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

Debate between Mike Amesbury and Guy Opperman

Thursday 1st February 2018 Public Bill Committees

[Guy Opperman]

My hon. Friend is right to make that point. The provider will be required to ask members and other beneficiaries looking to access or transfer their pension benefits if they have received either pensions guidance or independent financial advice. If the member indicates that they have not received guidance or advice, the provider will have to recommend that they seek it. The provider will also have to ask the member whether they want to wait while they access guidance or advice, or, crucially, to confirm that they want to proceed without receiving it.

That will do two things from a behavioural nudge perspective—I suspect we will talk about behavioural nudges at great length. First, asking the scheme member if they would like to wait before accessing their pensions benefits so that they can receive guidance will give a clear steer that receiving guidance is the default option. Secondly, asking people to confirm that they want to access their pension without first receiving guidance ensures that the scheme member has to take an active decision to opt out. We believe that that strikes the right balance. It ensures that people are encouraged to take guidance without removing the element of personal choice. It also does not inconvenience those who have already accessed appropriate guidance or independent financial advice.

I could give a number of different quotes, but I will cite Tom Selby, the senior analyst at AJ Bell, who described the original auto guidance idea as weak and said that our proposal represents an improvement. He said:

“Automatically enrolling members into guidance for each transfer or every time they took money from their own pension pot—when they have already decided what they want to do—would have caused massive delayed and huge complaints.”

It was by no means clear, previously, that

“it would have a material impact on the take-up of guidance. It therefore risked being…ineffective.”

He added:

“The new amendment is a vast improvement and, in the short term, should help increase awareness of the importance and value of advice and guidance. It also gives the Financial Conduct Authority breathing room to consult on alternative nudges towards guidance that have been shown by research to be effective.”

The amendments also ensure that the occupational pension schemes that provide flexible benefit are covered—they are not covered by the Work and Pensions Committee’s suggestion—including those in Northern Ireland. Our proposals seek to ensure consistency of approach between personal and stakeholder pension schemes, which are regulated by the FCA, and occupational pension schemes.

[Mike Amesbury (Weaver Vale) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. I have a point of clarity. Surely a move from recommended guidance to default guidance would result in a higher up-take of independent advice and guidance.

[Guy Opperman]

We are into behavioural economics and nudge theory. In broad terms, imposing greater barriers to force people to do things should in principle get a greater take-up. However, there is a fine line. If we place too many hurdles in the way of the individual, they will not move anything even if it is in their interest, and they simply will not engage with the process. While one may agree or disagree with the concept of pension freedoms and having the ability to choose whether to consolidate pots or access them to do with them whatever one wishes, that freedom is available. One therefore has to be careful because, if there are too many barriers in the way, people simply will not engage with that policy.