Bank of England and Financial Services Bill [HL] — House of Lords, 2015-11-11
Topic: Labor
William David McKenzie (Labour, Centre-left): My Lords, I should explain that this is a probing amendment at this stage. Indeed, it was prompted by Clause 24, which of course is an enabling provision to allow Pension Wise to be expanded in due course to cover guidance for a secondary annuity market. It also enables us to pursue issues that arise from the House of Commons Work and Pensions Committee report covering guidance and advice. This is not to revisit our support for the changes to the pension regime introduced from April 2015, although we previously expressed our concerns about the speed with which such a dramatic policy shift was introduced and the lack of consultation that would normally characterise such a change. I thank the Minister for his letter of 4 November that followed up on some matters raised at Second Reading and which, to an extent, overlaps with this amendment We welcome the announced delay to the introduction of the secondary annuity market until 2017, given the reported responses to the Treasury consultation, in particular because of expressed concerns about the potential costs of operating a scheme and the challenges of enabling an in-depth package of support for consumers making their decision—I will say more on this in a moment. The Bill makes reference to enabling guidance for "relevant interests" for "relevant annuities". Perhaps the Minister can give us news of what these terms may cover or, at least, when we might expect some news The House of Commons Select Committee raised a number of concerns about the current arrangements. A key concern was the lack of data and, indeed, a reticence to publish statistics, which inhibits proper scrutiny of how the reforms are progressing. It recommended that the Government should publish, or cause to be published on a quarterly basis, customer characteristics, including pension pot size and other sources of retirement income; take-up of each channel of guidance and advice; reasons for not taking up guidance and advice; subsequent decisions taken; and reasons given for those decisions. It will also be important to have a breakdown of the customer characteristic by gender and ethnicity so that there is a greater understanding of the differing impact of these changes The Minister’s letter suggests that Government will make "core" Pension Wise data available on the government performance platform "this autumn". Can the Minister expand for us on what is to be covered by "core data" and whether they will satisfy the recommendations of the Select Committee that I have just outlined? The committee rightly concluded that the long-term effects of the new freedoms are uncertain and recommended that the Government initiate a rolling research programme to track the long-term consequences of consumer decisions. It is to be welcomed that research is to be undertaken on the immediate impact of a Pension Wise appointment on customers, but where does this leave the concept of a rolling research programme? Does the Minister agree that one is appropriate From what data there are, there seems to be a legitimate cause for concern about the take-up rates of the guaranteed guidance and suggestions that fewer than one in 10 individuals accessing their pension pot availed themselves of face-to-face or telephone advice. Given that the guidance guarantee was recognised as a fundamental component of the reforms and vital to help individuals make informed choices about their lifetime savings, is the Minister satisfied about the current state of play? Particular concern was recorded by Age UK and the Financial Services Consumer Panel about whether the system of pension providers giving risk warnings and signposting consumers to Pension Wise was operating as it should. There are suggestions that providers are following the letter rather than the spirit of their obligation—hence the recommendation that there should be a review of the obligations with a view to their being strengthened, particularly in the prominence given to communications. Will the Government encourage the FCA to strengthen its rules and guidance for pension providers concerning Pension Wise The Minister will be aware of the ongoing debate around the adequacy of just one session with Pension Wise and whether it really is sufficient to support people through their retirement. The expectation is that those with complex needs should pay for advice. For others, it seems they could dip in and out of engagement with the specialist services of TPAS, the Money Advice Service and Citizens Advice. Is this viewed by Government as a sustainable model? Confusion abounds, seemingly not just among consumers, about the distinction between advice and guidance, and we are reminded that the FCA January 2015 guidance seeking to clarify the boundaries of advice runs to 47 pages. Evidence suggests that individuals are very reluctant to pay the typical sums required for a session with an independent financial adviser, hence the need and hope for some middle ground between regulated advice and guidance. Progress on this will presumably have to await the outcome of the Financial Advice Market Review It is hard to read a newspaper or indeed watch a consumer TV programme these days without some reference to the rise of pension scams. Whether there has been an actual increase is, according to the Select Committee, a matter of some uncertainty, although the ability to access the whole of one’s pension pot has certainly created scope for the increase of such activity, given the ingenuity of unregulated businesses often based overseas.