cap on fees will apply to payment protection insurance claims The Bill also makes provision for the devolution of levy funding associated with debt advice provision. Powers over debt advice are, of course, already devolved to Scotland. I shall elaborate on all those elements during my speech On advice services, we welcome any measures that make the pensions or financial markets more accessible for people. There are aspects that we wish to query, and we hope to get some reassurances from the Minister in his response. First, I would like some detailed reassurances from the Minister that the amalgamation of three expert services into one will not dilute the overall service in any way, in terms of either output or quality. The Minister is shaking his head, but I hope he can provide some detailed reassurance as to how the Government will make sure of that. Whenever there is a merger of this sort, it normally results in a reduction of either specialism or capacity. I hope that he can assure us all that neither will happen. I also hope he will commit to significant investment in the new body to ensure that it is properly promoted and that awareness is therefore increased. Government and Opposition Members have already stressed the importance of that We need reassurances on funding. It appears that all funding discretion currently rests with the Treasury, so who will take the decision on the budget of the new single body? Who will be able to challenge the Treasury on any additional funding? It is clear that for the new body to work, it needs to be properly resourced by both the financial sector and the Government. I ask because we all—not least the Government, I am sure—hope that the Bill will do some of the work necessary to catch up on some of the problems with pension freedoms that we all warned about and that are now starting to happen According the FCA, more than a million defined-contribution pension pots have been accessed since George Osborne’s reforms were introduced. The FCA also says that it has become the new norm to access pension pots early. That is where our concern starts. Between October 2015 and September 2016, the number of non-advised drawdown sales was on the rise, and it is currently at 30% of drawdown sales, compared with 5% before the reforms. Some 63%—almost two thirds—of all annuity sales are now to consumers who have not received advice. Indeed, the FCA estimates that only around 20% of consumers who accessed a DC pension in the third quarter of 2016 had a Pension Wise appointment either by telephone or face to face. That is a huge concern that I am sure the Government share. Indeed, I know that it now concerns them, because they are trying to play catch-up on the issues with pension freedoms that we warned about when they were being introduced. I am not sure that the Bill adequately addresses those issues yet I am not sure that the Bill addresses those customers who do not make a decision upon retirement. We are seeing more people choosing just to draw down the pot and put it in the bank. With interest and inflation rates as they are, those decisions are clearly losing people money. But people are doing it because that is what they know and are comfortable with. Even to seek pensions advice or guidance is a daunting, complex and alien prospect to most people. I am keen to hear from the Minister about not only his expectation for increased usage of the new service, but how the Government plan to ensure that the service engages people who are put off talking about pensions at all. That will probably need to start with what they plan to call the organisation, because the "single financial guidance body" probably is not the most intriguing, approachable or marketable name I want a firm commitment from the UK Government that they will not in any way attempt in Committee to water down the amendment to clause 5, secured by the Opposition in the Lords, that requires scheme managers or trustees to check whether members have received any guidance. In fact, I wonder whether the Government wish to go a little further towards what some stakeholders feel might be more appropriate, which is automatic guidance with an opt-out system When most people are near retirement, they will encounter the pensions world and its lexicology and products for the first time. It is intimidating, which is why we see some people using pension freedoms to bung their pots in the bank. For them to get the most out of their investments, we need to make sure that people are properly guided to make not only a decision, but an informed decision that is of benefit to them. It is a high-stakes game: once an annuity is purchased, that is it—it cannot be reversed. We need to ensure that people have the confidence to take a decision, and that comes from being informed that taking no decision and hoarding cash may not be the best decision and that there is specialist help out there and it does not have to cost The Government also tabled a useful amendment to clause 2 in the Lords, which seeks to ensure that cognisance is taken of the needs of people in vulnerable circumstances. Perhaps that could be strengthened and clarified by including it in the clause 3 functions I would also appreciate it if we had a word from the Minister as to whether the UK Government plan to provide greater clarification on what guidance and paid-for advice will be in terms of the Bill. Providers and other stakeholders will appreciate that clarification Part 1 also covers action on cold calling. Clearly, we are delighted that the campaigning efforts on cold calling by the Scottish National party, the Scottish Government and my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) have started to pay off. I congratulate her on this partial win, which should hopefully make a difference to people, particularly pensioners, getting bombarded by nuisance calls. Recent research from the Money Advice Service suggests that there could be as many as eight scam calls every second—the equivalent of 250 million calls a year. Citizens Advice has calculated that 10.9 million consumers have received unsolicited contact about pensions alone since April 2015. Perhaps the UK Government may wish to use the opportunity in clause 4 to go a bit further on cold calling and hold company bosses accountable, as suggested by my hon. Friend in her Bill 18 months ago Clause 9 appears to afford a lot of power to the Secretary of State to direct the exercise of the functions of the new body, stating that it must "comply with directions given to it by the Secretary of State" I hope that the Minister will explain why the UK Government feel that that is a necessary provision and how it will not be abused On debt, I want to query something that the Secretary of State said at the Dispatch Box in her opening speech. If I picked her up correctly, I think she said that household debt was falling. If that is the case, I am sure that she would want to correct the record because, clearly, household debt is not falling. Standard & Poor’s came out with very important research at the back end of last year about its concern regarding UK rates of household debt. Perhaps that could be clarified in time either by the Minister or the Secretary of State.