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Mrs. Lait: Can the Minister clarify where the balance would lie in terms of people who have stakeholder pensions under a trustee system and the many stakeholder
pension schemes that will not have trustees? Would a member of a trustee stakeholder scheme go to the pensions ombudsman? Would someone with a money- purchase stakeholder scheme go to the FSA?
Miss Johnson: That is a matter for the relevant pensions Minister. The hon. Lady said that she will be raising such issues in debates on child support, pensions and social security. That issue should be raised with my colleagues in the Department of Social Security.
I accept that things will not always be clear cut. Clearly there can be cases where a person has a complaint against both an authorised person and the scheme trustees or employer--for example, in relation to a decision to opt out of an employer's scheme and take a personal pension plan recommended by an independent financial adviser. When problems arise, it is not immediately clear where the fault lies.
Sadly, I am not sure that that conflict can ever be resolved entirely. However, I hope that the hon. Member for Beckenham will note that paragraph 14(2)(c) of schedule 14 enables the ombudsman scheme rules to make provision allowing the ombudsman, with the consent of the complainant, to refer the case to another body for resolution by that body. Paragraph 19 provides a similar power for the voluntary jurisdiction, and allows the scheme to perform functions on behalf of a similar body, such as the pensions ombudsman. Those provisions were included with the pensions ombudsman in mind to ensure that the consumer could continue to benefit from an apparently seamless service in relation to pensions questions.
I hope that the hon. Member for Beckenham will agree that although there is no overwhelming single argument against the proposal that she has made, taking the various factors together, there are a number of potential problems that we ought to guard against. I hope that she will find my comments about the relationship between the two schemes reassuring.
Question put and negatived.
Dr. Vincent Cable (Twickenham):
I beg to move amendment No. 456, in page 2, line 18, at end insert--
Much of the attention of the Minister and her officials has been directed to the concerns of the City and the lightness of touch of regulation under the FSA, and we have devoted relatively little attention to the retail consumer interests, of which there are several. I raised in Committee the broad category of vulnerable consumers, which is a group of people who could be defined in terms of age, geography, mobility and income. The Minister gave a sympathetic reply, but said that such concerns
could be dealt with under the general objective of consumer protection contained in the Bill. I think that she accepted the spirit of the amendment I tabled in Committee, but thought that there was no reason for particular provision to be made.
I return to the issue for one particular reason. In another capacity, I am increasingly involved in the scrutiny of the Utilities Bill, which came before the House a few weeks ago. It contains a clause that specifically deals with disadvantaged consumers, and that represents an evolution in thinking in Government about how regulation should be handled. Until recently, utility regulators took the view that matters of poverty and age were nothing to do with them. The hon. Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee on Trade and Industry, recounts a tale of the time the gas regulator appeared before the Committee and said that poverty had nothing to do with her. She claimed that it was the business of the Department of Social Security and the Treasury and should not be brought to the regulators.
The Department of Trade and Industry now understands that poverty is a regulatory issue and that it has, and should have, direct responsibility for focusing on the distinct problems of disadvantaged consumers. There are strong analogies between regulating utility contracts, which are complex and involve switching costs, and the kind of transactions that many consumers have to deal with in the financial services market. I do not know whether the Department has compared notes with the Treasury, but it seems that the regulation of financial services may be lagging behind the regulation of utilities in that respect. Perhaps some cross-fertilisation could take place.
The issue is important and I wish to press it. We are concerned on behalf of many people who face two sets of problems. The first is the problem of financial exclusion, which is something that the Minister knows about, because the Treasury has led the interdepartmental work on financial exclusion. She will know that some 1.5 million people are effectively shut out of the system of banking and financial intermediation.
The second problem is the exploitation of vulnerable people by financial institutions. We all know of many cases of 75-year-olds who have sought advice from bank branch staff. The old people do not understand that the advice is not independent and they are persuaded to switch large sums of money into an account that yields high commission income for the bank but is not in the interests of the customers. Some of those cases have been highlighted in the Daily Mail, which has run a campaign on the issue for some years.
The issue of vulnerable consumers is, therefore, partly a question of access, but also of abuse and consumer protection, which are not sufficiently covered in the Bill. What role can the FSA play, other than in its broad commitment to consumer protection? Well, the FSA could perform various specific functions and there is the possibility of cross-subsidising some of its regulatory activities. Certain kinds of financial institutions, such as credit unions, cater to the financially excluded, and cross-subsidy within the FSA arrangements could permit such work to be given priority, together with the use of information.
This is an important issue that affects many people but has been omitted from the Bill. I understand that such a provision may previously have been felt to be insufficient. However, given the way in which regulatory thinking in government is advancing, particularly when we consider the Utilities Bill, I should need to be persuaded by the Minister that there were very good reasons for not pressing the amendment to a Division.
Mr. Flight:
The issue raises an important subject on which all parties in the House agree--that is, that more than 1.5 million people do not use financial services. However, I think that the thoughts of the hon. Member for Twickenham (Dr. Cable) might have been led up the wrong path by his experience in connection with the Utilities Bill.
With regard to this Bill's objectives, the Government, the Opposition and the FSA have all stressed that they are the key guidelines that the FSA is to follow. I am sure that the hon. Gentleman is not suggesting that in that category of objectives the FSA should be thinking about making rules that were biased towards one particular section of the community.
Many things can be done to address and help those who do not use financial services. The hon. Gentleman cited many voluntary procedures. Credit unions are being encouraged to participate, Barclays bank is doing deals with post offices, and so forth. I think that on reflection the hon. Gentleman would agree that it is not appropriate for the issue to be listed as one of the five key objectives of financial regulation. I suggest that it is playing to the gallery, rather, to raise the point in this context.
We want to hear what other initiatives the Government suggest to help those consumers, and to encourage banks and others to provide services where they do not exist. As has been pointed out, much of that will have to be done on a cross-subsidised basis. Again, it is not really the role of regulation to have an objective telling businesses to cross-subsidise.
As for the right advice and products being provided for older people in particular, that is covered in the Bill under best practice. Under the Bill, it is a sin for advisers or providers to recommend a product to older people which is not suitable for their circumstances, and they can be punished if they do so. The amendment would not add anything in that area. Furthermore, I am sure that the industry is developing codes of good practice, and the FSA can encourage such development under its objective to provide greater education.
There is no disagreement with the spirit of the proposal, but the amendment itself is unsuitable.
Amendment made: No. 240, in page 2, line 17, leave out paragraph (f) and insert--
"(f) the need to minimise the adverse effects on competition that may arise from any exercise of its general functions;
(g) the desirability of facilitating competition between those who are subject to any form of regulation by the Authority.".--[Miss Melanie Johnson.]
"(g) the need to facilitate access to appropriate financial services for disadvantaged consumers.".
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