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Volume 754: debated on Thursday 26 June 2014


Asked by

To ask Her Majesty’s Government when they propose to announce details of plans to guarantee all retirees face-to-face pensions guidance from April 2015.

My Lords, the Government recently consulted on how best to deliver the guidance guarantee through their post-Budget consultation, Freedom and Choice in Pensions. They are now processing the responses and aim to respond before the Summer Recess of Parliament.

My Lords, I thank the Minister for that reply, but I am not reassured. We have a clear case here of a policy being announced and the Government now trying to work out when, how and whether it can be implemented. The Budget Statement was very clear: the guarantee was for “free, impartial, face-to-face” guidance, not the opportunity to attend a mass meeting or have some group therapy. I took the guarantee of face-to-face provision to be an opportunity for those who want or need it to interact individually and directly with another human being. Is that still the policy?

My Lords, that is the policy. The FCA is working closely with the Pensions Regulator and the DWP to co-ordinate standards to deliver it. In developing the guidance, it is working with consumer groups, the Pensions Advisory Service, the Money Advice Service and Citizens Advice to build on existing good practice. I think that it is fair to say that not everybody will want personal, face-to-face guidance, but to the extent that they do, it will be available.

My Lords, for these reforms and freedoms to work, the Government must try to remove some of the mythical mist which surrounds pensions. As the FCA draws up options for the guidance which is to be given, what reassurance has my noble friend had from the pensions and insurance industries that they will support and drive forward these reforms so that the consumer, the owner of the pension pot, is in the driving seat?

My Lords, the Association of British Insurers has produced a detailed response to the consultation that we are undertaking. Within that, it has underlined its commitment to help customers understand their options and enable them to make good decisions. I think that for many people, when the word “pension” is mentioned, a mist descends; so demystifying pensions is a big challenge already. That is why we are devoting £20 million over the next couple of years to getting the new guidance system up and running.

My Lords, the mist may not be entirely accidental. I remind the House of my interest as the independent director of the Financial Ombudsman Service. The Telegraph reported on 13 June that officials are getting ready to tell more than 1 million people in their late 50s and early 60s that they will not get the full amount of the single new “flat-rate” state pension. The Pensions Minister, Steve Webb, told the Telegraph:

“I think I may have been guilty of oversimplifying the new flat rate state pension ... But as soon as you caveat this type of thing people switch off”.

Will we have the opportunity to scrutinise the communication plan for this scheme to make sure that more mist does not descend in future?

My Lords, the provisions relating to the guidance will be in the pension scheme Bill when it comes before your Lordships’ House. I am sure that there will be plenty of opportunity to debate those provisions at great length, to which we on this side look forward.

The answer is that it may be or it may not be, depending on what people want to do. One can envisage there being cases at workplace level, where there is a workplace scheme, where it is sensible to start off, for example, by having a collective session followed up by individual guidance. The key thing which we want to underline is that individual guidance will be available. As I said earlier, however, not everybody will want to receive it in the same way.

My Lords, the Budget Red Book indicates a bonanza for the Treasury in the next few years as a result of this annuities treatment. This policy could have echoes of the pensions mis-selling scandal of the 1980s, which cost £12 billion. If the Government are not clear and unambiguous that this means individual advice, people will be left on their own and be mesmerised. It is a good thing for the Government, but a bad thing for individuals. The Government need to act very quickly on this.

My Lords, the Government are acting quickly on it, and we absolutely agree that this must be seen as a good thing for individuals. This scheme is not being introduced to make a short-term improvement in government finances. I remind noble Lords that a number of countries—for example, Australia, Denmark and the US—already have the kind of provision that we are proposing. The FT recently reported that, when the leading finance and pensions expert was asked about this, he said:

“There’s nothing to suggest that Poms are any more stupid than Australians”.

I agree with him.