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Lord Mackay of Ardbrecknish: My Lords, perhaps I was rather taking that out of what one or two noble Lords had said: that the Government were responsible and ought to take the blame. I was rather going ahead of myself there, and deducing that that probably meant that the Government should pay compensation. If I jumped to a wrong conclusion, as has been indicated to me, by the shake of his head, by the noble Lord, Lord Desai, then I happily withdraw that suggestion.
Lord Mackay of Ardbrecknish: My Lords, that is nothing new. The noble Lord thinks that the Government should resign every day, and I have no doubt that he will go on for a good many years thinking that the Government should resign. However, perhaps I may say that in 1988 when we launched personal pensions, the main booklet for employees did carry a very clear "health warning", if you likegood company pension schemes may well remain the best choice for most people entitled to join them. My noble friend Lord Clanwilliam made that very point, that some people must have been very foolish to think they could get a better buy by taking themselves out of an occupational pension scheme where their employer contributed a significant amount of money to their retirement package.
Having said that, however, there is no doubt that personal pensions remain a flexible and entirely suitable way of saving to provide a secure income in retirement for a great many people. They can make it possible to maintain a mobile and varied career with a good pension, and also of course those jobs and careers where there is not an occupational pension. These advantages will no doubt ensure that personal pensions will continue to appeal to many people. I have no doubt that they will continue to have a significant role to play in future pension provision.
However, for people to choose personal pensions with confidence, they must be able to rely on high standards of professionalism on the part of those responsible for selling them. They must be able to trust advisers and sales staff to recommend suitable products. That is why SIB defined new and tougher standards for future sales of personal pensions. Everyone who has mentioned it, I think welcomes and approves of things like full commission disclosure. As a result of SIB's new standards, investors choosing between occupational and personal pensions now get a "reason why" letter to explain each personal pension sale, backed by sophisticated analysis of their own personal circumstances.
The regulators are following this up with more intensive supervision of sales. The Department of Social Security has also issued guidance to employers about the advice they may give to any of their employees considering a personal pension. These new standards are backed up by more demanding training and competence
My noble friend Lord Clanwilliam asked me about the SIB's approach to the independent financial advisors, and how many, if any, of them would be driven out of the industry. We recognise the value of independent financial advice in providing customers with additional information and extending choice. Of course we regret any failures among independent financial advisors. However, where they have failed to meet regulatory standards they must accept responsibility for providing a remedy, and, unless investors know that this will happen, they will not have confidence in that sector, or possibly in the industry as a whole.
The noble Lord, Lord Haskel, seemed to feel, as perhaps did the noble Lord, Lord Peston, as well, that there was need for more statutory regulation. However, we believe that we already have regulation enough within the statutory framework and we do not believe that the costs and disruption of a major change to the system would in fact be justified. Both noble Lords suggested that policyholders should not be expected to meet the bill for mis-sold pensions. It will of course be some time before individual companies can assess their exposure and decide how it should be funded. As the prudential regulator, the DTI has written to all life companies setting out the general principles which should be followed when making this decision. Firms with shareholders should consider whether their funds should meet some or all of the cost, while with-profit offices which have sufficient free reserves will be expected to use these funds rather than cutting current policyholders' bonuses. The overall effect will be that policyholders' interests should be protected as far as possible. All policyholders of course do have an interest in knowing that, when investors lose as a result of a firm's failure to comply with the rules, they will receive redress. With-profits policyholders will also benefit from seeing that their company maintains its reputation, restores consumer confidence and so attracts new business.
The noble Lord, Lord Desai, took us down the SERPS trail, if I may call it that, and indicated that perhaps people ought not to have been encouraged to move into private pension provision there. Perhaps I can say to him that, of the 5 million people who have taken out a personal pension in place of SERPS, more than 40 per cent. are making contributions on top of those received from the Department of Social Security to boost their income in retirement: that is new money being invested to provide extra security in old age and money that could not have been paid into SERPs. So I do not think the argument on that score is entirely one-sided.
The noble Lord, Lord Peston, suggested to me that all financial products should carry risk warnings. Could I say to him that the new disclosure regime involves a "key facts" page, which includes risk warnings and this document has been market tested on consumers to
Again, a number of noble Lords "dipped their toe" into the question of occupational pensions, and of course that is going to be the subject of many happy hours of debate, as I described them earlier today, when we come to consider the pensions Bill which will shortly appear. I will say more when we come to that, I have no doubt. Of course we have to tackle that problema problem coming from the erosion of confidence caused by Mr. Robert Maxwell. I understand fully the difficulties that the Maxwell pensioners have had, just as I understood some of the difficulties some of my friends had when huge writs were served on them by Mr. Maxwell to try to get them to keep their mouths shut when they dared to criticise someone whom, I regret to say, far too many people considered for many years to be a great man.
Perhaps I may conclude by saying that the regulators' central aim has been to devise a mechanism which ensures that where harm has been done it will be put right. They have sought to do that reasonably and fairly, working with the industry to secure a just outcome as quickly as possible, while minimising administrative costs. Although their approach has been criticised from various, and sometimes contradictory, directions, as is the way with such things, the Government believe that the SIB has acted with commendable thoroughness and independence.
I have no hesitation in concluding that the system of regulation in which the SIB takes the prime role, and which benefits from major practitioner input, is sound, and working effectively to protect investors. The reforms instituted by the SIB review last year are beginning to bear fruit. The financial services industry plays an important and growing role in a sophisticated modern economy such as ours. Increasing affluence means that people will more often have resources available for investment and will want to invest. They must be able to invest with confidence. A clean, well-regulated market is in the interest of consumers and financial services firms alike.
Lord Haskel: My Lords, the hour is much later than we expected and so I shall not detain your Lordships for long. We have had a debate which covered several Government departments: investment and savings; finance and regulations; the benefits system. Noble Lords have spoken on all those aspects, and I thank them for their participation. All noble Lords have shown a concern for the consumer, and many have spoken of the need for better regulation.
The noble Lord, Lord Jenkin, spoke of the need to speed up the review which is in progress, and I heartily agree with that. The noble Earl, Lord Clanwilliam, spoke of the need for caveat emptor, and I repeat the response given to him by my noble friend Lord Desai: in today's world, the seller is responsible for the suitability of the goods that he is selling.