It is a pleasure to serve under your chairmanship this morning, Mr Howarth. I thank Nick Smith for securing this important debate. I know he has engaged extensively and constructively with the Financial Conduct Authority on these matters over the past year. I was pleased to meet him in February to discuss how we can avoid a repeat of the unfortunate circumstances that occurred in the British Steel pensions scheme case. I am aware of the extensive work he has undertaken with Stephen Kinnock and others from south Wales, and I know that the FCA has valued immensely that interaction to try to improve communications and other aspects raised in the debate this morning.
Many issues have been raised in the debate, and I will seek to respond to them all—particularly the importance of a well-functioning financial advice market. I have listened carefully to all those who have made observations about the aspects of that that are not functioning well.
I will refer to the lessons that have been learned specifically in the British Steel pensions case; the actions the FCA has taken to address unsuitable pensions transfer advice; the protections in place for consumers; and the issue of so-called phoenix firms—an outrageous situation where individuals seek to leave behind responsibility for a previous, failed enterprise, recreate a new enterprise and therefore absolve themselves of responsibility.
I am here as the Minister responsible for financial services. I note the questions that have been raised by Jack Dromey concerning the status and other aspects of the pensions Bill. I was in front of the Work and Pensions Committee last week with my colleague, the Minister for Pensions, so I have some observations on that, but he has lead responsibility in that area, so I shall seek to secure a response from him.
As the Minister responsible for financial services, I am committed to ensuring that a well-functioning financial advice market exists to support people to make the right decisions for them and their families. In 2015, as has been mentioned, the Treasury and the FCA launched the financial advice market review, with the goal of improving the accessibility and affordability of financial advice. The Government and the FCA have now implemented all 28 recommendations from that review and will be reviewing the advice market again over 2019 to monitor progress and report back next year.
The Government have also made financial advice mandatory for people considering a defined-benefit pension transfer where the value of the pension is over £30,000. That threshold is purposely low, given the dire consequences of taking poor advice and making unwise decisions—as has been said in relation to a number of cases this morning. That is to ensure that people consider the fact that they may lose guaranteed income in retirement and are aware of all the options available before they make such a complex decision.
Turning to British Steel, although most financial advisers offer sound advice, unfortunately there are cases where the advice people receive is not right for them. The British Steel case was one such instance and resulted from a unique set of complex circumstances. A minority of advisers were responsible for giving unsuitable advice, which resulted in losses for scheme members. The restructure of the British Steel pension scheme occurred at a time when there was considerable concern over the future of Tata Steel, and members were understandably worried about whether they were about to lose their jobs and pensions. Several public bodies were involved in supporting scheme members to decide what to do with their British Steel pension, and it would be helpful to outline their different roles, because that will bring clarity to where the issues lie and how we can address them.
The Pensions Regulator is responsible for negotiating and agreeing arrangements where an employer is unable to continue to support a defined-benefit scheme, as was the case for Tata Steel and the British Steel pension scheme. That includes guidance and oversight of the trustees and scheme administrators. As such, the Pensions Regulator was also responsible for the options available to BSPS members, the communications sent by the trustees and the deadlines for decisions to be made.
The FCA is responsible for the regulation of the financial advice market. Financial advice firms must be authorised by the FCA before they are permitted to provide advice, including on pension transfers, and advisers are required to provide financial advice that is suitable for the individual’s personal circumstances.
The Pensions Advisory Service was an independent service offering free-to-consumer guidance on pension matters. As has been mentioned, it has recently been merged with Pension Wise and the Money Advice Service to create a new single financial guidance body, which is now known as the Money and Pensions Service. The hon. Member for Birmingham, Erdington asked from the Opposition Front Bench about the status of that body. The chief executive is now in place, and work is going on in this financial year to set up the processes for bringing those three entities together. There will be a series of announcements over the coming months about their intentions, but the body will operationalise in the course of the coming financial year.
As to the lessons learned from the experience in south Wales with the British Steel scheme, the independent Rookes review, which considered the communication exercise that supported members of British Steel to take decisions on their pension, reported in January. It noted that there are important lessons for organisations to learn to prevent such a case from happening again. There are, I think, 18 recommendations, and they include earlier intervention and intelligence sharing between the regulators and the Money and Pensions Service; improved support for members considering cash transfers out of defined-benefit schemes; improved guidance for trustees facing restructuring and other major changes; and improved message content clarity and channels.
The Pensions Regulator, the Financial Conduct Authority and the Money and Pensions Service have publicly committed to addressing the review’s remaining recommendations. They have agreed a joint protocol to work together to ensure that consumers are appropriately protected. It includes ensuring that support and communications are in place for members of defined-benefit pension schemes, ahead of any restructures and consultations—something manifestly different from what happened in the regrettable case that we are considering. Another aim of the protocol is that there should be better co-ordination of the involvement of different public bodies through early intervention, expedited approval processes and improved information sharing. The bodies have also developed branded written materials for trustees, to ensure that there are better communications with pension scheme members, including letters to alert them to the risks of transferring out of DB pension schemes, and the giving of practical information.
I will now talk about action on unsuitable pensions transfer advice, because the British Steel case has also raised many questions about quality.