Financial Guidance and Claims Bill [ Lords ] (Second sitting)

Debate between Mhairi Black and Lord Mackinlay of Richborough

Thursday 1st February 2018 Public Bill Committees

[Mhairi Black]

I also appreciate the Minister’s honesty in getting straight to the point and saying that he will reject amendments 40 to 41. To return to my point, I think that if we do not strengthen clause 5, it will be a real missed opportunity. The Lords amendment was a welcome move in the right direction—that is why I was quite looking forward to building on it—so it is a disappointment to hear him say that the Government will carry on with this watered-down version.

It seems totally counter-productive if we are now at a stage where we acknowledge as we write policy that people do not understand pensions and they do not have a clue about them, on the whole. That is the gist. People want someone to hold their hand through the process, not ask them, “Have you had advice?” “No, I haven’t.” “Right. Okay, we’ll move on.” The Minister said that the onus would be put on the individual. To me, what the Government are suggesting does put the onus on the individual rather than on an independent body to hold people’s hands and guide them through the process. It seems like a missed opportunity. Forgive me if this is the wrong time, but I will press amendments 40 and 41 to a vote at the appropriate time.

[Craig Mackinlay (South Thanet) (Con)]

It is always a pleasure to serve under your chairmanship, Mr Rosindell. I declare a couple of interests: I am a member of the Institute of Chartered Accountants in England and Wales and of the Chartered Institute of Taxation. Part of the Chartered Institute of Taxation has a low-income tax reform group, which includes a couple of charities that play a leading role in helping those who are on low pay: TaxAid and Tax Help for Older People. Before my time in Parliament, I was the north Kent volunteer, as a member of the Chartered Institute of Taxation, for Tax Help for Older People. Often there would be a widow or widower facing consequences that they did not quite know how to deal with, and that would be where the charity came in to help. Obviously, a lot of that work now happens through our surgeries on a weekly basis.

We live in a different world now, with auto-enrolment accumulating very nicely among millions of people across the country. If we are having difficulty today, we will have some very serious money in the future that needs to be dealt with, and people will need appropriate advice. I mentioned on Second Reading that the amounts involved across the country over the next 10, 15 or 20 years could amount to literally hundreds of billions of pounds.

Even without auto-enrolment, there are a number of choices that people need to take on board. Someone may be lucky enough to have a defined-benefits scheme. They are in the descendancy, for many reasons, but I have heard of instances of people who work for banks, in particular, having a defined-benefits scheme. They could be cashing that in, and thinking about a change to a different scheme of up to 50 times the annuity rate. Again, we are talking about very big figures.

People need to make a number of choices at various stages when approaching retirement: whether they should have a defined-contribution pot; whether an annuity is right for them—probably not a decision that many people are making, given the current low interest rates—and whether to change provider. I can see there being hundreds of thousands, if not millions, of people in a few years’ time who have been using NEST, for instance—the easy provider that many small employers are using—reaching the age of 55 or above and asking themselves, “Well, what now? Would changing to a different provider be better for me? Would a draw-down facility on my pension by best? Should I consider the inheritance tax benefits?” We are now in a new world where pensions are a very generous potential inheritance tax-saving product. They might also ask, “What are the factors of my health?” Health might play a very big part in whether someone wants to take all their income now as a full draw-down, or eek it out into the future. There will be a multitude of choices that people should make. People’s personal tax position should also never be forgotten, so that they take their pension in the most efficient way possible.

I would call this group of amendments, very simply, “the scam blockage and advice enlightenment measures.” They are very welcome and, from what I have seen of the Government’s proposals, I am fully supportive of them. I think they take on board the suggestions of the Work and Pensions Committee. However, I have spoken many times, and remain concerned, about what constitutes advice. I note in new clause 1(1)(d) that the FCA will be entitled to put together rules about what constitutes advice.

I remain concerned that somebody with a smaller pot—perhaps a pot of £30,000, which will be a very common position for many people to be in under auto-enrolment in the future—may get involved with SFGB and take the full advice. They will be told, “These options are available to you.” However, I do not think that the legislation provides for advising people what the best provider and tax situation is for them. It is still hoped in new clause 1, as good as it is, that people go and get advice. That advice is simply not available in the market because independent financial advisers will look at a small pot and say, “Well, for the fees involved, I don’t really want to take you on.”

I have spent considerable time pushing for flexibility under FCA rules to allow people to see an IFA on almost a no-liability basis. Instead of the IFA having to do a full “know your client” assessment, which takes a long time and costs a lot of money, I propose an appointment with no liability on the IFA’s part. That would at least give people some help and guidance, which is infinitely better than none.