| Previous Section | Index | Home Page |
Mrs. Jacqui Lait (Beckenham): Like my hon. Friend the Member for Arundel and South Downs (Mr. Flight), I emphasise that new clause 34 is a probing amendment. It is so probing that I managed to forget to include in it the fact that the Occupational Pensions Regulatory Authority should go with the pensions ombudsman.
I thought that it was worth having a debate about the role of the pensions ombudsman in the new structure. It arises because of a constituency case that has raised some complex issues, most of which will be pursued in other ways, but the need to look more closely at the role of the pensions ombudsman was one of the results of that case. I will pursue some of the issues in the Committee that is considering the Child Support, Pensions and Social Security Bill. I emphasise that I tabled the new clause and was interested in it long before I was delighted to take on the pensions spokesman portfolio.
The pensions ombudsman has a good record. Many consumers have been delighted with his decisions, so I emphasise that it is an entirely constitutional legislative issue. It is by no means an attack on his role. There is a debate in the financial world about that role. I do not wish to take part in that debate. He has been so good to so many small consumers that some of the bigger companies have raised issues about him.
Members of pension funds, however, are unlikely to go to the press because they would feel intimidated in doing so. They are not likely to complain publicly. However, I think that complaints have been raised with a number of hon. Members privately. Lawyers are picking up on some of the issues that are emerging. That is where the debate has been in the past. As he has been so successful at resolving many of the easier cases, it is primarily only the complex, and of course the new, cases that remain.
The pensions ombudsman is unique in that he has some judicial powers, one of which is almost equivalent to those of Customs and Excise--he can send in the bailiffs. I am sure that some of the other ombudsmen wish that they had similar powers.
The ombudsman has been criticised over administration and delays. My hon. Friend pointed out that there have been improvements. Last September's annual report showed that fewer cases were waiting at the end of the year. However, we must remember that the poor ombudsman has few staff. He has half a lawyer, one legal adviser, one in-house litigation solicitor and no actuaries. Given that actuaries drive the pensions industry, I should have thought that he needed access to in-house actuarial advice.
I recognise that the pensions ombudsman only looks after occupational pensions. Historically, such pensions have been the prime provider, but life is changing. We have more money purchase and private pension schemes as well as the Government's stakeholder pension. That is where the problem arises. The Financial Services Authority and OPRA, plus two ombudsmen--two different ombudsmen--will have regulatory authority over stakeholder pensions, which points up the absurdity of the present situation.
The Investment and Life Assurance Group pointed out to me the confusion among the bodies that regulate stakeholder pensions. Such pensions are designed for people who earn roughly up to £20,000 a year. With the best will in the world, those are the people who have most need of sensible advice and who may need to have recourse to the regulatory authorities.
The present provision will lead to confused consumers. That is why there is an argument for the pensions ombudsman to come under the umbrella of the FSA in the new set-up. That would make the system simple. Consumers could go to one organisation. That ombudsman would have access to the latest thinking in a structured as opposed to an informal way.
Under the present proposals, the ombudsman is out on a limb, completely independent and without a structural relationship with the FSA. He may hear about best practice and thinking and new forms of help for consumers through the informal net, but he will not do so through the formal structured net, so he is a fairly lonely character in structural terms--robust, but lonely.
The Government must consider whether they are happy that the pensions ombudsman sits outside the FSA. The argument for that, as I understand it, is that the pensions ombudsman deals only with occupational pensions, which are not a financial product in the same way as an insurance policy is. These days, that comes close to deciding how many angels are dancing on the head of a pin. Ordinary consumers, among whom I would count most hon. Members, would not recognise the distinction
between an occupational pension and a financial services product. On those grounds, we have reason to bring the pensions ombudsman within the FSA structure.
In a sense, inertia rules. I feel that there could be a role for the ombudsman within the FSA, and that his relationship with the FSA should at least be more clearly defined. As I said, the matter of who holds responsibility for stakeholder pensions, for example, is very confused, and a clear line of responsibility needs to be established. Another option is to give the pensions ombudsman more power over more pensions products.
Consumers will become confused about pensions, and confused consumers become angry consumers. They will receive little satisfaction from this regulatory system and will be pushed from pillar to post. Moreover, hon. Members will discover that ever more people will visit our advice surgeries or write complex letters to us about pensions. As hon. Members who have dealt with pensions cases will know, constituents often visit us and begin by saying, "It's a long story", before producing several files. We have to help people with pensions complaints to find their way through the pensions maze.
I should hope that the Government will take new clause 34 away and seriously consider whether there is a role for the pensions ombudsman, with more responsibility, outside the structure, or whether he might be better placed within the FSA structure--so that the lives not only of consumers, but of hon. Members might be simplified.
The Economic Secretary to the Treasury (Miss Melanie Johnson):
As the new clauses deal with rather different topics, I shall deal first with new clause 2, and then with the points made on new clause 34.
New clause 2 proposes that certain activities must be the subject of a regulated activities order, to be made under clause 20. Currently, however, the Bill does not specify which activities should or should not be subject to such an order, although, in schedule 2, an indicative list is provided of the types of activities that could be covered. The schedule essentially sets the four corners of the scope of financial regulation in the Bill.
Specifying activities in the Bill would not be appropriate, and it would go against the basic structure that we have tried to establish--which is that the detailed activities to be regulated are to be specified in secondary legislation, so that the scope of regulations may be adapted when necessary to take account of the changing needs of the regulatory climate. When it is proposed to extend the scope of regulation under the Bill, affirmative resolution procedure will apply.
Much of new clause 2 touches on advice being given on general matters, not on particular investments. The draft regulated activities order that was published in February 1999 proposed that, if advice was not being given on particular investments, it should not be caught. Therefore, generic advice given on investing in shares rather
than bonds, for example, would not be a regulated activity, whereas advice to buy shares in a given company would be a regulated activity.
The new clause seems partly to seek to contradict that position, and potentially to bring new matters within the scope of regulation, which is simply not our intention.
Although I appreciate that the hon. Member for Arundel and South Downs (Mr. Flight) said that the new clause was a probing amendment, I hope that I have explained why we do not think that it is the appropriate way to go.
Mr. Flight:
The point of the probing amendment that was debated in Committee was to establish whether the Treasury were proposing to specify in the Bill the various types of investment advice that have developed. I should be grateful if the Minister could answer that.
Miss Johnson:
If we specified them, we would do so in secondary legislation which will require an affirmative resolution. In schedule 2, we have indicated only the types of activity that we think could be covered, rather than tied ourselves down on the matter in primary legislation.
New clause 34, proposed by the hon. Member for Beckenham (Mrs. Lait), deals with dispute resolution in connection with operational pensions. It has been our intention where possible and sensible to remove the scope for overlaps and gaps in the arrangements connected with all kinds of financial services, so I cannot deny that there is a certain logic in the proposal.
However, the pensions ombudsman's current role is different from that envisaged under the Bill. The pensions ombudsman can entertain complaints against any trustees or sponsoring employers. That would not be the case under the Bill, because all potential respondents--such as employers--would not need to be authorised by the FSA, and so could not be brought within the compulsory jurisdiction. There is a fundamental difference in terms of the basis of the jurisdiction of the ombudsmen.
| Next Section
| Index | Home Page |