Pensions: Online Dashboard

Baroness Altmann Excerpts

Tuesday 24th July 2018 Lords Chamber

[Baroness Buscombe]

My Lords, the noble Baroness will know that we are talking about something quite complex. As we look at it, the more we explore and the more questions we ask ourselves and the industry. My honourable friend in another place was right to talk about what was set out in 2016. We want to be careful to ensure that we cover all the challenging issues associated with the dashboard, not least questions of governance, funding, what role the Government might have and whether legislation is necessary. The department has been working closely with stakeholders across the pensions and financial services industry, the regulators, consumer bodies and others, as part of this feasibility study.

[Baroness Altmann (Con)]

My Lords, I welcome the potential of the pensions dashboard and I thank the Minister for her answers so far. It does not sound as if the whole project has been parked, but can my noble friend comment on the accuracy of pensions data and whether the problems of errors in pension recording have led to some concerns about a dashboard containing past pension records? Can she perhaps reassure the House that, at the very least, all auto-enrolment pension records could be put on to a dashboard funded by the industry—not by government but facilitated by her department?

[Baroness Buscombe]

First, I congratulate my noble friend on being appointed as the chair of pensionsync. I noticed that the question she has just asked was on her blog this week, suggesting that it is perhaps due to errors. I entirely refute that suggestion. The reality is that we already have, as my noble friend well knows, the online Pension Tracing Service to help people more easily locate their pension savings. We have also established the “Check Your State Pension” service, which has provided more than 9 million estimates since its introduction in 2016. We also have the development of a single financial guidance body. This department is doing a huge amount towards a revolution in the way that we support people to save in their retirement. Auto-enrolment, to which nearly 10 million people have actually signed up in the last six years, is an example of where we are working with this quiet revolution.

Bereavement Benefits

Baroness Altmann Excerpts

Monday 11th June 2018 Lords Chamber

[Baroness Buscombe]

The noble Baroness will know that those in need of additional income-related benefits will receive them, as well as child benefit for those with dependent children, for example. This is not a cost-cutting exercise. We are investing an extra £40 million in each of the first two years after the reform. This is a modernisation of an outdated system, which relates to a time when women were not expected to work and, indeed, there were not jobs available for them. We are spending more than £95 billion on working-age benefits to help those in need. People in receipt of the bereavement support payment can access other parts of the welfare system if they need it. With regard to being a lone parent, it is important to add that the problem with the old system was that, if one remarried or went into a civil partnership, one lost that entitlement altogether. People do not lose it under this system.

[Baroness Altmann (Con)]

My Lords, I understand that my noble friend has her brief from the department, but I urge her please to go back to her officials and question them about what they perceive as the fairness of these changes. Money is being taken away from families with young children, three-quarters of whom will lose out and 90% of whom will receive support for less time. That money is being recycled to families without children, while the 21% of families whose parents choose not to marry or decide to cohabit receive absolutely nothing. Overall, by 2020, the cost savings will be in the tens of millions of pounds. Before the 18 month-period expires around November this year, I urge her to look into the possibility of devising a bereavement payment specifically designed for children, so that their parents can be there for them. The damage to their mental health and educational attainment has been well documented.

[Baroness Buscombe]

My Lords, I will not be going back to the officials because—

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

Ping Pong (Hansard): House of Lords
Tuesday 1st May 2018 Lords Chamber

[Baroness Drake (Lab)]

My Lords, I recognise that the constructive engagement of the Ministers with Members in the House of Commons and noble Lords in this House has resulted in beneficial amendments to the Bill and enthused people about the creation of the new financial guidance body. I accept that we need to move on and let the department get on with building the new body and delivering all the grand things that we want it to achieve. I thank the Minister and the Bill team for the access that was afforded to me personally to raise matters on the Bill.

I welcome the Minister’s clarification that the reference to pension guidance in Amendments 7 and 8 is defined by reference to Section 5 in the Bill, on the new body’s pension guidance function, which itself is a subset of Section 3, which requires that guidance to be free and impartial. I think there was some misunderstanding and it is very helpful that that clarity of link between the sections has been made clear.

If I may make one final observation, a well-founded consensus on matters of high principle supported by legislation can sometimes be undermined in the implementation. Everyone agrees that referring people by default nudging to impartial guidance before they access their pension savings is an integral part of protecting consumers and enabling them to make more informed decisions. However, there are anxieties that the FCA and the Secretary of State, in setting the rules for the process, should not give administrative control to the providers particularly of the opt-out process, given that the providers will not be impartial because they have a direct interest in retaining the consumer as a customer for their product. So any reassurance from the Minister that the Government recognise this concern, and intend that the rules for nudging and defaulting people into impartial guidance will be designed in such a way as to prevent providers from manipulating the process to undermine the referral to guidance, would be welcome.

[Baroness Altmann (Con)]

My Lords, I am grateful to the Minister and officials for their work on the Bill, but significant flaws remain, including a point on which I hope the Minister will be able to offer reassurance relating to pensions guidance.

Along with the noble Lords, Lord Sharkey and Lord McKenzie, Members of this House voted by 283 to 201 in October to add an amendment creating provisions for savers to be defaulted to impartial, independent guidance if they have not already received guidance or regulated advice before they decide when, whether or how to access their pensions. The purpose of those provisions was to address the consistently low take-up level of pensions guidance by harnessing the potent force of inertia.

The amendment passed by this House was supported because there is a wealth of evidence suggesting that people are ill-equipped to make key decisions without such impartial, independent professional support. That was specifically the intention behind setting up the Pension Wise service when the pension freedoms were introduced. I hasten to add that I congratulate the Government once again on introducing those pension freedoms—I think that that was the right thing to do—but fewer than one in 10 are making use of this guidance, despite the fact that so many need it.

At Second Reading in the other place in February, I was pleased to hear assurances from the Pensions Minister that the new clauses would be strengthened—albeit by some fine-tuning. The same assurances were given in evidence to the Work and Pensions Select Committee, yet the Commons amendments show that the promised fine-tuning seems to have been somewhat inadequately applied.

Instead of being strengthened, the default guidance provisions added by noble Lords have been replaced with clauses that merely require pension providers to refer savers to guidance if they have not yet done so. This introduces no new requirement for providers beyond what is already required by FCA rules. The new clauses also leave open the possibility that savers may opt out of guidance by their scheme provider. The FCA’s consumer panel believes that this is inadequate, the noble Baroness, Lady Drake, just expressed similar concerns, and I should be grateful if my noble friend could reassure the House that there will be a separate and impartial opt-out process. There are significant reasons to fear that consumers may not otherwise receive the assistance that they desperately need.

If providers have an interest in not sending people to the guidance service and finding ways in which they can encourage them to call their own helpline or take advantage of their own services, the concerns expressed by Age UK, the Financial Services Consumer Panel and by noble Lords when the Bill was originally passed will, unfortunately, be borne out.

This may seem a small point, but a great deal depends on it for millions of savers. As the Work and Pensions Select Committee pointed out, providers do not usually benefit if there are higher rates of guidance take-up—indeed, it may be to their detriment—so they may well try to find ways round and an opt-out process that is not impartial and, perhaps, take advantage of customers in that way. Therefore, I would be grateful if my noble friend was able to offer reassurances about the opt-out process. I welcome the idea of default guidance, but I hope that regulations will be a lot stronger than the current legislation seems to suggest.

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[Baroness Buscombe]

I thank all noble Lords who have taken part in this brief debate, and in particular the noble Lord, Lord McKenzie, for his very warm words of support for these amendments and for the Bill, and for the way in which we have worked collaboratively and have, collectively, improved the Bill. We have sought to do so with care not to impose requirements where they are not necessary or where they could box the new body into a corner in terms of its ability to be flexible. Default guidance is an example of an area where we want to be extremely careful. That is why so much time and care has been taken to make sure that we have come to a situation where we are managing that balance sufficiently.

I absolutely understand the concerns of the noble Baroness, Lady Drake, in relation to the scheme being free and impartial. To reassure her, and my noble friend Lady Altmann, I will refer back to a part of my speaking note where I made it absolutely clear that that is the case and stressed that the guidance given under these amendments, as the noble Lord, Lord McKenzie, said,

“can only be provided by the single financial guidance body. This is by virtue of the interaction between Clauses 3 and 5, and Amendments 7 and 8. Subsection (7) of Amendment 7 and subsection (6) of Amendment 8 define the pensions guidance referred to in the amendments as the information or guidance provided in pursuance of Clause 5 of the Bill”.

This sounds rather convoluted, but I reassure noble Lords that it actually creates clarity.

I fear that my noble friend Lady Altmann is looking for mandatory guidance, but we simply do not believe that that is right. As the Work and Pensions Select Committee in another place observed in its report, Clause 5(2) does not require individuals to participate in or expressly turn down guidance before being granted access to their pension pot. Opting out could be passive for a significant proportion of people. It also risks making routine transactions, and those in which the individual has already taken advice, unnecessarily cumbersome. Further, the clauses which relate to the rules and regulations that will be developed require the FCA, the Secretary of State and the new body to work together —this is very important—to develop these new requirements. Respecting the concerns of my noble friend Lady Altmann, we are talking about a strong final nudge. As is customary, before making the rules and regulations the FCA and the Secretary of State will need to consult, providing the proper opportunity for public scrutiny of proposals before they are commenced.

My noble friend referred to a vote that took place on default guidance. However, it is important to stress that it did not reference mandating the guidance. All our research, including talking to stakeholders, shows—

[Baroness Altmann]

I thank my noble friend for giving way. I am not in favour of mandatory guidance: I have always supported the idea of default guidance.

[Baroness Buscombe]

On that basis, I hope that I have—at least to some degree—reassured noble Lords that we have found the right balance, having worked very closely with all noble Lords and the Select Committee in another place to ensure that we hit the right mark in developing default guidance.

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[The Earl of Kinnoull (CB)]

My Lords, I will comment briefly on Amendments 2A and 10A. I very much congratulate the noble Lord, Lord Sharkey, on putting them down and on making such a clear presentation of them, and I will not add very much to what he had to say.

I was looking at something that I pointed out to the House at an earlier stage in respect of the size of the asset of private pensions in Britain, when I referred the House to the Office for National Statistics report, one chapter of which is on private pension wealth. The median for someone between the age of 55 and 64 who has a private pension is to have a pot of £145,000. To put that in perspective, the average value of a house in Britain in June last year was £220,000, and Savills said that it thought that 48% of the house was financed by debt. That means that for an average person in Britain, the pot of pension is huge, and of the same order, as the value of their home. This makes it an incredibly juicy target for the bad guys.

That is why it is very important—I strongly suggest it is why people voted for the amendments when they did—that a belt-and-braces approach must be taken to frustrate the wicked designs of the bad guys. I very much hope that the Minister will be able to say that the Government will support these two amendments.

[Baroness Altmann]

My Lords, I support Amendment 10A and I hope that my noble friend will be able to accept it. Of course I welcome the Bill and the concept of a ban on cold calling but I fear, as we have expressed and the noble Lord, Lord Sharkey, in particular has pointed out, that unless we ban the use of any leads that have been obtained from cold calling we will not protect consumers.

What is cold calling? It is unsolicited, direct marketing. Companies try to approach potential customers to entice them into buying products that in most cases end up being scams and on which those customers often end up losing significant sums of money.

The legislation tends to focus on this issue from the perspective of protecting people’s information and data, but this issue of banning cold calling needs urgently to be considered from a customer perspective as one of business selling practices. That is very different from the concept of protecting someone’s data. Even if there were consent in some way to cold calling, the practice that is currently prevalent—whether from overseas or within the UK—tends not to be calling people whose numbers have been found by invading their data privacy. Very often, it is random number calling from an automated device or merely trawling through telephone directories. Even those people who sign up to the Telephone Preference Service receive cold calls.

Cold calling is effectively already banned, but what the Bill seeks to do, what noble Lords were trying to do and what this amendment would help to achieve would be more than that, because we will never effectively stop someone trying to call people. However, if we ban the business reasons for which they do so we will properly protect consumers. That leads on to my plea to my noble friend to consider this from the point of view of the selling process and the customer buying process. If we ensure that the regulators in charge of the sales process do not permit the use of data that has been obtained from an unsolicited call, in any form, as we have already done for mortgages, that would be much more likely to ensure the kind of protection that I know my noble friend and the Government wish to achieve.

I thank David Hickson from the Fair Telecoms Campaign. He has tirelessly attempted to help people understand why these things are so important. The ICO is of course responsible for enforcing compliance with data protection legislation but the regulation of business practices is undertaken by the specialist regulators. In the case of pensions, it is the FCA or the Pensions Regulator. Indeed, the FCA already prohibits unsolicited direct marketing of mortgage products. The SRA prohibits unsolicited direct marketing of claims management services by solicitors, so it is possible to stop. I urge my noble friend to consider and respond to these concerns when she makes her closing remarks.

[Lord McKenzie of Luton]

My Lords, I start by acknowledging the role played by the noble Lord, Lord Sharkey, in our deliberations—particularly on cold calling, which he has been focused on. I am not sure that we are meant to, under the rules, but I also welcome the Minister from the other place, who is with us and hoping not to get the Bill back for another round of ping-pong. We will see.

The consumer protection function of the single financial guidance body is part of the armoury to build a case for banning cold calling and unsolicited direct marketing for consumer financial products. It adds to the abolition of cold calling for pensions and CMCs that is now in the Bill. As sent back from the Commons, the Bill requires the SFGB to consider the impact of unsolicited direct marketing on consumers, publish from time to time an assessment of whether such activity has a detrimental effect on consumers and advise the Secretary of State whether to make regulations under the cold calling provisions of the Bill.

The amendment in the name of the noble Lord, Lord Sharkey, seeks to add a requirement for the SFGB to additionally publish an assessment,

“not less than once every two years”.

Given where we are in the process, I frankly doubt that this requirement would add value. Surely the key is to have flexible arrangements so that the body can respond to emerging issues and report expeditiously as and when evidence of detriment is available. If the noble Lord’s concern is that the SFGB will somehow let this function lie fallow, I am sure that the Minister can put something on the record in her response.

Amendment 10A—also in the name of the noble Lord, Lord Sharkey—seeks to ban,

“the use by any person of data obtained in contravention of the prohibition”,

of cold calling for pensions and,

“determine the penalties for any such contravention”.

A further amendment seeks a parallel prohibition on data from cold calling for claims management services. It is understood that through measures in this Bill—which will be complemented by existing and forthcoming data protection legislation—where personal data is obtained through an unlawful cold call, further use of that data would be contrary to the Data Protection Act 1998. I understand that fines for such abuse are about to be raised significantly. Through the general data protection regulation and the Data Protection Bill going through Parliament, these matters will be addressed and prohibited. The issue is important and it is certainly important that we hear from the Minister on the second amendment of the noble Lord, Lord Sharkey.

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[Baroness Buscombe]

My Lords, Amendment 21 implements the commitment I made to your Lordships’ House that the Government would table an amendment restricting cold calls made in relation to claims management services. We are all aware that calls about claims management services are not just a source of irritation; for the most vulnerable in our society, being bombarded by these nuisance calls can be highly distressing.

The Government have already taken forward a number of measures to tackle this issue, but debates in your Lordships’ House clearly demonstrated that more action was needed. That is why the Government tabled Amendment 21, which will insert a provision into the Privacy and Electronic Communications (EC Directive) Regulations—the regulations which govern unsolicited direct marketing calls—to ban such calls in relation to claims management services, unless prior consent has been given. This amendment takes the onus away from the individual to opt out of such calls being made to them and puts the responsibility back on the organisation to do its due diligence before making such calls. As I have mentioned previously, there are complexities in legislating in this area, including issues relating to EU frameworks. But I am confident that the amendment will have the effect of making unwanted calls about claims management services unlawful.

Concerns were also raised in your Lordships’ House about the commercial use of illegally obtained data, and I have been having further discussions with the noble Lord, Lord McKenzie, on this issue. The measures in the Bill will be complemented by existing and forthcoming data protection legislation. Where personal data is obtained through an unlawful cold call, the further use of that data—for example, to make further calls in the future—would be contrary to the Data Protection Act. The ICO can issue fines of up to £500,000 for breaches of the Data Protection Act, although this will be raised significantly—to approximately £17 million or 4% of a company’s turnover—through the forthcoming general data protection regulation and the Data Protection Bill that is currently going through Parliament.

Overall, we believe that Amendment 21 is another robust proposal to add to our package of measures to tackle unsolicited marketing calls, and one that will be gratefully received by consumers across the UK.

As we have heard, Amendment 21A, tabled by the noble Lord, Lord Sharkey, seeks to prevent the use of data obtained by illegal calls. I completely agree with the sentiment behind this amendment and, as I said, government Amendment 21 on cold calling will be complemented by data protection legislation, which includes requirements for data to be processed fairly and in accordance with the law. I repeat the assurances I gave earlier, that where personal data is obtained through an unlawful cold call, the further use of that data—for example, to make further calls in the future—would be contrary to the Data Protection Act 1998. I therefore encourage the noble Lord, Lord Sharkey, not to move his amendment, and I beg to move the Motion on Amendment 21.

[Baroness Altmann]

My Lords, before the Bill passes into law, I would just like to welcome the Bill, as well as the debt respite scheme and the help for those with unsecured debt. It includes some very important measures. I thank my noble friend the Minister and the Bill team for all the hard work they have done on these measures. I thank the noble Lords, Lord Stevenson, Lord McKenzie and Lord Sharkey, the noble Baronesses, Lady Drake and Lady Kramer, and the noble Earl, Lord Kinnoull, who have all been so instrumental in getting this through. On this particular amendment, I am most grateful to my noble friend the Minister for listening to the concerns expressed in this House.

[The Earl of Kinnoull]

My Lords, I can be even briefer, but I want to thank particularly the Minister for living up to her commitment because, having read through the comprehensive Amendment 21, it does precisely that and I thank her.

Personal Independence Payments

Baroness Altmann Excerpts

Tuesday 23rd January 2018 Lords Chamber

[Baroness Buscombe]

I can indeed respond to the noble Baroness because only last week I had a meeting with officials who are closely focused on this issue. I cannot give her the exact numbers, but we are bringing on board many more work coaches. We are training them and continually working to improve our systems to ensure that any backlogs in the waiting time for the initial assessment and reassessment are cut down; I think they have been cut by at least half over the past year. We recognised that the number of people coming forward was greater than we had initially judged, so we are responding to that as quickly and efficiently as we can. At the same time, we have to make sure that there is continuous improvement, that the PIP benefits process is working fairly and effectively and that it offers the best claimant experience possible. My honourable friend in another place, the Minister of State with responsibility for this issue, has given me a list of the different things we are doing to improve the assessment process and deal with any backlogs in the system.

[Baroness Altmann (Con)]

My Lords, I would like to congratulate my noble friend the Minister and my right honourable friend in the other place on taking this decision. It is the right decision, although I am sure it was a difficult one and will be difficult for the department to implement. Nevertheless, it is right and I welcome it.

[Baroness Buscombe]

I thank my noble friend for supporting us in what we feel strongly was the right decision. It was a difficult one because obviously, we need to take some time—not long, but some time—to make sure that we can respond in the right way and support a fair number of people whose assessments we need to re-evaluate. We will do that to the best of our ability, but very much at the forefront of our minds is the need to work with stakeholders, including Mind and other charities, to ensure that we get this right. Again, I thank my noble friend.

Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018

Baroness Altmann Excerpts

Monday 22nd January 2018 Lords Chamber

[Lord Jones (Lab)]

My Lords, like my noble friend at the Dispatch Box, the Minister is a master of detail and I thank her for her helpful introduction. However, since they refer to Wales as well as the rest of Britain, have these draft regulations any relevance to the steel-workers of Port Talbot at the previous Tata company? Indeed, do they in any way impinge upon the pensions entitlement of the remnant of the steel industry across Britain? It is not that one expects steel pensions to be sky-high, which the cap might anticipate. If the Minister can in any way make reference to the beleaguered steel industry, and in particular those steel-workers in the great Port Talbot works who are very anxious about their pensions, that would be helpful.

[Baroness Altmann (Con)]

My Lords, I congratulate the Government on introducing these very important regulations. I spent years of my life helping the victims of failed pension schemes under the previous system, which had no insurance protection for lost pensions, despite the workers in those schemes having part of their state pension and their entire private pension savings included in their pension scheme as they were not allowed to have any other pension savings. Having been assured by the Government that their pensions were safe and protected by law, they found that it turned out that they could lose their entire pension. Indeed, many of them did, including steel-workers in south Wales at the time.

It is 10 years since the Financial Assistance Scheme was extended to mirror the Pension Protection Fund. It took a parliamentary ombudsman inquiry, a Public Administration Select Committee inquiry and then a case in the High Court, followed by a case in the Court of Appeal—where the victims were forced to take the then Government to court—to ensure that the Financial Assistance Scheme, which at the time was designed to help only a few of those who had lost their pensions and to replace only a small portion of the pensions they had lost, was extended to mirror the PPF. As the noble Lord, Lord McKenzie, rightly said, it is only right that the continued mirroring of the scheme should be followed, and having extended the Pension Protection Fund cap, it is essential that the Financial Assistance Scheme cap must also be increased. I congratulate the Government on doing so.

Pensions

Baroness Altmann Excerpts

Wednesday 13th December 2017 Lords Chamber

[Baroness Altmann (Con)]

My Lords, I am grateful to be allowed to speak in the gap as this is an issue close to my heart. The 2010 coalition agreement promised there would be no changes to women’s state pension age before 2020, but a few months later Ministers decided to start increases from 2018. I tried to persuade the coalition Government that increasing women’s state pension age a second time before the original 1995 changes were finished was wrong. I still believe that. The implementation has caused regrettable injustice, distress and anger, and I hope my noble friend will forgive me for highlighting these issues in case she is not fully aware of them.

First, no man faced an increase of more than one year while these women, who generally have much lower private pensions and who had been disadvantaged in state and private pensions throughout their lives, had increases of up to a year and a half on top of the previous three, four or five-year rises. Secondly, women were given only five to eight years’ notice while around the same time the Government announced that it would not be fair to make any changes to the pension arrangements of public sector workers within 10 years of pension age. Such double standards were difficult for many women to accept. Thirdly, and most importantly, many women did not know about the 1995 changes, so in 2011 while Parliament believed it was increasing their pension age by up to one and a half years, some women effectively faced a delay of up to six years.

I also did not realise in 2011 that the Labour Government from 1997 to 2009 did not make sure that women knew about the changes in 1995 so that they could plan for the delay. Even worse than this, many 1950s-born women were lulled into believing that their pension age would be 60. Around 2004, the department wrote to many of these women to tell them how much or how little state pension they were in line for, but those letters did not tell them that their pension age would not be 60. As a letter about their state pension did not mention their pension age, women would naturally assume that they would get it at 60, like every woman they had ever known. Even in 2015, some official websites still listed the women’s state pension age as 60.

I know this is a difficult issue, and I sympathise hugely with my noble friend. Believe me, I understand how uncomfortable her situation must be, but I hope that we can find a way to help the good women who are facing real hardship and show our understanding of the position in which they find themselves.

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

3rd reading (Minutes of Proceedings): House of Lords
Tuesday 21st November 2017 Lords Chamber

[Baroness Kramer (LD)]

My Lords, as well as congratulating the Minister on bringing the language of “vulnerable circumstances” to the Bill, I want to congratulate the others who have made this issue so clear during our very positive and engaged debates; namely, the noble Baronesses, Lady Coussins, Lady Finlay and Lady Hollins. When the Minister first put down a slightly earlier draft of the amendment, which reordered some of the opening sections of Clause 2, because I am a naturally suspicious person, I tried to see whether there was some bear trap in there or something that I should be afraid of. I could find no such bear trap—and nor could my colleague, my noble friend Lord Sharkey, who I think now has a reputation for the most incisive examination of language in a Bill. I fully understand the desire of the Government to be clear and transparent—they seem very positive. I shall have more to say about the Bill in later stages—but, with this first grouping, we start off on a rather good note for the opening of Third Reading.

[Baroness Altmann (Con)]

My Lords, I congratulate my noble friend on the hard work done by her and the Bill team to include the changes called for in our earlier debates on the Bill. I fully support the reworking of the sections to improve the clarity of the Bill; the adjustments are sensible and pragmatic. I also add my congratulations to the noble Baronesses, Lady Finlay, Lady Hollins and Lady Coussins, on the important provision relating to vulnerable individuals. It is important that we have achieved that increased protection for them in the Bill. I again thank my noble friend and offer support for the amendment.

[Baroness Tyler of Enfield (LD)]

My Lords, I add my thanks and congratulations to all concerned in this area. We now have within the objectives the reference in paragraph (d) to,

“the needs of people in vulnerable circumstances”.

That is hugely relevant. As chair of the former Lords Select Committee on Financial Exclusion, I know that we spent a lot of our time looking at the problems faced by people in vulnerable circumstances. We focused particularly on the needs of people with mental health problems and disabilities and the vulnerable elderly. We received a lot of evidence on that point, and I know that many people will be very glad to see these words included.

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[Baroness Buscombe]

My Lords, I shall be brief. I respond first to the noble Earl, Lord Listowel. I very much welcome the opportunity to write to him on his question about council tax for care leavers. On the scheme, I say to both the noble Earl and the noble Lord, Lord Kirkwood, that the Treasury has already issued a call for evidence. I attended a meeting at the Treasury with officials from Scotland, along with Treasury Ministers and officials to discuss how it works, what the processes have been and the path and history behind the debt respite scheme in Scotland. That is already under way.

Perhaps I should repeat one brief paragraph just to reassure the noble Lord. The single financial guidance body must provide advice within 12 months of being established, and on receipt of this advice, we will make regulations to set up the scheme as soon as is practicable, and certainly within 12 months of receiving the advice. It must be no later than 12 months, but we shall make every effort to do it as soon as we can.

I should also add that the scheme can apply to public debts, but we do not want to prejudge the consultation that we are progressing. A number of questions that the noble Lord raised rightly rest with the consultation process.

[Baroness Altmann]

I intervene briefly to ask my noble friend for some gentle reassurance about the issue of cold calling. I am enormously grateful that we have the debt respite scheme agreed, and the new wording, on which I congratulate the department, and the new wording for the Long Title, which explicitly includes cold calling. Can my noble friend reassure us that the ban on cold calling that the Government intend to introduce will be as effective as possible and that, rather than using the ICO, which has very broad powers, the direct regulator—in particular, on pensions, the FCA—will be responsible for enforcing the ban? Regulatory imposition and enforcement by existing regulators is surely more effective in achieving compliance than relying on enforcement of widely drawn regulation.

This weekend, a story in the Mail on Sunday exposed the problems of nuisance calls to vulnerable elderly people about funeral plans. It was absolutely clear how ineffective the ICO has actually been in enforcing a ban on cold calling. It merely tries to sweep up the mess afterwards. It is cited as saying,

“where we find the law has been breached we will … take … action”.

[Baroness Buscombe]

I am so sorry to interrupt my noble friend, but there is no amendment in respect of cold calling tabled at Third Reading, and therefore we cannot speak to it. I reassure her that we have already committed to introducing legislation to ban cold calling in the other place.

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[Baroness Kramer]

My Lords, I apologise, as when I last spoke, I attributed to the noble Viscount, Lord Trenchard, a very eloquent speech that was made on cold calling and the way it targets vulnerable people, when it was the noble Viscount, Lord Brookeborough, who made that speech. I apologise to both parties. If I have any excuse, it is that I confuse my own children, and one of them is male and the other is female, so it is even more embarrassing.

As regards this group of amendments, my only regret is that the cap on fees is set at 20%. It would have been better to have a lower cap. However, we congratulate the Government on the underlying principle of taking temporary action because it is very likely that by the time the FCA gets its grip on this issue we will be beyond the reach of future PPI claims. However, other than that, I once again thank the Minister for being responsive to the issues that have been raised all around the House, including this one and those of cold calling, debt respite and financial inclusion. This is a very important move by the Minister and her name will be attached to these issues well into the future.

[Baroness Altmann]

My Lords, I too once again thank the Minister and all parties who have worked so hard on this Bill. I thank the noble Earl, Lord Kinnoull, who initially raised the issue of Scotland. It is excellent that the whole of Great Britain is included in the Bill. I thank the department for all the hard work that it has done to achieve this.

I too am delighted to see a cap on the PPI claims management fee. Like the noble Baroness, Lady Kramer, I would very much have liked the Government to agree that the parties responsible for the mis-selling would pay the fee rather than taking it out of the compensation that is paid to the customer. I understand that there may be an issue over the profitability of the claims management company itself but perhaps a compromise would be to split the 20% so that the customer gets 90% of what is due and the financial firm that has done the mis-selling perhaps pays 10% as well to the claims management firm. Having said that, I certainly welcome a 20% cap. I once again thank the noble Lords, Lord Stevenson, Lord Sharkey and Lord McKenzie, and the noble Baronesses, Lady Kramer and Lady Drake, the noble Earl, Lord Kinnoull, and all other noble Lords who have made such great improvements to the Bill.

[The Earl of Kinnoull (CB)]

My Lords, I cannot resist speaking briefly because of the good news in this group on the Scottish side. I pay tribute to and thank the Minister and her colleague, the noble Lord, Lord Young of Cookham—he of the very early morning email, which I received so often during the process of the Bill and which made me feel jolly lazy. I also pay tribute to and thank the noble Baroness, Lady Altmann, who added her name to my Scottish amendments; they were of course badly drafted, and I thank the parliamentary draftsman for correcting all that.

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

[Lord Sharkey (LD)]

My Lords, we on these Benches very strongly support the amendment, for which the noble Lord, Lord Stevenson, has made such a detailed, eloquent and powerful case. The notion of a breathing space or debt respite scheme has attracted a lot of support both in this Chamber and outside.

The Minister herself has acknowledged the merits of such a scheme. She said at Second Reading:

“A breathing space scheme could help people affected by serious debt by stopping creditor enforcement and freezing further interest and charges on unpaid debt”.—[Official Report, 5/7/17; col. 943.]


There is really no need for the conditional “could” in that assessment. The evidence from the existing scheme in Scotland makes it clear that such a scheme does help people affected by serious debt—and help is very definitely needed.

Last week, the FCA published its detailed study of the financial lives of UK adults. This is a truly remarkable and detailed study and an exceptionally useful piece of work, and I congratulate the FCA on producing it. But it is also a truly worrying piece of work. Among its many findings was the fact that in the case of 400,000 adults who were behind on payments and had contacted their provider, their provider did not encourage seeking free debt advice. Another 300,000 adults in the same position reported that their provider did not allow time to pay. Worst of all, for 100,000 adults in arrears, their providers were unsympathetic, did not encourage seeking free debt advice and did not allow more time to pay.

A debt respite scheme would certainly help the debtor, but Scotland shows that it would also help the creditor, who would recover more of the debt. This is a win-win situation. Both sides gain. The case for a debt respite scheme is clear and compelling. That is why, no doubt, the commitment to such a scheme was contained in the Conservatives’ 2017 general election manifesto. But the Minister seemed to feel, when we discussed this at earlier stages, that the issue was so complex that delay was necessary. She said in Committee:

“The Government’s manifesto … proposed the introduction of a statutory breathing space scheme and statutory debt repayment plan. This is an important and complex issue. It requires thorough preparation and consultation on details, such as who could be eligible, which debts could be in scope and how someone could enter into a breathing space”.—[Official Report, 19/7/17; col. 1683.]


All this is quite right, of course, and includes the important and unresolved question of whether rent and utilities arrears should be included in any such scheme. In that context, it is worth repeating what the noble Lord, Lord Stevenson, mentioned a few moments ago: a debt respite scheme already has the backing of at least part of the utilities sector, Water UK.

But focusing on these undoubtedly important questions avoids the simple question of when. It ignores the fact that primary legislation can establish the framework and leave the details to secondary legislation. However, the noble Lord, Lord Young, said last Friday in this Chamber:

“The legislative programme for this Session is already at full capacity and there is no scope for additional measures”.—[Official Report, 27/10/17; col. 1148.]


So, if the question is when there will be a legislative vehicle that will allow the construction of a breathing space, the noble Lord, Lord Stevenson, has provided the answer. The answer is this Bill and this amendment. I hope that the Minister will see its obvious merit and be able to accept it as an obvious way of making progress without further delay.

[Baroness Altmann (Con)]

My Lords, I too have added my name to the amendment, which I hope my noble friend will be minded seriously to consider and, if necessary, bring back at a later stage still. There is clearly widespread support across the House and indeed the country for such a scheme. There is also rising concern about the level of consumer debt within the economy as a whole. We know that more and more people are falling into debt, having perhaps been enticed into borrowing at teaser loan rates that have then risen. We also know that the trend in interest rates may well start to go up, which again would cause significant difficulties for those who have taken on perhaps unwise levels of debt. In practical terms, just giving this breathing space, which I know the Government support, could help to manage a situation that has gone beyond manageable for many vulnerable people. I hope that noble Lords across the House will support this, and indeed that my noble friends on the Front Bench will be able to as well.

[Baroness Coussins (CB)]

My Lords, I very much welcome the proposal at the heart of the amendment, and indeed the very similar idea of the breathing space on which the Treasury announced its consultation last week. At this stage I have just one question on which I seek clarification from both the noble Lord, Lord Stevenson, and the Minister. I remind the House of my interest as president of the Money Advice Trust. In my view, it is essential that any breathing space scheme covers public sector creditors as well as lenders in the private sector. The noble Lord, Lord Sharkey, touched on this point.

Debts to public bodies are an increasing feature of the UK’s personal debt landscape. The Money Advice Trust, for example, reports that 25% of callers to its national debtline service had council tax arrears last year, up from just 14% a decade ago. Calls about benefit overpayments and other public sector debts have also increased, and so too has scrutiny of the debt collection practices of these public sector organisations. So for any new debt respite or breathing space scheme to be truly effective, it must provide breathing space from all creditors, including local councils, the DWP and HMRC in particular, so as to give people the time they need to seek advice and tackle their debt problems. I would be most grateful if the noble Lord, Lord Stevenson, confirmed that the intention behind his amendment is to include public sector creditors, and if the Minister said whether she expects public sector creditors to be included in the Treasury plans.

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[Baroness Altmann]

My Lords, I have added my name to this very important amendment. Of course, I welcome this very important Bill. Providing guidance for consumers is absolutely vital, and I congratulate the Government on bringing forward the Bill. However, the intention of this amendment is to make it work better for the public.

I support this amendment wholeheartedly as it would be a major step forward in ensuring that the pension freedoms work better for the public. As the noble Lord, Lord Sharkey, rightly said, too few people are making use of the excellent Pension Wise service, which was set up to help them make well-informed decisions about their pensions. Indeed, when the Government announced the new pension rules, they rightly recognised that the public were not well equipped to understand the important features of their pension savings and the new landscape that would allow them to make the best use of this excellent new policy, so they also announced what they referred to as the guidance guarantee to ensure that everyone could have free impartial support before making decisions about their defined contribution pensions.

Pension Wise has consistently high satisfaction ratings of 90% or more, as the noble Lord has already mentioned, but the majority of people are at risk of poor outcomes and a worse quality of life in retirement than they could otherwise enjoy because they do not get the guidance. So far, pension providers have been left to encourage people to use the guidance by sending a Pension Wise leaflet with all their so-called wake-up packs. These are sent to a customer about six months before their previously chosen pension age. Providers have to mention that Pension Wise is available, but clearly the message is not getting through. Pension Wise is merely presented as an option for customers rather than what it needs to be: a normal part of the pension access process. Too often, the public do not read the materials they are sent or are encouraged also to call the providers’ own hotlines. Once they have done that, people often feel they have already had free help and, even if they do not realise that it is not unbiased or impartial and may not have explained all the issues they need to consider, they do not go on to Pension Wise.

As we are automatically enrolling people into pensions, I believe it is also right to consider automatically encouraging the use of free guidance to help people before they make these irreversible decisions. The two should go hand in hand. Creating the new single financial guidance body, which is warmly welcomed on all sides of the House, could be an excellent opportunity to deliver a new approach to guidance designed to make using the Pension Wise successor body the expected norm. That is what this amendment attempts to achieve, with people automatically being told that they have an appointment waiting for them, perhaps a voucher of some kind that gives them the time of a telephone appointment that has already been made for them but also makes it clear that they can change this if they prefer a different time or have a face-to-face appointment, if they would like.

An ILC-UK survey of consumers found that only half of defined contribution pension customers thought they understood quite well or very well what an annuity is, and that a shockingly low 3% said this about draw -down. Another study by the Pensions and Lifetime Savings Association found that just over half of pension-age customers wrongly thought that draw-down products offer them a guaranteed retirement income, and about a quarter thought that draw-down carried no investment risk at all. Given such findings, it is surely clear that we urgently need better regulatory requirements to help non-advised customers to receive the guidance and fulfil much better the absolutely appropriate promise of this guidance guarantee. The lack of safeguards for pensions seems out of proportion to the known risks of consumer detriment. Research from Just Group, which has also been pushing for this amendment, suggests that defined contribution pension customers aged over 55 who had Pension Wise guidance believe that the investment of time in seeking such guidance was worth while, with 90% saying that all customers should use it.

This amendment would allow the use of similar principles to auto-enrolment and would help to overcome the inertia and lack of engagement with the complexity of pensions. By arranging or directing customers to free guidance rather than just mentioning it to them, take-up is likely to be much higher. Such auto-enrolment into guidance can be organised in a number of ways. However, the current guidance service management with whom I have liaised has already suggested to me that it believes that providers could book appointments for customers who call up with a request to transfer money from their pension or take some money out of it. I point out to noble Lords that guidance for some transfers is important, not just for when people take money out, because the customer could be helped to avoid falling for a scam scheme. Pension Wise has already managed to stop some customers from losing their pension when they responded to a cold call that was urging them to transfer rapidly out of a good scheme to a scam one.

To ensure that people have a guidance session before they engage with their provider about the possible options for their pension is more likely to result in them not taking out money yet, which the provider may not tell them about, or realising that there are many reasons to keep the money in pensions, such as not being taxed or losing the tax benefits of pensions. Of course, financial advisers can help here, but for those who do not have such independent advice the free guidance service is important. I hope that the Government will accept these sensible ideas, which have wide support from across the House, and which would be a major step forward for consumer protection in pensions.

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[Lord McKenzie of Luton]

My Lords, we should be grateful to the noble Lord, Lord Kirkwood, for moving the amendment on behalf of the noble Baroness, Lady Meacher. If I understand the points he made it looks as though this will be another issue for us to consider on Third Reading, so I do not propose to dwell on it extensively. If that is not the case it will be good if the Minister tells us.

The thrust of the amendment is to try to get interim rules in place to put a cap on the charges levied, particularly relating to PPI as the ability to claim is coming to the end of its natural life. The noble Lord raised an interesting point on what the remedy would be when people exceed the cap. Will the Minister confirm that the route would be that the excess is recoverable by the claimant, rather than some other more direct remedy? I look forward to his reply.

[Baroness Altmann]

My Lords, I thank the noble Lord, Lord Kirkwood, for moving the amendment on behalf of the noble Baroness, Lady Meacher. I ask the Minister whether we have considered the issue, supported by a number of consumer groups, that I raised in Committee requiring a company that has been found to need to pay out on a claim to pay the claims management fee, rather than taking it out of the compensation. That should perhaps be more acceptable with a cap, but also more effective for those who receive compensation, as well as encouraging companies that have mis-sold something or perpetrated harm to the consumer to voluntarily contact consumers who have been harmed, rather than waiting for a claims management firm to do so on their behalf, thus saving them the extra cost of the claims management fee.

[Lord Young of Cookham]

My Lords, I join the noble Lord, Lord McKenzie, in thanking the noble Lord, Lord Kirkwood, for moving the amendment in the absence of the noble Baroness, Lady Meacher. We are sorry that she had to leave for family reasons. I again pay tribute to the work she has put into this amendment. She has pursued it with diligence.

The amendment seeks to put in place a fee cap from two months after Royal Assent until the FCA implements its own cap. We debated this in Committee. I am grateful to noble Lords who contributed to this debate for highlighting it again.

Clause 17 already makes great strides to secure fair and proportionate prices for consumers by giving the FCA a duty to cap fees charged for financial services claims. However, as a number of noble Lords pointed out in Committee, the implementation of a new regulatory regime and an effective, robust cap will necessarily take some time, during which consumers could continue to be charged disproportionate fees. In that debate, noble Lords expressed concerns that the FCA’s PPI claims deadline may have passed by the time its fee cap is in place. That point was made by the noble Lord, Lord McKenzie. We already know that 90% of financial services claims relate to PPI and therefore we want to ensure that consumers are protected against excessive fees for PPI claims as soon as possible. That is why, as the noble Lord, Lord Kirkwood, anticipated with commendable foresight, the Government intend to table an amendment at Third Reading to introduce an interim fee cap in respect of PPI claims management services.

The amendment will set a fee cap at 20%, excluding VAT, of the claim value and will be enforced by relevant regulators on commencement two months after the Bill receives Royal Assent. The Claims Management Regulation Unit consulted on a 15% cap. The data that it collected on the costs to CMCs of processing claims and market analysis of profit margins resulted in proposals to introduce a 20% excluding VAT cap on claims management services. The amendment supports the Government’s aim of ensuring that the claims management sector works in the interests of consumers by protecting them from excessive fees.

The amendment tabled by the noble Baroness, Lady Meacher, and moved by the noble Lord, Lord Kirkwood, would go some way towards ensuring that consumers are protected during this interim period. However, the government amendment will go further in two key areas. First, it will have a wider application than the amendment tabled by the noble Baroness. The interim fee cap will apply to both CMCs and legal services providers that carry out claims management services in relation to PPI claims, to be enforced by the relevant regulators.

Secondly, it will include in primary legislation a prohibition against charging more than 20% of the claim value for PPI claims, which will enable the regulators to implement the cap quickly. As I said a moment ago, this level was reached using the helpful and comprehensive responses to the Ministry of Justice’s consultation on proposals to introduce a fee-capping regime for CMCs handling financial services claims.

On the procedure for claiming any excesses imposed over the cap, anyone in breach of the interim fee cap will be subject to regulatory enforcement, which could include fines. Furthermore, a contract to receive or pay a sum in excess of the fee cap would be unenforceable, thereby ensuring that firms cannot profit from their malpractice and that consumers are entitled to recover excessive fees.

My noble friend Lady Altmann raised a question about compensation. As we will revert to this issue at Third Reading, perhaps we could deal with it then.

I make it clear that the interim cap is intended to be a temporary measure and, as such, will apply only until the FCA has implemented its new rules under Clause 17. It will also apply only to PPI claims, whereas the FCA’s cap will apply to all claims relating to financial products and services. We remain of the view that the FCA, as the incoming regulator, will be well placed to develop its own cap, or caps, based on an assessment of the market. Given the Government’s undertaking to table an amendment on this matter at Third Reading, I hope that the noble Lord will feel able to withdraw the amendment.

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The Minister has told us that we will receive the Government’s response to the Select Committee report before Third Reading. Are there any pearls that might be shared with us today, given the strong recommendations that it makes around duty of care?

[Baroness Altmann]

My Lords, I congratulate my noble friend Lord Holmes on persisting with the amendment. I support the need to make sure that regulated firms have this duty of care, especially in circumstances such as the diagnosis of cancer and other illnesses, from which people can recover but for which they need particular care during that period. While the Bill is going through the House, it would be excellent for the market if we were able to introduce measures of this nature, but I also look forward to hearing from my noble friend and seeing the Government’s response before Third Reading.

[Lord Young of Cookham]

My Lords, I am grateful to my noble friend Lord Holmes for moving the amendment. He mentioned that he was a member of my flock. He displays exactly the right independence of thought tempered by loyalty to the party that any Whip could wish for. I am grateful to the noble Baroness, Lady Kramer, the noble Lord, Lord McKenzie, and my noble friend Lady Altmann for speaking to the amendment, which seeks to ensure that the FCA adheres to a set of regulatory principles in relation to acting in the best interest of consumers and managing conflicts of interest fairly. Noble Lords also raised the broader issue of duty of care, which is not mentioned specifically in the amendment but is obviously relevant. As noble Lords may remember, my noble friend tabled a similar amendment in Committee.

Aside from the provisions in general consumer law, the FCA already applies rules on firms conducting regulated activities in relation to their dealings with consumers. First, the FCA’s rules set out in Principles for Businesses require firms to conduct their business,

“with due skill, care and diligence”,

and to,

“pay due regard to the interests of … customers and treat them fairly”.

Principle 8 sets out:

“A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client”.


That accurately mirrors proposed new subsection 1(b) in the amendment, so there is a congruity of objective there.

Secondly, the rules on clients’ best interests require a firm to act in its client’s best interests across most regulated activities. The client’s best interests rule states:

“A firm must act honestly, fairly and professionally in accordance with the best interests of its client”.


Again, those are exactly the words used in my noble friend’s amendment, so there is no disagreement over objective.

Thirdly and finally, a number of FCA rules contain an obligation on firms to take “reasonable care” for certain activities. For example, one of the Insurance: Conduct of Business rules states:

“A firm must take reasonable care to ensure the suitability of its advice for any customer who is entitled to rely upon its judgment”.


Those rules in the FCA Handbook are supplemented by more specific rules in various FCA sourcebooks. The FCA will be able to apply its existing Principles for Businesses, which I have just quoted, to claims management companies and to make any other sector-specific rules that may be necessary, under its existing objectives. The FCA supervises against these rules and other provisions and, where necessary, can take enforcement action against firms to secure appropriate consumer protection.

The FCA is of the view that its current regulatory toolkit is sufficient to enable it to fulfil its consumer protection objective. The FCA will consider the precise rules that apply to claims management services and how they fit together as an overall regime. In doing this, the FCA will take into account its statutory operational objectives, including its objective of securing an appropriate degree of protection for consumers. It will also consult publicly on its proposed rules.

Turning to the broader issue of duty of care, the noble Lord, Lord McKenzie, asked whether there were any pearls. I think the oyster is still at work so the pearls are not available for display this evening. The words “duty of care” mean different things to different people and the precise scope and content of any proposed duty of care are uncertain. The impact of a duty of care obligation needs to be fully considered, as do the cost, complexity and time that might be involved in customers seeking to bring firms to court as a result of a duty of care obligation.

I was asked to say something about the timescale of the work on this. A duty of care could have an effect on many of the FCA’s provisions in its handbook, including the need to replace or remove some. The FCA intends to undertake a comprehensive review of the handbook post Brexit. The FCA believes that it would be best to include duty of care in that review, particularly as the FCA’s ability to change its rules in some areas will depend on the relationship between the EU and UK post withdrawal. Many of the FCA’s current rules are based on EU legislation. Once the relationship between the EU and the UK following withdrawal is clear, there will be more clarity around the degree of discretion that the FCA has to amend its rules.

In addition, the FCA is currently identifying the necessary changes to its rules to ensure that they continue to operate as a coherent set of rules following EU withdrawal. This work is being done in parallel with the work across government to review directly applicable EU legislation. It is a significant, complex and time-critical exercise that must be progressed immediately. If noble Lords have any concerns about the timing of the discussion paper, that is primarily a matter for the FCA.

Returning to the amendment, it is not necessary to include regulatory principles in the Bill because of the provisions the FCA already has. For that reason, I would request—or suggest—to my noble friend Lord Holmes that he withdraw his amendment.

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I hope that the Minister’s promise remains open. It would be extremely disappointing and very odd if it were now to be withdrawn. If the Minister intends to withdraw this timely and welcome promise, I hope she will tell the House why, and explain why a problem she saw clearly as requiring urgent action last Tuesday no longer requires it this Tuesday. It really is hard to see how this would make any sense, or be seen as fair or reasonable. The Minister could of course accept the amendment before us as a way of doing by other means what she promised last Tuesday. But one way or the other, it is time that we put a speedy and definitive end to these flagrant and damaging abuses. I beg to move.

[Baroness Altmann]

My Lords, briefly, I support this amendment as well. Cold calling and other unsolicited approaches are a growing nuisance. I have not come across a group pushing to stop the Government from banning these cold calls. Direct marketing to people’s home phones or personal mobiles surely has no place in modern business practice. Leaving responsibility for a ban to Ofcom and the ICO is simply not an effective strategy. It clearly is not working.

The measures in Amendment 42, which has been deliberately and carefully crafted by the noble Lord, Lord Sharkey, supported by the noble Earl, Lord Kinnoull, are designed to prevent the cold calls rather than trying to catch cold callers afterwards, once they have already plagued the public. If firms engage in unsolicited approaches to encourage consumers to make claims which may or may not be valid, using the data thereby obtained would also be an offence. We could finally tell the public that any people who call them out of the blue, or contact them in some unsolicited way, are breaking the law; they should therefore not engage with them.

This provision would not stop claims management companies advertising broadly to offer claims management services, but it would help to stop the speculative nuisance calls, texts or emails which are plaguing millions of British people so frequently. The crucial additional power would be the role of the FCA. Using the regulator and forcing firms to demonstrate, if challenged, that they have not obtained business as a result of leads from cold calls would then mean that they would be at risk of losing their licence. It would be a much more effective strategy to stop the cold calls in the first place. I welcomed my noble friend Lady Buscombe’s words during our previous day on Report, which promised that there would indeed be some action from the Government in another place. I hope that we will get broad reassurance on those points in tonight’s debate.

[The Earl of Kinnoull]

My Lords, I will be very brief indeed, as we have heard two very clear and good speeches from the noble Lord, Lord Sharkey, and the noble Baroness, Lady Altmann. The first point I made at Second Reading was on the importance of maintaining access to justice for our citizens. The point I make now is that I see nothing in Amendment 42 which in any way fetters access to justice. I see only good features of it, and I very much hope that we will hear good news from the Government in due course.

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

Report: 1st sitting: House of Lords
Tuesday 24th October 2017 Lords Chamber

[Baroness Kramer]

My Lords, I congratulate the noble Baroness, Lady Drake, on such an extraordinarily comprehensive but succinct speech framing the future structure of the kind of pensions dashboard that I think everybody in this House feels consumers deserve. I also congratulate the Government on their willingness now to step forward and take ownership of this process. As the noble Baroness, Lady Drake, said, the two key underlying issues that will be crucial to the public are protection of data—the whole issue of access to data—and quality guidance to enable them to make use of the information that comes to them through that dashboard as they try and structure their future financial circumstances.

I assure the House that although very often we on this side will try to write an amendment that we think is comprehensive and will basically create the legal framework we want the Government to follow, there are times—this is one of them—when we recognise that the need for development and the underlying complexity of the issue mean that the far better route is government ownership of the policy and the project to take it forward. The Minister will know from having listened to the noble Baroness, Lady Drake, and others in the House that we will always be here with scrutiny and with recommendations to the Government, but it will be exciting to see the process that they now put in place to make sure that this goes from merely a possibility enabled by technology to a very real service for consumers in this country.

[Baroness Altmann (Con)]

My Lords, I too congratulate the Government on their decision to host the pensions dashboard and to put in place the necessary measures for the dashboard to be held in one place. I congratulate the noble Baroness, Lady Drake, on her persistence and her excellent description of why it is so important that this measure is implemented in the manner she set out.

The public need a single dashboard. If individual private sector organisations each released their own dashboard, it would be too confusing for the public. One thing that will certainly assist in any dashboard is standardised statements, required perhaps by the FCA and the Pensions Regulator, whereby anyone who receives a statement about what pension they have—what terms it has and so on—has to be given a piece of paper. Sometimes called a pensions passport—although it does not matter what it is called—this will be a standardised, simple statement that tells people in one place what they have and clearly explains the kind of terms that the pension has, its value and any special features. Sadly, too often, the private sector has not been able to achieve that. Very often the statements that people get are almost unintelligible. They are sometimes far too long and use different language for the same type of pension, so that people struggle. I support this amendment and congratulate the Government and the noble Baroness.

[Lord McKenzie of Luton]

My Lords, I too thank the Government for the announcement that the dashboard is to be taken forward and acknowledge the role that has been played by several Members of your Lordships’ House, particularly my noble friend Lady Drake, who with her impeccable logic and powers of persuasion has really led the charge on this. I also acknowledge the noble Baroness, Lady Altmann, who has long campaigned on this issue.

We know that the delivery of the dashboard will be a huge challenge, but it is an opportunity for individuals to see all their savings and pensions in one place, including the state pension. As my noble friend Lady Drake said, the key fact is that it is a single, public service dashboard, so that individuals who use it can have confidence that there will not be a conflict of interest between those seeking to use information and data to sell products and those who are genuinely attempting to help people to understand the pension pots that they have. The data shows that over their lifetime people could change their jobs 11 times. I am not sure how current that is, but 11 changes of jobs could mean as many as 11 pension pots. We know the challenges of small pension pots and how difficult it is for people to access those—they forget where they are. It is particularly an issue for women.

Hearing that the dashboard is to be taken forward makes this a good day. There is lots of hard work to do, and there are many governance issues for your Lordships’ House and others to keep an eye on as it gets developed.

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[Baroness Kramer]

My Lords, we on these Benches would gladly have added our names to this amendment but the list was full, which is always good news, particularly when the inspiration and leadership come from the Cross Benches. I just want to make it clear that we are very supportive of the amendment.

I also want to add one comment. I know that sometimes the use of the term “vulnerable” is challenged but, as I know from dealing with legislation in the other place, although that was quite some time ago, there is a long and very established history of using the term “vulnerable”, certainly at least—although, I am sure, not limited to—among the utilities, which obviously have to recognise and identify all kinds of vulnerable customers for a whole range of purposes. It allows what I would call reasonable common sense to apply in identifying the full scope of people who are vulnerable. Some of the examples that we have had today have been around mental capacity issues and learning difficulties, but it seems to me that nothing in the many historical ways in which this term has been used in legislation previously would limit it or prevent it, for example, applying to care leavers or, in terms of financial education, to younger children and to the broader group that we are discussing.

Therefore, I hope that the Minister will accept that there is a well-tried, true and well-trodden path setting out how we identify vulnerable people. The term is frequently used to tackle a variety of needs and there is plenty of legislative precedent that makes this a very effective amendment.

[Baroness Altmann]

My Lords, I add my support for the amendment and congratulate the Cross Benches and the noble Lord, Lord McKenzie, on tabling it. In a way, it is very sad that the financial services industry is not making more effort to look after vulnerable customers or indeed to present materials in the ways that the noble Baroness described. I think that doing so pictorially could help everybody. So far, financial services are all about dense words and jargon that people struggle to understand.

This body is due to be financed by the industry and the industry has perhaps not always taken enough care. One hears stories from cancer charities where somebody would call up their bank and say, “Look, I am going through some treatment. Is there any chance I could either have a loan or some respite from repayments?”. It simply is not on their agenda to help people in that way, even when people approach them and explain their vulnerability and their circumstances. So it is right that this body should introduce some measures that are designed particularly for vulnerable customers and, indeed, change the narrative and the language used to explain finance, educate people and inform them about finance, in ways that the industry seems not yet to have been able to do.

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Monday 11th September 2017 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I rise briefly to speak to Amendment 56, which is in my name. I note that the clause on setting standards, which is only 11 lines long, has eight amendments. That underlines its importance.

The origins of Amendment 56 are my concerns with the behaviour of the Financial Conduct Authority; I have been regulated by it and its predecessors for the whole of my commercial career. I realise that the single financial guidance body will only be a client organisation of it, but I am concerned about FCA ethos leaking down to the SFGB.

Perhaps I should explain further. When a regulated client rings up the FCA with a specific question, asking for help in the interpretation of its rules, the FCA, in my direct experience, simply says, “We can’t give you any help in interpreting those rules”. That is quite unlike regulators in other jurisdictions in other places—I originally wrote down “competitor regulators”. That is very unhelpful, but while it is unhelpful in the financial services world, firms are usually big enough to afford advice from big firms of solicitors. Here we are often dealing with very small charities that do not have access to £1,000 per hour for Allen & Overy, so it is important that the SFGB offers that advice.

It has been said to me that there is a big problem concerning resourcing. I think that that is quite a difficult position to maintain. First, other similar regulators in other jurisdictions do not perceive those resourcing problems. In fact, most of the questions that come up, such as on a drafting issue, do so repeatedly and the same question will be asked by many of those being regulated. Secondly, just thinking about one particular bit of FCA regulation because I know about it—the regulation of insurance brokers—the FCA and those that are being regulated bear the cost of that regulation, which is more than twice as expensive as Ireland, Bermuda and Hong Kong. That multiple is far bigger than for France and Germany. I do not therefore think that good regulation has to be expensive.

The amendment is aimed at trying to ensure that that sort of behaviour is not replicated and that the SFGB remains friendly and helpful in interpreting the regulations that it will impose on those that it regulates.

[Baroness Altmann (Con)]

My Lords, I add my support to Amendment 56. It is important that if those who are involved in the actions that will be part of the new body want to know and to clarify what their duties are, there is clear direction for them. I share the concerns that a number of financial companies have offered to me: they want to abide by the regulations, yet when they ask the FCA, “If I do this, would that be compliant?” the response often is, “If you do it and we don’t like it, we’ll see you in court”, which really is not very helpful.

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[Baroness Altmann]

My Lords, I too support the thrust of this amendment moved by the noble Baroness, Lady Drake, and the remarks of the noble Baroness, Lady Kramer. I hope my noble friends on the Front Bench will take seriously the efforts being made around the House to improve protection for consumers. I whole- heartedly support the aims of the Bill and I congratulate my noble friends on bringing it before the Committee, but adding to it measures such as this would very much strengthen protection for the public.

[Lord McKenzie of Luton]

My Lords, I support my noble friend, who has drawn a strong parallel with the experience of Pension Wise, with which she was heavily involved. She made the point that it is not only those who might be termed traditionally vulnerable people who are at risk from the ingenuity of impersonators but those who might be more sophisticated.

I should like to make a brief reference to paragraph 17 of the memorandum that the DWP sent to the Delegated Powers Committee. It says:

“Deferring the announcement of the name will also help protect the new body’s brand and reduce the likelihood of the setting up of ‘imposter’ websites as a means of deceiving and defrauding the public. Imposter websites could put members of the public at risk”,


and,

“were an issue when the Pension Wise brand was launched”.

If they were at risk before the naming of the body, what will give strong protection once the body is named? That seems to be the thrust of my noble friend’s amendment, which I support.

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[Baroness Kramer]

My Lords, I will speak in support of this very important amendment moved by the noble Baroness, Lady Drake. Much of the difficulty in the conversations we have had around this Bill has come over the role and obligations of the FCA. If the Minister or her officials care to look at the FCA website, they will understand that consumer protection is very much interpreted in the realm of preventing mis-selling and preventing scams; it is not a broader protection of the consumer in the way that some might interpret that language—for example, to make sure that the consumer has successful routes to navigate financial services.

I can give the Minister one simple example of which she will be aware. Many of us around this Committee—and, indeed, probably the Minister herself—believe that a breathing space scheme would be very advantageous in helping people to move through debt management to restore their finances. However, the FCA cannot mandate such a thing. It cannot act, as it were, to protect the consumer even though one might consider, if using just the English language, that such an action would be captured by the words “consumer protection”.

In the same way, on the issue of access the FCA can try and act so that a banking institution, for example, does not put up barriers that would discriminate or set itself up in such a way that people could not get on to the relevant website to access the service, but that is not access as in, “What financial services do members of the public require, and are those kinds of services being provided by the financial service sector and industry?”. So it cannot gap-fill. Actually, it is quite unusual to have an arrangement where such gap-filling is not possible. For example, in the United States, that may be done indirectly through things such as the Community Reinvestment Act, so there are paths by which that kind of back-filling can be pursued by the regulator.

I hope very much that the Government will understand that, in terms of providing advice and guidance, the FCA in looking at the standards that have been set cannot operate within the usual realm of an economic regulator of essentially promoting market efficiency or market fairness, which is its fundamental and underlying approach and responsibility. That is why the inclusion of language that talks about acting in the interests of consumers and about promoting financial inclusion is very appropriate when the FCA is now engaged in something that steps outside its traditional, typical overarching role.

[Baroness Altmann]

My Lords, I too support the amendment moved by the noble Baroness, Lady Drake. It is an important amendment, and it would be most welcome if my noble friend would seriously consider extending the protection for consumers that this Bill is rightly aiming to achieve. I echo the comments of the noble Baronesses, Lady Drake and Lady Kramer, in terms of focusing on the FCA promoting the interests of consumer protection, perhaps in new ways from what has happened in the past.

[Lord McKenzie of Luton]

My Lords, like other noble Lords who have spoken, I speak in support of my noble friend’s amendment. As ever, my noble friend has been very concise and focused on this key issue about how we can get the FCA in these arrangements to be seen to act in the interest of consumers and financial inclusion. There is a tension between the FCA as a regulator of the market and what we seek through this Bill—an improvement in financial capability and for guidance to be given to people so that they can make better-informed financial judgments.

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Moved by

[Baroness Altmann]

69: Schedule 3, page 27, line 5, leave out paragraph 33

[Baroness Altmann]

My Lords, Amendment 69 seeks to remove Clause 33, which proposes to cancel legislation, passed by Parliament only last year, which ensures that the pensions guidance body can help members of the public who have bought annuities they neither want nor need, perhaps having been forced to in the environment which existed before the pension freedoms were introduced. Section 2 of the Bank of England and Financial Services Act 2016 amends Section 333A of the Financial Services and Markets Act 2000 and extends the definition of pensions guidance, expanding the scope of Pension Wise so that pensioners who are able to sell their annuity income can access free, impartial guidance before they make this irreversible decision. Since May last year, when the Act was passed, the Government have unexpectedly announced that they have changed their mind and no longer intended to allow people—who had been assured that they would be able to sell unwanted annuities from April 2017—to do so. This decision will obviously have disappointed many of those people, but I accept that Ministers believed it was right.

However, there are two important reasons why it is unwise and unnecessary to revoke the legislation that was enacted just last year. If we retain authorisation for Pension Wise or the new single financial guidance body and the FCA to facilitate mandatory guidance for people who may, in future, be allowed to sell their unwanted annuities, we will not need to take up precious primary legislative time to introduce the measure once more—that has already been done. We do not need to explicitly remove this measure; it can either be considered redundant or, in so far as it relates to something that already exists but is little known, it could be of use to many members of the public.

No further regulations have yet been laid in this connection. However, it is important that the single financial guidance body and the FCA should still have a remit to inform or guide the public on selling an unwanted annuity. The particular reason is that it is already possible for people to sell their existing annuities if they are under £10,000. Although the Government changed their mind on anyone’s overall ability to sell an unwanted annuity, there is the ability—which is not widely known—for people to sell one valued at under £10,000. It is surely important for the single financial guidance body or Pension Wise still to be involved in this area and ensure that there is public information and guidance about the risks of such a sale. I beg to move.

[Baroness Kramer]

My Lords, I support the noble Baroness, Lady Altmann, on this. Given that we have loosened up pension provision very widely, and recognised people’s ability to make decisions about their future, I have never understood the Government’s decision on taking away the right to sell an unwanted annuity. There are many reasons why this might be the right and appropriate decision for people in some circumstances. People may be facing large mortgages on which, for historic reasons, they are paying very high interest rates and which could be wiped out, to their overall financial benefit, if they could access their annuity. I could understand it if the Government thought that necessary safeguards should be added. In that case, the answer is to add those safeguards. For example, people could be required to access guidance at the very least, or there could be a much stronger recommendation that they access advice under these circumstances. To choose this vehicle, when this issue has been paid very little attention and focus, seems like an under-the-radar change to something absolutely fundamental. I support the amendment.

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[Baroness Buscombe]

My Lords, my noble friend Lady Altmann has moved Amendment 69, which intends to retain the section of the Bank of England and Financial Services Act 2016 which amended FiSMA to allow Pension Wise to offer guidance to consumers wishing to make changes to the payment of their annuity. Pension Wise was set up with the very specific remit of delivering guidance to help people make decisions on their options following the introduction of the pension freedoms. The Pension Wise remit was subsequently extended to include guidance to people who needed help in considering selling their annuity. This would have supported the Government’s proposals at the time to extend the pension freedoms to those who have already purchased an annuity. The Government decided in October 2016 not to proceed with this proposal because of concerns around consumer detriment.

The new body the Government propose to create in this Bill will inherit the guidance guarantee that Pension Wise provided but will also be able to help with guidance on any pension matters. Therefore, this amendment is not needed. I am particularly grateful to the noble Lord, Lord McKenzie; we entirely agree with the Opposition’s view of these proposals, which would allow those who have already purchased an annuity to sell the income they receive for a lump sum. Following extensive engagement with industry, consumer groups and financial regulators, the Government decided they would not continue with these proposals. Indeed, through discussions with stakeholders it had become clear that, while many annuity providers were willing to allow customers to sell their annuities, it is likely that there would be insufficient buyers to create a competitive market.

In September 2016, Money Observer reported a survey of 10 annuity providers, in which only one firm said it would purchase annuities issued by others and six ruled themselves out. This corresponded with government findings of a lack of interest from potential purchasers of annuities. This could have led to consumers receiving poor value for their annuity income streams and suffering higher costs in the sales process. The Government estimated that only 5% of annuity holders would have opted to sell their annuity and, although some people have been disappointed, consumer protection is a top priority for the Government. As the noble Lord, Lord McKenzie, said, priorities have to be thought through and this was not considered a key priority. Although some people have been disappointed, it would not be acceptable to allow a market to develop that could produce poor outcomes for consumers. I therefore encourage my noble friend Lady Altmann to withdraw her amendment.

[Baroness Altmann]

My Lords, I thank my noble friend for her response and thank the noble Baroness, Lady Kramer, for her support. This is about consumer protection. Of course, I respect the Government’s decision not to approve a secondary annuities market at this point. However, that does not address the fact that there are people out there with annuities worth £10,000 or less who are able to sell them, whether or not there is a market. They are particularly at risk, presumably, of obtaining very poor value. It is not clear to me why we need explicitly to undo legislation that is already in place to ensure that the financial guidance body can at least help people who might want to sell an annuity understand what the risks are. If the new body no longer has any requirement to inform or guide people on this issue, we still leave those consumers high and dry. As the legislation is already in place, it seems rather strange that the Government explicitly want to repeal it. They could just leave it on the statute book and make sure that there is adequate information as part of the new pensions guidance framework.

[Baroness Buscombe]

My noble friend referenced the possibility of making the legislation redundant in some way. With respect, that is very problematic. The Government have made it clear that they do not believe it makes sense to mandate guidance on a market that no longer exists, and that therefore it is far better to revoke the legislation. However, the broad remit of pensions and money guidance gives the body the option of guidance on this if it is appropriate.

[Baroness Altmann]

I thank my noble friend. The legislation says that Pension Wise should enable pensioners who are able to sell their annuity income to access free impartial guidance, and some can do so. However, I am reassured to hear that the new pensions guidance body will still be able to carry and promote information and guidance for the public on this matter. I beg leave to withdraw my amendment.

Amendment 69 withdrawn.