Clause 19
Pensions Bill
11:30 am
David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)
No, I am not proposing to abolish housing benefit. I am suggesting that the cost of the Government not having the resources to deliver a better basic state pension is a large number of people on means-tested benefits. The Minister is entitled to point out to me that our proposals would be considerably more expensive than his but I am entitled to point out to him that there is a cost to his lack of financial generosity, which is to have a huge number of people on means-tested benefits and therefore to have less clarity about what the returns will be.
We have already seen that the Secretary of State could not guarantee for the majority of people that they were going to get a £2 for £1 return, because although people will get their employee contribution paid in and their employer contribution paid in, although they will receive an employer contribution if they are in employment and not self-employed, and although they will obtain tax relief they will also lose tax on the way out. They will lose the charges. They may lose some of the means-tested pensioner benefits. They may lose housing benefit and they may lose council tax benefit, so they will go up one escalator and in some cases they will go down another escalator. That is why many of the people in the pensions industry and beyond are worried about the extended means-testing.
I do not want to quote him too often because he will get carried away by the extent to which we rely on him in this Committee, but there is also an excellent article by Mr. Steve Bee in yesterday’s edition of Pensions Week, where he says at the beginning:
“I was looking through the January issue of the Financial Services Authority’s newsletter for financial advisers”—
as we all do—
“when I noticed the reference made to means-tested benefits and the giving of advice”.
He quotes an extract from that advice from the Financial Services Authority to financial advisers. It says:
“Means-tested state benefits factors that impact on the advice you give will vary from product to product and customer to customer. However, one factor that you may want to consider taking into account is whether a product will affect the customer’s entitlement for means-tested state benefits. Principle nine imposes a broad requirement for a firm to take reasonable care to ensure the suitability of its advice...You may wish to consider the impact of your financial advice on means-tested benefits in communicating with some of your customers”.
Then Mr. Bee cites a bad example of a firm that recommended a low-premium pension to someone in their late 50s with no previous pension provision. The point that he makes in his article is:
“This does beg the following questions about the care that will be taken as people are auto-enrolled into pension saving by the legislation the government is proposing:
Will those auto-enrolled into saving in personal accounts be advised on the impact on their entitlement to means-tested benefits? Will older people with no previous pension provision be advised not to save in a personal account?”
He goes on to cite another couple of considerations. He says in conclusion—it is worth quoting because the issue is important:
“The fact, though, that this is important enough to be brought to the attention of financial advisers by the regulator indicates it will surely be even more important for the DWP to take great care when distributing personal accounts to its target market of people on low to medium levels of income. If, however, the government cannot give assurances to those about to be swept into pension saving that the same level of care will be taken in regard to the suitability issues that are required of financial advisers, then perhaps people should be wary about getting caught up in the scheme”.