Draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024

(Limited Text - Ministerial Extracts only)

Monday 29th January 2024 General Committees

[The Economic Secretary to the Treasury (Bim Afolami)]

I beg to move,

That the Cttee has considered the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024.

This instrument makes an update to financial services legislation to make operating a pension dashboard service a Financial Conduct Authority-regulated activity. Let me begin by saying that the Government have long held the ambition of delivering pension dashboard services to the public. It is very important that individuals can easily access and view data about their pension savings in one place and at their convenience. Executed well, pension dashboards can deliver significant benefits to consumers, providing better access to information about their pensions held in different schemes. These days, people often have many different schemes.

The instrument will bring a step change in how people engage with their pension savings and will finally allow people to have a full picture of those savings. Equipped with that information, individuals will be better able to plan for their retirement, seek financial advice and guidance, find lost pension pots and make informed decisions. The Government are supporting the development of the digital architecture needed to make pension dashboards a reality, as well as facilitating the development of a Government-backed pension dash-board by the Money and Pensions Service. We have also supported the development of multiple private sector pension dashboards. Different individuals will have different needs, and this will ensure that a wider range of platforms exist to suit such needs.

However, we are clear that this multiplicity of providers can only take place with a suitable and robust regulatory framework, recognising that consumers using pension dashboards could be vulnerable to unfair potential harms. During the passage of the Pension Schemes Act 2021, the Government committed to bringing the operation of a pension dashboard service within FCA regulation. This order amends the regulatory perimeter to make operating a pension dashboard service that connects to the Money and Pensions Service’s digital architecture a regulated activity. Once in force, it will mean that anybody choosing to operate a pension dashboard will need to be authorised and regulated by the FCA.

[Ian Lavery (Wansbeck) (Lab)]

This new legislation refers to a lot of personal data about individuals’ pensions, and the Government have suggested that commercial bodies will also be involved. Can the Minister give guarantees about the protection of the data of individuals concerned?

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[Bim Afolami]

I thank the hon. Gentleman for his point. The whole Committee knows of his strong commitment not only to those in his constituency but those across the country when it comes to protecting people from unfair potential harms. He has illustrated that commitment with his question. I would say two things in response. First, the reason we are making this a regulated activity is precisely to protect individuals, whether it is their data or protecting them from being open to potential scams or anything else. That is why under the regulated activity the FCA will be watching anybody who operates a pension dashboard service. Secondly, the reason we are not just having one Government dashboard service but a multiplicity of private providers is that different people will want different things, and different institutions will operate in different ways. It is important to ensure that we have the right competition, but that competition needs to be underpinned by safety and security. That is why this is being made a regulated activity.

Firms that are authorised by the FCA and are granted permission to undertake the new regulated activity will have to follow the rules set by the FCA. As hon. Members may be aware, the FCA consulted on rules for pension dashboards last year. We will continue to work with the FCA as it develops its response. In conclusion, this instrument delivers an important change to ensure that appropriate consumer protections are in place while progressing our ambitions for pension dashboards. I hope the Committee will join me in supporting this measure, which I commend to the House.

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[Bim Afolami]

A lot of interesting points have been made, and I will address those made by the hon. Member for Hampstead and Kilburn, who raised the broader policy agenda around open banking. In response to her question about whether I will take a holistic view, the answer is yes. It is important to see all of these things in one picture, and I am doing a lot of work with the industry on that.

However, it is important to see that there are fundamental differences between the goals of open banking and pension dashboards—and this also addresses some of the points made by the hon. Member for Glenrothes. Open banking seeks to enable data sharing and increased competition and innovation in the banking market, whereas pension dashboards will help increase consumer awareness and understanding of their pensions. Therefore, in terms of what the purpose of those services are, we are talking about a difference between producers and consumers. One of the key differences is that it would be very unusual for somebody not to know the provider of their bank account, whereas we know that people have lost track of their pensions—often because they have so many different pots.

On the hon. Lady’s question about whether pension dashboards will use the Government’s One Login service, the short answer is that I do not know, but I am happy to write to her on that. I confess that I will have to check that myself, and I thank her for that question. On the hon. Lady’s question about timing, this SI is the beginning of the process whereby, as soon as possible, we will make sure that the architecture is developed safely.

That takes me on to not just the hon. Lady’s point, but also the point made by hon. Member for Glenrothes about minimising the risk of people losing their data. It is important for the Committee to know that no data is stored on pension dashboards. As a result, it is not possible to mass-harvest individuals’ data via dashboards technology. As for the Money and Pensions Service, security standards are designed to ensure that the ecosystem interface of qualifying pension dashboards meet the appropriate level—

[Peter Grant]

I appreciate the Minister’s reassurances, but he will be aware that it was not possible for anybody at Fujitsu to mess about with the information held on Horizon until somebody discovered that it was possible. Without going into too much detail, at what level of expertise and at what level of independence from the whole project are the assurances of IT security being tested?

[Bim Afolami]

The hon. Gentleman asks at what level. In terms of the Money and Pensions Service, it is the National Cyber Security Centre that is advising specifically on these. I am happy to talk to him about it in future weeks and months, but that is the level of seriousness with which we take this issue.

When it comes to other private sector providers, as we talked about at the beginning of the debate, the FCA will determine at which point they are able to connect to the technical architecture. There are various dependencies, including the time required for them to familiarise themselves with the rules, when the architecture is ready and various other things, but the FCA will determine that. Why? I go back to the whole purpose of this statutory instrument: the FCA will make sure that this is a regulated activity to address the concerns of the Committee and others, because it is very important, as we all agree.

The SI introduces an important addition to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to ensure that pension dashboard operators are appropriately regulated and that consumers are protected. I am glad that there appears to be broad support from the Committee for the aims of the order. I thank Committee members for this debate, which I hope they have found informative, and I hope that they will join me in supporting this secondary legislation.

Question put and agreed to.