Finance Bill

Debate between James Duddridge and Gregg McClymont

Wednesday 2nd July 2014 Commons Chamber

[James Duddridge]

I find this issue rather exciting, although clearly the House does not, given how empty the Chamber is. The pension changes that the Government are bringing forward are absolutely essential and, I think, will transform the marketplace in the long term. However, I am concerned that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), having suffered the Finance Bill in Committee, seems to have spent the intervening time reading the Hansard reports of what we all said. Really, it is too much of a punishment to do that and then have to come back yesterday and today. Thankfully we will have Third Reading later this evening, if all goes well.

On new clause 13, my hon. Friend the Exchequer Secretary talked entirely about defined contribution schemes. When he winds up, perhaps he will update the House on what is happening with defined benefit schemes, or perhaps there are no transitional issues for defined benefit schemes in the new clause. I think it is entirely right to give people plenty of time to look at these issues, because a number of people were not expecting these changes and would not have predicted them, so they will need longer to consider their personal positions. As time goes on, I think that there will be less need for guidance and advice, whether provided by the state or privately, because people now going into defined contribution schemes will know what the options are likely to be when they come out. Indeed, five years from now it will be slightly more predictable. People should look at that years, rather than just a few months, before they retire. Of course, that is not possible immediately, given that these changes have only just come in.

[Gregg McClymont]

The hon. Gentleman will be aware that the other arm of the Government on this, the Pensions Minister, has developed a whole pensions policy based on the notion that inertia has to be harnessed for the public good, meaning that, as a rule, people are not aware of the complexities of pensions and there therefore needs to be a system in place so that those who do not exercise a choice still get a good outcome. Is the hon. Gentleman really that confident that we will very quickly reach a situation in which there will be informed consumers across the board who can make the kinds of investment decisions to which he is referring?

[James Duddridge]

I think that the default position will be that an annuity is purchased, rather than a lump sum being withdrawn. I think the hon. Gentleman is saying that that is the more cautious route, but I am concerned that it is not the right route for some people. Taking out a lump sum might make a lot more sense for them. However, it is an additional option. The guidance that the Government are offering is not perfect. In fact, perfect advice, if it is taken forward to a recommendation, is incredibly expensive.

[Gregg McClymont]

I thank the hon. Gentleman for that thoughtful response. I am not sure that the default position will be that someone is defaulted into an annuity. We need clarity on that as we discuss these clauses. I think that a choice will have to be exercised one way or another, but I might be wrong. Perhaps the Minister will provide clarity on that.

--- Later in debate ---

[James Duddridge]

The Minister, as ever, will provide clarity, and I will ensure that he has plenty of time to do so.

We need to look at these changes in the round and consider other changes being made, particularly the individual savings account legislation that is going through. In the longer term, I think that ISAs and pensions will be linked and that we will move towards the individual retirement accounts we see in America, but working more from the base of an ISA up to a pension, rather than a merging of the two or a dumbing down of pensions.

An earlier intervention referred to spouse-to-spouse transfers on ISAs, which I think are particularly relevant in relation to new clause 13 and defined contribution pensions, because some people will be taking larger sums of money out and investing them directly into an ISA with little awareness that it cannot then be transferred to their spouse. The earlier the Government look at making spouse-to-spouse transfers exempt for inheritance tax, the better, particularly during this early transition period. The Sunday Times and a number of other financial services campaigners are urging the Government to look at the issue of spouse-to-spouse transfer, but I have not heard it mentioned with regard to the release of lump sums and defined contribution lump sums. Through new clause 13 the Government are recognising that there are transitional issues, but the additional transitional issue relating to ISAs has not necessarily been covered.

I welcome the reduction from £20,000 to £12,000, which entrusts individuals to make decisions. Changes to trivial contributions are also very welcome, particularly as people move from employer to employer, building up large numbers of very small pots. It may not make financial sense to merge them, so it may be better to take them out of a pension tax wrapper and independently move them to an ISA.

On the issue of guidance, we should be open and honest that the Government cannot afford to provide full-blown advice and recommendation. It is very good of the Government to allocate a significant sum of money to pointing people in the right direction. If the average pot is £30,000, as we have heard, the thousands of pounds that full-blown advice and recommendation may cost would be totally disproportionate to the potential benefit.

It is good to get guidance, but I would exercise caution about what is best: face-to-face guidance is not always the best option. If I wanted to transfer money or enact a financial transaction, I would not want to sit down face to face with my bank manager. I would much prefer the tried and tested method of interacting with and getting advice and guidance through the internet, at least at an early stage. I would not want the Government spending all the money on face-to-face guidance. Guidance on the internet may well be better for an increasing number of people, including a mini fact find into which they put their basic information.

The change may be from face-to-face to face-to-faces. Financial services presentations can work face to face, but they can also work over the internet. Once people have completed an initial fact find or an overview of their financial position—they may want to use their lump sum to repay debt, for instance—they could be diverted to an individual webcast with the relevant financial guidance.

[Gregg McClymont]

I thank the hon. Gentleman, who is speaking from his experience of the sector, for giving way again. Would he care to comment on why the existing annuities market was not working? My understanding of the analysis is that the default position of individuals was simply to accept what they were offered and not to get involved in the type of process to which he refers. If that means that the annuities market was a failure because people were not getting value for money as a result of not shopping around, what confidence does he have that there will be an overnight revolution in people’s engagement with the type of guidance he suggests?

[James Duddridge]

The annuities market was not working effectively in a number of ways, but, in relation to the lump sum, it did not work for a lot of our constituents if they rationally expected a very low life expectancy. If they had been diagnosed with a particular illness, the question of what would happen to their money would cause them great stress. It is important, therefore, to enable them to release some of that pension money and put it into another instrument so that their family can share it or, indeed, so that they can enjoy it themselves in their final years. I understand there is a risk of people under-predicting their longevity, but the large number of people with a diagnosed illness would like to access that pot. That is a slightly extreme position, but it is at the other end of the scale.

Ford and Visteon UK Ltd

Debate between James Duddridge and Gregg McClymont

Thursday 12th December 2013 Commons Chamber

[Gregg McClymont]

We have to be careful, given the ongoing legal case, but the comments from both sides of the House on these issues have resonated with everyone in the House today, including with those in the Public Gallery. Both sides of the House are clear that Ford must engage with its responsibilities. The wider issue is that if companies have a responsibility, beyond the bottom line, to their employees and the countries in which they operate, the direction of travel for Ford in this case must be clear.

What more can the Government do to satisfy the demands of Ford Visteon pensioners? I would be delighted to hear the Minister outline what the changes to the PPF cap mean and talk about the wider issue of ensuring that such pension transfers do not end up being to the great detriment of employees.

[James Duddridge]

On what more the Government can do, in my speech I explained that—doing my bit in my small way—I would not be buying a Ford Capri Mk II. The Government have a bit more purchasing power than the Duddridge household. How does the hon. Gentleman feel about the Government reconsidering purchasing Ford vehicles until this matter is resolved?

[Gregg McClymont]

That is a question for the Minister, who is just about to respond to the debate.