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Lord Ezra: My Lords, I too thank the noble Lord for repeating the Statement on the pensions mis-selling

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problem. I make it quite clear that on this side of the House, we fully support the prompt action which the Government are taking. We hope that it will yield positive results.

There is a reference in the Statement to priority and the most urgent of the 600,000 cases. What do those represent and what will happen to the remaining cases? The Government are apparently going to take firms off the list once they have dealt with the priority and urgent cases. But will those firms be examined in relation to their dealings as regards the remaining cases?

Dealing with this particular problem is only one part of the issue, as the noble Lord repeated in the Statement. It is essential that no further scandal of this sort should occur in the future. The Government have indicated that they intend to take major measures to deal with that, which we shall no doubt debate in due course. But is the noble Lord aware that at present, there is vigorous selling of what are described as draw-down schemes which are phased retirement plans offered to those who are likely to retire in the near future? Is he aware that it has been stated that those draw-down schemes are more risky than annuities and are not for people who need maximum income from their pension funds?

It seems to me that this whole area of pensions selling raises many questions and that while one issue is being dealt with, the skill and innovative experience of those selling the pensions means that another scheme is devised which may theoretically be perfectly proper but nevertheless can lead people into making the wrong decisions. How is that ever-changing approach to pensions to be dealt with so that those who are investing in those schemes can be assured that they receive the right advice and are not misled by over-enthusiastic salesmen?

Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords for recognising the need for prompt and effective action to deal with the scandal of pensions mis-selling. I believe that the noble Lord, Lord Ezra, goes further than the noble Lord, Lord Mackay of Ardbrecknish, meant to go or, indeed, did go in welcoming such prompt action. The noble Lord, Lord Mackay, was more concerned to defend the record of the previous government than he was to analyse the options open to us to improve the situation in relation to mis-selling.

Of course the noble Lord is right that the Economic Secretary's predecessor, Angela Knight, recognised the need for action. But as the Statement makes clear, since only 2 per cent. of cases had been compensated by 14th May, which was soon after we took office, it cannot be said that the action taken was exceptionally effective.

The noble Lord is quite right to say also that pensions matters take time. But the test of that and the test of whether effective action is indeed being taken is to be seen in the difference between those firms which have taken effective action and have clearly been dealing with the problem and those which have certainly not taken effective action and still find themselves at the tail end, being named month after month by the Economic Secretary to the Treasury in the lists which she places

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in the Libraries of both Houses. The noble Lord wishes to revert to the fraud and theft carried out by Maxwell and he is fully entitled to do so. But he must recognise that the scale of what we are describing now is perhaps 20 times greater than that for which Robert Maxwell was responsible.

The noble Lord, Lord Mackay, referred to the figure of 600,000 in the Statement. As the Statement makes clear, that figure is the number of cases currently being investigated. There are more cases coming forward--probably up to 1.5 million cases in the end--which are of lower priority where the threat to people's pensions is less urgently seen because the time scale is further away but he is certainly not entitled to draw the conclusion that 4,400,000 pension schemes were properly sold.

The noble Lord raised the question of whether there will be another Statement in January. There will certainly be another monthly statement of defaulting firms in January. Whether there is a Statement to the House is a matter which has not yet been decided. The noble Lord questioned the need for this Statement. When we are making progress towards the additional sanctions in particular as regards individual registration and sanctions against individual managers and directors, it is only right that Parliament and the pensions industry should know about that at the earliest possible opportunity.

The noble Lord will have observed also that there was the statement on 28th October last at which the Financial Services Authority was introduced. He will know that at that time, before and subsequently, our determination to reform the structure of financial regulation has been made very clear. That is extremely relevant to the other issue which was raised; namely, whether there will be comparable failings in the pensions industry in the future.

The noble Lord asked me how many will opt back into SERPS. I do not know, and I do not think that those whose cases are being investigated know that at the present time. Of course the noble Lord is right that if a significant number opt back, that will affect the cost of SERPS, but it may do so in "netting out" against stakeholder pensions or against other pension provision which it is the intention of the Government to introduce in the coming years.

The noble Lord made his usual reference to advanced corporation tax. I expected that; indeed I would have been disappointed had he not done so. It is noticeable that the good schemes which are taking effective action to deal with mis-selling of pensions have shown no signs of being deterred from taking that action by the decisions which the Chancellor took in the Budget. It is the anomaly between the good schemes and the bad schemes which shows the degree of mis-selling.

The noble Lord, Lord Ezra, referred to the 600,000 cases. I can confirm that as they are the ones currently being investigated they are the most urgent cases. The noble Lord asked me whether we can be sure that there will be no further scandal. We cannot be sure of that but we are taking action through the establishment of the

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Financial Services Authority, through the Bank of England Bill which will transfer financial regulatory powers from the Bank of England to the FSA, and through subsequent legislation to ensure that we have a more effective and more powerful regulatory authority in the financial services industry. I am grateful to the noble Lord for what he said about sales skills in the pensions industry and the drawdown schemes which are starting to emerge. Of course the regulators will have to be vigilant to ensure that sales of this kind are properly assessed, and to ensure that there is no comparable mis-selling.

There is a specific argument for drawdown schemes. I do not think it is fair to say that they are always inappropriate. They can be taken up by those who retire when annuity rates are low. They can be appropriate, but like all complicated schemes people who are considering taking advantage of them should take independent advice before committing themselves. However, as regards the Government, it is the continued forceful pressure on mis-selling of pensions and the continued pressure for an improved regulatory regime which is at the core of our response to this scandal.

4.55 p.m.

Lord Dean of Harptree: My Lords, while I recognise that tough measures are amply justified in dealing with this blot on what is otherwise an industry with a good record, will the noble Lord assure us that the Government recognise the vital importance of encouraging all forms of legitimate saving for retirement, and that there will be no further Budget raids on the resources of occupational pension schemes?

Lord McIntosh of Haringey: My Lords, I have no difficulty in confirming the importance which the Government attach to all forms of saving for pensions, whether public or private. However, I shall not commit myself to future Budget provisions.

Lord Taylor of Gryfe: My Lords, first I declare an interest as a former director of an insurance company. I fully support what is being done by the Government. I am not so sure that I fully support the threatening, aggressive language of the Statement. This is a complex issue. We are talking about examining hundreds of thousands of policies to make sure that they come within the categories that have been cleared. I support the scheme completely. I was a director of Friends Provident. Friends Provident was formed by Quakers in order to give people a fair deal. Friends Provident is jealous of its reputation but it came under the hammer and was fined substantially under the provisions which are legitimately imposed. Is there an adequate appeal procedure against the substantial sums that are being lodged against insurance companies bearing in mind the complications of giving fair treatment and obtaining acceptance and co-operation from the industry rather than simply threatening it with deadlines?

Lord McIntosh of Haringey: My Lords, I have no natural tendency to aggressive language. In ideal circumstances I would agree with my noble friend that

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aggressive and threatening language is not appropriate. However, I must say that a certain amount of aggressive and threatening language from Government Ministers appears to have been necessary and appears to have had some effect. In those circumstances I suggest that the remedy is justified and that our natural tendency--which is universal in this House--to be gentle not just with each other but also with the outside world, perhaps could be put on one side.

My noble friend also asked me about Friends Provident and whether there is any appeal procedure against the fines imposed by the Personal Investment Authority. As my noble friend recognises, Friends Provident was fined £450,000 and it has not appealed against that fine. Of course in their regulatory activities the regulators are working within the civil law--they are working within the context of contract law--and if any pension company thought that there was severe injustice in the fines being imposed, there is no doubt that company would have a remedy because there has to be due process of law. However, it is significant that not only has Friends Provident not appealed but none of those firms which have been fined has appealed.

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