Financial Guidance and Claims Bill [Lords]

Jack Brereton Excerpts

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

[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.

[Jack Brereton (Stoke-on-Trent South) (Con)]

I am pleased to be called to speak in this debate, Madam Deputy Speaker, because the issues are of particular interest to me as a member of the Work and Pensions Committee. I want to reflect on some of the evidence the Committee has heard in its inquiry into pension freedoms and choice, as it relates to some of the changes proposed in the Bill.

While I am extremely supportive of the work the Government have done to increase the freedom of our constituents in respect of their pension savings, it has undoubtedly created new challenges that must be addressed. I am pleased that the Bill has been brought forward as an opportunity to address them. The first challenge is advice. It was apparent from our sessions on the British Steel pension fund that those who find themselves needing to switch often struggle to get the advice they need. There were mixed experiences, with some people receiving very good local advice and others receiving very bad advice or none at all.

[Mark Tami]

On the British Steel pension scheme, does the hon. Gentleman agree that the FCA has been very slow to react, when it was clear in certain locations that there were many problems with the way some people were advising people to get out of the scheme?

[Jack Brereton]

That issue certainly came up in our evidence. Those who saw our evidence sessions will know that there was quite a significant grilling of the FCA.

Those experiences show that some irrational decisions—often described as “emotional” decisions—were made in the moment. Sadly, those short-term decisions were not the best investment decisions for the longer term. Unfortunately, this vulnerability—the vulnerability of immediacy or a form of panic, one might say—allowed predatory vulture companies to take advantage of an emotionally charged situation, with people reinvesting their pension pots without the full, impartial advice that is needed. Those vultures exploited scheme holders, framing what they were doing as giving impartial advice, when it was nothing of the sort. Many people felt that they were not fully informed of the consequences of the complex investment decisions they were having to make.

The accessibility of free independent advice in such situations has, in some cases, been woefully limited. More generally, the often perplexing nature of pensions leaves many people making decisions about their investments that are not necessarily in their best interests. Evidence presented to the Select Committee by the Association of British Insurers from the FCA’s “Financial Advice Market Review: Baseline report” suggests that not even one in 10 UK adults—just 6%—had received regulated financial advice. Worryingly, 25% of people who needed advice about their finances did not access it.

There are a number of reasons why our constituents are not accessing the advice they need, but what has been demonstrated is that not enough people are currently accessing the free independent advice that is available. The Association of British Insurers suggested that although 44% of people who are approaching retirement had access to some sort of advice, only 10% used the Pensions Advisory Service and only 7% used Pension Wise. The lack of clear advice combined with confusion about who to trust for independent advice has made it too challenging for those making investment decisions. Not enough people are getting the advice that they need to make properly informed judgments.

Secondly, we also found that very limited numbers of people are making the active decision to shop around and switch providers. Often, the tendency of those changing schemes is to stick to the same provider, so switching—active consumerism—is another challenge. There are, of course, a number of reasons why people might find it difficult to switch providers, not least the lack of good information and advice about the choices available, as I just related. It is also a major barrier to consumer activity, so I am pleased that part of the Bill proposes to create a single guidance body. That will make it much clearer for our constituents to see where they can turn for the right advice to make informed decisions and manage their finances for the future.

[Alex Burghart (Brentwood and Ongar) (Con)]

My hon. Friend is giving an important speech. Some of the evidence that we received on the Work and Pensions Committee was from Citizens Advice, which suggested that 97% of the pension scams that had taken place in one year originated from unsolicited calls. Does he think that the measures that the Government are bringing forward in the Bill will go some way to combating that?

[Jack Brereton]

I thank my hon. Friend for that point; I agree that it is critical that we take action to stop cold calls, and I am about to come on to some of those points.

This change will also ensure that the advice that is available is joined-up and better suited to our constituents’ needs, ensuring that decisions are not made in isolation, but with consideration to the wider implications of investment decisions on an individual’s overall finances. Measures in the Bill will also ensure that people receive the appropriate advice as a matter of course and that they should opt out if they do not wish to receive such advice. I also hope that the commitment made by the Government and the industry to develop a pensions dashboard will be delivered, making it easier for our constituents to have access to the information that they need about their pension savings to make suitable decisions.

Thirdly, the Committee heard about the increasing number of pension scams that are being reported, with more people being actively deceived into making investments that are not in their best interests. It was suggested that many rogue companies are using cold calling to target people and to get them to invest without full thought of whether it is the right and best decision for them. I am sure that many right hon. and hon. Members have, like me, been contacted by constituents who have been continually badgered by cold calling. It is a real issue in Stoke-on-Trent South and I am sure that it is a challenge in other areas, too. Many of the people targeted by cold calling are elderly or vulnerable and are taken advantage of by those seeking to cheat our constituents out of their hard-earned life savings.

[Michelle Donelan (Chippenham) (Con)]

Does my hon. Friend agree that although the pension freedoms that were introduced in 2015 were a fantastic opportunity for our constituents, they have led to an increase in rogue scammers and cold calling? That is why new clauses 9 and 4 are so important for the Bill.

[Jack Brereton]

I absolutely agree. That is why it is so important that this legislation is passed and that the Government have proposed these amendments. I am pleased that the Government have put measures in the Bill to ban the use of unsolicited marketing on pensions and financial products and services. It is a significant step towards preventing future abuses.

Of course, this legislation can never stop all scams being attempted—we cannot legislate away those who have nothing but contempt for legislation—but it does send a clear message not just to those conducting this behaviour, but to those who are at risk of being conned. By raising awareness of the challenge of scams, the Government can make more people wary of them. This will mean that those who are targeted can have the confidence that whenever they are cold-called by people trying to offer this sort of advice about their pensions or information about their investments, the calls are not legitimate but in fact illegal, and they should put the phone down. The Government are taking a balanced approach, acting if necessary to target where cold calling is most prolific and most damaging, such as in the area of pensions and financial products and services.