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Financial Guidance and Claims Bill [HL]

Volume 783: debated on Wednesday 6 September 2017

Committee (2nd Day) (Continued)

Clause 3: Specific requirements as to the pensions guidance function

Amendment 42A

Moved by

42A: Clause 3, page 3, line 15, at end insert—

“( ) As part of its pensions guidance function, the single financial guidance body must provide guidance on other sources of retirement income, including housing wealth, to enable members of the public to make fully informed decisions about pensions and retirement income.”

My Lords, we all know that because of the profound changes since pension freedoms were introduced, retirement income decisions have become much more complex. From the age of 55 there are a greater number of options for using the pension pot, including taking the pension as cash, keeping the fund invested or purchasing an annuity. Accordingly, I welcome the broad drafting in this Bill of the objectives and functions of the single financial guidance body and, in particular, the recognition of provision of advice as well as guidance, and the continuation of the vital role played by the Money Advice Service in support of the financial capability strategy.

Financial decision-making is complex and retirees must consider their long-term, not just their short-term, retirement income needs. The SFGB needs to encourage this by ensuring that consumers understand the full range of options available, including the potential role of any housing wealth. Consideration of the potential role of housing wealth is already included in the pensions advice allowance, which allows people to withdraw £500 tax-free from their pension pots on up to three occasions, to pay for financial advice on their retirement. I welcome that inclusion and think it should be extended.

This means that pension income and the value of housing equity are considered alongside one another. Because some people will feel unable to afford, or be unwilling to pay for, such advice, it is crucial that free impartial guidance is available through the SFGB. The Equity Release Council’s White Paper, Equity Release Rebooted, estimates that over-55s in England possess about £1.8 trillion in housing wealth, and that is expected to double to £3.6 trillion by 2036. Meanwhile, the average value of a defined contribution pension in 2012-14 was £30,300. Research by the Equity Release Council estimates that while the average 55 to 64 year-old should have a pension pot of £123,000, they may only have an average of £30,200, indicating that a likely future need for supplementary retirement income is there, such as from housing wealth.

I would want not to push people into equity release but to look holistically at their assets. In one important area affecting retirement assets, the FCA’s prediction means that approximately 2.6 million interest-only mortgages will reach maturity over the next 30 years, with estimates that 48% of borrowers may not have enough money to fully repay their loan. It is not surprising that statistics from the council’s spring 2017 market report indicated that the use of property wealth to fund lifestyle and health in old age is growing rapidly, and is likely to continue to grow in the coming years.

In 2013, Demos estimated that the over-60s were holding unmortgaged housing wealth of £1.23 trillion; that figure would be significantly higher now. The Aviva Real Retirement Report suggested in 2016 that 46% of homeowners aged over 45— approximately 6 million households—see property as a key part of their retirement income planning, increasing to 58% among 45 to 54-year-olds. This is borne out by the Equity Release Council seeing a year-on-year equity release lending growth of £342 million. The average amount lent under an equity release policy during the second half of 2016 was very high, at £92,376 for lump-sum plans and £54,584 through drawdown plans, with an additional £37,751 reserved for future use.

I share the view of Age UK and many commentators that a saver withdrawing their pension pot should receive guidance, including on housing wealth, by default. But since that is the subject of a later amendment, I shall not discuss it any further here. In summary, as part of this wider landscape of helping people to preserve their lifestyles and well-being in retirement, a consideration of the important role of housing wealth should be an explicit part of the advice envelope proffered by the new body. I hope that that might be acceptable. I beg to move.

I support this amendment from my noble friend Lady Greengross because, as she has outlined, a lot of people have the majority of their wealth tied up in their property. The current equity release schemes are much more flexible than they used to be and contain a variety of safeguards. The Equity Release Council’s statement of principle, by which all the council members must abide, mandates that all equity release customers must receive independent financial advice. Can the Minister clarify whether all equity release schemes will fall under the FCA? I understand that currently it is only those from members who are part of the Equity Release Council, which means that we will potentially have twin-track standards going on for the customer.

The requirement for a solicitor to sign off the arrangement becomes particularly important when we look at the issues around mental capacity and coercion. When I was at the Equity Release Council’s annual meeting, I was quite shocked to hear from one person there who had been negotiating equity release with a client. She had a suspicion that something did not quite seem right and decided to visit the client without the client’s son present, at which point the client said, “I don’t really want to do this at all. My son’s pushing me to do it”. She had the sense to say, “That’s very simple. I am refusing the equity release, and I will write to you”, and she tore up the forms there and then.

The difficulty that we face all the time is that people get coerced and pressured by their family. There is a lot of evidence of that. It is extremely difficult to detect, and it is that one-to-one encounter with the client that gives the gut feeling that something is not quite right. When the person who is managing or selling the scheme acts on that gut feeling, they will reveal if there has been a problem. By having an independent solicitor to advise, we are building in the safeguard of somebody else looking at it, being able to assess the client and having some experience of assessing capacity for that decision at that time, which is what is required under the Mental Capacity Act. That will also allow people who are depressed or have fluctuating capacity to be detected. Somebody from the finance sector may have very little true training. Although the Equity Release Council is addressing vulnerability very well, I am concerned that in some of the schemes that are not part of the council the people dealing with them do not understand that the prerequisite for offering the product is to have separate legal representation.

Has there been any consideration of exit charges and their appropriateness and of whether the transparency of scheme exit charges will fall under the new guidance and will therefore be transparent and comparable? There can be a problem if somebody signs up to one of these schemes, circumstances change and they wish to withdraw from the scheme; in the past they have been hit by fairly punitive exit charges. I would be concerned if that oversight is not rolled up into the new body.

My Lords, I am strongly in favour of this amendment, which picks up on an issue addressed earlier by the noble Baroness, Lady Altmann. It is that the world we live in is far more complex than the one that provided the framework when these original bodies, which are now being brought into one, were set in place. We need that revision for this single body to encompass the whole of the arena of life as it is today.

The noble Baroness, Lady Greengross, was very clear that for many people, the overwhelming majority of their wealth and assets is in their home, that using that as part of their support for their old age may well be a strategy they want to pursue, and that they cannot consider a pension without looking at that issue with the same kind of clarity and without looking at the situation as whole.

I have personal experience of this. I have an elderly family friend who is considering equity release or some similar way to use the wealth embedded in her home. I started to look at the various websites and at the products that are available. Noble Lords will be delighted to know that this is apparently the golden age of equity release, which is increasing at the rate of 28% per year. The websites are exceedingly seductive. The comparison sites compare one product to another, but none of them exposes the real issues of concern or the questions one should be asking about whether the product is appropriate. It is also easy to find a way to access that equity without being in a regulated environment. Recognising that, equity release is for some people entirely appropriate but for many it is entirely inappropriate, and advice is critical.

If people are not signposted and sent through a guidance mechanism to get that financial advice, it seems to me they are in very murky waters. It takes a very sophisticated financial expert to work their way through this. It makes pensions look simple, and I hope very much that the Government will take on board and make use of this excellent amendment.

My Lords, this is an interesting amendment. I believe that it is possible for the noble Baroness to achieve what she wants under the terms of the Bill as it stands, but that is not entirely clear and not quite for the reasons set down in the amendment. The amendment says:

“As part of its pensions guidance function, the single financial guidance body must provide”,

et cetera. Clause 2(4) says that the “pensions guidance function” under Clause 2(1)(a) is,

“to provide, to members of the public, information and guidance on matters relating to occupational and personal pensions”.

I do not think that equity release falls within that definition. There is a separate issue as to whether it would fall within Clause 3, which says:

“As part of its pensions guidance function, the single financial guidance body must provide information and guidance”,

et cetera, but that is to do with,

“flexible benefits that may be provided to the member or survivor”.

It seems to me, on a straightforward reading of the Bill, that it would not be possible to use the pensions guidance function strand of the new body, but there seems absolutely no reason why the money guidance function could not be used for that purpose. That would be a potential quarrel I would have. The Minister may say that interpretation is too restrictive and not right, but I do not think it would preclude the noble Baroness achieving what she wants. It seems to me the money guidance function should enable guidance to be provided on assets including on equity release.

The noble Baroness, Lady Kramer, raised the question of whether the FCA regulates all these schemes. I am advised that it probably does not, but obviously there is an issue there and perhaps the Minister would respond to that. We can support the thrust of this, because I think it achieves what the noble Baroness wants, but not quite, as I understand it, in the terms of the amendment, because of the other functions in the Bill.

My Lords, I begin by thanking the noble Baroness, Lady Greengross, for her amendment, which seeks to add an additional requirement to Clause 3. She has a formidable reputation for campaigning on behalf of those of above average age. For as long as I have known her, she has taken a particular interest in housing, so there is a lot of force behind her amendment.

Clause 3 specifies that as part of its pensions guidance function, the single financial guidance body must provide information and guidance to help a member of a pension scheme make decisions about the options open to them as a result of the pension freedoms. This requirement replaces the current duty on the Secretary of State for the DWP to take steps to ensure that people have access to guidance on the pension freedoms. It ensures that the single financial guidance body will continue to meet the guidance guarantee made by the Government when they introduced the pension freedoms legislation back in 2015.

In its recently published interim report on the review of the retirement income market, the Financial Conduct Authority identified some emerging issues. For example, the review found that draw-down of defined contribution pots is becoming much more popular, and accessing pension pots has become the “new norm”. The FCA is now working with the Treasury, the DWP and other stakeholders to fully understand all the emerging themes and to develop ways in which any issues can be addressed. Without reopening some of the earlier debates, that shows the FCA is able to respond to concerns about consumer interests.

At Second Reading the noble Baroness raised questions about the adequacy of saving into a pension scheme at the levels required by automatic enrolment. The amendment she proposes would make it a statutory requirement for the body to provide guidance on other sources of retirement income, including housing wealth. While I agree with her that it is important that people plan for retirement, no matter what they age they are, and that they consider all their retirement income options, I hope to persuade her that her amendment is not necessary.

As part of its pensions guidance and money guidance functions, the body will provide general information and guidance to members of the public about the benefits of saving towards retirement, and the range of products available to provide income in retirement, including the products that the noble Baroness mentioned in her speech. I think the noble Lord, Lord McKenzie, came up with the answer before me: these services are already provided by the Money Advice Service and the Pensions Advisory Service. For example, the MAS website has information on what equity release is and on other products, such as home reversion plans. In establishing the single financial guidance body, the information and guidance about sources of retirement income that are currently spread across all three existing bodies will continue to be delivered but will be much more joined up—for example, there will be just one website instead of three—making it easier for people to access and consider in the round. That will also make it easier for the new body to assess any gaps in the provision, quality or impartiality of the information and guidance available.

Reverting to the debate that we had before the dinner break, the body will not provide advice on specific products. Its role is to provide general information and guidance on the options open to people so that they can make their own more informed financial decisions. It is not in the remit of the body to provide financial advice. In some instances, though—this was touched on during our debate—it may be that the body would need to refer an individual to an independent financial adviser, who would be able to advise them which products were the most suitable in their circumstances; I think that is what the noble Baroness, Lady Kramer, was implying. That in itself is a helpful service; we know that often, people are reluctant to seek financial advice or unsure of where to go. The body and its partners can play a role in breaking down those barriers, enabling people to understand when it will be beneficial or necessary for them to seek financial advice.

Housing wealth, as the noble Baroness knows better than anyone, is a complex area. Equity release schemes, as an example, may be a suitable option for some, but it is important that people are made aware of the associated risks. The FCA’s ageing population study, to be published later this year, will consider how lending in retirement can be made to work better for older consumers—again, evidence that the FCA is conscious of its responsibility to consumers. That study will consider product innovation and building upon existing industry initiatives to facilitate mortgage lending to older consumers. The Government are clear that anyone considering equity release should seek independent financial advice to ensure that the product is appropriate to their individual circumstances.

The noble Baroness, Lady Finlay, raised a number of issues. I may have to write to her about the transparency of exit charges. In a nutshell, though, so far as equity release is concerned, the FCA, as I think she said, has responsibility for the regulation of equity release products and advice on these. The Equity Release Council is the industry body for the sector and sets out rules and guidance that all members have to comply with. All customers must receive independent legal advice before taking out an equity release product. I hope that addresses some of the issues the noble Baroness raised about undue pressure being exercised by family members with an interest. The borrower has to provide a written suitability report, and the FCA requires the borrower to be provided with a “key facts” illustration for each product. Independent solicitors must also verify understanding before proceeding, and the customer must signal receipt and acceptance of the written suitability report. That report explains why they believe that equity release is suitable and why a particular product is being recommended to that customer. I think the noble Baroness raised the issue that people do not have to get regulated advice. I would like to reflect on that and perhaps drop her a line.

So while the body may provide general information on these schemes, that is an example where it would be best placed to make people aware that they should be speaking to regulated advisers, and signpost them to the appropriate place. As I explained, the body is required to provide guidance to replace the pension guidance guarantee. That is because we want to ensure that the move to a single body in no way reduces the guidance on offer for those who wish to consider exercising their pension flexibilities.

To conclude, the SFGB’s money guidance and pensions guidance functions already enable it to provide people with information and guidance on retirement planning, saving in a pension scheme, different sources of retirement income and, where appropriate, to signpost them to regulated advisers. These are all services which MAS and TPAS deliver now, and the body will continue to do that but in a more joined-up way for customers.

Against that background, I ask the noble Baroness to withdraw her amendment.

My Lords, first, I thank noble Lords who supported me, at least in principle: the noble Baronesses, Lady Kramer and Lady Finlay, and, in particular, the noble Lord, Lord McKenzie. I do not mind how this happens and I am aware, having done a lot of work over the years on abuse of older people, that there are extreme dangers in people being given the wrong advice, particularly adult family and children. I just want to be sure that older people are being pointed in a direction that will be helpful to them. This is so complex and it is very important that we get it right; I thank the Minister for his obvious commitment to that. As long as it works, I do not mind. I just want to be sure that older people are getting the range of advice that they need. That includes their being sure that they are going along a track that is in their interests in the long term, so that this complicated system of new ways of using your pension is put into action wisely for those who cannot afford the sort of private advice that many of us here would not dream of acting without. I thank the Minister for his understanding of what I am getting at. I am happy to withdraw the amendment; I just hope that we achieve the goals that I think we all share. I beg leave to withdraw the amendment.

Amendment 42A withdrawn.

Amendment 42B

Moved by

42B: Clause 3, page 3, line 15, at end insert—

“( ) As part of its pensions guidance function, the single financial guidance body must make provision to ensure that members of the public receive the information and guidance set out in subsection (1) through either—(a) the single financial guidance body, or(b) regulated advice from a financial advisor,before accessing defined contribution or money purchase pension benefits.”

My Lords, Amendment 42B is in my name and that of the noble Baroness, Lady Altmann, for whose support I am extremely grateful. I will speak also to Amendment 42C. Amendment 42B is very simple. It provides that, before accessing pension pots, people must have received the appropriate information and guidance either from the SFGB or from a regulated adviser. I touched on the need for this in my earlier remarks on Amendment 27A, and I am sure that I do not need to remind the Committee that take-up of advice on pensions is very low and that financial capability and understanding are also at very low levels. Conversely, financial misunderstanding is at very high levels. This augurs badly for sensible pension decisions.

The FCA’s July interim report on retirement outcomes shows that accessing pension pots early has become the new norm under pension freedoms, as the noble Lord, Lord Young, noted a moment ago, with 72% of pensions accessed by people aged under 65. Most of these people withdrew lump sums. Half withdrew the full value of their pension. The FCA says that it found no evidence of people squandering their pension savings, but expressed concern about why people are shifting their savings out of pensions. Over half of the fully withdrawn pensions were not spent but were transferred into other savings or investments. This suggests, according to the FCA, a mistrust of pensions, and raises the possibility or even probability of new risks, such as paying too much tax and missing out on investment growth and higher retirement income. The FCA also found that most consumers chose the path of least resistance; they usually accepted the draw-down option offered by their existing pension provider without shopping around or even using the information provided by their own pension provider. That is perhaps entirely unsurprising, given the very low levels of take-up of advice and the high levels of ignorance and misunderstanding. It may be unsurprising, but it is also worrying.

The FCA’s Retirement Outcomes Review is the fifth such investigation into the UK’s retirement market. All five investigations have found much the same thing: they have consistently identified DC pension customers’ poor awareness of their options and the distrust, disinclination or inertia that can so easily lead to poor decisions. It is not just poor decisions that are a concern but scams and frauds as well. Without taking proper advice, vulnerability to scams and frauds increases. The FT reported earlier this year that losses from pension scams in March this year alone had risen to a record high of £8 million. Victims of what they described as “liberation fraud” were typically conned into placing their pension funds into investments that do not exist or are illiquid or incapable of delivering the promised returns. Victims are not usually warned about tax charges in liberating their pension funds before the age of 55, which can wipe out half the value of their savings. Being better informed and advised will not, of course, prevent all poor decisions or prevent all scams and frauds, but it is a powerful safeguard against these things. It is not the same as just having information advice out there somewhere; it means accessing and using this information and advice, which is what our Amendment 42B would do. It requires people, before they can access their pension pots, to have received information and guidance either through the SFGB or regulated advisers—the same kind of controls that currently apply to taking out a mortgage. The amendment would make that work for many more people.

I turn briefly to deal with Amendment 42C, which would simply require the SFGB to report annually on the levels of usage of pensions guidance and regulated financial advice by those accessing their pension pots. As I explained earlier, the quality of guides is very high but the take-up is very low. We need to know how well the SFGB is doing in fixing this problem and have the SFGB publish the data. We need to see how successful it is, for example, in raising the level of take-up from the current extremely low 7%. That is a vital way in which to hold the new body to account and what the amendment does—although, having thought about it a little more, I accept that the SFGB may not be the best-placed organisation to do that. The Minister, from whom I gratefully take correction, is nodding as I say that. But I hope that the Minister will give careful and sympathetic consideration to Amendment 42B in particular. I beg to move.

My Lords, I support the amendment, to which I have added my name. It would make the take-up of guidance the default option or a mandatory option for anyone who does not have independent, regulated financial advice. We are taking time and spending so much effort setting up a body that is designed to help to guide and inform the public; this amendment would help to ensure that the public actually get the benefit of it.

Clause 5(1) gives the Secretary of State powers to issue,

“directions to the single financial guidance body”,

to do this. Therefore, before anyone could transfer or access their pension savings, they would have received this guidance, which will be set up specifically to make sure they understand the risks before they make any decisions about their pension. Someone would also explain the tax consequences and the potential long-term dangers of giving up a pension because, once they have given it up, they cannot get it back. As the noble Lord, Lord Sharkey, just remarked, the recent FCA research shows that there are some people who are transferring money out of their pension and just putting it into a cash account or a different investment because, clearly, they do not understand the benefits of keeping it in a pension. Having somebody explaining it to them first would be very much the aim of this particular body.

I wholly support the pension freedoms that the Government have introduced, but they are introducing them into a landscape where, for the past few decades, people were encouraged to believe that they did not really need to understand or engage with pensions, because all the decisions were taken for them. For most people, they were in a default fund on their savings journey and then, when they took the money later on, they were put into an annuity and that was it. They did not really need to understand what any options were because they did not really have many options. Unfortunately, people did not understand how annuities worked either. If we make this guidance a default or mandatory option then we make sure that we are protecting the public as well as giving them the freedoms. It is right that we give them the opportunity to make decisions that will suit them, but we have to make sure that we give them the opportunity of making properly informed decisions and as fair a chance as possible of making the freedoms work for them.

Providers too often want people to make a decision when they are too young, for example. It is not just in the freedoms landscape that people are taking their pensions early; the majority of people were buying annuities well before the age of 65 under the previous system, too. I hope that the Government will seriously consider that the 7% take-up rate for Pension Wise is woefully low—we need to find a way to increase that and we need to make sure that we protect the public and give them the fairest chance of making the freedoms work. Pension Wise or the new body could, for example, issue vouchers for everybody who is coming to the stage at which they might need to make a decision about their pension. They could be sent a voucher for a free guidance session. The financial guidance body, perhaps with the FCA and with providers, can work on ways of boosting take-up, but it is definitely something that would make the work that we are doing in this Committee so much more valuable around the country. I support this amendment.

My Lords, we support this amendment. We think that it is a good, strong, robust amendment. It takes us back to the introduction of pension freedoms which, I am afraid, were done rather precipitately and without the groundwork being properly laid. This was a point that my noble friend made at the time but it fell on stony ground.

I was going to ask what the take-up of regulated advice or guidance was at the moment but the noble Baroness has given us the 7% figure for Pension Wise. If one is heading for a much higher percentage, it raises the question of what the resource implications of that would be. I do not know if any groundwork has been done—it is not a reason for not doing it. These are important situations. My noble friend has prompted me about the idea of an MoT at the age of 50 as part of the process to get people to focus on their upcoming pensions. We are certainly happy to support this. I am interested to hear what the Minister has to say on what the problems with it might be. Whatever they are, I would hope that we could overcome them, because this could make a very significant difference to the pensions landscape.

I thank all those who have taken part in this debate for these amendments on the specifics of the pensions guidance function.

Amendment 42B, tabled by the noble Lord, Lord Sharkey, and my noble friend Lady Altmann, seeks to ensure that people have taken guidance or regulated advice before accessing their defined contribution pension pot. The pension flexibilities introduced in 2015, which a number of noble Lords who have taken part in the debate have spoken about, gave people the freedom and choice to decide how to access their defined contribution pension savings. The flexibilities give people control of their money and allow them to make choices which tailor their approach to their own particular circumstances. As has been mentioned in the debate, at the point of introduction, this provision was not there.

Since 2015, we have provided Pension Wise as a source of free and impartial guidance to help people make more informed decisions. There have been over 5.3 million visits to the Pension Wise website since launch and there have been more than 154,000 appointments. Customer satisfaction with Pension Wise remains very high. In 2015-16, Pension Wise delivered 61,000 guidance appointments. In 2016-17, this had increased to 66,000. By the end of July this year, there had already been nearly 27,000 appointments. This clearly demonstrates that the work we and the industry are doing to promote Pension Wise guidance is working.

It is important that people know that help is available when making important decisions about their pensions. Clause 3 ensures that the Government’s guidance guarantee will continue to be met by the new body. It is also important, however, that people have the freedom to choose sources of information, guidance or regulated advice that are right for them before making a decision about their pensions. It is not immediately clear that such an intervention at this point in the journey would be effective in changing people’s behaviour, and it might serve only to frustrate people who have already made the decision about accessing their money. As has been mentioned, such an approach would not be without cost, which would fall on the firms that pay the levy. Additional costs would need to be justified with clear benefits in terms of better outcomes for people.

Pension schemes and providers are required by law to signpost people to Pension Wise guidance. We know that this is working: pension providers are consistently cited by around half of the people who contact Pension Wise as the place they first heard of the advice. We are working with providers to ensure we continuously improve the effectiveness of signposting. We are also working with a number of employers, locally and nationally, to promote the Pension Wise service.

The FCA’s Retirement Outcomes Review: Interim Report found that take-up of Pension Wise was low. However, it also highlighted a number of mitigating contextual factors which should be considered. It found that 53% of pots had been fully withdrawn, but that the vast majority of these were small pots—60% were smaller than £10,000 and 90% were smaller than £30,000. It also found that 94% of people making full withdrawals had other sources of retirement income on top of the state pension, and so the FCA did not see this as evidence of people squandering their pension savings. Lastly, some people who did not use Pension Wise decided that financial advice was the right route for them. Between October 2015 and September 2016, sales to people who took regulated financial advice accounted for 37% of annuity sales and 70% of draw-down sales.

Having said all that, I find this all quite difficult. As noble Lords have suggested during this debate, it may well be the case that people could benefit from using more guidance. However, the landscape is somewhat complex and bears further scrutiny. I am not persuaded that the amendment in front of us is the right way to go. I listened with interest to a number of the alternative suggestions that were made.

I return to my script. The interim report to which I referred a moment ago has raised a number of issues, and the FCA has proposed a number of remedies. It has invited views and is actively engaging with government, regulators, industry and consumer bodies before delivering its final report in the first half of 2018. The right way forward may be to wait for the full report of the FCA and consider its recommendations, which may pick up some of the points made in this debate, in light of all of the information and evidence. This will ensure that we make the right interventions at the right time, which help people make the right choices for their circumstances.

Amendment 42C—which I was never attracted to—tabled by the noble Lord, Lord Sharkey, would require the new body to report annually on the usage of pension guidance and regulated financial advice by members of the public accessing their pension pots. The noble Lord made it clear that, on reflection, he thought that this might not be the best way to proceed, so it might be for the interest of the House if I skip the next four paragraphs of my remarks, as I think that the noble Lord indicated that this may not be the best way to go forward. There is already a robust process in place in this area, and we should not seek to duplicate work which is already in train and well advanced. The FCA has already identified a range of indicators that are intended to give a snapshot of the market for financial advice and establish a baseline.

I think that I have dealt with the points that have been raised in the debate; if I have not, I would like to write on them. However, against the background of what I have just said, I hope that the noble Lord may feel able to withdraw his amendment.

My Lords, I thank the noble Baroness, Lady Altmann, and the noble Lord, Lord McKenzie, for their contributions to the debate. In a way, I am not quite certain where this leaves us. I listened quite carefully to what the Minister said, and I can understand the merit in having this completely underworked, over-resourced FCA carry out yet another inquiry in its spare time into this again. However, I can also understand the merits of doing something fairly concrete, fairly soon, about what I think we all agree is a problem. I am also puzzled about why it is quite so difficult, in the sense that this is what happens when you take out a mortgage. It seems to me perfectly reasonable to suggest this is also what should happen when you access your pension.

In passing, I should say that, first, I am quite grateful for the Minister’s speedy dispatch of the second amendment—I will not dwell on that—but I disagree with him when he talks about Pension Wise working. That is not right or accurate; it is misleading. A more accurate view is that it works exceptionally well for the very small number of people who use it. That is a better statement than the blanket statement that Pension Wise is working. That is one of the roots of the problems that we face here.

In the face of the lack of absolute enthusiasm for the first amendment, I will withdraw it. However, we should continue the conversation about this and not just wait for the FCA to opine. There is perhaps room for a more round-table general discussion about what advances we can make without waiting for whenever—shortly or in due course—the FCA will publish its findings. However, in the meantime, I beg leave to withdraw.

Amendment 42B withdrawn.

Amendment 42C not moved.

Amendment 42D

Moved by

42D: Clause 3, page 3, line 25, at end insert—

“( ) As part of its pensions guidance function, the single financial guidance body must provide information and guidance regarding unsolicited communications and make provision to ensure that members of the public receive this information and guidance before taking any action following an unsolicited communication, such as transferring an occupational or personal pension to an unregulated scheme.”

My Lords, I will also speak to Amendment 42E. Effectively, these amendments would ensure that anyone who received an unsolicited approach about their pension would have to go to Pension Wise before they were permitted to do anything or receive the guidance if they did not have an independent financial adviser.

I admit that this amendment is the result of the fact that we were unable to find a way to ban the cold calling that leads to the scams that we are trying to deal with here in the Bill. I also thank the Minister for the recent statement from the department that it has decided that it will ban cold calling for pensions. However, I hope your Lordships will agree that this seems like an ideal legislative vehicle in which to carry out the Government’s wish to ban cold calling and to protect the public effectively. Banning cold calling effectively protects members of the public from scams. Scams that result in people losing much or all of their pension are almost always the result of an unsolicited approach. So this is a roundabout way of trying to achieve something which is clearly in the public interest and which the Government themselves would like to do.

We could require people who had an unsolicited approach either to have a financial adviser to ensure that what they were doing was right or to have a conversation with our guidance service to assess what they were about to do. Presumably, the first question from whoever was speaking to them from the guidance service would be, “Is this the result of an unsolicited approach—a cold call or an email from someone you did not know, or a text or whatever?”. At that point, it would be possible to protect the person before they could sign away their pension in a scam. There is a classic trick of rushing people into parting with their money or signing on the dotted line by saying that it is a limited offer which is available only today or is about to run out. That would not be able to happen if somebody had had to make an appointment with Pension Wise or the guidance body and had discussed it first.

I hope that we can discuss this issue. If this is not the best way of achieving the aim, I hope that the Government will consider introducing into this Bill another method of achieving it so that we can start the ball rolling on protecting the public and getting rid of cold calls. We have done that for mortgages. I know that the Minister has said that it is a complex matter, but I would be very grateful if she could explain the complexity which means that we should pass up this opportunity to do something that the Government themselves want to do when no other legislative vehicle in which to do so is in sight for the next couple of years. I beg to move.

My Lords, I had not intended to say very much but, after discussing this issue with the noble Baroness, Lady Altmann, earlier, I thought that I should say a few words now. As I said at Second Reading, my interest is very much in Part 2 of the Bill—an area that is home territory for me and on which I have something to say. My drafting eye was caught by Amendment 42E. I feel that having a decent definition of “unsolicited communication” would be very valuable in legislative terms as we go through this process. It applies not just in this area, which has been very eloquently explained by the noble Baroness; it applies also in Part 2 and elsewhere. Therefore, I feel that it is worth debating it now.

As I see the definition, even simple things such as a letter or some sort of Facebook communication would not fall within it, so I simply say that it is worth having a good definition so that we know what a cold call is. It is not just a telephone call. I receive an awful lot of Part 2-type telephone calls at home, admittedly in Scotland, every single lunchtime, but there are other methods of cold calling. Certainly I have been shown very worrying letters by local vulnerable people in Scotland suggesting that they do something urgently about their pensions and so on.

Therefore, I think that we need that definition, and I strongly support the thinking behind these two amendments. I would be very happy to join a meeting to talk about how one might tweak definitions and whether a definition is needed here or elsewhere in the Bill, but I think that it would be very helpful to have a clear idea of what a cold call is.

My Lords, has the definition of cold calling been sought from the trading standards group of scambassadors who have been looking at all types of scams? It would be incredibly helpful to have that definition. I also wonder whether this amendment is too narrow as written. However, I congratulate the noble Baroness on using this opportunity to do something that desperately needs to be done. The amount of scamming is a scandal.

My Lords, I refer to my Amendment 73, which attempts to define cold calling using many more words. That was in the context of banning cold calls for claims management companies. I do not claim that this is the correct version for cold calling.

My Lords, I was pleased to add my name to the amendments in the name of the noble Baroness, Lady Altmann. Both amendments address the problem of cold calling and pensions. I would, like the noble Baroness, have preferred an outright ban on cold calling, just as I would like an outright ban on cold calling for the benefit of debt management companies and for claims management companies. We can deal with banning cold calling for claims management companies later in the Bill, as the noble Baroness just pointed out, and she and I have both tabled amendments to do exactly that. Regrettably, banning for pensions and debt management companies is outside the scope of the Bill.

The amendments before us, therefore, cannot and do not go that far, but they do offer a pretty good work-around. They would do two things, as the noble Baroness has explained. They would require the SFGB to provide information and guidance on cold calling. They would also require people to have received this information and guidance before taking any action following a cold call.

Noble Lords have discussed cold calling on many occasions in this Chamber. On every occasion there has been universal dissatisfaction with the process and universal recognition that it is a menace, yet it still goes on. There has been a 180% increase in the past 10 months alone. There are now 2.6 million calls every month. This is an omnipresent menace. But there is no cold calling for mortgages. We banned that. Successive Governments have never got around to banning cold calling for pensions, for debt management or claims management and I know that the Government have promised, yet again, to ban cold calling for pensions. But, yet again, it is a promise without a delivery date. It is a promise that has no obvious legislative vehicle except this one.

I still do not understand why the Government are dragging their heels over this or over debt management and claims management cold calling either. I acknowledge that there will be complexities in devising the details of any ban, but it is surely not beyond the ability of the Government to deal with it speedily if they assign the right priority and the right resources to it. In any case, I remind the Minister that we have already held out in these debates the possibility of an enabling clause in the Bill with the details to follow later in secondary legislation. We have had no response to that—all rather disappointing and mystifying. In the absence of any willingness on the part of the Government to actually do anything in the Bill, these amendments show how progress can be made. I very much hope that the Minister will respond positively.

My Lords, we support the thrust of the amendment, but there is just a query on its precise ramifications which perhaps I may raise now. The amendment states:

“As part of its pensions guidance function, the single financial guidance body must provide information and guidance regarding unsolicited communications and make provision to ensure that members of the public receive this information and guidance before taking any action following an unsolicited communication”.

I am not quite sure how that could be caused to happen; that is, where the knowledge of an unsolicited communication is and how that feeds through to encourage people not to take any action until they have considered these matters. When the Minister winds up, she might expand a little on that.

I certainly support what the amendment is trying to achieve. The idea of taking a power in the Bill to seek to move forward more quickly once it has left this House is certainly worth considering. But I guess that my key message is to the Government. Their response to the consultation document was robust and covered not only cold calling, but we have this equivocation as to when it is going to happen. I find it difficult to understand, given everything that is going on with Brexit, which is changing the world, why we cannot move swiftly to introduce provisions in a vital area where there is clear consumer detriment that is destroying many people’s lives. It would be helpful to have that clarification in the wind-up, and subject to that we support the amendment.

Perhaps I may give an indication of my support in principle for banning cold calling of every type by saying that I have given up my landline because so many calls now are nuisance calls. They are about pensions and all sorts of other things. Apparently I have more accidents in my car than hot lunches. We have all had enough of it and this is an issue which is close to the hearts of many, if not all, noble Lords.

These amendments seek, under the pensions guidance function, to give the single financial guidance body a duty to provide information and guidance to members of the public about unsolicited communications. I should like to start by thanking my noble friend and all noble Lords for their contributions to this topic at Second Reading and during the first day of Committee. I really do understand that pension scams, and particularly unsolicited communications, have to be dealt with. As I have sought to reassure noble Lords, the Government also take the threat of pension scams extremely seriously and have committed to taking action to tackle the issue. Noble Lords have already made reference to the fact that last month the Government published their response to the consultation on pension scams, and in that document the Government underlined their commitment to bring forward a package of measures designed to tackle such scams.

As noble Lords will be aware, the Government intend to introduce legislation in a finance Bill later this year to tighten the rules in order to stop scammers opening fraudulent pension schemes. Tougher measures to prevent the transfer of money from an occupational pension scheme into a fraudulent one will be introduced following the rollout of the master trust authorisation regime in 2018-19. The Pensions Regulator will be given new supervisory measures to authorise and deauthorise master trusts according to strict governance standards, and the Government will consider how the legislation to limit transfers should align with these measures.

On pensions cold calling, which is the subject of my noble friend’s amendment, the Government’s consultation response committed to bringing forward legislation when parliamentary time allows. I really would like to reassure noble Lords that work is under way to ensure that the ban, which will include emails and text messages, is robust. We will continue to work with stakeholders and those with an interest in this space as work progresses. We hope to be able to outline more about our plans for engagement on Report. I say that, but I also ought to make it clear that, as the noble Lord, Lord Sharkey, has said, while we would love to do this overnight, the truth is that this is not in the scope of the Bill. I wish noble Lords could be flies on the wall at some of the meetings I have had with officials from the DWP and the Treasury, and also with ministerial colleagues including the Pensions Minister. We have been searching every which way to find an opportunity to introduce this legislation. We will not be overcome. We are determined to do it as soon as is practically possible. Indeed, it was not until I became a Minister that I realised how hard it is. It is easier for me now to understand, even after nearly 20 years in your Lordships’ House, how difficult it is to get some of these things done in practice.

I hope my strength of feeling is coming across: we are genuinely working on this as we speak. We are not dragging our heels. There is no lack of willingness. We are absolutely clear that we want to take this forward, but at the same time we need to be really careful about how the legislation is drafted—for example, by being careful not to exclude legitimate transactions and so on. I have the result of the consultation in front of me, which sets out in some detail the reasons why we have to be a little bit careful about how this is drafted, but I assure noble Lords that if it was in scope it would be in this Bill. Unfortunately, it is not in scope and we have been given clear instructions on that by all the powers that be who advise us on drafting of legislation in Parliament.

I turn to the amendment tabled by noble Lords on the pensions guidance function. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions. The noble Lords’ amendment would see the single financial guidance body given a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

I will take each part of the amendment in turn and will first talk to the duty to provide information and guidance on pensions cold calling. As my noble friend and all noble Lords will be aware, information on spotting, avoiding and dealing with scams is currently provided by the Money Advice Service, TPAS and Pension Wise. Information on pensions scams is also available via the Financial Conduct Authority’s and the Pensions Regulator’s websites. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions, but the amendment would give the single financial guidance body a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

Under the new body’s money guidance function, which will allow the body to provide information and guidance to enhance people’s financial capability, the Government would expect the body to continue to provide information of this sort. However, the Government believe that the new body will be best placed to determine exactly what information and guidance it provides. It will have the ability to assess the landscape and see what information and guidance is already out there. I agree that information on avoiding financial scams is vital, and, as I have already said, the Government expect that the body will continue the existing services’ good work in this area, but I do not agree that it is necessary to specify this in legislation.

On the second part of Amendment 42D, which states that the body should,

“make provision to ensure that members of the public receive this information and guidance”,

after receiving a cold call, I wholeheartedly agree that members of the public should know where they can go to seek information and guidance if they need it. Of course, the Government would expect that any information or guidance that the body provides is as accessible as possible. However, the amendment would not help to achieve this. In practice, it is not possible or reasonable for the body to be required to ensure—the noble Lord, Lord McKenzie, has said it is quite difficult—that people will come to it for help after receiving a cold call. Having said that, I heard an example of this when I was at TPAS. It was absolutely brilliant. It had all been recorded, of course, so one could hear this woman say, “I think I’ve just had a cold call”. Sure enough, this brilliant adviser—the person giving guidance—said, “I’m very sorry to say this sounds very much like a cold call that you should ignore. Well done for calling us, thank you so much”. This is happening daily, as I saw for myself. The body would not know who had received a cold call unless, of course, they went to the service. Even if the industry had access to this information, the body would not have the power to require the industry to ensure that members of the public received information before taking action.

I understand what noble Lords are seeking to achieve with this amendment. However, it would not be helpful to mandate the guidance that the body provides, particularly when there is already a clear expectation that the body should provide it, or to make the body responsible for ensuring that people seek out this guidance. I therefore ask my noble friend to withdraw the amendment.

I thank my noble friend for her answer and for her passion at the beginning of her response. She clearly understands the concerns that have been expressed right across the House. Perhaps we in this House can help to accelerate the process by which we could achieve what she is struggling at the moment to achieve. Let me first respond to the question of the noble Lord, Lord McKenzie, and try to explain that these amendments are actually linked to Amendment 42B. If you have mandatory guidance that has to be taken before anybody can make a decision to access or transfer their pension, then Amendments 42D and 42E allow that to apply to a cold call.

As the noble Lord rightly pointed out, Pension Wise, or the financial guidance body itself, would not know in advance who had had a cold call and therefore needed to come, but if guidance were mandatory the guidance body would have a duty, as specified in this amendment, to ensure that anyone who had a cold call received advice or came for guidance before they were permitted to transfer the money. The problem with the scams comes when people transfer money from their existing pension elsewhere. So, as I say, the mandatory default guidance in Amendment 42B links in to Amendments 42D and 42E to try to capture the public protection that we wish to achieve.

It is, however, important to specify that this body must inform the public and provide adequate information about the risks of unsolicited approaches about pensions and about guidance and so on, because the body might think, “Well, if there is another organisation dealing with scams—we have Project Scorpion and Project Bloom, different initiatives going on around government—we do not need to be so cautious about informing the public”. This is the place where we want to make sure that the public is informed about pensions. Having said that, it seems that if we can get the ban on cold calling into the Bill at this very time, perhaps by changing the title of the Bill, or in some other way, with support across the House, working together to find a way that would be acceptable, we would all, including my noble friend, be much more comfortable with the protection we are offering the public. In the meantime, I beg leave to withdraw the amendment.

Amendment 42D withdrawn.

Amendment 42E not moved.

Clause 3 agreed.

Clause 4: Delegation of functions to delivery partner organisations

Amendments 43 and 44 not moved.

Amendment 45

Moved by

45: Clause 4, page 3, line 46, at end insert—

“( ) When arranging with a primary SGFB delivery partner to carry out on its behalf the debt advice function, the single financial guidance body may contract only with organisations and companies which are established for charitable or not-for-profit purposes.”

My Lords, it is well past my bedtime and I will therefore be very brief. I think I can be. I was going to say that these are two sides of the same coin but there are three amendments. Let us be imaginative and say they are grouped around a common theme, which is again to get on record the idea that the work that is going on either directly or through the SFGB must ensure that the services delivered are free at the point of use. That is the main point of Amendment 45, which restricts the operations to,

“companies which are established for charitable or not-for-profit purposes”.

It may be argued, and I think I would accept, that many companies operate in a way that has different branches and it may be that the particular branch which deals with, for example, debt advice might be a not-for-profit operation. Provided it is understood that the advice is always free, the actual status of the company is probably of a lesser order and I would understand if the Minister were of a mind to mention that in his very brief response.

Amendment 46 deals with how the objective attaching to the SFGB also applies to the overall system, in the sense that it would be perverse if the arrangements were such that the initial interactions with the partners and organisations working with the SFGB were free at the point of use but these were also referring clients to profit-seeking or charging operations. This is primarily a probing amendment but, again, I am looking to make sure that the advice circle is complete by retaining this free-at-the-point-of-use idea.

Amendment 47 picks up the possibility that with regard to the general governance arrangements that are set in place—which the Secretary of State has responsibility for, as we have learned this evening—the FCA may have an involvement but the single financial guidance body certainly has an arrangement for making sure that governance is properly arranged and the level of accountability is appropriate. One might ask why that was necessary but it would be a rhetorical question and I do not expect a lengthy response. Given that the delivery partners are being supervised by the FCA in most cases, and certainly where clients’ money is concerned, it is a requirement that they be authorised by the FCA. Given that most of these are charities and therefore also subject to the regulatory requirements of the Charity Commission, it is unlikely that the SFGB would be in a situation where governance arrangements were falling short of absolutely perfect. Again, reassurance from the Minister would be most welcome. I beg to move.

My Lords, I am grateful to the noble Lord, Lord Stevenson, for moving Amendment 45 and then demolishing it, which saves me the task of so doing. I confirm that we are absolutely clear that any help funded by the new body will be free at the point of use. The difficulty we have with his amendment is that it may be appropriate for the body to enter into arrangements with organisations which provide free-to-client advice but also make a profit elsewhere. He made it clear that as long as it is free at the point of use to the client, he was relaxed. That deals with that amendment.

Turning to Amendment 46, we agree it is important that delivery partners refer members of the public to additional help when they are unable to provide the information themselves. The difficulty with the amendment is that it prevents delivery partners referring members of the public to the most relevant source of help in the first instance. For example, if a member of the public needs legal advice, we do not believe that delivery partners should be obliged, as the amendment requires, to refer that individual back to the SFGB. They should be free to refer that person for appropriate legal advice.

Finally, I may need to write to the noble Lord on Amendment 47. Given the SFGB’s relationship with government, it would be inconsistent with the precedent set by other arm’s-length bodies if the sponsoring department sought to interfere with, or have direct involvement in, the contractual arrangements that the body seeks to enter into. But I assure the noble Lord that as an arm’s-length body the SFGB will be required to comply with government policy on public procurement. The sponsoring department will support the SFGB in dealing effectively with any issues that may arise in the area of delivery partner governance and accountability. If the noble Lord wants more information on that, I would be very happy to drop him a line. Against that background and given the hour, I hope he will be able to withdraw the amendment.

I thank the Minister for his comments and his brevity. Hansard will have an interesting time trying to unscramble all our mixed-up shorthand for the body that is still yet to have a name. I wish we would get a name quickly and then we would not have to worry about “F”, “S”, “G” and “B”, and my teeth falling out. I will read Hansard very carefully, and I am sure that any additional information that might be provided by letter will be most welcome. I beg leave to withdraw the amendment.

Amendment 45 withdrawn.

Amendments 46 and 47 not moved.

Clause 4 agreed.

House resumed.

House adjourned at 10.11 pm.