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Lord Newby: My Lords, I am grateful to the Minister for that reply and indeed for that latter comment. The truth, however, is that we still disagree about the effect of current provision on the likelihood of many lower-income families adopting child trust funds. I hear what the noble Lord, Lord Naseby, says about the possibility that these building societies are not as far advanced as the Children's Mutual; perhaps they should be able to offer more products more easily. However, the truth is that they cannot, and it appears that they will not. As a result, we believe that many of those who I would have thought the Government would be keen to see take up child trust funds will not do so. Therefore, as grateful as I am for the Minister's comments, I fear that he has not gone far enough, and I would like to test the opinion of the House.
Resolved in the negative, and amendment disagreed to accordingly.
The noble Baroness said: My Lords, the Minister alluded a few moments ago to the fact that Amendment No. 3 covers some of the same territory as the previous amendment. Indeed, I was surprised that the two were not grouped. However, as the role of the Opposition is to ungroup and not group amendments, I left it as it was proposed.
Baroness Noakes: My Lords, that just shows the Minister that it is always worth another try. The effect of Amendment No. 3 would be to remove the requirement for a provider to offer particular types of account. The practical effect would be to remove the
We have no problem with a stakeholder product being approved by the Government and being available to consumers, and we would have absolutely no problem if the Government's explanatory material said that stakeholder products were good things in which to put one's child trust fund money. We believe that that is the right place for the Government to steer voucher recipients. Equally, we have no problem with the Inland Revenue using stakeholder accounts as a default where parents cannot be bothered to do anything or where, as mentioned by the noble Lord, Lord Newby, they understand only building societies and, if those do not offer accounts, they will do nothing.
However, we believe that the market should be encouraged to offer diversity and choice and it is neither efficient nor necessary for all providers to have to offer one kind of product. We believe that the explanatory material should explain the different types of product and their different features so that people can choose between them but we do not think that every single provider should have to offer a particular type of product as that may not play to the strengths of certain providers.
Therefore, on the one hand, we favour diversity of choice and freedom for providers to offer what they are good at, but, on a practical level, we worry about the impact of the requirement to provide a stakeholder account. If, for example, I decide to go into business as a child trust fund provider, which I have no present intention of doing, I must provide a stakeholder account alongside anything else that I want to market to attract child trust fund vouchers. The other products that I offer can have child structures, investment approaches and the approaches to minimum investments that I want. As I understand it, if I choose to become a child trust fund provider, I can offer those very diverse products but I must also offer a stakeholder account. I should be grateful if the Minister could confirm that.
Therefore, when I come to market child trust fund products, what would be the practical impact of having to offer a stakeholder product? Could I simply state at the bottom of my marketing material, "If you want one of the Government's stakeholder varieties, please apply separately", thus building my marketing around the unconstrained products that I wanted to offer? Or will stakeholder products, in practice, be a dominant offer? If it is simply a technical requirement, there may be little objection to it because the market will promote what it wants. I could not find anything in the Bill or the draft regulations which seemed to address that point. So I am struggling to find out what is the practical impact of having the requirement for a stakeholder product.
Lord McIntosh of Haringey: My Lords, I sympathise with the difficulty the noble Baroness has in understanding what Clause 3(3) says because in regulations it is all stated as "may". However, we have published the draft regulations and I can make it clear that the intention in the regulations is to specify that all providers must offer a stakeholder account as part of their product range as it has been specifically designed to provide good value to all consumers. That is the basis on which we debated the last amendment and it had better be the basis on which we debate this amendment also.
The stakeholder account is to be equity based but its risk will be controlled through lifestyling, a progressive move to less risky assets commencing no later than at the age of 13, and a requirement to diversify investments in the account. Although equity investments can go down as well as up in value, the evidence is that they provide the best returns for long-term investment. Nevertheless, it is not compulsory for investors to take out a stakeholder account. They are free to choose whatever account best fits their needs and risk preferences. Moreover, parents are always able to transfer their child's CTF account from a stakeholder one to a cash based one. Transfer between those accounts will be free.
Parents will have access to financial information and education to help them make suitable choices about which type of child trust fund account is right for them. I say this with the noble Lord, Lord Newby, in mind as the only virtue that he sees in the Bill is the increased availability of financial information. An information pack will also be issued to parents alongside the CTF voucher covering points that need to be considered. I think everyone in the House agrees that it is important that families make informed decisions. To ensure appropriate support for parents, particularly those with little experience of savings and investment, the Government have commissioned research on the best way to communicate to parents how to take the financial and investment decisions involved.
Allowing all investors to have the opportunity to invest in equity could help people engage with financial institutions and understand different ways of saving. That is why I am so puzzled at the expressed intention of the noble Baroness, Lady Noakes, in taking out Clause 3(3). This is precisely what that subsection and the regulations which it permits are intended to do. I wonder whether she is not in danger of finding herself on the opposite side from her
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