Pension Schemes Bill

Gregory Campbell Excerpts

Tuesday 25th November 2014 Commons Chamber

[Steve Webb]

I do not agree that it is either unusual or unsatisfactory. It is clearly important that the House accepts and is familiarised with the basic principles of approach and that we set out what will be in the regulations and what we are going to try to achieve through them, but often the regulations will be subject to separate consultation exercises. There is an awful lot of scrutiny; I can assure the right hon. Gentleman that these things are never knowingly unscrutinised.

The right hon. Gentleman asked about the timetable. Let us put it this way: our lawyers are not taking Christmas holidays. We are working as fast as we can.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The Minister talks about the lawyers not taking Christmas holidays. We are almost in December, so how certain can those people across the United Kingdom who are preparing for retirement in April, May or June of next year be in the weeks that follow the autumn statement and the non-holiday taking of the lawyers that they will have clarity, and that it will come before April?

[Steve Webb]

I think that the grouping of the amendments means that we are muddying together two completely separate things. The guidance guarantee and the budget freedoms will be in place on 6 April and the legislative framework will be in place—period.

Also in this group are regulations about defined ambition pensions, risk sharing and so on and they must be in place by April 2016. I think perhaps our conversation has been slightly at cross purposes. What has to be in place by April 2015 will be. There has been lots of consultation and a lot of it is not about regulation but about FCA rules. The FCA has already been consulting extensively and will publish more shortly. Separately, we will have many regulations to produce on defined ambition and so on. That will take longer and there will be further consultations on all that. I do not think there is anything particularly unprecedented about any of this.

Let me move on, finally, to amendment 73, tabled by my hon. Friend the Member for Reigate and my right hon. Friend the Member for Sutton and Cheam (Paul Burstow). They obviously raise an important point about the context of the guidance guarantee and the fact that DC pension pots these days, although hopefully not in the distant future, might be only a small part of people’s overall retirement wealth. I would not dispute for a moment the premise that decisions have to be made in context and that, as far as possible, we want well-informed consumers making the best decisions in their own interests.

I do not want to over-promise what this relatively limited conversation can cover or achieve. It clearly is not regulated financial advice. It is not a fact check or a fact finder. It will not lead people to say at the end, “It’s equity release for me.” I am not saying that that is what my right hon. and hon. Friends are saying, but we must be absolutely clear that we will not stretch this thing to achieve other goals, laudable as they might be, when they are not what it is being set up to do. For example, people who do not have DC pension pots might also want to think about equity release, but they will not access the guidance guarantee because they will not have a pot. If we think people should be accessing equity release more often, we need policies to deliver that. Shoehorning them into the guidance guarantee inappropriately will hit some people and not others. We must ensure that the guidance conversation delivers what it is meant to do and if we try to cram too much into it, we risk undermining that. That is one of the things we are testing through the surveying we are doing and through behavioural testing. If we bombard people with lots of products, issues and options, one of the worries is that they will just buy an annuity with their own provider and we will almost go back to where we started. So we are trying to strike that balance, and I wanted to put the caveat in first.

Let me now try to be a little more positive. My hon. Friend the Member for Reigate asked for more detail on the guidance guarantee. Our colleagues at the Treasury have committed to providing further information in an update on progress on implementation that will be published before the end of the year on 31 December. That deals with the guidance guarantee.

To be clear, I would welcome the opportunity provided by my hon. Friends to clarify that the objective of the guidance is to ensure that consumers are empowered to make effective decisions about their retirement income options. While the focal point for the guidance session will be an individual’s DC pot, the guidance will cover the range of issues that affect an individual’s financial decision-making. That includes their wider financial circumstances—debts, others assets including their home and their personal motivations and goals, including attitudes to risk, desire for an income and so forth.

This is all provided for in the FCA’s proposed standards, which will be published in final form very shortly. They require that the guidance service encourages people to provide relevant information about their financial and personal circumstances and their objectives to ensure that they can get maximum value from their guidance. The financial information might include pension pots or benefits, other sources of wealth or income, including where the individual has a spouse or partner, tax status and debt position.

Our colleagues at the Treasury, along with the delivery partners, are working up the detail of the guidance in line with FCA standards, including scope and what it should cover. I hope my right hon. and hon. Friends will accept that it is not appropriate to hardwire those things directly into the Bill. My hon. Friend the Member for Reigate said during the course of the Taxation of Pensions Bill:

“It will have to be capable of being improved in the light of experience”.—[Official Report, 29 October 2014; Vol. 587, c. 340.]

I agree with him on that point. Stipulating these things in legislation does not allow us to adapt the guidance in this way. We want to give people context, but not try to hardwire things into primary legislation when we are trying to evolve the best possible guidance offer.

I should stress, as I have said, that we are not talking about regulated financial advice. Guidance will help consumers consider their assets such as housing, wealth, savings and investment in the context of their retirement decision, but it is not a fully holistic financial planning service, such as one might get from multiple sessions with a professional regulated financial adviser. We are clear that the guidance will not replicate the services of professional financial advice, but will complement it. We will ensure that the consumers know both the value of seeking financial advice and where to go next. Referring again to Second Reading of the Taxation of Pensions Bill, my hon. Friend made the point:

“If the guidance can push people in that direction, to properly regulated and properly informed independent financial advisers, we will have properly informed consumers making proper choices.”—[Official Report, 29 October 2014; Vol. 587, c. 341.]

I am happy to reassure him that the guidance will do just that.

My right hon. Friend the Member for Sutton and Cheam asked about social care. I can assure him that our Treasury colleagues are working on how to hand individuals on to the right place after using guidance. On social care, we are in discussions with a range of organisations, including Age UK, while we are discussing with the Department of Health how to link in to the statutory duty on local authorities, in which I believe my right hon. Friend might have had some involvement, to refer people to local care and advice services. I can assure both my hon. Friend and my right hon. Friend that we take these issues seriously. This is not advice; it is guidance, but it is guidance in a financial context. We want to equip consumers to make the best choices they can. I hope the House will leave us with flexibilities to go on evolving that, while recognising that greater certainty is needed as soon as possible.