The amendment proposes to adjust clause 12 to strengthen the provisions on financial assistance from the Secretary of State related to the operation of the single financial guidance body. The intention of the new body is to increase the number of people who receive financial guidance and advice—indeed, the ambition is to greatly increase it. This function is key to increasing financial awareness, education and inclusion across the country.
While the current services provided by the three bodies to be merged are greatly valued and appreciated by those who use them, I think there is common ground that they are not used enough. A primary function of the new body needs to be to increase take-up of the services it offers. For example, take-up of the services offered by Pension Wise is extremely low. The latest figures from HM Revenue and Customs show that some 772,000 people withdrew more than £6.5 billion from their pension pots in 2017. However, only 66,000 appointments were made with Pension Wise in 2016-17—approximately 8.5% of people.
An FCA survey found that one in eight 55 to 64-year-olds who planned to retire in the next two years and who have a defined contribution pension had used the Pension Wise service in a 12-month period. The FCA also found that 25% of pension transfers are withdrawing all, or virtually all, of the pension, with 19% withdrawing virtually all and 6% withdrawing all. What plan do the Government have for those who have withdrawn all their pension and may end up with nothing later in life? They may end up falling into the arms of the taxpayer, and the Government need to prepare for that.
While traffic to Pension Wise’s website is quite high, it is not a sufficient substitute for access to tailored and personal advice. Also, many of those looking for advice may not be completely digitally aware. As Baroness Altmann said in the other place,
“When you introduce pension freedom into a marketplace that has never really been encouraged to engage with pensions and mostly does not understand much about them, obviously you need an expert to help you.”
NEST has said that it is concerned
“that people appear to be making decisions based solely on a read of the Pension Wise website”.
If those looking to transfer their pension are only accessing the Pension Wise website, it means that they will not get the tailored specialist advice that they need at such a time. We must therefore ensure that as many as possible of the 772,000 people who take advantage of their pension freedoms every year receive the guidance that they need to make informed and reasoned decisions about what are usually large sums of money.
For this reason, having set out why this body matters and the scale of likely demand at the next stages, we are surprised that the Government, from some of the things that they have said, appear to expect to make a financial saving from the formation of the new body. The Government’s impact assessment states:
“One structure replacing three will reduce cost of guidance provision, releasing funds through these efficiencies…savings could be used to reduce the levies that industry pay to finance the government’s guidance provision.”
With the greatest respect, that is the last thing that should happen. We do not believe that the Government should use the formation of the new body to make savings and pass them on as reductions in the amount paid by the industry to finance the body. The industry has a responsibility to finance the body adequately through the levy system. The industry and the Government should use the efficiencies created by the new structure, as well as additional money in grants and levies, as appropriate, to drastically increase the services provided. In our view, that is essential to the success of the SFGB if it is to deliver the complete guidance service that people need.
I had a fascinating discussion earlier this week with the chief executive of the Pensions Advisory Service, and she referred to the extraordinary statistics on TPAS’s work and the take-up of it. She made the point, absolutely rightly, that more could be done with existing resources and economies of scale from bringing together the three organisations, but she went on to make the compelling point that so great is the likely demand at the next stages that much more will need to be done to finance the new body. Inescapably, unless it is properly resourced, the new body will not be able to discharge the functions that will fall upon it.
The chief executive gave some examples. She made the point again about not duplicating work done by other areas of Government such as research, and said that, in TPAS’s experience, some things that are key to the services that it provides include, of course, the dashboard and the website, but also face-to-face guidance, which is crucial time and again. She talked about the specialisms necessary to help and inform decisions about options, saying that we should not dumb things down by having people give guidance by just reading off a list. She said that an advertising programme ought to be part of what the Government do, and that it could be done in a number of different ways. She also spoke about what I call the Carillion capacity—the capacity to respond at a time of crisis—as well the promotion of financial public awareness, which we debated earlier.
In conclusion, we hope for a statement from the Government that makes the point that the purpose of the new body is not to save money but to provide the kind of service that all people in all circumstances ought to be able to count on. The industry must play its part, but Government must be unambiguous that the body will be properly and fully resourced.
Can I answer the point raised directly? It is absolutely the case that merging three bodies and having one building rather than three will create some degree of potential cost efficiencies, but we are absolutely of the view that those efficiencies should then be directed into frontline services. I can unequivocally give that assurance to the Committee.
The hon. Gentleman referred to the original response to the consultation. It is true that there is an expectation that rationalising the provision will create some operational efficiencies. One would expect that. However, that same response made it very clear that the intention was for any savings to be channelled to frontline delivery of debt advice, and money and pensions guidance. I could not be any clearer on that in any way whatsoever.
I manifestly want to make that point, but I also disagree that there will be an insufficiency of funding, and the reason for that, it seems to me, is threefold. First, this is effectively not taxpayer-funded; it is done by a levy. The levy is a moveable feast, depending upon the need identified by the individual organisation, and it is something that can be assessed and increased on an ongoing basis, to provide the service that, it seems to me, we all wish to ensure is there. Secondly, there is capacity to top up the levy, should the Secretary of State wish to do so, and the financial guidance body on an ongoing basis, and that additional funding can be provided.
The proposed amendment has the bizarre, counter- intuitive effect of removing the discretionary nature of the financial assistance that the Secretary of State can provide. I simply make the point that while we are keen to ensure that this body is run more efficiently, in terms of amalgamating most probably into the High Holborn offices of the Money Advice Service, we certainly believe that this is something the levy will be able to fund, and if it is the case that this expands the provision—the House of Lords seems to have done so and this House may do so as well—then the levy may go up to accommodate the need as has been described. With those assurances, I respectfully ask the hon. Gentleman to withdraw his amendment.
The assurance that this is not a cost-saving measure is very welcome, but I stress again: is there an economy of scale? Are there possibilities, for example, of freeing up, by locating in one location, which is very likely to be the case? All of that is absolutely true, but right at the start, as we go down this path, to see a welcome mechanism created, we need to be confident, and to send a message to the people out there that they can be confident, that the new organisation will be effective, dynamic and properly resourced. Therefore, on the basis of the assurances given, I beg to ask leave to withdraw the amendment.