Pensions

Lord Tunnicliffe Excerpts

Thursday 12th December 2013 Lords Chamber

[Lord Newby]

There are obvious limits to what government and Parliament can do, but I have always believed that one of the very important things that Parliament can do is to act as the bully pulpit and set out what it thinks is the correct way of behaviour. In terms of the financial institutions we have instituted, as the noble Lord knows, a number of pieces of legislation in this area but, as the Parliamentary Commission on Banking Standards pointed out, culture is very important—that is, the culture of the industry and also of consumers. A big problem around pensions in particular is that virtually no consumer understands the product that they are buying, which makes it very difficult for us to get people to accept responsibility. They find it very difficult to get to grips with a pretty complicated product.

[Lord Tunnicliffe (Lab)]

My Lords, unusually, the report of the Financial Services Consumer Panel on annuities is even more alarming than the press reports. Its final paragraph states:

“The chances of mass consumer detriment”—

I emphasise, mass consumer detriment—

“are, in our judgement, too high to trust to current market-driven solutions alone: hence our recommendations for further regulatory and government-led structural reform”.

Will the Minister commit to using the Pensions Bill to require a regulator to set best practice standards for those offering annuities and to require pension schemes to take responsibility for directing savers to brokers who meet those standards?

[Lord Newby]

My Lords, there is already the open-market option review, which brings together the Government, the regulator, providers and consumer groups. It is looking at how we can promote best practice. There is also an ABI code which, for example, requires insurers to no longer send out application forms so that people take out an annuity automatically with the company with which they have their pension pot. We are bearing down on this issue, and what the report that was produced only this week shows, is that there is further to go. However, we have the structures in a new regulatory framework, and we are determined that it will work.