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I start by thanking the noble Baroness, Lady Drake, and the noble Lord, Lord McKenzie, for sparing the time to meet me and officials last week. I will also say now that I apologise for the timing on these things. I will not try to give a “dog ate my homework” excuse—these things are sometimes just unfortunate—and I heed what the noble Lord, Lord McKenzie, has to say about the timing of the report. I make no commitments right now about Third Reading, but I am happy to meet both the noble Lord and the noble Baroness, Lady Drake, and will answer a number of the points that have been raised. As the noble Lord, Lord Davies, said, some were pretty technical, so I hope noble Lords will forgive me if I do not cover them all, in which case I will write as soon as I possibly can with detailed answers.
To start, the noble Baroness, Lady Drake, spoke of the tension in the policy. All I would say in response is that many of the responses to the consultation welcomed the proposal to extend the pension freedoms to those who had already bought an annuity. As the Government have always made clear, for many people, an annuity, which provides a guaranteed income for life, will remain the right choice. However, the Government believe that there is no reason why they should impose barriers that prevent individuals being free to make their own decision about what to do with their annuity rights, purchased with the money they have saved throughout their working life.
Turning to the DPRRC recommendations, we will read them with great interest. Again, I make no further commitment, but we will certainly do that.
I was asked: how will the Government ensure that there will be a functioning market for financial advice to support consumers making this decision? To put a bit more flesh on the bones of what I said earlier, the Government are engaging with financial advisers and their representative bodies with a view to ensuring that there will be enough participating advisers to service consumer demand. The Government are keen to look across the financial services sector to improve the availability of financial advice to people, particularly those who do not have significant income or wealth.
That is why, as noble Lords will know, we launched the FAMR with the FCA, and the review is due to publish its recommendations by Budget 2016. The Government will ensure that the financial advice requirement for the secondary annuities market fully respects the outcome of that review.
Turning to potential conflicts of interest between financial advisers, brokers and buyers in the secondary annuities market, the Government will set out in secondary legislation the definition of appropriate financial advice in relation to the clause. We intend “appropriate financial advice” to be FCA-regulated financial advice, so eligible financial advisers will be authorised and regulated by the FCA. In addition, the Government intend to legislate through secondary legislation to require all UK buyers in the market to be FCA-regulated. As I said, this means that the FCA will be able to design specific rules governing the conduct of both financial advisers and buyers in this market, and the Government are working with the FCA and expect it to consider making rules about potential conflicts of interest. The FCA will consult on its proposed rules for the secondary annuities market next year.
On the issue of the Government protecting the interests of dependants in joint life annuities, which is a very valid point, the Government recognise the importance of protecting all those who have a right to an income under an annuity contract, not just the primary annuity holder. That is why we will be making the free and impartial Pension Wise guidance service available to anyone with a relevant interest in an annuity. In addition, we will ask the FCA to consider additional measures, such as requiring firms to obtain written consent from named dependants and beneficiaries before facilitating the sale of an annuity.
I will leave it at that for now, but I assure the noble Baroness and the noble Lord that I will write them in due course on the other points that arose.
Amendment 25 agreed.
Moved by Lord Bridges of Headley
26: After Clause 27, insert the following new Clause—
“Independent advice on conversions and transfers of pension benefits: appointed representatives
(1) The Pension Schemes Act 2015 is amended as follows.
(2) In section 48(8) (independent advice in respect of conversions and transfers: Great Britain), in paragraph (a) of the definition of “authorised independent adviser”, after “Secretary of State,” insert “or is acting as an appointed representative (within the meaning given by section 39(2) of that Act) in relation to a regulated activity so specified,”.
(3) In section 51(8) (independent advice in respect of conversions and transfers: Northern Ireland), in paragraph (a) of the definition of “authorised independent adviser”, after “Northern Ireland,” insert “or is acting as an appointed representative (within the meaning given by section 39(2) of that Act) in relation to a regulated activity so specified,”.
(4) The Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001 (S.I. 2001/1217) are amended as follows.
(5) In regulation 2(1) (descriptions of business for which appointed representatives are exempt) after sub-paragraph (cca) insert—
“(ccb) an activity of the kind specified by article 53E of that Order (advising on conversion or transfer of pension benefits);”.
(6) In regulation 3 (requirements applying to contracts between authorised persons and appointed representatives) after paragraph (3G) insert—
“(3GA) A representative is also to be treated as representing other counterparties for the purposes of paragraph (1) where the representative gives advice (in circumstances constituting the carrying on of an activity of the kind specified by article 53E of that Order) on behalf of other counterparties.”
(7) The amendments made by subsections (4) to (6) do not affect the power to make further subordinate legislation amending or revoking the amended regulations.”
Amendment 26 agreed.
Moved by Lord Bridges of Headley
27: After Clause 28, insert the following new Clause—
“Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001
(1) The revocation of the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (S.I. 2001/3649) by the National Savings Regulations 2015 (S.I. 2015/623) is to be treated as never having had effect.
(2) Accordingly, in the Schedule to those regulations, omit the entry for that order.”