Trade Union Bill
Baroness Drake Excerpts(8 years, 8 months ago)
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Baroness Drake (Lab)
My Lords, I support Amendments 9 and 10. Clause 10 has raised much concern and strength of feeling, and the debate has been binary: on the one hand, the view confirmed by the Select Committee that the Bill would have a significant and negative impact on Labour Party funding; on the other side, the Government’s adherence to their manifesto commitment to introduce opt-in to union political funds. The Select Committee attempted,
“to reconcile these two issues by setting out a proposed compromise”.
It identified a way forward, which, put at its simplest, means introducing the principle of opt-in for new members while seeking to mitigate the worst of the impact on union political funds and the Labour Party through changes to the provisions in Clause 10.
The principle of opt-in is in the manifesto, but the detailed process for implementing it is not. Amendment 9 captures the unanimous view on the desirable changes to Clause 10 and the majority view on the position of existing members. As the Select Committee observed, Clause 10 is very far from commanding a consensus, not only because of the impact on the Labour Party but because of the obstacles the Bill presents to the successful implementation of opt-in—what I would call the double-jeopardy effect.
The amendment would require new members to contribute to the political fund only if they have opted in, in writing or electronically. To restrict the opt-in system to an in-writing, on-paper process is an obstacle to successful implementation and is much less likely to achieve a good response rate. Doing something through the post can be harder than doing it online. People can mislay their form. It provides what in behavioural terms are points of friction, which encourage inertia and will discourage opt-in. Members do not make a decision on whether to opt in or not; rather, they make no decision.
The Government, in arguing for opt-in, refer to the shift in the market where consumers purchasing products or services are increasingly being asked to give active consent when entering a new commitment. But increasingly those opt-in decisions can be made electronically—indeed, that is at the very heart of our e-commerce world. Allowing opt-in to political funds electronically goes with the market shift. The amendment contains no requirement for members to renew their opt-in decision every five years, but would provide greater transparency in that all members, existing and new, must be reminded every year of their right to opt out and cease paying into the political fund. The Certification Officer must, in a code of practice, set out the annual reminder communications that unions must issue, monitor unions’ compliance and report.
The arguments against a five-year renewal are several. Regulated annual reminders to members of their right to cease paying is a more proportionate approach and is consistent with market practice. In the market, where an initial opt-in decision is required for membership, services or financial products, there are many instances where consumers are not required to renew their decision, although it is not unusual to send an annual reminder. The default is that the policy agreement or service continues. This can be compatible with Financial Conduct Authority requirements. It is reasonable for the provisions of Clause 10 to take a similar approach, given that other products in the market are normally of much greater value than a 9p political levy.
The Bill is disproportionate as, every five years, a member’s opt-in decision expires unless they have renewed it—so every five years, the union would have to contact all members to ask them to renew. The Select Committee reported that the administrative and financial burdens on unions arising from this requirement would be considerable and disproportionate against the size of the 9p contribution. The exercise would cost a union one year of political fund contributions every five years.
Depending on when a union last held its last political fund ballot, which it is required to do every 10 years, it could face the tasks of initially contacting or persuading all existing contributing members to opt in; contacting and persuading all contributing members to renew their decision to opt in five years later; then conducting a full postal ballot of all members to secure a renewed authority to have a political fund—all in the space of about six years, and all expensive.
The amendment increases the transition period to at least 12 months, to be set following consultation with the Certification Officer and the trade unions. Most witnesses agreed that a three-month transition period is far too short. Retailers were granted two years to prepare for charges on plastic bags. Following the Health Act 2009, which banned cigarette displays, the coalition brought the provisions into force in 2012 for larger shops and 2013 for smaller shops. The right-to-rent landlord checks in the Immigration Act 2014 came into force in 2016. Three months appears to be very mean-spirited when compared with the two or three or four-year transition periods allowed under other legislation on issues of considerable moment.
The Certification Officer advised that Clause 10 would require unions to revise their rulebooks and secure his approval. Many unions need to get member approval at an annual or special conference. This will take time and expenditure. Rules revisions, developing guidance on training for union staff and reps and other changes are too great a task to be completed in three months. It is setting unions up to fail. Moving to opt-in is not the only demand on union resources coming out of this Bill. Dealing with the abolition of check-off will be a major priority, too.
Finally, the amendment does not extend the opt-in requirement to existing members as part of the Bill. But it does require them to be covered by the transparency requirements to annually notify members of their right to opt out. This gives effect to the majority view in the report. Not extending the opt-in to existing members as part of the Bill is fairer and more even-handed. Human behaviour is such that persuading existing members to make an active choice is much more difficult. They are more likely to make no choice. As the noble Lord, Lord Burns, said, there is no trigger point such as joining the union. Response rates will be lower and greater expenditure will be incurred in prompting, chasing and following up. Not extending to existing members, but providing them with regulated annual notification of their right to opt out, increases transparency.
The noble Lord asked what the principle was here. The principle is that when you introduce a new regime for future members, you should have a protection regime for existing people. There are precedents. The principal protection for the existing members under this amendment is a compulsorily regulated regime of notifying members of their right to opt out, which will be monitored and reported on by the Certification Officer.
As the Select Committee observed, even without some of the onerous provisions in Clause 10, there will still be “a sizeable negative effect” on members contributing to political funds. The Select Committee’s overarching proposal was that the Government should implement their other manifesto commitment: to convene cross-party talks and make an urgent effort to reach agreement on party funding. The majority view was that the question of extending the opt-in to existing union members should not be part of the Bill but should be considered as part of those talks. As the Select Committee observed:
“The further danger of proceeding down a non-consensual route is that any cut in the Labour Party’s funding will simultaneously reduce the incentives for the other parties to make concessions with a view to achieving comprehensive reform”.
The amendment strengthens transparency considerably. It introduces opt-in going forward, but it also introduces fairness, proportionality and, even more important, what has been missing—a level of even-handedness.
Viscount Hailsham
Notwithstanding my considerable respect for the noble Lord, Lord Burns, and my noble friend Lord Cormack, now my near neighbour, and indeed the noble Lord, Lord Tyler, I am not with them on the amendment.
The amendment is in paragraph 142 of the Select Committee report. I am an advocate of the alternative view: a generous transitional period for existing members. I should like to think that the Minister will offer a more generous transitional period than she is presently contemplating. I cannot help feeling that, if she did, she would attract considerable support.
My reasons are very simple and can be briefly expressed. First, as a matter of principle, existing members should be covered by the opt-in provisions. The noble Baroness, Lady Drake, referred to the amendment as fair and even-handed. It is nothing of the kind. It actually deprives existing members of the greater ability to opt out, if they want to. There is nothing fair or even-handed about the amendment; it has a contrary effect.
However, I agree with another point made by the noble Lord, Lord Burns, and, incidentally, my noble friend Lord Cormack: that it would unbalance party funding. That is not in the general interests of the country or, therefore, within the general consent of this House. I therefore think that the alternative approach formulated in paragraph 142(b) of the Select Committee report is the way forward. A more generous transitional period for existing members seems to me to catch the sense of the House.
Bank of England and Financial Services Bill [HL]
Baroness Drake Excerpts(8 years, 11 months ago)
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Lord Bridges of Headley
My Lords, this amendment introduces an advice requirement for some of those consumers who wish to sell their annuity income streams on the secondary market.
We have already debated the extension of Pension Wise, enabling it to offer guidance for consumers in this market. The Government recognise the importance of protecting all who have a right to receive an income under a relevant annuity, not just the primary annuity holder, and this has been a concern raised by noble Lords previously. That is why we can clarify that we will be making the free and impartial Pension Wise guidance service available to anyone with a relevant interest in a relevant annuity.
Today, the Government are introducing a new measure to ensure that consumers are adequately supported when making the complex decision of whether to sell their annuity income streams. A regular income stream from an annuity is a valuable asset and, for the majority of individuals, it will be in their best interests to keep their annuity. Therefore, it is important that annuity holders understand the value of their income stream and are informed about the options available to them.
The Government have consulted on the steps that should be taken to support consumers with this complex decision. In addition to Pension Wise guidance, we asked whether consumers should be required to take financial advice in order to receive a tailored recommendation to inform their choices. We also asked whether the safeguards in place should vary depending on the value of an annuity to ensure that consumers with lower value annuities do not have to pay disproportionately high costs in order to sell them. There was broad support from both industry and consumer groups for requiring advice above a threshold. The Government have listened and are putting this measure in place through a government amendment to this Bill today.
This proposed new clause will place an obligation on the Financial Conduct Authority to make rules requiring certain authorised firms to check that advice has been received before annuity holders may sell their annuity income stream. The FCA will determine which businesses will be required to make these checks, what the checks will entail and when they will be carried out. We expect that the FCA will be consulting on its proposed rules during 2016.
The threshold for advice, including how it will be calculated, will be set out by government through secondary legislation. The Government will also lay secondary legislation to specify what type of advice individuals must have received. In specifying appropriate financial advice, the Government’s intention is to require advice to be FCA-authorised and regulated. The Government also intend to legislate that all UK buyers in the secondary market for annuities will be FCA-regulated. This will allow the FCA to design specific rules governing the conduct of both financial advisers and buyers in this market, and the Government will work with the FCA to consider any conflicts of interest that may arise between these parties. The Government are engaging with financial advisers and their representative bodies with the aim of ensuring that there will be enough participating advisers to meet consumer demand when the market opens. Within the financial advice market review, the Government are considering how the availability of financial advice can be improved, particularly for those who do not have significant income or wealth. The review is to publish its recommendations by the time of Budget 2016, and the Government will ensure that the financial advice requirement in the secondary annuities market fully reflects the outcomes of this review.
A further power will allow the Treasury to exempt from this advice requirement those individuals whose financial circumstances meet certain criteria. The Delegated Powers and Regulatory Reform Committee has recently recommended that this power be affirmative rather than negative, and the Government will respond to the House on this recommendation at the earliest opportunity. The Government will consult on the regulations to be made under all powers afforded by this clause in 2016.
Today’s debate coincides with the Government’s publication of their response to the March 2015 call for evidence on the creation of a secondary market for annuities. This sets out the wider set of proposals around, and the next steps for, the implementation of the secondary market. The response gives further detail on how the market will operate, including tax considerations as well as further details on the consumer support framework, part of which the Government are legislating for in this Bill. Your Lordships will no doubt be minded to consider the wider policy in today’s discussion, and your views on these proposals are welcomed. I beg to move.
Baroness Drake (Lab)
My Lords, I refer to my entry in the register of interests, in particular my membership of the board of the Pensions Advisory Service. I am also on the Delegated Powers Committee.
There is no pre-existing secondary annuity market which can inform an assessment of whether it would be a well-functioning market, what the key risks are or what is an appropriate level of consumer protection. I have had little time to digest the Government’s response to the consultation on this market, published today, but up to 5 million people could participate in this market—although interestingly, the Pensions Minister and the Economic Secretary both advise that for the vast majority of customers, selling an annuity will not be the best decision. There is a real tension in the policy on this secondary market. The Government have to ensure a robust consumer protection regime consistent with their asserted view, which I do not disagree with, that the right decision for most people is to retain their annuity. At the same time, an effective market needs a sufficient level of demand from consumers to sell their annuities and a sufficiently wide range of purchasers. These two requirements do not sit easily with each other.
While it is welcome that the Government are taking further steps through their Amendment 25 to protect the consumer, I have real concerns about the sufficiency of those protections. The Government will now also allow the original issuers to buy back annuities. This will be allowed only indirectly when facilitated through a regulated intermediary, such as a broker or financial adviser—presumably to enhance consumer prospects of a better deal—although annuity providers can still buy back low-value annuities directly. That raises several issues. What will be the threshold at which direct buyback of low-value annuities will be allowed? How will this be measured—by income stream, by income stream in relation to the individual’s financial resources or by the annuity’s value on the secondary market? Indirect buyback through an intermediary will mean an extra layer of costs for consumers, paying in effect for their own protection. How will the Government control those costs?
As individuals will be required to take advice, how will the Government ensure that advisers are willing to provide advice at a reasonable charge, particularly to those with modest value annuities? This is a problem under the required advice regime for individuals transferring defined benefit assets to defined contribution arrangements, so similar problems are certain to arise in a secondary annuity market. Will sufficient brokers enter that market to enable a fair price? Allowing buyback, directly or indirectly, must increase the risk of consumer inertia as individuals choose to stay with their original provider, notwithstanding any advice that they receive, heralding a weak demand size which is already so common in the pensions and annuities market. The Government intend to bring forward legislation to create a further regulated activity for buying back an annuity. What is the timetable for that legislation and will we have time to consider it properly?
Bank of England and Financial Services Bill [HL]
Baroness Drake Excerpts(9 years ago)
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Baroness Drake
“Extending a duty of care to the financial sector
In every contract to supply a service, traders who are ring-fenced bodies providing financial services as defined under section 142A of the Financial Services and Markets Act 2000 (ring-fenced body) shall be subject to—(a) a fiduciary duty to their consumers and small businesses with respect to provision of—with reasonable care and skill, and(i) the operation of care services, and(ii) the management of any individual contract to provide services,with reasonable care and skill, and(b) a duty of care towards consumers and small businesses across the financial services sector.”
Baroness Drake (Lab)
My Lords, in this amendment I return to an argument that I have articulated in this House before. Culture and conduct in the banking sector were integral to the explanation for the financial crisis in 2008 and there is no compelling evidence that the culture has changed sufficiently. As the Financial Services Consumer Panel commented:
“The financial services industry has a long and ignoble history of poor treatment of consumers”.
The recent foreign exchange riggings saw banks fined £4 billion for deliberately misleading customers. Fixing the market was still happening a full five years after the financial crisis. Now we read in the CMA report on the £16 billion current account markets that millions of customers who regularly use their overdraft get a poor deal. In effect, the law still does not protect customers sufficiently.
The purpose of this amendment is to ensure that providers must put the consumers’ interests first and resolve conflicts of interest in the interest of the customer when providing core services and in the management of any contract to provide services. Profit should not be made at the expense of the customer through their lack of knowledge and consent.
A fiduciary duty of care, as contained in this amendment, is needed for two reasons: first, to force the pace of cultural change in the banking sector, and, secondly, because regulation still enshrines too weak a duty to the consumer. Massive fines are simply not delivering the desired behavioural change, but they add to the cost for consumers and raise concerns about sustainability. A regulatory focus on sufficient providers in the market and a reliance on the power of the disclosure of information are simply not delivering the required consumer outcomes.
The markets are becoming more complex. Governments will continue to react to rather than prevent problems unless a step change is taken in defining the duties expected of providers towards consumers.
The FCA’s Treating Customers Fairly initiative enshrines a weaker duty to the consumer, arguably rendered weaker by the Financial Services and Markets Act, which requires the FCA to have regard to,
“the general principle that consumers should take responsibility for their decisions”.
Indeed, the Financial Services Consumer Panel September 2015 briefing provides a well-argued presentation on that very point.
The complexity of many financial services, combined with weak standards of governance, conflicts of interest, inappropriate remuneration structures, asymmetries of information, knowledge and understanding between the provider and consumer, behavioural biases, and unequal power between consumers and providers, has resulted in an extremely unbalanced relationship. Given that imbalance of power, consumers can reasonably be expected to take responsibility for their decisions only where provider firms exercise a fiduciary duty of care. Regulation does not explicitly create a requirement for firms to act in their customers’ interests or to eliminate conflicts of interest in the consumers’ interests.
The need to balance consumers’ responsibility with greater firm responsibility is not new. The Joint Committee on the draft Financial Services Bill commented in 2011 that,
“a statutory duty should be placed on firms to treat their customers ‘honestly, fairly and professionally’”,
allowing the FCA to ensure that,
“companies address conflicts of interest”.
The then FCA said that it supported a general principle that a regulated firm should act honestly, fairly and professionally, in accordance with the best interests of the consumer.
The Financial Services and Markets Act as amended by the Financial Services Act 2012 requires the FCA to,
“have regard to … the general principle that those providing regulated financial services should be expected to provide consumers with a level of care that is appropriate”.
The Government argued at the time that this provision would ensure fairness, honesty and professionalism. This intended effect is clearly not being achieved in many instances in practice.
Some argue that a fiduciary duty requiring providers to put customers first would impose an obligation to act in the best interests of customers to the exclusion of the firm and its shareholders’ interests. My response to that is that no financial organisation or its share- holders should have the right to a profit where, integral to the design of a product or service and the manner of managing that product or service, is a disregard or neglect of the consumer’s interest. Without this principle asserted as the bedrock to regulatory rules we continue to lock dysfunctionality into the financial and banking sector which will continue to manifest itself. That is not good for the UK when we have such a high dependency on the sector, providing as it does £65.6 billion, or 11% of total government receipts, and nearly £127 billion in gross value added to the UK economy.
Lord Bridges of Headley
My Lords, I thank the noble Baroness, Lady Drake, for prompting this short debate and for her thoughtful and thorough speech on the subject. As she rightly says, we need to improve the way the financial services industry treats its customers. We all want to see better standards in the banking and financial services industries, and to ensure that the customer always comes first. The question before us, however, is whether this amendment would achieve that. I am sorry to say that I am not at all convinced that it would—and I am conscious that your Lordships have been around this issue before, not least in 2013. I read the Hansard report of that debate yesterday. None the less, let me clarify the Government’s position.
The Government do not consider that introducing a fiduciary duty or a duty of care in legislation would help to drive up standards within ring-fenced banks because, as noble Lords know, banks are already subject to a wide range of legal duties. First, a bank is subject to obligations under the Financial Services and Markets Act 2000 and the regulators’ rulebooks. Under the latter—the principles for business—a firm is required to act with due skill, care and diligence, and to pay due regard to the interests of its customers and treat them fairly The enforceable rules of conduct that will apply to banks under the SM&CR, to which the noble Baroness referred, will put the same requirements on the vast majority of bank employees, complementing the obligations on the firm, requiring them to give due regard to customers’ interests and to treat them fairly.
In addition, ring-fenced banks are subject to obligations under their contracts with their customers. These include implied terms—under Section 13 of the Supply of Goods and Services Act 1982 or Section 49 of the Consumer Rights Act 2015, where the consumer is not an SME—that the ring-fenced body will perform the service with “reasonable care and skill”. So, it is not clear that imposing a fiduciary obligation on a bank to its customers or small businesses would add any value. I would argue that a fiduciary obligation is not appropriate in the relationship that a bank has with the majority of its customers. It is a specific kind of obligation that a director owes to a company, or a trustee owes to a beneficiary under a trust.
It would be appropriate for a bank to have such an obligation when it was acting as a custodian, and such obligations can and do arise quite naturally in such circumstances. But, and this is the point, deposits with a bank are not property held on trust, so a fiduciary obligation simply would have no place in the contractual relationship between a bank and its customer—for instance, in a sales relationship. Clearly, it would be meaningless where the bank has lent the customer money.
Some time ago—noble Lords may not remember this, as it was in 1848—the case of Foley v Hill held that the relationship between a bank and its customer was that between a debtor and a creditor: a contractual, not a fiduciary, relationship. It was therefore not within the jurisdiction of the court of equity.
Furthermore, a fiduciary duty, even if it were to be imposed, could only deliver change if it was enforceable. Only the beneficiaries—the consumers and small businesses—could enforce it. This would obviously be expensive, requiring court proceedings, and would only produce financial compensation. The Government firmly believe, therefore, that the amendment would not add anything to the duties that already apply to ring-fenced bodies. Rather, it would add confusion where there is clarity. Banks can comply more easily with specific requirements, and customers and regulators can more effectively hold the bank to account when they do not comply.
I declare an interest here. I spent much of the last few years trying to ensure that one of the country’s largest high-street banks treats its customers fairly and earns their loyalty. In the light of that experience, I point out that the high level of competition and choice that now exists, and the increasing ease with which consumers can switch accounts, makes it even more imperative for banks to treat their customers not just fairly but personally and with real integrity.
This amendment would not improve on the regulations that already govern banks’ relationships with their customers. It would not give banks or their senior managers a clear understanding of what is expected of them, or provide a viable and effective means of holding banks to account. I therefore ask the noble Baroness to withdraw it.
Baroness Drake
I thank the Minister for his reply, and I will not enter into iterative debate on a fiduciary duty, other than to say that I will persistently argue from these Benches that the UK’s regulatory framework is inadequate for the consumer. Slowly but surely, in certain areas such as the introduction of independent governance committees in the insurance sector which embrace a fiduciary responsibility, there is a growing recognition that the current regulatory framework is not delivering the right response to behaviours in the banking and financial sector. Yet more layers of sedimentary rock in the regulatory system will not deliver that. None the less, I beg leave to withdraw my amendment.
Baroness Kramer
I shall make one relatively small point. This is an area where I do not pretend expertise. At Second Reading, I referred to the importance of both guidance and advice and the significance of distinguishing between the two. At the moment, many people who are retiring will have spent a large part of their careers accruing pension benefits through a defined benefits plan and a relatively small proportion of their career in defined contributions, so for many people now the discretionary pot is probably quite small and many of them may feel that they can therefore make decisions without advice. That picture will rapidly change as a generation comes forward for whom defined contributions have essentially been the framework within which they have provided for most of their pension. We are moving into a situation where advice will become more significant, so this problem needs resolution. I ask that any measure the Government take recognises that this is not a front-loaded problem but a back-loaded problem, so they need to be sure that they are constantly expanding the relevant resources.
Baroness Drake
My Lords, I shall speak to paragraph (f)(i) and (ii) in the amendment which refer to the secondary annuity market, and I draw the attention of the Committee to my registered interests, in particular my membership of the board of the Pensions Advisory Service, which is a delivery body for the current Pension Wise.
In the summer Budget Statement, the Chancellor confirmed that he wishes existing annuity owners to have the freedom to sell their annuity income but announced that plans for a secondary annuities market would be delayed until 2017 to ensure that there is an in-depth package to support consumers. The Pensions Minister, the noble Baroness, Lady Altmann, confirmed that the delay was to ensure consumer protection adding:
“We can’t launch without safeguards”.
It is important, as paragraph f(i) in the amendment provides, first to identify very clearly the risks in this market and the potential advantages and disadvantages to the consumer of converting an income for life into a cash sum before agreeing the regulations with regard to guidance to be provided to individuals considering trading their annuities. If the infrastructure of such a secondary annuity market were to be put in place, it is not yet clear who would be the buyers of the annuities. There are still lots of unknowns about how that market would operate. Until we understand more about how that secondary market will operate and what regulatory restrictions will be imposed, it will be difficult to assess whether customers are able to get a good deal. If an individual got a poor deal in the first place, selling the annuity on would not necessarily reverse that; indeed, it could make it worse. If, as the Chancellor argues, the pensioner freedom reforms were needed in part because the annuity market was not working in the best interests of all consumers for the simpler proposition of selling someone an annuity, why would it be expected that the reverse secondary market, where someone would resell an existing annuity, would work any better?
Some people will certainly be tempted to cash in their annuity for what looks like a large sum but their annuity may be bought at a heavily discounted price. Selling their guaranteed income could prove expensive because of the cost of individually underwriting each transaction. There will be costs to trading, complex pricing systems and consumer vulnerability to poor behaviour by some firms. So many pensioners may not be better off as a result, and it may be difficult to assess whether the lump sum that they have been offered is a fair swap for what they would be giving up. Actually, though, once they have given that up, the decision is irreversible.
The Bill refers to protecting the interests of those who have an interest in a particular annuity, and that certainly needs to be considered. What is the situation in a joint life annuity? What is the definition of those who have an interest? How will their interest be protected? What if a person is not named on a joint life annuity contract? These may seem irritating points of detail, but they will be matters of significant substance for some people who may be the beneficiaries of an income stream from an annuity.
The Government have also advised, as my noble friend Lord McKenzie said, that they want to consider how to explain the interaction between annuity income, capital and deprivation laws in the welfare, social care and council tax reduction system—something that we rather tripped over when implementing pension freedoms. In making that clear to people who are considering selling their annuity, the guidance would need to explain clearly the implications of that interaction.
In the secondary annuity market, the appropriate form of consumer protection has to be an integral part of any proposals to allow people to resell annuities, and therefore a clear identification and consideration of the safeguards and guidance that are appropriate is required before regulations come into force. It is important to be assured that they are actually fit for purpose. Creating a secondary annuity market is certainly not a simple proposition, which presumably is why the Chancellor has delayed his plans until 2017, although I accept that the proposed expansion of pension guidance to those considering selling their annuity is to be welcomed. However, it will be important for Parliament to understand what guidance will be delivered, and how, to people looking to trade in a secondary annuity market, because such a market will come with risk and complexity and that has to be reflected in the quality and comprehensiveness of the guidance provided. This is not going to be a proposition without problems. Some people have suggested introducing a requirement to take independent advice but even that is not a simple proposition, not least if a requirement to take advice significantly reduces the value of the transaction to the seller.
Lastly, the complexity of a secondary annuity market means it is essential that the pension guidance that is provided is of a high quality, delivered by people with the necessary skills and expertise. This is not going to be a straightforward set of guidance. Reflecting on experience to date, it is very important that those who bear responsibility for signposting to the guidance those who want to trade in the annuity market are not organisations with conflicts of interest in whether that guidance is followed. Sometimes, being better informed and better guided does not make people such good customers. Given that this is even more complex than the pension freedoms market, it is really important to get this proposition right.
Lord Bridges of Headley
My Lords, once again, I thank noble Lords for their very useful and constructive comments and speeches. I thank the noble Lord, Lord McKenzie, in particular.
As your Lordships know, the Government want to ensure that those who will be able to sell their annuities on the secondary market have access to high-quality information and guidance that enables them to make informed choices. That was endorsed by many responses to the recent consultation. We want to build on the success of the existing Pension Wise service, for which the satisfaction levels remain high. The Government are committed to using the lessons learned from the implementation of existing freedoms and the Pension Wise service to help consumers in both this market and the new secondary market for annuities.
I draw your Lordships’ attention to the work that the Government are already doing—in both what is happening now and what is planned—through the prism of the amendment that the noble Lord, Lord McKenzie, has brought before the Committee. First, the amendment would commit the Government to undertake and publish a review of the new pension freedoms and pensions guidance. On this point, the Government have already set up a working group of representatives from industry, regulators and government to review the pension freedoms. This group will collect and analyse information on the choices that people are making when accessing the new pension freedoms and related guidance and advice. It will also identify key information gaps and seek to address them.
In addition, early information from HMRC and the regulators has been published, and key data from the Pension Wise service will soon be available on the Government’s performance platform. Pension Wise is also in the early stages of procuring external research, which will cover the extent to which the pensions guidance has enabled customers to make informed and confident choices about their pension arrangements.
Secondly, the amendment would commit the Government to tracking consumer outcomes from pensions guidance. The Pension Wise research that I have just mentioned will aim to do just that. It will help the Government to understand what customers do following their Pension Wise appointment.
I am conscious that the noble Lord asked me some very specific questions about uptake. If he does not mind, I would like to write to him once I have the appropriate information on those points.
Thirdly, the amendment would require the Government to review pension providers’ reporting requirements. In line with its remit to protect consumers and ensure that markets function in consumers’ interests, the Financial Conduct Authority has specifically committed to monitor developments in the retirement income market and to take action where the market is not operating as intended. The first of these mandatory data requests was sent to firms in September. It includes information on both the stock and the flow of pensions savings held by firms, as well as on sales of retirement income products by providers and cash withdrawals.
The amendment also calls for safeguards against pension scams to be strengthened. A priority of this Government is to protect people from scams. A number of cross-cutting initiatives are already in place, but we will continue to look at ways to strengthen messages for consumers and to arm them with the information they need to protect themselves against scams. For example, the Government are already co-ordinating action to raise awareness of, and tackle, scams through Project Bloom, a National Crime Agency-led task force. It includes the regulators, anti-fraud groups, such as Action Fraud, and police forces. In addition, both the Financial Conduct Authority and the Pensions Regulator have their own pension scam awareness campaigns.
Finally, the Government have put a number of protections in place through the directly provided pensions guidance service, Pension Wise. Pension Wise alerts customers to the risks of scams in guidance sessions, and the website and output document contain warnings and guidance.