Pension Schemes Bill [HL]

Lord Hutton of Furness Excerpts

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Monday 2nd March 2020 Grand Committee

[Lord Hutton of Furness (Lab)]

My Lords, I shall speak briefly to Amendment 68. I put my name to it and raised the issue at Second Reading in the Chamber. We have had a long debate this afternoon, and I think most of us are pretty clear that pension dashboard services are going to provide a significant service to pension scheme members. We might be able to track down £20 billion-worth of lost pension scheme assets, and we might be able to encourage more people to save for their retirement if it becomes clear to them through accessing a pensions dashboard that they may not be in possession of all the means they might wish to have in their retirement. However, we must not lose sight of one very important risk, which is that although I hope that pension dashboard services will bring significant advantages, they could also be the route through which potential harm is done to pension scheme members by bad or sharp commercial practice or whatever else. It is particularly important that we consider ensuring that a safety-first approach is adopted when it comes to the establishment of these new services.

I cannot think of anything more fundamental—this is what I think Amendment 68 is trying to flush out—or more important than to place on the shoulders of those responsible for running these schemes a duty to act in the best interest of pension scheme members. I am sure that through these regulations and other provisions a welter of regulation will bear down on to the shoulders of those services, but the idea is that they have a direct legal responsibility to pension scheme members to act in their interests when they are accessing data on the pensions dashboard. A very clear line of legal responsibility will go a very long way in establishing the right overall governance and attitude of mind that should be at work when these schemes come into operation. Those who are running pension schemes have similar fiduciary duties and therefore it is entirely appropriate. If this amendment is not accepted, there may be some other more effective approach. I hope the Government will give some consideration to how this further level of accountability and aid to the good governance of these new services is best advanced.

[Baroness Sherlock]

My Lords, the six amendments in this group in my name and that of my noble friend Lord McKenzie of Luton are probing amendments designed to get Ministers to reassure the Committee that there is a robust system of regulation and supervision for those involved in the dashboards. Rather than go through them one at a time, as there are overlapping amendments from other noble Lords, it might be easier if I simply ask the Minister to clarify some of the key aspects of the supervision and regulatory regimes which the Government have in mind.

I was delighted last week when the Minister indicated that the Government have acceded to the request from my noble friend Lady Drake and many others around the Committee:

“we shall be introducing a new regulated activity under the Financial Services and Markets Act 2000 to reflect the provision of dashboard services.”

Hurrah, say I. That is marvellous. The Minister continued with only very slightly less certainty:

“Clause 118 provides the power to set out detailed requirements ‘for qualifying pensions dashboards’. It is also likely that this will be linked to the new regulated activity outlined by the Financial Conduct Authority.”—[Official Report, 26/02/20; col. GC 183.]


I think we are being told that this means providing a dashboard service will be added to the regulated activity order. I am assuming that is what that means.

Those requirements in Clause 118 may include

“what … information is to be provided”

and

“how the ... dashboard service is to be … operated.”

They may also,

“require a dashboard service to comply with standards, specifications or technical requirements published … by ... the Secretary of State ... The Money and Pensions Service”

or another specified person. Crucially they may,

“require the provider of the pensions dashboard service to be a person approved … by … the Secretary of State … the Money and Pensions Service”

or another specified person. The last of those is crucial.

If running a dashboard service is to be an FCA-regulated activity, should that not mean that those running it have to be approved by the FCA—in which case, ought that not to be made clear? It could be another body, but the bodies named do not include the FCA. If the activity is on the ROA, does that mean that the FCA will then be able to use its full range of FiSMA powers of supervision and regulation on anyone providing dashboard services? Can the Minister further confirm that that would mean that complaints about anything to do with the dashboard could be made to the Financial Ombudsman Service?

This is the train I am trying to establish. It is great that the activities are regulated by the FCA. Will the people running it have to be FCA approved and therefore subject to the full range of FiSMA powers? It seems that that is where the real firepower is located. Alternatively, are the Government envisaging that a dashboard service might be run by an organisation that was not FCA approved, supervised or regulated? Would there be a real risk of consumer detriment if the FCA cannot use its full range of powers on anyone using a commercial dashboard?

Provision of information to a dashboard also needs to be subject to a scheme of regulation and compliance. Information will come from various sources. Will the provision of information from trust-based schemes to a dashboard be regulated by the TPR? What about the information provided from contract schemes? Will that come from via the FCA? Will it be directly under FCA supervision or by the fact that they regulate the firms providing the information? Who will oversee the provision of information from the state and make sure it is accurate? Where does the consumer go to complain about their data? At the moment, if a bank misuses your data, the ICO will deal with the bank, but the consumer will go to the Financial Ombudsman Service to deal with detriment. What will happen here?

My biggest concern is what will be done with data provided on dashboards and the potential for mis-selling. Amendment 68 would require that those providing dashboard services would have to act in the fiduciary interest of savers. My noble friend Lord Hutton just made a compelling case for that. Our argument is that this is a special situation where the state has mandated that consumers’ data should all be gathered together in one place. That is helpful, but it is a little like saying, “Rather than having them wandering freely across the hillside, all the lambs have been gathered into one pen”. In that case, you want to be pretty sure that there is a good lock on the gate and that anyone coming along pretending to be a shepherd can be spotted early and—“Stop. Enough of this analogy. Ed.” I think the point is made.

Because of this higher challenge, there should be a higher duty of care to the consumer. If an organisation running a dashboard service is regulated by the FCA, it will be subject to the “treating customers fairly” FCA standard, but this goes higher. It becomes even more important if it is possible that any of those people will not be subject to the full range of FCA supervision and regulation powers. There should be a duty of care to the consumer. We can see the benefit of gathering information/lambs in one place, but it of course makes the information/lambs much easier to access. Can the Minister give us some reassurance on those points?

[Earl Howe]

My Lords, the amendments in this group are designed to ensure that consumers are placed at the heart of dashboards and that the Financial Conduct Authority is given responsibility for certain aspects of that. I say straightaway that I wholeheartedly agree with this aim. What I cannot agree with is the way of achieving it proposed in the amendments.

The Government are persuaded that a strong regulatory regime is key to maintaining public confidence in dashboards. There are existing powers which we will use to introduce a new regulated activity for dashboard providers. We can do this by amending the regulated activities order set out in Section 22 of the Financial Services and Markets Act 2000. This will bring the provision of a qualifying dashboard service within the regulatory and supervisory the remit of the FCA. There is no need for the new dashboard-specific regulated activity to be in the Bill.

We are working with Her Majesty’s Treasury and the FCA to agree the nature and scope of the changes. Legislation amending the order will be brought forward in due course. I can also confirm that the Financial Services and Markets Act covers Northern Ireland, meaning that any new regulated activity would also extend to Northern Ireland. It is important to note that the new regulated activity will apply only to dashboard providers. Pension scheme trustees and operators are already within the regulatory remit of either the Pensions Regulator or the FCA. The requirement on pension schemes relating to the provision of information via dashboards will be set out in regulations and FCA rules pursuant to this Bill.

The noble Baroness, Lady Sherlock, asked whether the FCA will be able to use its full range of powers; yes, it will. All the FCA’s existing powers will be available where a dashboard provider must be FCA-authorised. To answer the noble Lord, Lord Hutton, the Financial Conduct Authority has an existing framework to ensure that authorised firms take the interests of customers into account. The Government will again set out in regulations the conditions that a dashboard will have to meet. This will be supported by new, dashboard-specific regulated activity, as I have just explained.

Strong consumer representation on the industry delivery group, alongside new regulations and a new, dashboard-specific regulated activity, will ensure that the design is in the interests of consumers and that they are protected. The regulatory framework for the new regulated activity will be proposed in the FCA’s consultation on the corresponding handbook rules and guidance.

[Lord Hutton of Furness]

I hear what the Minister is saying and am very grateful for the thoroughness with which he is responding to these issues, but will pension scheme members have any direct legal redress against a dashboard services operator should things go wrong? As I am hearing him, most of the remedies seem to lie in the hands of regulators or others, but if my data is misused or I feel that some problem has occurred as the result of the inappropriate organisation of a pensions dashboard service, where do I stand?

[Earl Howe]

Consumers will have various modes of redress available to them if they are not served legally or properly by their scheme provider or the dashboard provider. Our response to the consultation on dashboards highlighted the need for a clear liability model for the whole dashboard system. The objective is to enable users to identify easily where to raise a complaint or a dispute if a dashboard fails to work, or if they fail to receive their pension information. We have asked the Money and Pensions Service, through the industry delivery group, to consider how this might operate and to make recommendations. The Pensions Regulator and the FCA will regulate compliance by pension schemes and the Information Commissioner will have a role in ensuring that the disclosure of pension information takes place in accordance with data protection legislation. Only FCA-approved bodies can provide a qualifying dashboard. Only qualifying dashboards can connect to the infrastructure, and they will fall under the full regulatory regime.

New Section 238G, introduced by Clause 119, ensures that the regulator will be able to monitor and enforce compliance with the new requirements, in keeping with the existing regulatory regime. The FCA also has the power to enforce rules that it will make under this legislation. Part 14 of the Financial Services and Markets Act 2000 allows the FCA to enforce any requirement on authorised persons, including those setting up or operating a personal stakeholder pension.