Clause 44 - Commencement

Part of Pension Schemes Bill – in a Public Bill Committee at 9:25 am on 4th November 2014.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 9:25 am, 4th November 2014

Good morning, Mr Bone. We now move on to consideration of new provisions and amendments relating to the guidance guarantee, as it has become known, with regard to the Budget freedoms. Government new schedule 2 includes the whole framework for the guidance guarantee and so, as the Committee will appreciate, it is one big slug rather than a set of different amendments that we could debate separately. I apologise in advance, but this will be the longest contribution I will make to our debate. However, I hope the Committee will find it helpful.

I will go through what the new schedule does as well as the content of the guidance guarantee. I am grateful—well, relatively grateful—to my hon. Friend the Member for Amber Valley for his amendments (a) to (h) to the new schedule. I will not deal with those as we go through, but I am sure he will seek to catch your eye, Mr Bone, and if so I will be happy to respond to the issues that he raises.

I am delighted to introduce this group of provisions—it says that in my brief, but I am—and in particular new clause 12, which paves the way for new schedule 2; the schedule sets out the legislative framework for the guidance guarantee. At the Budget we announced what we call freedom and choice in pensions—in our view, the most far-reaching changes for nearly a century to how defined-contribution pensions savings can be taken in retirement. Colleagues at the Treasury have introduced parallel legislation, also currently before the House, to implement the tax changes that permit the new flexibility.

Under the measures, people will have the freedom to access their hard-earned pensions savings in a range of ways. Crucially, however, people may need help to navigate the wider range of choices they will have and work out the right path for themselves. Deciding how to put one’s pensions savings to best use to fund one’s retirement is one of the most significant financial decisions an individual will make, which is why at the Budget we committed to a guidance guarantee, meaning that everyone with a defined-contribution pension will be able to access free and impartial guidance on the available options as they approach retirement. That is set out in some detail in new schedule 2.

Many of the provisions in the new schedule amend the Financial Services and Markets Act 2000, and I will refer repeatedly to proposed new sections 333A and so on, inserted in that Act by the new schedule, which set out the framework. I will start with proposed new section 333A. It defines pensions guidance and articulates the central objective, namely helping people to make decisions about how they use their pension savings in retirement. The responsibilities of the Financial Conduct Authority and the Treasury on financial services currently sit in that area.

Going through the schedule, we set out the role of the Treasury, the FCA and the delivery partners, the Pensions Advisory Service and Citizens Advice. It was announced in July that the Treasury would retain overall responsibility for the guidance service to make sure that it is up and running in good time for next April, and that it would do so not alone, but in partnership with organisations with track records in delivering expert, trusted guidance on pensions and wider personal financial issues. Proposed new section 333B of the 2000 Act puts a duty on the Treasury to put in place the guidance service and ensures the Treasury is accountable for delivering for  the commitment made at the Budget to a guidance guarantee. That means that the Treasury can deliver aspects of the guidance itself or make arrangements with other bodies to do so. In fact, the web channel—that is nothing to do with me—of the guidance service is being delivered on the website by a Treasury-based team of experts drawn from the Government Digital Service and the Money Advice Service.

In July, the Government gave a clear commitment in their response to the consultation on the Budget flexibilities that organisations providing guidance must be genuinely impartial and not subject to any conflicts of interest that could affect consumers’ trust or cause them to question their motives, such as a commercial interest in selling financial products or services. The overwhelming majority of respondents to the consultation were of that view. We want to ensure that the measure works effectively, so we have involved not-for-profit consumer organisations such as Citizens Advice and the Pensions Advisory Service. Those are trusted brands that we want to involve in the process.

There are scammers out there, and the FCA has set up a campaign called “Scam Smart”—difficult to say, but you know it when you see it—to alert people to the risk that someone will come along and say, “I’m from the Government and I’m here to give you the guidance that the Chancellor told you about. Why don’t you put your pension money where I tell you to?”. That is unacceptable, so the new schedules introduce a power to make it a criminal offence for somebody to impersonate the guidance services.

In the interests of giving the Committee all the information it needs, I will just say that I have been given a single-sided copy of my notes, so I am missing alternate pages. At the moment, I am busking the even-numbered pages. Nobody had spotted that so far, but I should mention it just in case the even-numbered pages happen to appear.

The FCA has a crucial role to play in putting in place a robust regime and equipping it to ensure that the guidance is high quality and consistent across our delivery partners. Proposed new section 333E introduces the concept of a designated guidance provider, which signifies that the delivery partners and, importantly, any subcontractor providing pensions guidance to consumers, will be subject to the FCA’s new standards regime. The standards regime is similar to but not the same as the FCA’s regulatory regime, because guidance will not give recommendations and is therefore quite distinct from regulated financial advice.

The Government believe, however, that the FCA has an important role to play in overseeing how guidance is delivered. It is important to be clear to the Committee what guidance is and is not. Guidance will discuss the pros and cons of different types of financial products and services, and many consumers will engage with the regulated financial services market, whether taking financial advice or buying a product, after taking guidance. I want to stress, and I am pleased to do so on an even-numbered page, that guidance and advice will not be in conflict with one another. I have likened it, in the past, to wine tasting and fine wine. I gather—I do not do it myself—that one samples the wine, thinks “Yes, I fancy a bit of that,” and buys a case or whatever it is called.