Savings (Government Contributions) Bill (Fifth sitting)

Kelvin Hopkins Excerpts

Tuesday 1st November 2016 Public Bill Committees

[Jane Ellison]

That takes us back to territory we have covered. I do not doubt the hon. Gentleman’s sincerity in putting forward his concerns, which he has expressed during debates on other amendments, but as I say, the Government are completely committed to auto-enrolment. We want to have a robust, functioning pension system, but there is also a need for complementary products.

[Kelvin Hopkins (Luton North) (Lab)]

I am strongly persuaded by the hon. Member for Ross, Skye and Lochaber. Indeed, I wish I had thought of his amendment before he did, but there we are. Is the Minister not concerned by all the issues raised in the evidence sessions last week about possible complexities and indecision by people who do not know whether to invest? A commission would clarify things for everyone, including us and the Government.

[Jane Ellison]

I rather take issue with that point. Commissions and reviews by nature tend to look at the broad sweep of policy and how policies interact; they could never offer specific advice for each individual. That is why we have the various advisory services—the Money Advice Service and its successor organisation—and why the Financial Conduct Authority will consider and offer advice on each individual product. Even making the slightly optimistic assumption that every member of the population would read such a commission’s outpourings, it would be unlikely to offer individual advice. I accept the general point that such things can often offer policy guidance in the long term, but that does not alter the fact that we want individuals to take advantage of the advice services that are available and to be guided by what the FCA says about individual products.

Most of the people who gave evidence to the Committee stressed that they saw the lifetime ISA as complementary to pensions. Help to Save is in much more of a standalone category. In all cases, everyone emphasised the Government’s commitment to auto-enrolment. I bring the Committee back to the figures that I gave last week: the rate of opt-out from auto-enrolment is around 9%, which is not just lower than originally expected, but lower than the amended figure.

[Kelvin Hopkins]

I thank the Minister for her answer, but does she not accept that an objective and disinterested arm’s length body such as a commission would be preferable to either private financial advice, which may involve vested interests, or Government advice? I can see strong arguments for what the hon. Member for Ross, Skye and Lochaber says.

[Jane Ellison]

I give way to my hon. Friend the Member for Macclesfield.

--- Later in debate ---

[Jane Ellison]

Let me try to wind this debate up on a note of consensus. Where we can achieve consensus on important long-term reforms—auto-enrolment is a very good example—it is wise to do so, but we are debating apples and pears here. The debate about what is the right way to go in the pensions and savings landscape over the next several decades is separate from, albeit related to, the Bill and the two products that we want to bring in to augment the available landscape of products for individuals in this country.

[Kelvin Hopkins]

I want to reinforce the point that the hon. Member for Ross, Skye and Lochaber made. The Turner commission was extremely valuable, because there was serious resistance from the Treasury. It was only because the Turner commission put its case so well and measured this so carefully that we got some positive change. Commissions can be extremely useful. As the Minister said, some of these issues are contentious.

[Jane Ellison]

I do not disagree that commissions can be useful; of course they can. A very good example has been cited. Neither am I arguing that we should not review things and seek, where we can with long-term things such as this, to get a degree of cross-party consensus. I referred to the review we have committed to on automatic enrolment. I am simply making the point that that debate is not relevant to the Bill. Delaying Help to Save for a year would mean people on low incomes missing out on the chance to save up to £600 in a Help to Save account and, of course, to benefit from a Government bonus.

As I say, we are debating two slightly separate issues. I think we all agree that these sorts of commissions and profound examinations of big issues often give rise to important things that achieve a degree of consensus, enabling us to move forward. However, that is not a relevant reason to delay the Bill, and that is why I reject the amendment. We heard in the evidence from StepChange that having £1,000 of rainy-day savings reduces the chance of falling into problem debt by 44%. Help to Save is a product that we have to get on with and not delay further.

I stress that we take an open approach to making pensions and savings policy and that we have approached these policies in an open and transparent way, as I have said. We will consult on the new financial guidance body later this year and, during the course of that consultation, there might well be a relevant moment to come back to some of the wider issues such as how we help individuals to make the right decisions for them. I have mentioned the automatic enrolment review, which will take place next year.

Those are better vehicles through which to have the debate we have just had and to get across some of the points that have been made, not all of which we would necessarily contest. I reject the amendment simply because it is not particularly relevant to the Bill. There is no need to delay the introduction of these two important schemes to establish a further commission.

Question put, That the amendment be made.

--- Later in debate ---

[The Chair]

New clause 2, which has already been debated, is on a similar subject, and I therefore remind Members wishing to speak to new clause 4 that their remarks should cover new material, and not be a repetition of the debate we have already had.

[Kelvin Hopkins]

I rise in support of the new clause. I believe that most citizens would benefit from this kind of advice. As the hon. Member for Ross, Skye and Lochaber said, even experts in the field of economics and finance are sometimes puzzled and at a loss when it comes to deciding what to do regarding savings and investments. The new clause is eminently sensible and would be a strong addition to the Bill. I would have liked this kind of advice when making my own investments back in the 1960s and 1970s.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

The issue was summed up for me last week when we heard evidence and got into a rather esoteric discussion about “taxed, exempt, exempt” and “exempt, exempt, taxed”. That is just gobbledegook to the average person, including me. We absolutely need to translate that into language that normal people, with a normal level of financial literacy, can understand.

[Kelvin Hopkins]

I thank the hon. Lady for that useful intervention, with which I strongly agree. I hesitate to say this, because I said it before, but it has been calculated that 50% of the population are not functionally numerate—they do not understand percentages and that kind of thing—so advice of this kind is vital for the ordinary citizen. I hope that the Government see fit to accept the new clause, and that we can move on.

[Jane Ellison]

I will try to observe your stricture, Mr Wilson, and not go over ground that we have already covered.

The Government do not disagree with the intention that everyone should get good advice before they take out a pension, and I certainly would not argue with the fact that for many of us, however well-informed we might like to think ourselves, such things can be confusing. The reason I will ask that the clause be withdrawn is simply that the solution it presents is not correct. Also, there are things in place to steer people, which I will touch on.

It is worth reminding the Committee about the definition of advice and guidance. “Advice” is financial advice involved in the provision of a personal recommendation for a specific product. It takes into account the wider circumstances of the person to whom the advice is given, and must be suitable for them. The definition also mentions regulated products. That is at the heart of the matter. I give a commitment that the Government will ensure that clear and accessible information about the lifetime ISA and Help to Save is available, so that potential customers can make an informed choice about whether the accounts are right for them.

Our impact assessment, which was based on a costing certified by the independent Office for Budget Responsibility, shows that our costings do not assume that people will opt out of workplace pensions to save into a lifetime ISA. However, as I have outlined, it is ultimately the role of the independent Financial Conduct Authority, not the Government, to set the regulatory framework for providers that will offer the lifetime ISA, including setting out any suitability tests that should apply. The FCA will consult on its regulatory framework shortly. It will ensure that providers are transparent to customers about the product, and that the products are sold with suitable safeguards in place.

I recognise the importance of individuals making an informed choice about whether Help to Save is right for them. Some may well be the same people who stand to benefit enormously from auto-enrolment. I have stated our commitment to that a number of times. We know that the Help to Save target audience may have less experience of financial products than the population on average. That is why we have already committed to work with interested parties to ensure that the right support and information are available, so that eligible people can decide whether the account is right for them. That will involve information and support from Government and the account provider, but we are also keen to explore a role for local organisations that are well placed to support the target population, such as local charities, advice bodies, social housing providers and the Churches, many of which have very good outreach and advice provision for people suffering from financial exclusion.

While we want to ensure that people have the information that they need, we must ensure that opening an account is as straightforward as possible. Requiring the account provider to give financial advice to every applicant makes the account application process more complex and time-consuming, and risks discouraging eligible people from opening an account. Countless studies show that the more hurdles there are to opening an account online, the more people are likely to fall away. Getting the balance right is really important.