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

I am grateful to my hon. Friend for that intervention. We are very focused on the April delivery date. The £20 million for start-up funding is already being spent. We are already working with TPAS and Citizens Advice groups, and money is being spent on preparing the websites. There is a lot going on already, including the spending out of that £20 million to get the system in place for April.

Obviously, the levy will be collected in the new financial year and will pay for provision of the guidance during that financial year. Prior to our discussions, the FCA has already launched a consultation on the structure of the levy. It already collects a levy, so the mechanism is in place. Once the FCA has heard the response to the consultation and reached a decision that is approved by the Treasury, the levy can be collected in the new financial year.

Moving on to part 5, which concerns the crucial issue of signposting, making people aware of guidance and prompting them to engage with it will be key to the success of the service. Historically, consumers have not engaged with decisions about what to do with their pensions at retirement: even though an increasing number of people are aware of the benefits of shopping around, most people still do not do that. Instead, they stick with their current provider and lose out on the best deal.

The pensions flexibilities give individuals a reason to engage and a chance to make a meaningful decision. Interest in pension saving and engagement with retirement decisions have increased since the Budget announcement. The Government want to ensure that providers, as part of their engagement with customers, must tell people about their right to guidance: an impartial source of information and support on their options as they approach retirement, which complements the information they will get from their provider. That is the purpose of proposed new section 137FB.

Rather than prescribe the signposting requirements in statute, the Government have decided to place a duty on the FCA to impose signposting requirements on pension providers through their rules. The FCA, as regulator of contract-based pension schemes, is well placed to specify the detail of—and to monitor compliance with—rules requiring signposting, and to consider how that sits alongside its other rules and requirements on firms to ensure consumers are being treated fairly.

The FCA’s rules are flexible and can be updated much more easily than statute. That is clearly important. The FCA has proposed that signposts be included in wake-up packs that are sent out four to six months before the intended retirement date, or when a customer makes contact indicating that they wish to access their pension funds. However, if it becomes clear that different timing or a different approach is necessary to maximise engagement, the FCA can change its signposting rules or make them more or less prescriptive.

As the FCA’s recent consultation makes clear, signposting is about more than simply referring to the existence of the guidance service. Signposting should include reference to the fact that the guidance is free and impartial and that it is designed to help consumers with defined-contribution pots approaching retirement to understand and navigate their choices in the new retirement landscape. It should show how guidance can be accessed and provide contact details and the basic information that customers will need to make an informed decision about their pension pot.

Proposed new section 137FB also requires the FCA to consult the Treasury before publishing its draft rules that will apply to FCA-regulated pensions, which are usually referred to by the shorthand of contract-based schemes, as it will be important to ensure that they align with the Treasury’s implementation of the service.

My hon. Friend the Member for Amber Valley may be interested to know that the FCA will also be required to consult the Secretary of State for Work and Pensions and to have regard to existing regulations to ensure coherence with requirements on trust-based pension schemes and any proposals to change those requirements. My Department will amend its disclosure of information regulations for schemes regulated by the Pensions Regulator, usually referred to as trust-based, to align with signposting requirements for contract-based schemes set by the FCA.

Finally, part 6 deals with consequential, transitional and commencement issues. Paragraphs 5 to 15 of proposed new section 137FB make consequential amendments to ensure the new provisions fit as part of the 2000 Act. In particular, they allow the FCA’s consultation on standards and on rules on signposting and on fees, published earlier this year, to be regarded as fulfilling the consultation requirements in the Bill. That means that the FCA rules and standards will be in place in good time for April, which comes back to my hon. Friend’s point, and will allow firms and delivery partners to prepare appropriately to be compliant by April. The Government are considering tabling amendments in due course to commence the guidance guarantee provisions on Royal Assent, so that the legal framework is in place in advance of April.

I hope that that gives the Committee an exhaustive, if not exhausting, account of new schedule 2. I commend Government amendment 58 to the Committee and look forward to the Committee’s comments.