Financial Guidance and Claims Bill [Lords]

Lord Mackinlay of Richborough Excerpts

2nd reading: House of Commons
Monday 22nd January 2018 Commons Chamber

[Craig Mackinlay (South Thanet) (Con)]

It is a true pleasure to follow my hon. Friend the Member for Walsall North (Eddie Hughes); I just have to shout that much louder to be as shiny as him.

On pensions, I want to continue along the lines set out by a couple of speakers, particularly my hon. Friend the Member for East Renfrewshire (Paul Masterton) and the hon. Member for North Ayrshire and Arran (Patricia Gibson). My background was similarly—I will not say dull, but to some it might appear so. I am still nominally in practice as a chartered accountant and chartered tax adviser, so I am most interested in the tax benefits of pensions as part of personal planning.

I also served on the Select Committee on Work and Pensions from July 2015 to May 2017, where I had the enormous pleasure of overlapping with the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) before she was promoted. I am delighted that she supports the Bill receiving a Second Reading this evening.

I very much welcome the new oversight body—the single financial guidance body—which my hon. Friend the Member for Gloucester (Richard Graham) said had such a snappy title, but I think that we know what it will be there for. Previously, the advice has always been out there, but I agree that it has been fragmented and not part of the inculcated knowledge of the public that help is out there and it is free. I hope that the Bill will help.

On pensions, there have been two arms. The first is the Pensions Advisory Service, whose main focus I see as advice on what pensions are and their benefits, plus online tools describing the saving needed to estimate future retirement income. It serves a useful educational function. The second is Pension Wise, which I am more interested in. It gives advice on what to do when approaching pensionable age, which is becoming ever more important.

All this represents a real issue—a welcome issue—for an increasing number of people across the country as auto-enrolment plays more and more of a role. The Government website suggests that 10 million employees will be enrolled across close to 300,000 employers by 2020. I see that as one of the real success stories of this Government and it is supported across the Chamber by all parties. That represents a savings rate in the future of up to £17 billion per year, so we could be looking at many hundreds of billions of pounds likely to be saved over the decades to come.

I was particularly pleased to serve on the Committee that considered the Pension Schemes Act 2017, which laid the framework, at the right time, for master trusts. Beforehand, there was a weak statutory framework—just approval from Her Majesty’s Revenue and Customs for many schemes that I think had some dubious background. That has now gone, which is welcome.

What interests me about Pension Wise is what people will do with what is potentially their primary asset in life, their pension pot, as they approach older age. The average pension pot is £50,000—slightly more for men and less for women. There is an historical background to that, which I am sure will be put right as time goes by. The time of defined-benefit schemes is very much behind us, for obvious reasons—unknown liabilities for companies.

The pension freedoms of April 2015, however, were one of the best kept secrets of the 2014 Budget and they came as a surprise to me—I certainly did not see them coming. The freedom to take lump sums of 25% has been with us for a while, but people then gained complete flexibility over what to do with their defined-contribution pensions. They could also get rid of the traditional annuity purchase, or indeed could do nothing at all if that suited them.

With interest rates low, it has to be recognised that, although they are still right for some, the time of traditional annuities is perhaps over. With freedom, though, come dangers, including from scams. In this data age, it is not difficult to find out when anybody is approached the age of 55, and with that comes the potential danger that people will be preyed on by scammers.

This afternoon, I searched on Google for “pension advisory service”. I was disappointed that the official Government Pensions Advisory Service was only the fifth result. Ahead of it came four other services that were perhaps good, perhaps bad, or perhaps somewhat indifferent. I am pleased that Pension Wise is found favourable by 88% of those who have used it, but, as the hon. Member for Oldham East and Saddleworth said, few have used it—perhaps no more than 10% of those planning to retire. That does not mean that people are not seeking and accessing advice. Those with larger pots will undoubtedly go to their independent financial advisers to get proper independent advice on their options and what might be best for them.

I wish to put on record that, during my time on the Work and Pensions Committee, I raised the limitations and bureaucracy that the FCA requirements impose on IFAs and suggested lighter-touch regulations, so that IFAs who deal with smaller pension pots could advise on a “no liability to the adviser” basis. That way, those with smaller pots could at least get good professional advice, which must be infinitely better than none.

Clause 4, on the regulation of cold calling, is hugely welcome. Many Members have mentioned their experiences with PPI, banking scams, claims for flight delays—the list goes on and on. Because of that, there is a serious problem with databases, so the Information Commissioner needs to be rather more robust on that.

I hope that the Bill will mean that more people will become aware of their options, seek genuine advice and get wise to the scammers. Over the past few years, the Government have laid good foundations for pensions, as people are making greater provision for themselves. The Bill is welcome, coming at the right time to strengthen the available financial guidance framework, and I have no hesitation in supporting it.

Financial Guidance and Claims Bill [ Lords ] (First sitting)

Lord Mackinlay of Richborough Excerpts

Committee Debate: 1st sitting: House of Commons
Thursday 1st February 2018 Public Bill Committees

I take entirely the legitimate point about the grey area that Citizens Advice and others see on a regular basis—we all see it, too, when a gentleman comes into a surgery with a sheaf of papers, plonks them on our desk and says, “Please solve that”—but I do not believe it is appropriate for the Government to shape the body in that way at this moment. I will discuss the issue further with the Money Advice Service, but for present purposes, I oppose the amendment.

[Craig Mackinlay (South Thanet) (Con)]

On the question of what is a personal debt and what is a self-employment or business-type debt, if a self-employed person who is a sole trader—that is, unincorporated—takes on a loan for a van or something else, that by its very nature becomes a personal debt. That is the nature of being a sole trader. Complications may arise where that person, who to all other intents is self-employed, trades as a micro limited company. If, because of difficulties accessing credit through the limited company, that person decided to take a personal loan and then provide it as a director’s loan account to his or her own limited company, what status would that loan have? I imagine in law—

[The Chair]

Order. I remind the hon. Gentleman that interventions should be brief and to the point. I am happy to call him if he wants to make a speech, but he must keep his interventions a good deal shorter than that.

[Craig Mackinlay]

Thank you for that advice, Mr Stringer. This is of course a complicated area, which requires a little extra explanation. In that instance, the bank or credit provider would recognise that as a personal loan. I wonder whether that would be covered by the advice that may be available.

[Guy Opperman]

I recognise my hon. Friend’s expertise in such matters, and I thank him for his intervention. Support for self-employed people is covered by the Bill, because the self-employed are members of the public, in the way he outlined. Any personal business debt of a self-employed person is covered in respect of them being an individual member of the public.

I take my hon. Friend’s point about loans. I am delighted to say that I am not able to answer it right now, but I will definitely get back to him. In seriousness, we need to consider that point and work out whether there is any way of changing it and taking on board the views of the organisations that have practised in this area for some considerable time. I will certainly write to him with a specific answer and circulate that answer to all Committee members.

Financial Guidance and Claims Bill [Lords]

Lord Mackinlay of Richborough Excerpts

3rd reading: House of Commons & Report: 3rd sitting: House of Commons
Tuesday 24th April 2018 Commons Chamber

[Neil Gray]

I rise to speak to amendments 39 and 40, which are in my name. I want to say at the outset that while Scottish National party Members have felt the need to bring back some elements from Committee, we do on the whole welcome and support the Bill. We just want to see some improvements, which we hope will help to protect consumers and those accessing financial products. It is a shame that on the third attempt to consider the Bill we may still not get time to consider the second group of amendments, and in particular those tabled by the right hon. Member for Birkenhead (Frank Field), which we are keen to consider. However, I will proceed as quickly as possible so that we might get to the second group in good time.

First, amendment 39 would require that specially trained advisers and guidance are made available to people in vulnerable circumstances and would provide an indicative list of what “vulnerable circumstances” should include. It is positive that the Government decided to amend the Bill in the House of Lords to include a reference to the needs of vulnerable people within the functions of the new single financial guidance body. However, we feel that the Government should go further.

The amended version of the clause remains a little weak with regard to the inclusion of vulnerable people. Our amendment would make things more explicit and strengthen that objective by providing more detail as to who may fall into this remit, using the term “people in vulnerable circumstances”, which we think is more appropriate. The circumstances illustrated in our amendment can have a significant impact on people’s finances and long-term savings plans.

People in difficult financial circumstances may be more likely to use new pension freedoms, at a cost to their long-term pensions saving. Attractive as the pension freedoms may sound, it is clear that the Government have not put in place adequate safeguards for older people who are opting to free up funds, to ensure they will not end up in a desperate financial situation later. Those with less money are more vulnerable to economic shocks in their personal circumstances, as well as being potentially more vulnerable to scammers who give misleading or false advice for a fee, as we heard from the shadow Minister, the hon. Member for Birmingham, Erdington (Jack Dromey).

Being a carer or disabled can incur extra lifestyle costs. We want to ensure that the new body is as accessible as possible for all people, regardless of their circumstances. Specially trained advisers and resources must make up part of the new body, so that people can have confidence in its ability to support people in vulnerable circumstances.

The Minister said in Committee that our amendment was too prescriptive, but that does not really stand up. There is plenty in the Bill that is prescriptive and detailed. The new financial guidance body will be looking to the content of the Bill to understand what its objective and remit are. We are simply ensuring that the new body is absolutely clear that catering for those who find themselves in vulnerable circumstances should be a significant part of its remit. The wording of clause 2 makes that sound like an afterthought. That is an important discussion to be had alongside the duty of care, which I will come to later.

Amendment 40 would require the new body to ensure that consumers are made aware of the differences between information, guidance and advice, so that they can specify what type of services they require from it. In Committee, my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) tabled an amendment that would require the new financial guidance body to define the meaning of those services. The Minister said that that would potentially duplicate available definitions set out in regulations, but he also seemed to think that we asked for a definition because it would be useful for the body itself. That was not our purpose. Our purpose was to ensure that consumers themselves understand what services they have access to. We are tabling this amendment with tweaked wording to make it clear that we are asking that the new financial guidance body communicates clearly what services it provides people with and what they can access.

Guidance, information and advice are very different things. People expecting advice on what route to take may be disappointed to receive various information only. Likewise, there may be issues around exactly what the body is allowed to advise and to what extent it is able to advise on options available. Through this amendment, we are simply highlighting how important it is to ensure that users understand what they are getting.

Government new clauses 4 and 9 give the Secretary of State power to ban cold calling related to pensions and other consumer financial products. The Government have also tabled amendments to bring forward commencement of those clauses. The SNP and the Scottish Government have campaigned hard on cold calling, so we are pleased to see those provisions in the Bill. It is a positive step that the Government have tabled amendments 45 and 46, which will speed up the process for putting in place the necessary regulations for banning cold calling. It is clear that consumers want action now.

On the Government’s amendments, there is a concern that the Government are treating claims management companies’ cold calling and pensions or financial products cold calling differently. In Committee, the Government introduced clause 34, banning cold calling for CMCs unless the consumer has given their consent. With the two amendments on pensions and financial advice cold calling, the Secretary of State is giving herself a get-out clause, to shirk responsibility for taking action. Cold calling is cold calling. Consumers simply do not want to be bothered by nuisance calls, as we have already heard from the hon. Member for Stirling (Stephen Kerr) and my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson). Creating a complex framework around which providers are allowed to make these calls, on what types of product, under what circumstances, is over-complicating a very simple issue. People just want it to stop.

Will the Secretary of State, or the Minister who responds to the debate, explain why they think the need to ban CMCs’ cold calling is greater than the need to ban pensions or financial products cold calling? Tough action needs to be taken on this; otherwise, we risk creating loopholes that will allow cold callers to continue to operate.

I want to mention the duty of care amendment: new clause 6, tabled by Members on the Labour Front Bench. My colleagues spoke about it in detail on Second Reading, particularly my hon. Friend the Member for Inverclyde (Ronnie Cowan), who sadly cannot be here today to speak on it again. Applying a duty of care to CMCs would be a positive step in ensuring that such companies remain accountable for their actions if they cause harm to consumers.

Ideally, all financial institutions should have the best interests of vulnerable consumers at the heart of their conduct, but we all know that that is not always the case, and the fact that the Financial Conduct Authority has agreed to bring forward a discussion paper on duty of care is really positive. Macmillan has campaigned tirelessly on this issue, and I thank its staff for the briefings that we received ahead of these debates. We hope that the Secretary of State and Ministers will give serious thought to this idea, as well as to our amendment on vulnerable persons, which ensures that the single financial guidance body expressly allocates resources for specialist support for people in vulnerable circumstances.

The SNP has long called for and campaigned for action on cold calling. Indeed, it was the subject of a ten-minute rule Bill proposed by my hon. Friend the Member for North Ayrshire and Arran. We welcome the fact that there is to be progress in this regard, but this area of the Bill is becoming a bit of a guddle. That is why we would obviously prefer to see powers over this area devolved to the Scottish Parliament, so that we could take more robust action, such as was suggested by the Scottish Government’s action plan on nuisance calls. Indeed, the Scottish Government Cabinet Secretary for the Economy, Jobs and Fair Work, Keith Brown, has written to the UK Government many times, asking for them to take a tougher line on nuisance calls.

Nuisance callers blight our society and cause significant distress, particularly to the elderly and vulnerable people. Such harassment is unacceptable and must be stopped. Hopefully, in the time we have available, we will take the opportunity to make some necessary improvements to the Bill.

[Craig Mackinlay (South Thanet) (Con)]

I shall restrict my observations to pensions cold calling and unsolicited marketing thereon.

Last year, I was pleased to play a part in the scrutiny of the Pension Schemes Act 2017. It was timely legislation to ensure that pension savers were adequately protected as they saved, during the working period of their life, by the regulation of master trusts, which had previously been rather worryingly lightly regulated—insufficiently so, when for many, their pension will be their primary asset in life.

I am pleased that this Bill will bring together the Pensions Advisory Service and Pension Wise into a single financial guidance body, under the control of the FCA. I am further pleased to support the Government’s amendments, especially new clauses 4 and 9. It is right that the new clauses in the name of the Government allow the making of regulations to prevent cold calling and the sending of unsolicited direct marketing materials relating to pension savers. That is further strengthened in Government amendment 10.

At the core of what we shall hear in the House this afternoon is whether “may” should become “must”. That is at the core of an amendment tabled by the hon. Member for Eastbourne (Stephen Lloyd) and Willingdon —amendment (a) to Government new clause 9. There is a case for healthy competition. That usually results in lower charges, and that can be—can be—good for consumers. It would be a draconian measure to ban advertising, to entirely ban direct marketing, because that could be banning choice. It is often good advice for pension savers who have accumulated a pension pot to move to a provider who may provide a better pension, perhaps at a lower cost, with lower charges. That decision now rests with pension providers. If they do not act sensibly, that “may” in Government new clause 9 will, in certain circumstances, become a “will.” That is an important power.

--- Later in debate ---

[Alex Cunningham]

The hon. Gentleman talks about a total pot in the trillions, but for the vast majority of people, particularly part-time workers, their pot, although better than nothing, will be relatively small. Does he agree that several groups are still excluded from auto-enrolment, and that the Government need to do something to bring them in?

[Craig Mackinlay]

I thank the hon. Gentleman for that contribution. There is a wide debate—I have taken part in it—about whether the self-employed are playing a full role in getting pension provision. I think that there are measures that could be taken, perhaps using the national insurance system, to provide them with greater certainty. The primary purpose of the Bill is to ensure greater financial understanding among the general population. They need to know where to turn at the right time. I have confidence that the single financial guidance body will achieve just that.

I close with a suggestion that is probably best directed to the Financial Secretary to the Treasury. It has some relevance to the honest proposals put forward by the hon. Member for Birmingham, Erdington (Jack Dromey) on mid-life reviews. Employees, as they work through their working lives, obviously have an employer. Employers are very well aware—possibly more than anybody else—of when an employee is approaching retirement. I am sure that most responsible employers will be keen to help. I recommend that the Secretary of State discuss amendments to the Income Tax (Earnings and Pensions) Act 2003 to allow employers to pay for advice, outside of any benefit-in-kind tax charge, so that advice can be provided to employees and paid for tax-free. That would extend a benefit-in-kind exemption similar to what we see when advice relating to settlement agreements, or payment for CV writing and recruitment advice upon redundancy, is duly paid for by an employer tax-free.

In my view, the Bill is fit for purpose and I very much support it.

[Frank Field (Birkenhead) (Lab)]

I wish to speak to amendments (b), (c) and (d) to new clause 9, which stand in my name. As the House might know, they arise from the work that the Work and Pensions Committee did on miners’ pensions. For most people, decisions about moving pension capital are made towards the end of their lives, but miners had to decide where they should safely put their pension savings as a result of the change in the ownership of their industry.

Given the warning from the hon. Member for Airdrie and Shotts (Neil Gray) that we may not get on to the second set of amendments, I should mention that I have some amendments in that group to raise with the pensions Minister. Perhaps I may address two points to the Economic Secretary, but first I thank both Ministers for the way they have engaged with the Work and Pensions Committee for our report and in our meetings. We are immensely grateful to them. On some issues, I have joined my Front-Bench spokesmen because we have been pushing the same measures and interests.

I wish to raise two points that I hope the Economic Secretary will say will be added to the Bill. First, not only should cold calling become unlawful, but any information that arises from it should not be used for commercial purposes—that is, in respect of pension savings. Secondly, would it not be sensible to use the opportunity presented by this Bill to add the Financial Conduct Authority to the list of bodies in the Government’s policing arm to counter activities that unlawfully undermine people’s pension savings by trying to persuade them to move their assets in one way or another?

In the interests of getting on to the second set of amendments, I conclude my comments.