Financial Guidance and Claims Bill [Lords]

Debate between Jack Brereton and Alex Burghart

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

[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.