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My Lords, this group makes several small pensions amendments, which I shall highlight briefly.
The first amendment is technical in nature and closes an unintended gap in guidance provision, ensuring that people in the Pension Protection Fund—the PPF—are able to access Pension Wise guidance. At present, Pension Wise is able to provide guidance only to a member, or the survivor of a member, of a pension scheme. As the PPF is a compensation fund, not a pension scheme, individuals whose schemes have transferred into the PPF are not able to obtain guidance from Pension Wise.
Where a defined benefit scheme transfers to the PPF, usually following the sponsoring employer becoming insolvent, it is possible that any money purchase benefits which a scheme member has built up, most likely as a top-up to their defined benefit scheme, could also transfer in. The amendment will allow these members to receive guidance on options around what to do with their money purchase benefits. Pension Wise should be available to all who wish, and are able, to take advantage of the pension freedom reforms, and it is right that we are taking action now to ensure that all are treated consistently.
Next is a series of amendments that make changes to Clauses 27, 30 and 32. These ensure that powers currently given to the Treasury will be given instead to the Secretary of State. This is so that when oversight of Pension Wise moves to the Department for Work and Pensions, my right honourable friend the Secretary of State for Work and Pensions will be able to exercise this power.
I turn finally to the amendment creating a new clause. This amendment is technical in nature and allows appointed representatives of authorised financial advisers to advise on the conversion and transfer of safeguarded benefits, which are the special valuable features of certain pensions, such as defined benefit pensions and pensions with guaranteed annuity rates, for the purposes of the advice safeguard established in Sections 48 and 51 of the Pension Schemes Act 2015.
These amendments to Sections 48 and 51 of the Pension Schemes Act 2015 will amend the definition of “authorised independent adviser” to include appointed representatives. As a result, they will be able to give appropriate independent advice to satisfy the advice safeguard. They will also amend the Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001 to the same end. Around two-thirds of financial advisers are appointed representatives who have a special contract to provide services on behalf of their principal, who will be an authorised financial adviser regulated by the FCA. This measure puts the eligibility of appointed representatives to advise on these transactions beyond doubt.
The amendment extends eligibility to advise on these transactions only to the appointed representatives of financial advisers. What this will not do is reduce consumer protections or weaken the accountability of financial advisers, or their appointed representatives. Where an appointed representative advises on these transactions, the directly authorised firm, as the principal, takes full responsibility for the quality of the advice and compliance with FCA rules.
The pension freedoms which came into effect in April have given people real freedom and choice in how they access and spend their income at retirement. This amendment will help to ensure that they operate as intended for customers with safeguarded benefits. I beg to move.
Amendment 22 agreed.
Amendments 23 and 24
Moved by Lord Bridges of Headley
23: Clause 27, page 22, line 41, leave out “Treasury” and insert “Secretary of State”
24: Clause 27, page 23, line 2, at end insert—
“( ) In subsection (3) after the definition of “pension scheme” insert—
““PPF” means the Board of the Pension Protection Fund;”.”
Amendments 23 and 24 agreed.
Moved by Lord Bridges of Headley
25: After Clause 27, insert the following new Clause—
“Advice about transferring or otherwise dealing with annuity payments
(1) The Financial Services and Markets Act 2000 is amended as follows.
(2) After section 137FB insert—
“137FBA FCA general rules: advice about transferring or otherwise dealing with annuity payments
(1) The FCA must make general rules requiring specified authorised persons to check that an individual—
(a) who has a right to payments under a relevant annuity, and
(b) if the Treasury make regulations under subsection (3), who is not an exempt person by virtue of those regulations, has received appropriate advice before transferring or otherwise dealing with the right to those payments.
(2) The reference in subsection (1) to a right to payments under a relevant annuity does not include a contingent right to such payments.
(3) The Treasury may by regulations provide that an individual whose financial circumstances meet criteria specified in the regulations is an exempt person for the purposes of subsection (1)(b).
(4) Regulations made under subsection (3) may (amongst other things) specify criteria based on the proportion of the individual’s financial resources that is represented by the payments under the relevant annuity or the value of that annuity.
(5) The rules made by virtue of subsection (1) may include provision—
(a) about what specified authorised persons must do to check that an individual has received appropriate advice for the purposes of those rules;
(b) about when the check must be carried out.
(6) For the purposes of this section—
(a) “relevant annuity” means an annuity specified (by type, value or otherwise) as a relevant annuity in regulations made by the Treasury;
(b) “appropriate advice” means advice specified (by reference to the person giving the advice or otherwise) as appropriate advice in regulations made by the Treasury;
(c) “specified authorised person” means an authorised person of a description specified in rules made by virtue of subsection (1).
(7) If regulations under subsection (3) or (6)(a) make provision about the value of an annuity, the regulations may also make provision about the basis on which the value of an annuity is to be calculated.”
(3) In section 138F(2) (notification of rules) after “137FB,” insert “137FBA,”.
(4) In section 138I (consultation by the FCA)—
(a) in subsection (6), after paragraph (aa) insert—
“(ab) section 137FBA;”;
(b) in subsection (10)(a) after “137FB,” insert “137FBA,”.”