Yes, a box—working-class Tories, I think. The idea is that people receive guidance and they realise they have choices, but they do not feel sufficiently equipped to make those choices; they want to pay for some regulated financial advice. We see guidance and advice as complementary. That is reflected in the levy to pay for the guidance.
FCA standards will help to ensure a high-quality and consistent service across different delivery partners, just as in regulated markets, where the FCA sets rules and supervises firms’ compliance. Many respondents to the Government’s consultation after the Budget agreed that the FCA should have a role.
Proposed new section 333N binds together the FCA’s functions in relation to pensions guidance under a focused new duty to ensure that consumers using the guidance service are appropriately protected. However, the FCA must also have regard to its wider objectives—protecting consumers of financial services, and promoting competition in consumers’ interests and market integrity —as the regulator responsible for the conduct of the financial services industry, ensuring that in setting standards for guidance, it takes into account developments in the market and any wider regulatory interventions.
The Government plan to introduce secondary legislation to clarify the fact that guidance providers are not subject to FCA regulation, which is why, instead, the Bill proposes to make them subject to a new, bespoke FCA standards regime. The Bill designates the delivery partners recently announced by the Treasury and gives the Treasury the power to designate others, and indeed withdraw designation by notice in writing, after consultation with the designee and the FCA. The Treasury must make the list of designated bodies public.
Proposed new section 333G places a duty on the FCA to put in place standards with which designated guidance providers must comply. Standards are, to all intents and purposes, equivalent to FCA rules for regulated markets. Like FCA rules, subsection (2) of proposed new section 333G provides that failure to comply is actionable by a private person—that is, individuals can take designated guidance providers to court for breaching the standards whereby they have incurred a loss as a result. The FCA can specify where any standards are not actionable, where, for example, a standard is high level. I should stress that we do not expect consumers to be bringing lengthy and costly court cases. Like the Financial Ombudsman Service, which helps individuals resolve complaints against financial services firms, there will be robust arrangements for handling complaints about the guidance service, with recourse to an independent adjudicator and ultimately to the Parliamentary and Health Service Ombudsman.
Proposed new section 333O allows the FCA to issue guidance to complement or explain standards, in the same way that it does with rules for regulated markets. Proposed new section 333H places a duty on the FCA to monitor compliance with standards and gives it powers to monitor compliance, broadly similar to the powers it has to supervise regulated firms. It can request information, conduct interviews, obtain evidence and, in extreme circumstances, could obtain a warrant to enter designated delivery partners’ premises if that were necessary. We hope that we will not be raiding the offices of TPAS any time soon, but we have that reserve power.
It is worth explaining at this point how the roles of the FCA and the Treasury complement each other in ensuring the guidance service works effectively—a belt-and-braces approach in other words. The Treasury is responsible for choosing and designating delivery partners and holds the funding levers over them. The FCA will be equipped to set the standards, bringing to bear its insight as the regulator responsible for the conduct of the financial services industry, and to monitor them. That is why the Bill gives the FCA and Treasury a dual-key approach to ensuring delivery partners comply with the FCA’s standards. The FCA will be able to make recommendations to delivery partners to remedy any non-compliance and, in the interests of transparency, it will make this public, as in proposed new section 333I, with limited exceptions. It must set out its policy on recommendations, with the consent of the Treasury under proposed new section 333J. It must consult on this policy statement in draft under proposed new section 333K.
While it is difficult to imagine that delivery partners will not respond to such a recommendation, the FCA can, if necessary, recommend to the Treasury that it should issue a direction in writing, copied to the FCA, to designated guidance providers. The Treasury’s powers in that respect are set out at proposed new section 333L, and non-compliance with a direction can be enforced through the courts. Like FCA recommendations, directions will, with limited exceptions, be published by the Treasury, after it has considered any representations by the designated guidance provider regarding publication. Proposed new section 333M sets it out that revocation of designation is also an option in cases of non-compliance with FCA recommendations. I apologise for the exhaustive nature of those remarks, Mr Bone, but the new schedule is very long.
Part 4 deals with funding and the levies. Proposed new sections 333P and Q concern funding. Taking 333Q first, this provides for the mechanism for funding the running of the guidance service in future. While set-up costs are being met by the development fund of up to £20 million allocated at the Budget, the Government announced in July that this service will be funded by a levy on the financial services industry. The Government believe that those firms that stand to benefit from better-informed consumers, who are more inclined and better equipped to engage with the financial services industry, should pay their fair share towards the costs of the guidance service. Proposed new section 333Q allows the Treasury to ask the FCA to collect a certain amount to cover the costs of delivering the guidance service. The FCA must then propose, and consult on, how it plans to allocate the levy among regulated firms.
The FCA has already proposed some initial models for allocating the levy, weighted in different ways, and proposed that small firms should pay nothing at all. It is considering the responses to the consultation. Finally, the FCA must seek the Treasury’s approval before making the rules for the levy. Once collected, the FCA will pass the funds to the Treasury, net of its collection expenses, which will in turn pay the funds into the Consolidated Fund. Funding for the costs of the guidance service will then be voted by Parliament to the Treasury’s budgets as part of the usual arrangements for departmental budgets. Proposed new section 333Q allows the Treasury to tell the FCA which factors will inform its consent to the allocation, and that the FCA must have regard to those factors.
Proposed new section 333Q defines the Treasury’s guidance costs in doing so. It is clear that those costs include cover to fund the delivery partners’ costs, its own costs of delivery, awareness raising, research and evaluation, and other relevant costs.
Proposed new section 333P provides for a separate levy to cover the FCA’s costs of setting and monitoring against standards and its other pensions guidance functions. That will be paid by guidance providers as a fee to the FCA, in the same way that regulated firms pay. That ensures that the costs of the FCA’s monitoring of designated guidance providers are transparent. Proposed new section 333Q provides that the costs of the fee can be met out of the grant given to delivery partners by the Treasury.