Economy: Update

Baroness Altmann Excerpts

Tuesday 28th April 2020 Lords Chamber

[Lord Agnew of Oulton]

I thank the noble Baroness. On insurance, I did not hear my noble friend Lord Callanan’s response, so I do not want to conflict with what he may have said, but the key thing here is that when one takes out a general business policy, one has the option of an extension for pandemic cover. The problem is that I think most businesses did not elect to do that, so it would not be right then to impose that cover on insurers retrospectively through the route suggested by the noble Baroness.

On paying council tax rather than business rates, as I have mentioned before, we have put together a package of some 11 types of support for businesses, ranging from the very smallest to the largest, including such things as the deferral of tax liabilities. I believe that there are 1.3 million self-employed people on self-assessment. Deferring will provide that whole cohort with some £13 billion in cash flow. So a range of measures is there. It is important for noble Lords to look in the round at the support that we are offering.

[Baroness Altmann (Con)]

In light of my noble friend stating that record levels of debt will result from this virus, and in light of the Bank of England purchasing significant amounts of conventional gilts, might he ask his colleagues whether they are considering liaising with the DMO to issue specific gilts for pension funds which have more than £1 trillion? That could be invested in mortality or longevity gilts, CPI-linked gilts and LPI-linked gilts to assist those defined benefit schemes that have significant problems in light of the current circumstances, to match their liabilities more accurately.

[Lord Agnew of Oulton]

My noble friend makes a very good point. It is certainly an idea that I will take back to the Treasury for further discussion. We issued war loans in both of the last world wars and it took a long time to pay them off, but it is a way of ring-fencing the efforts that we will have to deploy to bring the country back from this awful business. So I thank my noble friend for her very sound suggestion.

EEA Nationals (Indefinite Leave to Remain) Bill [HL]

Baroness Altmann Excerpts

2nd reading (Hansard): House of Lords
Friday 19th July 2019 Lords Chamber

[Baroness Altmann (Con)]

My Lords, I congratulate the noble Lord, Lord Oates, on introducing the Bill and on his steadfast dedication to protecting our country’s reputation at this vital time.

This is a question not just of the rights of good people who have chosen to work and live in our country but of honour, trust and decency. Are we a country that keeps our word? We have heard from other noble Lords of the unequivocal assurances given to the 3 million EEA nationals who are living here, that they would be automatically granted indefinite leave to remain in the UK, with rights no weaker than now. Instead, as so eloquently described by the noble Lords, Lord Oates and Lord Kerr, and my noble friend Lord Cormack, they are being offered a settled status based on immigration regulations which can be changed by Ministers, and which are not even set in primary legislation. This will offer a code—no physical proof or stamp in a passport—and it must be applied for by a strict cut-off date, so if someone is unwell or unaware and misses the deadline, they will lose out. That is hardly an automatic grant of the indefinite leave to remain they were promised. The House of Commons Home Affairs Committee also supported a declaratory approach, with physical proof of approved rights.

So I add my thanks to the noble Lord, Lord Oates, for producing the Bill, which I fully support, and I urge the Minister on the Front Bench—whom I welcome very much to this debate—to offer, if she can, some words of support or assurance to the House that she will take this seriously and bring it back to the department for further discussion.

As so many noble Lords have said, we should have done this right at the start of the Article 50 process. We have treated these good people inhumanely. They have been subject to uncertainty—we have not taken the moral high ground. So, again, I urge the Minister to relay the desire to act, albeit belatedly, with honour and decency that has been expressed in this debate, to demonstrate that our Government’s words can be trusted—especially at this late stage, when a new Prime Minister will seek to reopen negotiations with the EU, which it has spent so long drawing together and which it has said it is not willing to reopen. I urge the Minister to consider the calls to fast track this piece of legislation now and show good will and appreciation towards the EEA citizens who perform such important work for us all, which should have been present right from the start. The Bill does what would have been needed and what we can still offer in a spirit of good will. It has my full support.

I also add my words of support, as expressed by my noble friend Lord Cormack, to the noble Baroness, Lady Hayter, for all the work she has done, and I express my regret at the way she has been treated, notwithstanding that I welcome the noble Lord, Lord Kennedy, who is here today.

Breathing Space Scheme: Consultation Response

Baroness Altmann Excerpts

Wednesday 19th June 2019 Lords Chamber

[Lord Young of Cookham]

The second part of the noble Lord’s question is easier to answer than the first. Any overpayments to the DWP will stop. People will not have their benefits docked if part of their benefit is an overpayment of a previous benefit; that will stop from day one. Likewise, if they have been overpaid universal credit and it is being docked because that is being paid back, that will stop on day one. On financial capability, I remember the noble Lord’s interventions during consideration of the Bill referred to by the noble Lord, Lord Stevenson. I mentioned in passing the work of the Church in financial education, but the noble Lord’s question deserves a more substantive reply than I can give at the moment. Perhaps I could write to him about progress on developing financial capability.

[Baroness Altmann (Con)]

My Lords, I declare my interest as set out in the register, as an adviser to a social enterprise which helps people in debt to manage and consolidate their debt more cheaply in the workplace. I congratulate my noble friend the Minister on this Statement, and in particular I congratulate our honourable friend the Economic Secretary to the Treasury, who has clearly listened carefully to the debates and points made on this issue. The extent of the measures announced today goes a long way towards proving that he is genuine in saying that this issue, which we have worked on extensively across this House, is close to his heart. I pay tribute also to the noble Lords, Lord Stevenson and Lord Sharkey, who were instrumental in this area, and thank the Government for introducing something so necessary. I have one brief question. Will the Minister find out what plans the department has to make sure that these schemes are publicised, so that those who need them are rapidly directed to the help that will be available?

[Lord Young of Cookham]

May I, in turn, compliment my noble friend, who was a Minister at the DWP and can perhaps claim some maternity regarding some of the policies we are now discussing? She made a very valid point about the role of your Lordships’ House. I recall the debates on the Bill; it was improved as it went through, partly as a result of the intervention of the noble Lord, Lord Stevenson. My noble friend mentioned publicity, and I entirely agree. When the time is right and we are ready to launch the new scheme, it should of course be well publicised so that those in financial difficulty know that it is available and, crucially, how to access it.

Economy: Personal Savings

Baroness Altmann Excerpts

Thursday 12th July 2018 Lords Chamber

[Baroness Altmann (Con)]

It is a pleasure to follow the right reverend Prelate, and I, too, congratulate my noble friend Lord Leigh for initiating this debate on the important issue of the fall in the savings rate. I also offer my congratulations to my noble friend Lord Lilley on his brilliant maiden speech. We all look forward to hearing many more words of wisdom from him in the coming years.

This is a debate about the role of savings in economic growth, building a stronger and fairer society, and promoting personal savings and the savings habit, which is surely an element dear to the hearts of most of us Conservatives and, indeed, most of us in this House across all parties. I congratulate my noble friend the Minister and the Government on some of the excellent initiatives that have been introduced to promote and build up a savings culture once again. Many of us have been concerned that that savings culture has been lost or damaged in recent years, partly due to the Bank of England’s emergency measures of quantitative easing, which have driven interest rates down so low, and have caused serious problems to pension schemes in this country.

The introductions of auto-enrolment and the pensions freedoms have been excellent opportunities to increase the coverage of pensions and make them more user friendly. In addition, we have had the Pension Wise service, which will be merged into the single financial guidance body, which is something that we could and should have had years ago—a national scheme that will help individuals better understand how to manage their money and pensions. Indeed, it will include debt, too.

The charge caps on default funds in pension schemes, after so many scandals with excessive what we call “rip-off” charges for so many years, are again extremely welcome. I also welcome the increase in ISA allowances, but I shall come back later to express some concerns about the overall ISA framework.

On exempting savings interest from tax, every little bit helps when interest rates are so low. That is certainly to be commended. The Help to Save scheme, which a number of noble Lords have mentioned, will I hope be an excellent initiative. And then there is help with debt generally, in controlling excessive charges on high-cost credit. All these things are to be commended, but many areas still need improvement.

I shall focus on some of the ways in which issues such as saving and debt are causing problems in the economy, and some of the possible resolutions, before finishing with some of the longer-term issues for savings and investment. From the point of view of the Lords Select Committee on Financial Exclusion, it was clear that there are real problems across the country, with 31% of the population reporting signs of financial distress. Twenty per cent of 18 to 24 year-olds are having problems with credit scores, which will lead to a rise in debt levels and in the use of high-cost debt, which are a significant cause for concern. The Bank of England’s analysis responded to concerns about the extreme rise in debt levels across the country, suggesting that they were not of such concern because increases in borrowing rates had been matched by rises in the value of financial assets. That did nothing to assuage my concerns or those of many others because, of course, most people who have high debts do not own financial assets, and therefore are negatively affected.

We are seeing this in the workplace. I declare an interest; I am advising a social enterprise that is trying to help workers manage their high-cost debt in the workplace through salary deduction and consolidation at lower rates. We know that financial worries exacerbate stress and mental health issues. These are already the biggest causes of sickness absence from the workplace, with 17.5 million working hours lost as workers take time off due to financial stress. Barclays did a study in 2014 which suggested that 46% of employees worried about finances. In 2017, the CIPD suggested that 25% of employees said that financial problems affected their work performance. Indeed, in the public sector for some reason that was 30%. So clearly there are issues. If employers can see the clear self-interest in helping their staff reduce debt costs and manage their debts, using programmes such as salary finance, which enable employers to deduct debt repayment from their staff’s salaries so they do not have to keep worrying about juggling debts and about where and how to manage repayments, it could be a win-win by improving productivity, staff well-being and the financial resilience of our population, which is so important as we move forward. We have had some years of very reasonable economic performance, but we cannot expect that necessarily to continue, so if we are able to build up financial resilience, that can only be of benefit to society as a whole.

I cannot properly speak in this debate without mentioning the exciting and brilliant topic of pensions—at least, I think they are exciting and brilliant. As the noble Lord, Lord Palmer, said, this brings us to the important issue of the difference between savings for a rainy day and investment for the longer term. Too often I feel that the public—and indeed sometimes policy—confuse the two and think of it all as savings, whereas there is a fundamental difference in terms of long-term investment. Pension saving by its nature is long term. We have hundreds of billions of pounds built up in pensions in this country. I know that we keep reading headlines about the pensions crisis and that there is not enough in pensions, but there is a huge sum of money in pensions, and we perhaps have an opportunity to focus on using those assets productively.

There is an attempt, on which I commend the Government, to use more of the assets of local authority pension schemes to invest in infrastructure. Consolidating the schemes, we could use pension assets for social housing and environmentally and socially responsible investing. There is an opportunity in the workplace with auto-enrolment. Will the Minister comment on the opportunity to engage in particular young people but workers of any age with what their pensions are invested in and to educate them and enable them to understand investment? So many people fail to understand the first thing about pensions, despite the fact that, with the pension freedoms, they are the most brilliant product. They are user friendly and can be used in ways in which we did not use them before. As we spread auto-enrolment across the whole workforce, this is increasingly important.

I shall just mention some notes of caution and ask the Minister to comment on some of them. First, as has been mentioned, it is vital to help consumers. A proper ban on cold calling is long overdue. All the scandals I have seen in pensions have started from a cold call. We worked hard across the House on the Single Financial Guidance Body and on the Bill that has just gone through to try to introduce a proper ban on cold calling that would require the FCA, the regulator, to prevent and disallow providers using leads from unregulated lead generators that started with a cold call. That is work in progress and has not yet been achieved.

There is also an issue with the ombudsman. A report has been issued today, I believe—I do not know whether my noble friend has had time to see it—on some of the failings of the Financial Ombudsman Service. There is great merit in helping consumers by merging some of the activities of the various consumer services that are there to help the public. The Pensions Ombudsman does not deal with all pension complaints. The Financial Ombudsman Service deals with some of them, the Pensions Ombudsman with others. Would it not make sense to have every pension complaint dealt with by one ombudsman?

My noble friend Lord Lilley mentioned pensions tax relief. I have long believed that most people do not have the first clue how much they get from pensions tax relief or what it is worth, yet we spend more than £40 billion a year on it. If we could rebadge pensions incentives as a flat-rate top-up, a bonus that you get for saving in a pension that is contributed to by the taxpayer, people would start to understand it and value it.

One could get even more radical and suggest that auto-enrolment, once it is bedded in, becomes compulsory. That would mean that the Treasury might not need to spend any of the money it spends currently on tax relief on auto-enrolment pensions, saving the taxpayer a fortune. The value of the pensions tax relief is tiny compared to the value of the employer contribution, which is a major incentive. Going on from that, it would be possible to have more generous incentives, funded by the taxpayer, to encourage people to build on more than the minimum under auto-enrolment, which I think most of us would agree will not give you a huge pension. It will give you a bit extra, above what the state can give you.

There is a scandal in the pensions system at the moment which I am very concerned about. I have raised it in the House several times and I implore my noble friend to take this issue back and ask for urgent action. It concerns what are called net pay administration schemes. There are millions of low-paid workers—this applies only to workers earning below £11,850—who are auto-enrolled into a pension administered in such a way that they cannot get the 25% bonus of tax relief that they are due. Most people do not know about it. I do not want most people to need to know about it. I urge the Government to deal with it so that these people, who are surely those who need most help with pension saving, end up with the money they are owed. I do not want another big scandal on this.

The other issue that concerns me is the lifetime ISA. In my humble opinion, it is dangerous, confusing to the individual and a huge mis-selling risk. Most people who go into it will need financial advice—but not necessarily a financial adviser—because they will not understand the penalty of at least 6% that they will pay if they take the money back. If we want to incentivise house purchase, we should do so directly, rather than confusing people with something that masquerades as a pension but has completely the wrong behavioural incentives. With pension freedoms, pensions are brilliant, because there is now more reason to keep them into your 80s, and that is what pensions should be about: lasting for the rest of your life, not giving you a pot of money to spend at age 55 or 60.

That brings me to my final point, which is that we must address the issue of saving for social care. Nothing has been done on this. We spend £40 billion incentivising retirement saving in just one product—the pension—yet a pension is not enough to see people through 21st century retirement. I recently had a response from the Government to a Written Question which identified that the over-65s—just the over-65s—have on average almost £40,000 in ISAs. There are millions of people with this money; it is not earmarked for anything. We know that the baby boomers are criticised for having savings, pensions and houses, but we should be harnessing that and celebrating it. If we look forward 10 or 15 years and they start needing care, but they have spent all that money, we will have a problem. However, if we have encouraged them to keep some of the money they have saved for care, we will have the beginnings of some kind of resolution to the care crisis, which makes the pension crisis pale into insignificance.

There is not a penny set aside for the future funding of social care—not by individuals, or the Government, whether national or local—and this cost is coming. Perhaps we could have a care ISA allowance. People could rebadge the ISAs they have, and maybe we could incentivise that by making them inheritance tax-free. That would not cost the Government much at all right now, but it would mean that people could save for later life. We could maybe allow people to take money out of their pensions tax-free if it were used for care in later life. Anything we can do to help people—the baby boomers, in particular—keep their ISAs and pensions for later life would be commended. I would be most grateful if the Minister would comment on that. I congratulate my noble friend again on raising this important debate.

House of Lords Reform: Elected Second Chamber

Baroness Altmann Excerpts

Tuesday 3rd July 2018 Lords Chamber

[Lord Young of Cookham]

I agree that all those professions and interests should be represented in your Lordships’ House and that the Cross Benches have a good representation of those interests. I think there is a quota of Peers allocated each year to HOLAC in order to appoint more Cross-Bench Peers. All this is against a background of the Prime Minister exercising restraint on political appointments. The recent Dissolution Honours List was the smallest since 1979—and here I warmly welcome my noble friend Lord Haselhurst.

[Baroness Altmann (Con)]

My Lords, I think most noble Lords would accept the idea that the size of the Chamber needs to be reduced, and it will be in due course, but does my noble friend agree that in the recent passage of the European Union (Withdrawal) Bill the House of Lords proved its value, working across party, across the House, together to make significant improvements to the Bill?

[Lord Young of Cookham]

The House of Lords played its traditional role as a scrutinising Chamber, looking at legislation that came before it. Some amendments were made, and I am glad that, when it came to the second stage of ping-pong, the House recognised the primacy of the elected Chamber.

Intergenerational Fairness in Government Policy

Baroness Altmann Excerpts

Thursday 26th October 2017 Lords Chamber

[Baroness Altmann (Con)]

My Lords, I too congratulate the noble Baroness, Lady Smith of Newnham, on securing this important debate. The issue of intergenerational fairness has been rising up the political agenda, and I find this trend deeply troubling. By pitting one generation against another, instead of generations working together and supporting each other, society is damaged.

First, like my noble friend Lord Willetts, I understand the concerns that young people express, particularly when it comes to housing, student debt and irresponsible credit card and loan practices. But those are issues related specifically to the housing market, the financial system and higher education. They are not really generational fairness factors.

The enormous rise in house prices across the UK has also driven up rents, which means that tenants of all ages have less disposable income for other expenditure. But that relates to the shortage of new homes and, to some extent at least, the Bank of England’s policy of quantitative easing, which was deliberately designed to inflate asset prices as an indirect means of stimulating the economy. Problems of housing affordability for younger people will not be most effectively solved just by giving young people more money to buy a home. In fact, such policies may further increase upward pressure on house prices. Increasing supply would be more beneficial. We are probably at the top of the housing price cycle. The ratio of house prices to earnings is clearly unsustainable, but it may not last. We have seen house price cycles before. Indeed, just because house prices have risen and many older people own their own homes does not actually improve living standards for older generations. They live in their homes and their income is not normally improved when house prices rise. The noble Lord, Lord Best, however, is right to focus on the need to encourage older people to downsize and free up family homes for younger people.

Another significant problem for younger generations is the sharp increase in the cost of funding higher education. Once more, that is not the fault of older generations, most of whom never had a chance to go to university—less than 10% of today’s retirees actually went to university. Older people are too often portrayed as undeservedly wealthy, having been lucky throughout their lives in ways that young people cannot hope for. But, quite frankly, I feel that such stereotypes are dangerous simplifications. There is an enormous range of income and wealth among pensioners. Lumping all those over pension age together and looking at their average wealth or income per person gives a misleading picture. Also, lumping the entire age group together is highly misleading. Most over-75s and certainly over-80s are not well-off at all. They live on low incomes with half or so needing means-tested assistance.

UK state pensions are among the lowest in the developed world. Pensioners overall are no more likely than other groups to be in poverty, but that is success and marks real social progress. It is not a signal that somehow we have done something wrong. In fact, pensioner poverty is most pernicious, because once a pensioner is poor they cannot normally hope to improve their future financial position. Younger people have their future career and earnings to look forward to, whereas pensioner poverty is most often permanent. However, the triple lock has been another example of a political construct that has become totemic and has proved damaging. I agree with my noble friend Lord Tugendhat that it may have outlived its usefulness, but it is also important to remember that the triple lock is rather misleading because the poorest pensioners are not actually protected and the triple lock gives much more protection to the younger, better-off pensioners than to the oldest and poorest, which is clearly the wrong way round.

Another factor that is too often overlooked is that young people are starting their careers and their earning years much later than previous generations did. Comparing today’s twentysomethings with those of prior cohorts is not quite comparing like with like. If young people today are starting work, say, five years later than was previously the norm, their income position should be compared with people five years older than them rather than of the same age. If the young also ultimately benefit from the extra qualifications, they should increase their earnings more as they progress through their careers and should not therefore stay behind previous generations. The best route out of poverty is employment, and we should congratulate the Government that employment rates for young people are around record levels with very low unemployment. Meanwhile, older generations are staying in work much longer than ever before. The numbers of older people in work are at record levels, as older generations keep contributing more to the economy.

I find it strange that there is so much concern about the so-called baby boomers having good pensions and owning more assets. Surely, in a societal sense, that is to be welcomed, partly because they are at the end of their careers rather than at the beginning or halfway through, but also because as more older people live longer, increasing numbers will need more money to support them through their expected extended later life. Extreme old age will increasingly become the norm rather than exception. More will need money to pay for social care, and if they have no money they will have to be supported by younger taxpayers.

We should perhaps be celebrating that today’s older people are better off than previous generations, while also encouraging those who can to earmark some of their money in case they need later-life care. I urge my noble friend the Chancellor to introduce measures that will address that, such as incentives to keep some of their pensions or ISAs or allocate a share of the value of their home to a fund that would be set aside for later-life care in case they need it. That would at last begin to bring in much-needed funding before the care crisis brings down the NHS and places ever more burdens on young taxpayers. It is also true that there is an intergenerational imbalance in pension coverage, but that is partly a function of the unrealistically expensive pension promises that were made by past employers, who did not anticipate the range of changes that have increased the costs of providing a final salary-type pension to around 50% of salary.

I caution strongly against pitting one generation against another. Older generations already do much to support the young. Society is a nation of generations, each of which needs to live together in harmony. The bank of mum and dad—and often the bank of grandma and grandad—is helping younger generations. Relationships between old and young people are so important, both in our communities and in the workplace. I urge noble Lords to be mindful of the need for intergenerational cohesion.

[Baroness Goldie (Con)]

My Lords, we are tight for time, so I ask your Lordships to pay attention to the seven-minute timetable, please.

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

Tuesday 24th October 2017 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I am grateful to the noble Viscount, Lord Brookeborough, for his contribution to this debate. It is a pity that there were not more people in the Chamber to hear the powerful case that he made.

Actually, I do not think that the Minister has responded yet—my apologies.

[Baroness Altmann (Con)]

My Lords, I echo the wise words of the noble Viscount. It is absolutely clear that the level of financial education across the country is woefully low, and that stems from the absence of any financial education at the schooling stage. When I was looking at introducing some pension issues into the national curriculum, the main message that I received as to why it could not happen was that teachers themselves did not know enough about those issues to be able to teach even primary or secondary schoolchildren.

There is clearly a role for the single financial guidance body, which is set up to provide information and education for the public, to devise modules that schools could use—but not only schools. I would hope that, given that most people in the workplace did not get financial education in school, such modules would also be useful within the workplace. This is a big gap in our education system. Education needs to provide our students and young people with the tools that they need to manage their lives. If they cannot manage their finances, they will often get into difficulties that they do not need to be in.

I certainly echo the sentiments of the amendment, which would require the single financial guidance body, as the obvious body to do this, to provide education materials that could be used within schools, but even importing that into the workplace alongside auto-enrolment, because all workers will automatically be put into pensions and need to have some understanding of how finance works in order to make the best of that. I support the sentiments expressed.

[Lord Young of Cookham (Con)]

My Lords, I was hoping for a moment that the noble Lord, Lord McKenzie, was going to wind up the debate and give some cogent reasons why his amendment should be resisted, but that falls to me.

Amendment 13, tabled by the noble Lord, Lord McKenzie, would alter the strategic function on matters relating to financial education. I am grateful to the noble Viscount, Lord Brookeborough, the noble Baroness, Lady Kramer, and my noble friend Lady Altmann for their contributions because, once again, we have highlighted the important issue of financial education, which has been one of the themes running through our debate today. We had a good debate on it in Committee, and there is no disagreement that financial education is extremely important at all stages of life.

In fact, a key role of the new body as a whole will be to improve people’s financial capability and help them to make better financial decisions. Clause 2(7) states:

“The strategic function is to support and co-ordinate the development of a national strategy to improve … the financial capability of members of public”.


Then there is the paragraph quoted by the noble Viscount, Lord Brookeborough:

“the provision of financial education to children and young people”.

The noble Viscount outlined areas where the public need to be better informed, and I agree with all that he said.

The financial education element of the strategic function is targeting a specific area of need, which is to ensure that children and young people are supported at an early age on how to manage their finances—for example, by learning the benefits of budgeting and saving. As I think I said in response to an earlier debate, the new body will have a co-ordinating role to match funders with providers of financial education projects and initiatives aimed at children—those could well be in schools—and will ensure that they are targeted where evidence has shown them to be more effective. This falls four-square within the wider strategic financial capability work of the body, and should form part of the national strategy that we expect the body to deliver.

As has been mentioned, the Money Advice Service has been undertaking that role, and it is one aspect that respondents to the government consultation overwhelmingly agreed is important for the new body to continue to work on, build on, and continue the initiatives already under way.

The amendment makes provision for the new body to advise the Secretary of State on the role of Ofsted and the primary school curriculum. As the noble Viscount, Lord Brookeborough, said, the Select Committee on Financial Exclusion made similar recommendations on the role of Ofsted and the primary school curriculum in its recent report. We will publish a direct response to the House of Lords ad hoc Select Committee report before Third Reading. The Department for Education, which has prime responsibility for this, will be a major contributor to that section of the response.

Again, as I said in Committee, the Government believe that the remit of the new body may cause confusion with regards to the school curriculum. Of course, it can work with schools to help children understand financial education and it can help fund lessons and explore further the barriers to school involvement. The Government are clear, however, that the school curriculum and monitoring of school performance are matters for the departments for education in England and in the devolved nations. Nevertheless, Clause 2(3) states:

“The single financial guidance body may do anything that is incidental or conducive to the exercise of its functions”.


It seems to me that there is nothing to stop the SFGB informally making suggestions to Ministers without the need for the amendment, as long as they relate to its functions. So I do not think that we need the amendment for there to be a dialogue between the SFGB and education providers. In practice, the body will be able to undertake activities to help schools provide financial education but we do not believe the amendment is an appropriate addition to the strategic function. For that reason, I urge the noble Lord to withdraw the amendment.

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

Committee: 4th sitting (Hansard): House of Lords
Wednesday 13th September 2017 Lords Chamber

[Baroness Drake (Lab)]

My Lords, I, too, rise to support the noble Lord, Lord Holmes of Richmond. I congratulate him on using the opportunity of the Bill as it opens up the issue of how the FCA regulates claims management companies to seek to introduce the regulatory principle that an authorised person should act more in the best interests of consumers, particularly vulnerable customers. Consistently, not just today but previously, the noble Lord has put a powerful and informed case, particularly with regard to people with serious health conditions, including cancer, who have to cope not only with their illness but the financial impact of their diagnosis. That impact is felt not only in loss of income but in loss of access to or poor treatment by financial services companies. This, in turn, compounds their financial difficulties. The evidence of that negative experience is increasingly documented but people just know it themselves, intuitively. As Macmillan confirmed, and as referred to by the noble Lord, 90% do not even tell the bank when they have a problem, because they know that either it will be held against them or that there is little or no prospect that the firm will assist or offer support to mitigate the problems that their ill-health diagnosis has triggered. Not only will they face prejudice but they will be competing with customers who present a more attractive commercial prospect.

This growing problem will not be addressed simply by exhorting firms to behave better; the Government need to take much more of a lead. The Government have also been urged to take such an initiative by the Lords Select Committee on Financial Exclusion and the Financial Services Consumer Panel itself. A regulatory principle, as proposed by the noble Lord, Lord Holmes, would place an expectation on firms to support customers at times of vulnerability, change corporate culture towards the vulnerable and enable vulnerable customers to have the confidence to ask—and to ask earlier—for support, thereby enhancing their ability to manage their financial affairs.

As other noble Lords have mentioned, the FCA has committed to publishing a paper on duty of care but, by resting on that, the Government are kicking this problem into the very long grass. As the noble Lord, Lord Holmes, commented, the FCA has stated that it will not prepare such a paper until after our withdrawal from the EU. The paper will, as has also been said, only just start a very long process of dialogue, consultation, response, drafting and so forth. There will be a lot of people diagnosed with serious ill health in that time whom the environment will not support. There really is an urgency for those 4 million or more people who are expected to be diagnosed with cancer within the next 15 years.

The Government should seize the moment by taking the opportunity of this Bill to embrace the intent of the amendment of the noble Lord, Lord Holmes. I am sure the Minister will say that the amendment is either too extensive in its expectation or creates regulatory uncertainty, but it allows for the detail of how the regulatory principle of duty of care can be translated into the financial conduct rules by the FCA. Through its supervision, the FCA can identity and assess firms’ conduct that may affect consumers’ access. It has the power to make firms change their behaviour, but only where this is within its remit. Unfortunately, the FCA has no specific duty relating to consumers’ access to financial services. The noble Lord’s amendment strengthens the FCA’s remit in respect of claims management companies by introducing that regulatory principle, which begins to define how and when those companies should act in the best interests of consumers.

[Baroness Altmann (Con)]

My Lords, I, too, rise briefly to support my noble friend’s amendment and congratulate him on laying it in the way he has. I certainly sympathise with him about wishing to put in measures which might originally seem out of scope and the need to be rather convoluted about it. I also echo the words of the noble Baroness, Lady Drake: these are issues that have been recommended by the Financial Services Consumer Panel, highlighted by the Lords Select Committee on Financial Exclusion and would go some way to help change corporate culture to support those who are going through serious, perhaps unexpected, illness and need time to adjust to their circumstances or to cope with their treatment.

The cancer charities are rightly raising this issue and it would be very helpful if the FCA were able to encourage firms to introduce some kind of special measures or special help in recognition of the circumstances that people will from time to time find themselves in—not only to help those people when they apply for that help but to encourage somebody who has had a cancer diagnosis, for example, to ask for help, which very often right now they do not even think of doing. Therefore, I hope my noble friend will take this matter to heart and take this opportunity to address an issue that could have serious and important social benefit.

[Baroness Kramer]

My Lords, I was a member of the Parliamentary Commission on Banking Standards, which looked at the duty of care issue. In the end, the commission made the decision not to pursue the matter and to empower the FCA to take up regulation and play a role. I thought at the time that was not a good decision but the argument was very much based on the idea that the remit of the Parliamentary Commission on Banking Standards was to do with banking, and that the new banking standards body would tackle many of these culture issues, of which duty of care is obviously an inherent part. Looking at the work of that banking standards body, I do not think most of us think it has followed that direction. I do not see any significant change in pressure from the various bodies, whether applied to banks or financial institutions, to make them become much more conscious of the needs of their customers, especially vulnerable ones.

I have never understood why the industry has resisted this duty. Frankly, it is akin to constraints on mis-selling as behaving in the wrong way towards any individual, providing them with an inappropriate service and not giving them adequate support to understand whether that is the service they need surely falls into that mis-selling category. Expanding the powers of the FCA to allow it to provide a more general approach through the mechanism of duty of care would make the FCA’s job on issues such as mis-selling significantly easier. Therefore, I hope very much that the Government will take this on board. Frankly, the long-grass decision is very frustrating. Whenever I hear that an important piece of legislation is being postponed because we have the Brexit Bill, I begin to wonder whether we recognise appropriately the needs of the country.

--- Later in debate ---

Moved by

[Baroness Altmann]

70ZZA: Clause 17, page 14, line 29, at end insert—
“(1A) The power of the FCA to make general rules includes the power to make rules that the losing defendant to any claim brought by a claims management company shall, subject to subsection (2), be liable for any charges payable under or in connection with a regulated claims management agreement.”

[Baroness Altmann]

My Lords, Amendment 70ZZA seeks to give the FCA the power to direct providers who are found liable for compensation to pay the claims management company’s fees direct, rather than the CMC taking money out of the customer’s compensation award. The aim of this change is to drive different behaviour in the market and bring about better outcomes for customers by making it more expensive for providers to pay redress to customers who use a CMC than it is in respect of those who claim direct.

It is clear that claims management companies are extremely profitable, with the National Audit Office reporting in February 2016 that CMCs are estimated to have earned between £3.8 billion and £5 billion just from PPI mis-selling compensation between April 2011 and April 2015. That means that consumers could have had billions of pounds more to spend but, instead, some of their compensation has gone to firms that have done very little work for the payments. Indeed, most people could have claimed compensation on their own, particularly if it was made much easier for them to do so. If providers were required to pay the CMCs directly rather than customers funding them, there would be an incentive for providers either to proactively contact customers to offer compensation or to make the process of applying for compensation much simpler, thereby encouraging more people to claim directly and saving the extra costs to the provider.

Claims management companies exist because the process of claiming compensation is not straightforward. Again, PPI is a good example of this and it highlights that the current redress practices are not working well enough for consumers. Therefore, as well as helping consumers keep every penny of their compensation, the amendment could also help to improve the redress system overall. I venture to suggest that it could be an alternative and possibly achieve better overall outcomes for consumers than banning claims management companies from charging fees at all.

Clearly, if the CMCs cannot charge for their services they will not remain in operation. However, simply doing this would address only one part of the problem: it would still not give firms any incentive to make it easier for people to claim compensation themselves, nor would it encourage the firms proactively to offer compensation in cases where there is a clear entitlement. Therefore, the risk would be that customers entitled to compensation would not receive their redress.

This measure would still benefit from being combined with a reasonable cap on claims management companies’ charges. I beg to move.

[Lord Young of Cookham]

My Lords, the amendment tabled by my noble friend Lady Altmann would, in effect, give the FCA a power to make rules requiring firms at fault rather than consumers to pay the costs associated with claims management services and she explained why this would a popular step. The FCA would be able to use such a power only in respect of firms it regulates.

I understand why this idea might seem appealing. The approach could, for example, incentivise those firms that the FCA regulates to be more proactive in offering compensation and dealing with consumer complaints, although this would be a rather indirect way of trying to do this. There are risks that such measures would lead to an increase in speculative and unmeritorious claims by CMCs, which could in turn have an adverse impact on consumers by burdening consumer redress schemes such as the Financial Ombudsman Service. Hopefully consumers will be helped by the ability to cap the fees in certain circumstances, therefore reducing the risk of the consumer not getting as much as they would otherwise be entitled to.

We are not ruling out the possibility that in some circumstances, the FCA might consider it appropriate to make a rule which has the effect that my noble friend seeks. This is within the FCA’s existing rule-making powers—subject of course to the normal principles and procedures which govern the FCA’s rule making, including public consultation and the preparation of a cost-benefit analysis.

However, as I mentioned earlier, such a rule could apply only in respect of defendants which are firms that the FCA already regulates. Claims management services include personal injury cases, and certain housing disrepair and employment cases. The FCA does not regulate defendants in that wide range of cases, so its rules could not apply to them.

Given the possibility of the FCA, within its existing rules, moving in the direction my noble friend has suggested, I hope she might withdraw her amendment.

[Baroness Altmann]

I thank my noble friend for his courteous and helpful reply.

I have been working with the consumer group Which? and it has been very forthright in explaining that it believes this would help the market and consumers overall. However, in light of my noble friend’s saying that the FCA already has the powers and may even be considering such a measure in certain circumstances—I am delighted that we have aired this issue in Committee— I beg leave to withdraw the amendment.

Amendment 70ZZA withdrawn.

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[The Earl of Kinnoull]

My Lords, again, I support the noble Lord, Lord Hunt of Wirral, and agree with every word he said. I thought it would be helpful to give a few figures for just how raging this fire is.

The first figure comes from CEHAT, the Spanish hotel and apartment trade body, which estimates that over the past three years the Brits have cost its members €100 million in claims. That is just Spain and just members of that trade body. The second is a wonderful statistic, which comes from an unnamed big tour operator in the Guardian on 31 July. It said that from July to August 2016 it took to Europe 750,000 British customers, 800,000 German customers and 375,000 Scandinavian customers. The Scandinavians lodged 39 claims, the Germans lodged 114, and the British lodged around 4,000. One can see just from those facts how much of a fire is burning here and what an important issue the noble Lord, Lord Hunt, has zeroed in on. I can say only that I support his thinking wholeheartedly and hope he is feeling very persuasive, providing he gets to see the Minister and the officials.

[Baroness Altmann]

My Lords, I, too, support my noble friend’s Amendment 70A. He has highlighted a very important issue. It is right that in Clause 17 the Government are looking to cap the charges made by claims management companies, but this should apply to personal injury claims as well as those for financial products and services. The cap on charges is also important because there will be problems in future associated with the increased use of the small claims track when it is extended to cover cases up to £5,000 for personal injury claims.

I was going to quote the same figures as the noble Earl, Lord Kinnoull, but I have also heard from a number of holiday operators and other representatives of the travel industry that resorts are now threatening to sharply increase prices for British holidaymakers or even withdraw all-inclusive packages from the UK market altogether. This situation is damaging the reputation of British holidaymakers and I support my noble friend’s amendment.

[Viscount Trenchard]

My Lords, I, too, strongly support my noble friend Lord Hunt’s amendments. I was completely horrified to hear the statistics relayed by the noble Earl, Lord Kinnoull. It does not surprise me because I travelled to Spain last summer—not on a package tour but they nevertheless somehow know where you are and I started to receive unsolicited texts and emails from people inviting me to make claims for the bad food or being sick. I just deleted them, of course.

I also agree with my noble friend Lady Altmann that, where possible, the cap on fees should be broadened because I would have used a CMC to pursue a claim against an airline. This was not this summer but the summer before, when our flights were cancelled and I tried to get refunded by an airline. My daughter had booked on the same flights through a different travel agent, but in the end neither of us has made a successful claim, although we are both entitled to. It was too difficult because the airline had contracted the flight to another airline. When you are entitled to a refund for a service that was contracted but not delivered—as in the cancellation of a flight—then, as the Committee is well aware, it is made extremely difficult for you to receive reimbursement. When I received an unsolicited email from a CMC about cancelled flight claims, I was quite tempted to use it. But even though I had virtually given up on the claim against the airlines, I decided not to because a quick examination of the company made me suspicious. I also thought it would absorb in fees most of what it might get back, so I decided not to proceed.

Once such companies are capped in what they can charge, I will feel much happier about using their services because of what they specialise in and because it is made extremely difficult for individuals to pursue refund claims themselves. In many areas there may be a route whereby the individual can do the same thing as a CMC, and do it for free, but it is often made so difficult. It is intended that people will get bored or be too busy to go on waiting, while listening to music and pressing “1” or “2”.

--- Later in debate ---

[Lord Deben (Con)]

My Lords, I support this measure. This industry has become huge. I emphasise the very simple point to my noble friend that it is an industry which encourages fraud and leads people to do things which they would never have done without this pressure. I do not believe we want that kind of thing in our society. It is expensive for decent people, holidaymakers and everybody, and the people who do it are among the most unpleasant people in our society. They are leeches on our society. My noble friend the Minister has treated this Committee extremely well and has spoken most charmingly about many things. I do not think this is something we can just pass off with good words. We have to tackle this. If we do not do that, we will fail the public as a whole. Above all, this is something we can do about morality. We should not have a society in which people are led astray in this way. This is not an industry that we need to encourage and the way to kill it is simply to say, “You can’t impose yourself on other people”. There is too much imposition anyway. This is something we could do.

[Baroness Altmann]

My Lords, I support this amendment and speak to my Amendment 73 on the same topic, which seeks to achieve the same aim as Amendment 72. The scale of nuisance calls is of great concern, as has been expressed in previous debates on this Bill from noble Lords on all sides of the House. The Association of Personal Injury Lawyers states that an estimated 51 million cold calls or texts are received each year from regulated claims management companies for personal injury claims. Although such nuisance calls are supposed to be prevented by existing regulations, current measures are clearly ineffective.

Reforms of claims management companies are clearly urgently needed. I congratulate my noble friend on introducing the Bill. Carol Brady’s excellent independent review of the regulation of claims management firms recommended moving responsibility to the FCA, which is what the Bill does, and I wholly support that. However, it is also important to protect the public from nuisance calls and texts, which the claims management companies often plague people with; to reduce the level of speculative and even fraudulent claims, which cause added costs for companies and end up costing other consumers extra money; and to stop customers being fooled into paying up-front fees to unscrupulous claims management companies, which they then never recover after they discover that they did not have a valid claim in the first place.

FCA regulation of CMCs will help toughen the oversight of nuisance calls, but that move alone is not sufficient to properly protect consumers. The FCA has powers of enforcement that are better than the current regime; it can strip those found to be flouting the rules of their ability to operate and can hold directors personally liable. But a ban on unsolicited approaches would add much more protection. It would be clear to consumers that they should not engage with firms which contact them and encourage them to make spurious claims. Currently, the claims management companies act with impunity to entice people to make easy money. But of course this has the effect of imposing higher costs on the wider public, as we have already heard this afternoon, because firms will charge more to cover the risks of such claims. We have seen this clearly with whiplash injuries and we are seeing this with holiday sickness claims. Indeed, the Law Society has also written to me to support the banning of cold calls. ABTA cites the problems that we have already discussed about the dramatic rise in speculative and fraudulent claims. This will cause detriment to the wider public if we do not make sure that we take the opportunity in the Bill to retain effective measures to address the issue.

The Minister has already said how much she wishes that she could ban cold calling for pension companies, and there was support across the whole House for that measure, but it is questionable; we hope that we might be able to find a way to get that into the Bill. However, cold calling for claims management companies clearly is in scope of the Bill. When defining “claims culture” in a Parliamentary Answer on 19 April 2016, my honourable friend in another place, Dominic Raab, said:

“The Autumn Statement referred to the cost to society of the substantial industry that encourages claims through cold calling and other social nuisances and which increases premiums for consumers”.


Therefore the Government have clearly equated claims culture with cold calling, and the logical and fair action would surely be to ban cold calling for personal injury claims rather than restrict the rights of people who have been injured through no fault of their own, which the Government are expected to do in the forthcoming civil liability Bill. These proposals perhaps aim slightly at the wrong target, but the Bill gives the Government the opportunity to aim at the right target and ban cold calling, which they state encourages a claims culture.

As the Government recognise that there is a problem, and there is both industry and public support, the Bill could be amended to include this ban on cold calling. Whether it is through Amendment 72, in the name of the noble Lord, Lord Sharkey, and the noble Baroness, Lady Kramer, or Amendment 73, in my own name and that of the noble Earl, Lord Kinnoull, I hope that we might take this opportunity to protect the public in this manner by banning cold calling.

[The Earl of Kinnoull]

My Lords, I strongly support the noble Baroness, Lady Altmann, and I thank her for allowing me to add my name to her amendment. Obviously, I also strongly support the thinking behind the amendment in the names of the noble Lord, Lord Sharkey, and the noble Baroness, Lady Kramer, and I just wish to add one or two points.

There was a very helpful Which? report in November 2016 detailing the full horror of nuisance calls in the UK. For the report, telephone calls in 18 cities were sampled. In 17 of the cities—the survey took place over a long period—more than a third of all the private phone calls were nuisance calls, and in Glasgow, which topped this terrible table of nonsense, more than half of the calls in the sample were nuisance calls. The top type of nuisance call was about PPI, which of course is firmly a CMC nuisance. In commenting on the November 2016 report, Keith Brown MSP, the relevant Scottish Minister, was quoted as saying:

“These calls are a serious problem that can cause both emotional and financial harm, particularly to some of our most vulnerable citizens”.


A very horrible statistic in the report was that four in 10 people in Scotland who had received these calls felt intimidated by them. It is barbaric behaviour.

I was delighted to read in their manifesto what the Conservatives are going to do about cold calling on pensions. Like, I think, every other noble Lord in the House, I feel that we must use this opportunity to extend the ban to this area as well. I suppose that it is the businessman in me who does a quick upside/downside analysis. My upside analysis has a reduction of emotional and financial harm and intimidation, and my downside analysis has nothing. Perhaps the Minister could tell me whether she agrees with that analysis. I hope that she feels as I do—that it is a social necessity that we carry through one or other of these amendments and put it in the Bill.

Financial Guidance and Claims Bill [HL]

Baroness Altmann Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 6th September 2017 Lords Chamber

[Lord Sharkey]

My Lords, Amendment 42B is in my name and that of the noble Baroness, Lady Altmann, for whose support I am extremely grateful. I will speak also to Amendment 42C. Amendment 42B is very simple. It provides that, before accessing pension pots, people must have received the appropriate information and guidance either from the SFGB or from a regulated adviser. I touched on the need for this in my earlier remarks on Amendment 27A, and I am sure that I do not need to remind the Committee that take-up of advice on pensions is very low and that financial capability and understanding are also at very low levels. Conversely, financial misunderstanding is at very high levels. This augurs badly for sensible pension decisions.

The FCA’s July interim report on retirement outcomes shows that accessing pension pots early has become the new norm under pension freedoms, as the noble Lord, Lord Young, noted a moment ago, with 72% of pensions accessed by people aged under 65. Most of these people withdrew lump sums. Half withdrew the full value of their pension. The FCA says that it found no evidence of people squandering their pension savings, but expressed concern about why people are shifting their savings out of pensions. Over half of the fully withdrawn pensions were not spent but were transferred into other savings or investments. This suggests, according to the FCA, a mistrust of pensions, and raises the possibility or even probability of new risks, such as paying too much tax and missing out on investment growth and higher retirement income. The FCA also found that most consumers chose the path of least resistance; they usually accepted the draw-down option offered by their existing pension provider without shopping around or even using the information provided by their own pension provider. That is perhaps entirely unsurprising, given the very low levels of take-up of advice and the high levels of ignorance and misunderstanding. It may be unsurprising, but it is also worrying.

The FCA’s Retirement Outcomes Review is the fifth such investigation into the UK’s retirement market. All five investigations have found much the same thing: they have consistently identified DC pension customers’ poor awareness of their options and the distrust, disinclination or inertia that can so easily lead to poor decisions. It is not just poor decisions that are a concern but scams and frauds as well. Without taking proper advice, vulnerability to scams and frauds increases. The FT reported earlier this year that losses from pension scams in March this year alone had risen to a record high of £8 million. Victims of what they described as “liberation fraud” were typically conned into placing their pension funds into investments that do not exist or are illiquid or incapable of delivering the promised returns. Victims are not usually warned about tax charges in liberating their pension funds before the age of 55, which can wipe out half the value of their savings. Being better informed and advised will not, of course, prevent all poor decisions or prevent all scams and frauds, but it is a powerful safeguard against these things. It is not the same as just having information advice out there somewhere; it means accessing and using this information and advice, which is what our Amendment 42B would do. It requires people, before they can access their pension pots, to have received information and guidance either through the SFGB or regulated advisers—the same kind of controls that currently apply to taking out a mortgage. The amendment would make that work for many more people.

I turn briefly to deal with Amendment 42C, which would simply require the SFGB to report annually on the levels of usage of pensions guidance and regulated financial advice by those accessing their pension pots. As I explained earlier, the quality of guides is very high but the take-up is very low. We need to know how well the SFGB is doing in fixing this problem and have the SFGB publish the data. We need to see how successful it is, for example, in raising the level of take-up from the current extremely low 7%. That is a vital way in which to hold the new body to account and what the amendment does—although, having thought about it a little more, I accept that the SFGB may not be the best-placed organisation to do that. The Minister, from whom I gratefully take correction, is nodding as I say that. But I hope that the Minister will give careful and sympathetic consideration to Amendment 42B in particular. I beg to move.

[Baroness Altmann]

My Lords, I support the amendment, to which I have added my name. It would make the take-up of guidance the default option or a mandatory option for anyone who does not have independent, regulated financial advice. We are taking time and spending so much effort setting up a body that is designed to help to guide and inform the public; this amendment would help to ensure that the public actually get the benefit of it.

Clause 5(1) gives the Secretary of State powers to issue,

“directions to the single financial guidance body”,

to do this. Therefore, before anyone could transfer or access their pension savings, they would have received this guidance, which will be set up specifically to make sure they understand the risks before they make any decisions about their pension. Someone would also explain the tax consequences and the potential long-term dangers of giving up a pension because, once they have given it up, they cannot get it back. As the noble Lord, Lord Sharkey, just remarked, the recent FCA research shows that there are some people who are transferring money out of their pension and just putting it into a cash account or a different investment because, clearly, they do not understand the benefits of keeping it in a pension. Having somebody explaining it to them first would be very much the aim of this particular body.

I wholly support the pension freedoms that the Government have introduced, but they are introducing them into a landscape where, for the past few decades, people were encouraged to believe that they did not really need to understand or engage with pensions, because all the decisions were taken for them. For most people, they were in a default fund on their savings journey and then, when they took the money later on, they were put into an annuity and that was it. They did not really need to understand what any options were because they did not really have many options. Unfortunately, people did not understand how annuities worked either. If we make this guidance a default or mandatory option then we make sure that we are protecting the public as well as giving them the freedoms. It is right that we give them the opportunity to make decisions that will suit them, but we have to make sure that we give them the opportunity of making properly informed decisions and as fair a chance as possible of making the freedoms work for them.

Providers too often want people to make a decision when they are too young, for example. It is not just in the freedoms landscape that people are taking their pensions early; the majority of people were buying annuities well before the age of 65 under the previous system, too. I hope that the Government will seriously consider that the 7% take-up rate for Pension Wise is woefully low—we need to find a way to increase that and we need to make sure that we protect the public and give them the fairest chance of making the freedoms work. Pension Wise or the new body could, for example, issue vouchers for everybody who is coming to the stage at which they might need to make a decision about their pension. They could be sent a voucher for a free guidance session. The financial guidance body, perhaps with the FCA and with providers, can work on ways of boosting take-up, but it is definitely something that would make the work that we are doing in this Committee so much more valuable around the country. I support this amendment.

[Lord McKenzie of Luton]

My Lords, we support this amendment. We think that it is a good, strong, robust amendment. It takes us back to the introduction of pension freedoms which, I am afraid, were done rather precipitately and without the groundwork being properly laid. This was a point that my noble friend made at the time but it fell on stony ground.

I was going to ask what the take-up of regulated advice or guidance was at the moment but the noble Baroness has given us the 7% figure for Pension Wise. If one is heading for a much higher percentage, it raises the question of what the resource implications of that would be. I do not know if any groundwork has been done—it is not a reason for not doing it. These are important situations. My noble friend has prompted me about the idea of an MoT at the age of 50 as part of the process to get people to focus on their upcoming pensions. We are certainly happy to support this. I am interested to hear what the Minister has to say on what the problems with it might be. Whatever they are, I would hope that we could overcome them, because this could make a very significant difference to the pensions landscape.

--- Later in debate ---

Moved by

[Baroness Altmann]

42D: Clause 3, page 3, line 25, at end insert—
“( ) As part of its pensions guidance function, the single financial guidance body must provide information and guidance regarding unsolicited communications and make provision to ensure that members of the public receive this information and guidance before taking any action following an unsolicited communication, such as transferring an occupational or personal pension to an unregulated scheme.”

[Baroness Altmann]

My Lords, I will also speak to Amendment 42E. Effectively, these amendments would ensure that anyone who received an unsolicited approach about their pension would have to go to Pension Wise before they were permitted to do anything or receive the guidance if they did not have an independent financial adviser.

I admit that this amendment is the result of the fact that we were unable to find a way to ban the cold calling that leads to the scams that we are trying to deal with here in the Bill. I also thank the Minister for the recent statement from the department that it has decided that it will ban cold calling for pensions. However, I hope your Lordships will agree that this seems like an ideal legislative vehicle in which to carry out the Government’s wish to ban cold calling and to protect the public effectively. Banning cold calling effectively protects members of the public from scams. Scams that result in people losing much or all of their pension are almost always the result of an unsolicited approach. So this is a roundabout way of trying to achieve something which is clearly in the public interest and which the Government themselves would like to do.

We could require people who had an unsolicited approach either to have a financial adviser to ensure that what they were doing was right or to have a conversation with our guidance service to assess what they were about to do. Presumably, the first question from whoever was speaking to them from the guidance service would be, “Is this the result of an unsolicited approach—a cold call or an email from someone you did not know, or a text or whatever?”. At that point, it would be possible to protect the person before they could sign away their pension in a scam. There is a classic trick of rushing people into parting with their money or signing on the dotted line by saying that it is a limited offer which is available only today or is about to run out. That would not be able to happen if somebody had had to make an appointment with Pension Wise or the guidance body and had discussed it first.

I hope that we can discuss this issue. If this is not the best way of achieving the aim, I hope that the Government will consider introducing into this Bill another method of achieving it so that we can start the ball rolling on protecting the public and getting rid of cold calls. We have done that for mortgages. I know that the Minister has said that it is a complex matter, but I would be very grateful if she could explain the complexity which means that we should pass up this opportunity to do something that the Government themselves want to do when no other legislative vehicle in which to do so is in sight for the next couple of years. I beg to move.

[The Earl of Kinnoull (CB)]

My Lords, I had not intended to say very much but, after discussing this issue with the noble Baroness, Lady Altmann, earlier, I thought that I should say a few words now. As I said at Second Reading, my interest is very much in Part 2 of the Bill—an area that is home territory for me and on which I have something to say. My drafting eye was caught by Amendment 42E. I feel that having a decent definition of “unsolicited communication” would be very valuable in legislative terms as we go through this process. It applies not just in this area, which has been very eloquently explained by the noble Baroness; it applies also in Part 2 and elsewhere. Therefore, I feel that it is worth debating it now.

As I see the definition, even simple things such as a letter or some sort of Facebook communication would not fall within it, so I simply say that it is worth having a good definition so that we know what a cold call is. It is not just a telephone call. I receive an awful lot of Part 2-type telephone calls at home, admittedly in Scotland, every single lunchtime, but there are other methods of cold calling. Certainly I have been shown very worrying letters by local vulnerable people in Scotland suggesting that they do something urgently about their pensions and so on.

Therefore, I think that we need that definition, and I strongly support the thinking behind these two amendments. I would be very happy to join a meeting to talk about how one might tweak definitions and whether a definition is needed here or elsewhere in the Bill, but I think that it would be very helpful to have a clear idea of what a cold call is.

[Baroness Finlay of Llandaff]

My Lords, has the definition of cold calling been sought from the trading standards group of scambassadors who have been looking at all types of scams? It would be incredibly helpful to have that definition. I also wonder whether this amendment is too narrow as written. However, I congratulate the noble Baroness on using this opportunity to do something that desperately needs to be done. The amount of scamming is a scandal.

[Baroness Altmann]

My Lords, I refer to my Amendment 73, which attempts to define cold calling using many more words. That was in the context of banning cold calls for claims management companies. I do not claim that this is the correct version for cold calling.

[Lord Sharkey]

My Lords, I was pleased to add my name to the amendments in the name of the noble Baroness, Lady Altmann. Both amendments address the problem of cold calling and pensions. I would, like the noble Baroness, have preferred an outright ban on cold calling, just as I would like an outright ban on cold calling for the benefit of debt management companies and for claims management companies. We can deal with banning cold calling for claims management companies later in the Bill, as the noble Baroness just pointed out, and she and I have both tabled amendments to do exactly that. Regrettably, banning for pensions and debt management companies is outside the scope of the Bill.

The amendments before us, therefore, cannot and do not go that far, but they do offer a pretty good work-around. They would do two things, as the noble Baroness has explained. They would require the SFGB to provide information and guidance on cold calling. They would also require people to have received this information and guidance before taking any action following a cold call.

Noble Lords have discussed cold calling on many occasions in this Chamber. On every occasion there has been universal dissatisfaction with the process and universal recognition that it is a menace, yet it still goes on. There has been a 180% increase in the past 10 months alone. There are now 2.6 million calls every month. This is an omnipresent menace. But there is no cold calling for mortgages. We banned that. Successive Governments have never got around to banning cold calling for pensions, for debt management or claims management and I know that the Government have promised, yet again, to ban cold calling for pensions. But, yet again, it is a promise without a delivery date. It is a promise that has no obvious legislative vehicle except this one.

I still do not understand why the Government are dragging their heels over this or over debt management and claims management cold calling either. I acknowledge that there will be complexities in devising the details of any ban, but it is surely not beyond the ability of the Government to deal with it speedily if they assign the right priority and the right resources to it. In any case, I remind the Minister that we have already held out in these debates the possibility of an enabling clause in the Bill with the details to follow later in secondary legislation. We have had no response to that—all rather disappointing and mystifying. In the absence of any willingness on the part of the Government to actually do anything in the Bill, these amendments show how progress can be made. I very much hope that the Minister will respond positively.

--- Later in debate ---

[Baroness Altmann]

I thank my noble friend for her answer and for her passion at the beginning of her response. She clearly understands the concerns that have been expressed right across the House. Perhaps we in this House can help to accelerate the process by which we could achieve what she is struggling at the moment to achieve. Let me first respond to the question of the noble Lord, Lord McKenzie, and try to explain that these amendments are actually linked to Amendment 42B. If you have mandatory guidance that has to be taken before anybody can make a decision to access or transfer their pension, then Amendments 42D and 42E allow that to apply to a cold call.

As the noble Lord rightly pointed out, Pension Wise, or the financial guidance body itself, would not know in advance who had had a cold call and therefore needed to come, but if guidance were mandatory the guidance body would have a duty, as specified in this amendment, to ensure that anyone who had a cold call received advice or came for guidance before they were permitted to transfer the money. The problem with the scams comes when people transfer money from their existing pension elsewhere. So, as I say, the mandatory default guidance in Amendment 42B links in to Amendments 42D and 42E to try to capture the public protection that we wish to achieve.

It is, however, important to specify that this body must inform the public and provide adequate information about the risks of unsolicited approaches about pensions and about guidance and so on, because the body might think, “Well, if there is another organisation dealing with scams—we have Project Scorpion and Project Bloom, different initiatives going on around government—we do not need to be so cautious about informing the public”. This is the place where we want to make sure that the public is informed about pensions. Having said that, it seems that if we can get the ban on cold calling into the Bill at this very time, perhaps by changing the title of the Bill, or in some other way, with support across the House, working together to find a way that would be acceptable, we would all, including my noble friend, be much more comfortable with the protection we are offering the public. In the meantime, I beg leave to withdraw the amendment.

Amendment 42D withdrawn.

Class 4 National Insurance Contributions

Baroness Altmann Excerpts

Wednesday 15th March 2017 Lords Chamber

[Lord Young of Cookham]

I assume those measures have already been approved by both Houses of Parliament, if they are going to come into effect next month.

[Baroness Altmann (Con)]

My Lords, I too add my congratulations to the Chancellor on his very sensible and timely decision. The idea that self-employed and employed people have opportunities for arbitrage, and that that needs to be corrected, is absolutely right. However, the Chancellor should be applauded for concluding that we should wait until the Matthew Taylor review and a more thorough analysis can be carried out, and then come back in the autumn with perhaps different proposals that will achieve the desired impact without breaking manifesto commitments and recognise the huge importance to our economy of encouraging self-employment, risk-taking and the establishment of new businesses.

[Lord Young of Cookham]

I am grateful to my noble friend for what she has just said and for her contribution to yesterday’s debate on the Budget. I am sure she is right in what she says about the Taylor review and about finding the right way through the dilemma of continuing to encourage enterprise and self-employment where it is legitimate while, on the other hand, removing the opportunity for arbitrage and abuse, which in some cases is taking place at the moment. I am grateful for her support.