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Session 2007 - 08 Publications on the internet General Committee Debates Pensions Bill |
Pensions Bill |
The Committee consisted of the following Members:Mark Hutton, Committee
Clerk
attended the
Committee
Public Bill CommitteeThursday 24 January 2008(Morning)[Sir Nicholas Winterton in the Chair]Pensions BillWritten Evidence to be reported to the House.PE 20 Royal London
Group
9.30
am
The
Chairman:
First, I would like to say that the Minister for
Pensions Reform, the hon. and learned Member for North Warwickshire
(Mr. O'Brien) sadly cannot be here this morning, though I
understand he intends to be here this afternoon, because of a family
bereavement. I am sure all members of the Committee will join me in
extending to him our sympathy for the loss that he and his family have
sustained.
Clause
8
information
to be given to jobholders
The
Parliamentary Under-Secretary of State for Work and Pensions
(Mr. James Plaskitt):
I beg to move amendment
No. 123, in
clause 8, page 5, line 2, at
end insert
( ) for all
workers to whom section [Workers without qualifying earnings] applies
to be given information about the effect of that section in relation to
them;.
Government amendments No. 124
to 134
New clause
8Workers without qualifying
earnings
(1) This section
applies to a worker
(a)
to whom paragraphs (a) and (b) of section 1(1) apply (working in Great
Britain and aged between 16 and
75),
(b) to whom paragraph (c)
of section 1(1) does not apply (qualifying earnings),
and
(c) who is not an active
member of a pension scheme that satisfies the requirements of this
section.
(2) The worker may by
notice require the employer to arrange for the worker to become an
active member of a pension scheme that satisfies the requirements of
this section.
(3) The Secretary
of State may by regulations make
provision
(a) about the
form and content of the
notice;
(b) about the
arrangements that the employer is required to
make;
(c) for determining the
date with effect from which the worker is (subject to compliance with
any requirements of the scheme rules) to become an active member under
the arrangements.
(4)
Subsections (5) and (6) apply where a worker becomes an active member
of a pension scheme in pursuance of a notice under this section and,
within the period of 12 months beginning with the day on which that
notice was given
(a) ceases to be an active member of that scheme
because of any action or omission by the worker,
and
(b) gives the employer a
further notice under this
section.
(5) The further notice
does not have effect to require the employer to arrange for the worker
to become an active member of a pension
scheme.
(6) But any
arrangements the employer makes for the worker to become, within that
period, an active member of a pension scheme that satisfies the
requirements of this section must be made in accordance with
regulations under this
section.
(7) A pension scheme
satisfies the requirements of this section
if
(a) it is an
occupational pension scheme or a personal pension
scheme,
(b) it is registered
under Chapter 2 of Part 4 of the Finance Act 2004 (c. 12),
and
(c) in the case of a
personal pension scheme, there are, in relation to the worker
concerned, direct payment arrangements (within the meaning of section
111A of the Pension Schemes Act 1993 (c. 48)) between the worker
and the
employer..
Mr.
Plaskitt:
Sir Nicholas, we appreciate the kind comments
you made about my hon. and learned friend. I will do my best to
substitute for him for these clauses.
This group of
amendments to clause 8 seeks to insert a new clause and to make
associated consequential amendments. The new clause facilitates
voluntary pension saving, to workers without qualifying earnings, which
means those earning below £5,035 for the 2006-07 earnings terms.
We always intended that this group of workers would have a gateway of
access to workplace saving and this clause provides that necessary
access.
However,
these workers circumstances are not the same as
jobholders because they do not have qualifying earnings.
Therefore, minimum employer contributions would not arise. Any employer
contributions would be voluntary. It would be wrong to automatically
enrol workers in this group in pension saving by offering them an
employer contribution, as they are likely to have high replacement
rates from state provision alone. Some workers in this group, however,
may want to save and it may be in their interest to do sofor
example if they have previously saved, but have decided for whatever
reason to reduce the number of hours they work in the run-up to their
retirement, or those combining part-time work with
childcare.
In
those cases, we want to facilitate easy access to pension savings if
these people feel it is appropriate for them. While we would not compel
employers to make pension contributions for this group of workers, many
employers might volunteer to do so, and indeed some already do.
Employers might already offer these workers access to the same schemes
as they offer other jobholders, and we want to ensure that these
workers have access to pension schemes. In these circumstances, this
clause requires employers to enrol these workers into a pension scheme
with the same core of requirements that apply to qualifying schemes for
other jobholders.
That said, we
remain mindful of the potential burdens on business, which is why we
would not require employers to enrol a worker more frequently than once
every 12 months. The new clause also provides that the process
by which a worker becomes an active member of such a pension scheme
will be established by regulation. Alongside
the new clause are a number of consequential
amendments, including amendments to clause 8, to ensure that
requirements on the provision of information, deduction of
contributions, and compliance apply equally to this group of
people.
Andrew
Selous (South-West Bedfordshire) (Con): Thank you, Sir
Nicholas. Let me welcome you back to the Chair and immediately express
my hon. Friends sympathy and condolences to the Minister. His
is a sad loss and I am sure the whole Committee would share these
sentiments.
I am pleased
to see this series of Government amendments to the Bill. They are a
useful addition and we support enabling workers earning less than
£5,035 with any one employer to contribute to personal accounts.
I note that the Minister said that the employer will have the option to
pay voluntary contributions and that some employers currently do that.
In a competitive marketplace, employers may need to consider that in
order to get the people they want to work for them. So the addition is
absolutely excellent. Concern has been expressed that lower-paid
workers would be losing out and this gives them at least the option to
joint the personal accounts scheme. Let us hope that many of them will
choose to do so and will then receive the full contribution from their
employers to which they will be entitled as and when, hopefully, they
go on to earn more than
£5,035.
I would
be grateful if the Minister addressed one question. The explanatory
note to amendment No. 123 talks about the provision of information to
workers without qualifying earnings. We are debating the area of
information in advance of the Thoresen review and are therefore
somewhat in the dark, but I presume that that information will need to
be slightly different, given that the employers contribution
will not be there as of right and that that may therefore affect the
considerations of lower-paid employees as to whether they have personal
accounts. Will part of the generic financial advice that jobholders
receive relate specifically to workers earning less than the lower
qualifying earnings
limit?
Paul
Rowen (Rochdale) (LD): I associate myself with the remarks
made by you and others, Sir Nicholas, about the Ministers
bereavement.
I also
welcome new clause 8 and the amendments that follow from it. It is
important that all workers are given the option of entering into a
pension savings scheme, and the clause and the amendments do that. That
option is welcome in view of the discussion on Tuesday about workers
who may have multiple jobs and do not exceed the £5,035
threshold on each individual job but for whom nevertheless there may be
considerable advantages in being able to enrol. Like the hon. Member
for South-West Bedfordshire I have questions about Government amendment
No. 123 on the sort of information that will be made available and I
hope that the Minister can clarify when it will be made available. The
type of information will clearly be different and possibly much more
complicated than that which would be available for someone earning
above the threshold. There needs to be some sort of provision to ensure
that a proper assessment can be provided for people in multiple
employment because the obvious corollary to that could be that they
might
automatically not take advantage of the benefits of
the scheme because the long-term benefits are not clear. I hope that
that can be
clarified.
I
understand why the employers contribution is not mandatory, but
I hope that once the scheme is in operation we will try to encourage as
many employers as possible to make a contribution. In terms of good
employment practice and encouraging people. If people want to reduce
their hours because they are bringing up a family or have reached an
age at which they want to scale down their working commitment, it would
be good practice on the part of the employer to make a contribution. I
hope the Minister will clarify his position on that, but I welcome the
proposals that this new clause and the accompanying amendments
deliver.
Mr.
Plaskitt:
I am grateful to the hon. Member for South-West
Bedfordshire and the hon. Member for Rochdale for expressing their
support for this Government amendment. There are 1.7 million people in
the category we are thinking about, and this opportunity will be very
important for many of them. Those people will want a scheme in place to
take this up. It is right that this degree of extra flexibility be put
into the provision.
Our questions
relate to the information side of this. I do not want to anticipate the
next group of amendments, which focus more specifically on the issue of
information supplied. Suffice it to say that the Bill retains
considerable flexibility about the provision of information to
jobholders. I do not accept the hon. Member for Rochdales
suggestion that the circumstances that will pertain to this group are
necessarily much more complex. Employers will have a role in providing
information to that group. At the very least, employers will need to
provide information about the scheme in which they have enrolled the
jobholder and the jobholders right to opt out.
However, the information to be
supplied at this point is fairly basic, and I do not think we will
depart substantially from the information that will be supplied to
workers who are not in this particular category. After all, the
emphasis, here, is on schemes that are simple, and sets of choices for
individuals that are also simple. We will have the opportunity to go
into this issue in more detail in the next section of the
debate.
Amendment
agreed to.
Paul
Rowen:
I beg to move amendment No. 83, in
clause 8, page 5, line 7, leave
out paragraph (c) and
insert
(c) that every
jobholder shall be entitled to one-to-one generic advice either by
phone or in person;
(d) that
the advice shall be publicly funded;
and
(e) that the advice shall
be
independent.
No. 85, in
clause 8, page 5, line 7, at
end add
(3) The funding
for information provided under subsection (1) must be equivalent in
value to no less than 0.05% of all money saved through the personal
accounts
scheme..
Paul
Rowen:
As the Minister said, these amendments give us an
opportunity to discuss issues regarding the types of information that
should be made available. Amendment No. 83 stipulates three things.
First, that
every employee should be entitled to a one to one session with an
adviser, by phone or in person, and we believe it is important that
each person is able to choose whether their session is conducted by
phone or in person. Secondly, we believe it is very important that this
be publicly funded, and some of the evidence that has been presented
supports that view. Thirdly, it should be independent. Amendment No. 85
sets some limits as to what that advice should cost. We have suggested
that it should be no less than 0.05 per cent. of all the money saved
through a personal account scheme. I will explain that
later.
9.45
am
We
all know that personal accounts are beneficial for the vast majority of
people but, for a clear number of them, saving through a personal
account may not be the right option. It is important for the
individuals concerned to make an informed decision about whether they
would be financially better off by saving through the personal accounts
system, a decision which is all the more essential when we consider
that people will be automatically enrolled unless they decide to opt
out. Various factors need to be taken into account when deciding
whether to opt out. There are obviously some clear principles, and we
can develop some generic advice; nevertheless, there are going to be
huge variations as to whether a particular person can
benefit.
A
large number of factors, which affect the suitability of personal
accounts, need to be taken into account. For example, in the last
sitting we discussed the age factor. We tabled a probing amendment,
which the Minister dealt with, about whether 50 was an appropriate age.
Clearly, there was an issue there, but there are others: current and
projected earnings, for example; multiple jobs, and how those vary over
time, which we have mentioned; time taken off work or planned time off;
the possibility for additional overtime; the level of employer
contributions availableparticularly, as we have already said,
for someone who is earning less than the threshold, where that
contribution could make a big differenceand whether putting
that into a personal account is worthwhile; the tax treatment; and the
levels of other savings and of indebtedness that a particular person
might have.
In my
view, it is important that advice be given to people who may have debts
from other activities that they have engaged in. Clearing that debt
really ought to be a priority for them, before they start saving. A
generic package, which does not allow for some sort of advice, does not
allow that sort of discussion. We already know about the level of
indebtedness that has risen alarmingly in the past few years; so, for
many people, dealing with credit cards and paying off such
high-interest debts ought to be a much greater priority than they are
being
given.
We
believe that the scheme should be publicly funded. A range of
stakeholders that have written to the Committee made that clear. The
CBI, for example, said that employers must not be responsible for
providing advice on savings. Advice is for the delivery authority and
the Government to give. Which? Said that there is a need for advice
both on the initial decision to opt out or not and on the ongoing
decisions. The TUC said the same, so it is
important that that advice be publicly funded. The mandatory employer
contribution will already put a huge strain on employers. We believe
that it is important to work with everyone to make the scheme work. It
must be publicly
funded.
The
information that is provided must be independent. We know that, in the
past, advice on second pensions may have been mis-advice. Later clauses
in the Bill deal with this. It is very important for the integrity of
the scheme that advice is clearly independent and is seen to be
independent, so that employers can concentrate on the other issues they
will have to deal with in setting up and broadening the scheme for a
group of employees that, in the past, has not had access to a pension
saving scheme.
We also
believe, however, that the Government must be kept at arms
length from this advice. While they may well have to fund it, they
should not be involved in the details. The Government obviously have an
incentive to play down potential problems, such as mass means-testing,
in order to boost the numbers. An amendment that my hon. Friend the
Member for Inverness, Nairn, Badenoch and Strathspey moved on Tuesday
requested some sort of assessment of how contributions affect
peoples benefits and whether there is a cut-off point beyond
which it would clearly not be beneficial for certain individuals to
enter the scheme. We need to ensure, therefore, that members of the
public have easy access to information when deciding whether to opt
outor opt in, if they do not automatically meet the
thresholdand at stages throughout their working lives, because
circumstances do change.
Amendment No.
85 deals with funding. According to the Governments impact
assessment, the average annual contributions to personal accounts by
employees, employers and the Government will be around £15
billion a year, and 0.05 per cent. of that is £7.5 million. To
put that in perspective, the citizens advice bureaus budget
last year was £43 million. It has 27,000 people working for it
at the moment, but 20,000 of them are volunteers. When the Government
set up the financial inclusion fund, they gave the CAB an additional
£10 million, enabling it to employ nearly 400 specialised debt
advisers. Clearly, £7.5 million is not a huge sum. It will not
deliver hours of advice for workers, but it is clearly important that
we set a minimum level of advice.
If we are talking about
personal accounts leading to another 6 million to 9 million people
saving in a workplace pension scheme for the first time, that is only
about £1 spent on advice for each new saver. I accept that is a
ballpark figure. Circumstances will change; some people will not need
the advice provided; they may well have their own arrangements in
place. Othersand sadly there are a large number of people whose
earnings fluctuate and whose employment patterns are not
regularwill need to make more use of that advice.
Given present levels of
personal indebtedness, it is very important that the option be there.
It is not just a straightforward question about what someone will save
over a period of time. For many people there are other priorities
concerning their own level of personal indebtedness. We believe that
this independent advice, which allows for a face-to-face meeting, will
be much better and will enable a discussion to take place. It
is
very important for the success of this scheme that that source of
independent advice is provided and I hope the Minister sees fit to
accept the points we are making in our
amendments.
Andrew
Selous:
I am sure that all members of the Committee share
the wish of the hon. Member for Rochdale that we get this whole aspect
of information right. He is right that this is a crucial area in terms
of getting personal accounts off to a good start. I noticed during his
speech that, like many of us, he used the words
information and advice almost
interchangeably. He was not alone in that. I have been looking back at
the evidence from our session on 17 January, when the Minister for
Pensions Reform, the hon. and learned Member for North Warwickshire,
spoke about the important distinction between information and advice.
He went on to say:
although it is not always easy to
make it in practice.[Official Report, Pensions
Public Bill Committee, 17 January 2008; c.
117.]
So here we have a
Government Minister recognising the difficulty of this
aspect.
I note that
Otto Thoresen himself has described generic advice asto quote a
briefing from Age
Concern
providing
information and guidance to people, better equipping them with the
tools to make informed decisions.
I would be interested to hear what the
Minister has to say about the distinction between information and
advice.
Paul
Rowen:
Does the hon. Gentleman accept that, in the context
of what I was trying to do, where I was talking about people who might
have credit card debts or other indebtedness, for them it is not just a
simple question of what they can save. Some sort of advice has got to
be given. They would still make the decision, but they would have to
balance priorities. They need to have the point made to them that it
might be best to sort their debts out first before starting to
save.
Andrew
Selous:
I completely agree with the hon. Gentleman, and I
intend to mention some categories of people who would generally not be
well advised to take out personal accounts. But I do think it is
important that we define any legal difference between information and
advice, given that we are just now coming out of the whole mess of the
140,000 people who have had to go to court in this country and in
Europe to sort out what happened to their pension savings, given that
they believed they were relying on assurances in Government
leaflets.
So
there is a question of liability. None of us wants to be in a position
in years to come where we will have to set up another type of financial
assistance scheme to deal with people who have set up personal accounts
when they should not have done so. The hon. Member for Rochdale is
right that there are some people who should be paying off debts,
particularly if they are debts on which they are paying extortionate
rates of interest. This is unfortunately the situation that many people
find themselves in, whether through credit card debt or debt from
various finance houses or other dodgy organisations that seem to
advertise continuously on daytime televisionparticularly offers
to take all peoples debts and put them in one place.
I have had a stream of
constituents in unbelievable financial difficulties because they
thought they could consolidate all their debts in one place and it
would make it easier. They were paying unbelievably high rates of
interestliterally more than 100 per cent. in some cases. The
hon. Gentleman for Rochdale is right that those people should be
advised above all else to get rid of that debt before they take up a
personal accounts
scheme.
10
am
Age Concern, in
its briefing to the Committee, also went on to
say:
For example a
personal account is unlikely to be suitable for a single person who is
a tenant, is approaching 65, and has never paid into a private
pension.
There will be
various categories of people for whom personal accounts are not the
right way to proceed with their
finances.
There
are concerns that simple generic advice will not satisfactorily apply
to millions of auto-enrolled employees. It is interesting that
financial advice that is given at the moment to people who are taking
up pension schemes has to take account of every aspect of a
persons financial affairs, including, crucially, any possible
future entitlement that they might have to means-tested benefits. I
would be grateful if the Minister gave some indication of the likely
shape of the advice. I am particularly interested in whether it will be
themed into addressing different groups of workers, perhaps in relation
to different income scales or different sets of circumstances. Will it
have worked examples, showing that most people will be better off but
that people in some categories should think seriously about whether it
makes sense for them? Will there perhaps be a flowchart to take people
easily through the advice?
Many people are put off by
reams and reams of text in long paragraphs and are not able to work
their way easily through it. The advice has to be easy to understand,
clear and simple. One of the reasons that many people are not involved
with pensions in the first place is because they are incredibly
complicated. The need for simplicity has been a hallmark of the debate
so far. Although we are debating the issue in advance of the Thoresen
review, it is important that we try to tease out from the Minister as
much Government thinking on the subject as we can. I look forward to,
and would be grateful for, what the Minister has to
say.
Mr.
Plaskitt:
I appreciate the contributions of the hon.
Members for Rochdale and for South-West Bedfordshire. Before I turn in
general to the amendment let me respond to some of the points that have
come up.
As the hon.
Member for South-West Bedfordshire rightly pointed out, the hon. Member
for Rochdale slid imperceptibly between information and advice in
moving the amendment. It is a minefield as we know, and it is important
to establish with as much clarity as possible the distinctions between
the two. Not only did he slide rather too easily from one to the other,
he also widened the area of consideration on information and advice
beyond pension decisions and spread it right out into the issues of
personal finances in general, people dealing with their debts and other
financial decisions. It is asking too much of the information system
that will accompany the introduction of personal accounts
to expect it also to be the means by which comprehensive financial
advice is given. Not that that is not requiredit isand
not that it does not exist; it does already exist in other areas, and I
would not want to try to replicate within this field of information the
things that he rightly sees as being
necessary.
The
hon. Member for Rochdale rightly said that some people are struggling
with debt. The hon. Member for South-West Bedfordshire said the same.
We know that, but the appropriate way to deal with it is through
programmes such as the financial inclusion projects that the Government
have under way, part of which is state funding; for which the hon.
Member for Rochdale was calling. The placement of independent financial
advisers in citizens advice bureaux is precisely the sort of help that
his constituents need, so the Government are putting resources into
that provision. That is a more appropriate place to be locating general
financial advice, as opposed to the specific area of
pensions.
Another
thing to do, which also picks up a point of the hon. Member for
South-West Bedfordshire, is to address the issue of unaffordable
credit. The way to address that problem is through the funding now
going into expanding the provision of affordable credit. Growth fund
investments are being made in almost all parts of the country; by
expanding credit unions, for example, we are putting in place
affordable credit to replace the 100 per cent. interestand,
worse, 1,000 per cent.deals that some people are suffering
from.
Andrew
Selous:
I take the Ministers point that we cannot
expect generic financial advice for people on the entire multiplicity
of financial issues that they will face in their lives. However, the
hon. Member for Rochdale has a point. People will not decide in a
vacuum whether to go into personal accounts. Would the Minister
envisagewithout committing him in any waythat it might
be appropriate for the advice to say something like, If you
have high debts, you may wish to consider this issue before proceeding
with personal accounts? That would not be too specific, but
would flag up an area as one where the person concerned should perhaps
speak to the citizens advice bureau or some other person who can give
competent
advice.
Mr.
Plaskitt:
I understand why he wants to press me, but he
will anticipate what I am going to say. Otto Thoresen is looking at
those questions. It is sensible to await his recommendations. The hon.
Gentleman has seen interim reports, and clearly the Thoresen review
will address such issues. We ought to see what recommendations come out
and then work with the delivery authoritythe Personal Accounts
Delivery Authorityto build the appropriate mechanisms and
ensure that they are in place before personal accounts are launched and
before auto-enrolment starts. We must ensure that the right bits of
information are given, the right advice is available and the right
pointers are there for people to find the required advice. We also have
to bear in mind, as we have said repeatedly, the burden on employers.
We have covered that
already.
During
the hon. Member for Rochdales contribution, he asked me what
information is to be provided. To help him, I will explain what
constitutes information in that
respect and what information we would expect to see included at the
point of auto-enrolment. Information included would be, for example:
the conditions of eligibility; the relevant joining processes; how
contributions, tax relief and benefits are calculated; the arrangements
for making additional contributions; survivor benefits under the
scheme; transfer rights; periods of notice to terminate membership;
what benefits are payable under the scheme; annual illustrations of
benefits at retirement; and procedures for disputes. Those are clearly
matters of information; they certainly do not stray into the area of
advice. Those are simple points of information, which people will need
to understand the implications of the schemes that they have been
enrolled
into.
Paul
Rowen:
I was clear about the need for advice and not just
information. Notwithstanding the Thoresen review, does the Minister not
accept that people do not make decisions in a vacuum? Part of the
problem in the past with pensions was that all the benefits were
explained up front and no information was given about how they affect
individuals. For many people at the lower end of the scale, some of
whom I deal with as constituents, that is often the problem. There is a
multiplicity of agencies and whatnot providing benefits advice, and I
believe that can complement what the Government are doing through their
financial inclusion scheme. I want to see them dovetail together. If
they do not, we will have a separate institution providing advice which
will not fit in with that provided by the CAB. That is why we say it
should be publicly funded. I want to see that sort of joined-up
thinking to ensure people get that sort of advice. It is advice that is
needed, in my view, and not just
information.
Mr.
Plaskitt:
I understand exactly where the hon. Gentleman is
coming from. However, I do not think it appropriate to place all these
duties on the information given about personal accounts. That would
overburden it. One of the reasons we have in the past seen undersaving
towards pensions, which is what we are trying to address, is that there
has been an element of fear, driven by complexity and by some accidents
in recent history that have coloured
perceptions.
The
point of this reform is not only to engage people with it via
auto-enrolment, but to put in place schemes that are simple, to try to
remove this legacy of fear about pensions. It is therefore important to
keep the schemes simple, and not to attach to the process of being
automatically enrolled a whole bundle of information andas the
hon. Gentleman would have itadvice, which can appear complex
and difficult to understand. That might regenerate exactly the sort of
fear that has led to people not taking up pensions, especially in the
income bracket we are looking at. The hon. Gentleman needs to consider
these things in balance. I will turn now to some of the more
substantive points that have come up, and deal with the other points he
has made about funding these arrangements.
Clause 8 recognises that
individuals will need access to relevant and accurate information when
they are automatically enrolled, as in any other circumstances when
they are making decisions about their retirement. It requires us to
specify in regulations the information that must be given to jobholders
about the employers duty and how it will affect them. I have
given some
indication as to what that might be. In particular, it requires that
prescribed information be provided about automatic enrolment, the
benefits under the scheme and the right to opt out. Some of this
information will come from schemes and be borne by scheme membership
charges.
We do not
believe that people will need one-to-one guidance as the hon. Gentleman
suggests. As a result of the employer contribution most people will
benefit from auto-enrolment and therefore enjoy a better income in
retirement. We already produce information on retirement planning
alongside a number of other organisationssuch as the CAB, the
Pensions Advisory Service and the Financial Services
Authoritywhich provide a professional and trusted service. As I
have indicated, the Thoresen review and the Government's action plan on
financial capability will add to the services on offer. We will work
with these and other organisations to ensure that a coherent and
consistent range of good-quality information and help is available to
those who are making decisions about their
retirement.
Let
me now turn specifically to amendment No. 83. The hon. Gentleman
suggested that all those auto-enrolled should be entitled to
publicly-funded, independent, one-to-one generic advice. Of course,
some individuals may wish to seek guidance. That is the case in any
financial decision. And that is why we have asked Otto Thoresen to
consider how a national generic financial advice service should be
provided to answer queries across the whole range of personal finance
issues. However, we do not agree that one-to-one advice will be needed
on this particular issue by most people.
10.15
am
There
is no legal requirement at present for individuals to receive
one-to-one advice before they join a workplace pension scheme.
Furthermore, given that the aim of our reform is to increase pension
saving, I have strong reservations about building a heavyweight process
around automatic enrolment, which might only serve to send the wrong
message to people and encourage them to opt out without good
reason.
Giving
people legal entitlement to one-to-one advice will suggest that we, the
Government, consider that such advice is needed. That in turn will give
the impression that automatic enrolment is something risky and complex.
That is precisely not the impression we want to give. We all agree
that, for most people, automatic enrolment is a beneficial opportunity
that ought to be welcomed. We need to avoid at all costs encouraging
people who would benefit from it to opt out.
We plan to work with all the
existing services, and with those like Thoresen, who are developing
further provisions in this area, so that all the information that
people need will be available and easily accessible. Inserting
rigidand inappropriaterequirements into primary
legislation is not the way to deal with the issue. I have concerns also
about his suggestion to write 0.05 per cent. into the Bill as
a means to achieve the public funding that he wants. I heard his
explanation of where he obtained this figure, but even after he told us
where it came from, he was quickly thereafter talking about
ballparks, which suggests that there is not anything
terribly scientific about it. Yet he wants to
write it on the face of the Bill. I do not think it would be appropriate
to put into statute a figure that has a little bit of a wet
finger in the air sense about it. It could risk putting into
statute obligations to raise money from these sources which might not
be necessary and could therefore be
wasted.
In
addition, this amendment would leak the costs of providing information
on the overall reforms to the funds in just one qualifying scheme. It
is difficult to see how that could be appropriate. However, I can
assure the Committee that we take the issue of the provision of
information very seriously. We see the information strategy as an
absolutely central plank of these
reforms.
Andrew
Selous:
I would be grateful if, before we conclude our
debate on clause 8, the Minister said something about two areas. The
first is liability: will people be able to sue if they think they have
done the wrong thing through being auto-enrolled on the basis of this
advice? We do not want a repeat of the financial assistance scheme
difficulties. Secondly, what about the position of those large
employers who would be happy to give some information in this area? Are
they going to be prevented from doing so? I fully accept that most
employers would want to be a mile away from having to give any advice
in this area, but some of the bigger employers might actually want to.
What is his position about
that?
Mr.
Plaskitt:
On the issue of liability, there is quite a
clear distinction here. That is going to arise when the product is
sold. Clearly, we are not talking about that in terms of automatically
enrolling people. I do not believe that issue arises. As for the point
about larger employers wanting to give information, a lot of
information is already given. We are not trying to proscribe or limit
the information employers might want to offer. What is important is
that when the schemes are ready to be introducedfrom
2012we will have established clearly what information needs to
be given to employees who are automatically enrolled. I read out the
types of information that will be included and that information needs
to be standard across the piece. I am sure that if employers want to
add additional information they will not be restricted in doing so. The
general atmosphere around the provision of information and advice will
be clarified once we respond to the Thoresen
review.
Andrew
Selous:
The Minister said that liability arises when a
product is sold. Where those 140,000 people were automatically joined
into occupational pension schemes that then collapsed the Government
found themselves in court and lost twice, in the High Court in this
country and in the European Court. It is not absolutely clear to me how
we will ensure that that does not happen again as a result of the
Bill.
Mr.
Plaskitt:
I have done my best to make it clear. I think
that there is a distinction; we are not talking about the same thing.
Automatic enrolment into pension schemes that must meet the minimum
specification laid down as a result of the legislation is a
substantively different process to that to which the hon. Gentleman
refers. I hope that I have been able to deal withno, I have
not, I will give way once more.
Paul
Rowen:
I have listened carefully to the exchange that has
just taken place. The Minister has not addressed the issue of
independence and some of his remarks have concerned me a little.
Independent in our amendment specifically refers to
advice and I, like the hon. Member for South-West Bedfordshire, get a
little concerned when it does not seem that there will be a clear
distinction regarding types of advice, that we will not have the word
independent. Maybe the advice will be generic and clear
and perhaps that will be addressed once Thoresen reports. If employers
can give additional advice there is a risk of repeating the problems of
the past with regard to second pension schemes and we do not want that
to
happen.
Mr.
Plaskitt:
We have already established, and I have tried to
make it clear, that an employer giving advice would probably do so
through an independent financial adviser, who would assume liability.
Most employers do not give advice; they give information. No Government
can safeguard against liabilities and that is why it is important that
we get the information right, that we do not rush into making decisions
about it, and that we take on board the report that we are awaiting
from Thoresen. I hope that I have now
managed to deal with the points. The debate has been useful and I hope
that in the light of what we have said the hon. Member will feel able
to withdraw his
amendment.
The
Chairman:
Before I call the hon. Member for Rochdale I
have to remind the Committee that I am obliged to adjourn in two
minutes time, at 10.25
am.
Paul
Rowen:
I will not detain the Committee. I appreciate what
the Minister said and I am happy to withdraw the amendment. It was
important to have the debate and express some of our concerns. We will
return to the issue once Thoresen reports and will perhaps have further
debates on Report. I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
8, as amended, ordered to stand part of the
Bill.
It being
twenty-five minutes past Ten oclock
The
Chairman
adjourned the
C
ommittee
without question put, pursuant to Order of the
Committee.
Adjourned
till this day at One
oclock.
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