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Lord McIntosh of Haringey: The noble Lord, Lord Higgins, is of course right in saying that I am a supporter of group personal pension schemes and I am particularly in favour of those schemes in which employers contribute as well. The Government are also in favour. We are pleased that our proposals for reform are already having a beneficial effect for those seeking to provide for their retirement.

We have no wish to undermine good-value existing provision, where it exists, but personal pension schemes do not have all the features which will make stakeholder pension schemes a good deal for their members. We believe that stakeholder pension schemes, because of all the tough conditions we have set out for them, will provide better value and a more flexible alternative for many of those who cannot join an occupational pension scheme.

The proposed minimum standards will ensure that all stakeholder pensions will offer low minimum contributions as well as the flexibility to stop and restart contributions without additional charge. As much as I liked my own group personal pension scheme, it did not do that. The requirement for stakeholder schemes to have a government structure which ensures that they are run in their members' interests is particularly important and is fundamental to our proposals.

We are prepared to consider alternative arrangements, provided that they are capable of delivering a similar outcome for scheme members. We are determined that stakeholder schemes shall be run in the members' interest. Personal pensions, even group personal pensions, often fall short of the high standards that we expect from stakeholder schemes.

It has been suggested that the availability of a group personal pension scheme should be enough to exempt an employer from the proposed requirement to provide access to a stakeholder pension scheme. We are keen not to discourage good-quality provision and we want to consult further on our specific proposals with regard to the way in which we could best incorporate these arrangements into a new regime. We know that many employees will already have started to pay into a personal pension, and we want to ensure that they are not disadvantaged.

As part of our programme of further consultation we shall shortly be publishing a consultation document on the details of the requirements for employers. This will include proposals on how to incorporate group personal pensions into the new arrangements, including whether there should be an exemption from the employer access

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requirement for group personal pensions where certain conditions are met. I hope, on that basis, that the noble Lord will feel able to withdraw his amendment.

Lord Higgins: We understand that the Minister is sympathetic on this point, but we shall need to consider the various issues that he has just raised. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 16:

Page 2, line 20, at end insert--
("(10) The ninth condition is that the scheme shall provide to anyone who applies to join the scheme full and accurate advice as to how a stakeholder pension would benefit the applicant compared to other types of pension and shall tell the applicant that they have up to twenty eight days to cancel the application without cost or penalty; and an applicant to a stakeholder pension scheme shall have up to twenty eight days from receiving the said advice to cancelling the said application without cost or penalty.")

The noble Lord said: My understanding was that the Government were suggesting--I have no reason to dissent from this--that Amendments Nos. 16, 31, 25 and 29 should be taken together.

Lord McIntosh of Haringey: We have been informed by the noble Baronesses, Lady Castle and Lady Turner, that Amendment No. 29 will not be moved--if that would help the noble Lord in his speech.

Lord Higgins: I was not proposing to make a speech on behalf of the noble Baroness, Lady Castle. I would not presume to rise to that level of oratory which we have seen during the course of the day. The real problem here is that, having regrouped it, I have lost sight of some of my most important notes. However, I shall seek to counter that! Essentially, here we have Amendment No. 16 first of all, which says that the ninth condition of the scheme shall provide anyone who applies to join the scheme with full and accurate advice on how the pension would benefit the applicant, compared to other types of pension, and telling the applicant, in simple terms, that they would have up to 28 days to cancel the application if they do not like it.

We are concerned about the level of advice. The reality of the situation is that the stakeholder pension adds to the list of products which are available to those who are seeking to provide for their retirement. In addition the Treasury is putting forward its proposals for LISAs. Further, there are the proposals for state second pensions. There are occupational pensions involving either final salary or defined contributions. There is the whole question of personal pensions and so on. There is now a plethora of products, and individuals will find it difficult to choose between them. We suggest that individuals will need advice. We cannot seem to obtain a clear response from the Government as to how they believe this advice should be provided. They have swayed back and forth on this matter. Either they have said that advice is not really necessary in this area or that advice is necessary only in relation to stakeholder pensions; or they have accepted that advice is necessary

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but they have not indicated how it is to be provided or who will provide the resources to enable the advice to be given.

It has been suggested that the figure of 1 per cent of funds under management per year will not be sufficient to enable those who are providing the pensions to give a great deal of advice. Earlier the noble Lord mentioned including commission within that figure. That suggests again that a provider of a stakeholder pension may seek to promote his stakeholder pension rather than someone else's. Amendment No. 16 seeks to provide adequate advice to anyone seeking to join a scheme.

Amendment No. 31 states that,

    "the employer shall require a certificate from the designated scheme to the effect that none of his employees will be admitted to membership of that scheme without evidence that the employee has taken independent advice in relation to his pension provision". The individual concerned will have to obtain that advice. That may involve him in expense. We are not clear as to the Government's position on this matter.

Amendment No. 25 states that,

    "the employer shall confirm with the Department of Social Security that the stakeholder pension scheme he proposes to designate is the most appropriate form of pension provision for his employees", as against one of the many alternative products which I mentioned a moment ago.

This matter raises important issues. The Government appear uncertain about it in their own mind. I shall not burden the Committee by quoting from ministerial statements, but they appear to vary as regards the giving of advice in this area and how important they think that is. Certainly we on this side of the Chamber believe that such advice is important. There are real dangers that an individual may take out a stakeholder pension and then find either that it is not the most appropriate form of pension provision for him or that it is a bad buy, not least because of its implications in relation to the minimum income guarantee. We have discussed this matter many times already today. I beg to move.

Lord Goodhart: I have some reservations about the matter of advice in this area. Advice is certainly important for people who are investing substantial sums in pensions. Of course they can afford to pay for advice which is proportionate to the amount at issue. However, advice is expensive. Most of the people at whom stakeholder pensions will be targeted will be extremely reluctant to pay for advice. If it is provided at no immediate cost to them by means of funding it out of the stakeholder scheme, that will impinge upon them sooner or later because it will add to the costs of the scheme.

It seems to me that one of the attractions of the stakeholder scheme--I am not suggesting for one moment that people should not take advice on this--is that if someone does not wish to take advice, he knows that if he goes into a stakeholder pension it may not be the ideal solution for him but at least he will not go far wrong with it. For that reason I am unable to support any amendments which make advice compulsory.

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As to the question of commission, I hope very strongly that one of the rules of stakeholder pensions will be that no commission will be paid. It has always seemed to me that commissions are an invitation to institutionalised bribery.

Lord McIntosh of Haringey: I understand the sensitivity of the Conservative Party to the potential for the mis-selling of pensions.

I do not want to underestimate the importance of advice for some people and information for others. Pension provision is a long-term commitment; if people are to be encouraged to make that commitment they need to be aware of the benefits of saving towards a pension. They need to be confident that their proposed arrangement is suitable for their needs and that it is secure. I take the point of the noble Lord, Lord Higgins, that people will be making a judgment not only of stakeholder schemes but between other potential forms of provision.

It is true that good, accurate information and advice will be an important part of the decision-making process for many individuals considering joining stakeholder pension schemes. We want that to be available to all potential members. We are not suggesting that everyone should join a stakeholder scheme without seeking advice. The complexity of existing personal pensions and the way they are run is one of the reasons why people need individual advice at present.

The stakeholder scheme is basically off-the-peg; it is not tailor-made. It is Marks and Spencer, not Savile Row. Indeed, it might even be Marks and Spencer literally as well as figuratively. As the noble Lord, Lord Higgins, said, if we require the schemes to meet the costs of providing advice, that would impose excessive costs. On the other hand, if individuals had to bear some or all of the costs, many could be put off starting a pension altogether. A number of people, like me, are very resistant to financial advice. We do not understand it, and when we do not understand it we do not believe it. There are an awful lot of people in the country like that.

Perhaps I may now turn to the second part of Amendment No. 16. I agree that the existence of a cooling-off period provides important protection. The regulation of marketing and financial advice is a matter for the Financial Services Authority and its rules already ensure that anyone receiving advice on a personal pension--as for any other financial service product--can cancel their application within 14 days. I expect there will be a corresponding cooling-off period for stakeholder pension schemes, but I do not think anybody will go to the stake for the difference between 14 days and 28 days.

I think that the arrangements on which we will shortly be consulting will meet the concerns expressed by the amendment. On that basis, I hope that the noble Lord will feel able to withdraw it.

Amendment No. 31 requires stakeholder schemes to ensure that anyone applying to join the scheme had received independent financial advice when the scheme

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had been designated by the employer. Employers would have to ensure that their designated schemes provided a certificate guaranteeing that none of their employees would be allowed to join that scheme without receiving independent advice. My argument that advice may be valuable in some cases but not in all deals with the argument for Amendment No. 31.

I do not understand Amendment No. 25. It provides that the employer shall confirm with the Department of Social Security that the stakeholder pension scheme is the most appropriate form of pension provision. That seems to be ambiguous. It could mean that the employer shall confirm with the Department of Social Security in the sense that the Department of Social Security confirms to him; or that the employer reports to the Department of Social Security that it is the employer's view that it is the most appropriate form of pension provision. The wording,

    "confirm with the Department of Social Security", is ambiguous. Unless the noble Lord, Lord Higgins, has any more to say on that point, I think that that is enough to encourage me to resist the amendment, particularly in view of the arguments which I have already put forward, against universal advice.

9.30 p.m.

Lord Freeman: Will the Minister comment briefly on what is probably the best avenue of advice? I refer to the annual pension statement, for which the Bill provides and which I very much welcome. Does the Minister agree that it is difficult to provide initial advice on how much pension provision an individual should make? It is the realisation year by year of how little has been provided that is often the best prompt and encouragement to make provision.

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