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House of Lords

Monday, 12 January 2015.

2.30 pm

Prayers—read by the Lord Bishop of Lichfield.

Introduction: Baroness Wolf of Dulwich

2.38 pm

Alison Margaret Wolf, CBE, having been created Baroness Wolf of Dulwich, of Dulwich in the London Borough of Southwark, was introduced and took the oath, supported by Lord Sutherland of Houndwood and Lord Rees of Ludlow, and signed an undertaking to abide by the Code of Conduct.

Roads: Young Drivers


2.43 pm

Asked by Lord Jordan

To ask Her Majesty’s Government whether they have any plans to produce a Green Paper to address the incidence of vehicle accidents involving young drivers.

The Minister of State, Department for Transport (Baroness Kramer) (LD): My Lords, Britain has some of the safest roads in the world. However, young drivers are disproportionately involved in collisions. There is a difficult balance to strike between promoting young drivers’ safety and their freedom to access work and education. We will not rule out further measures, but at present we are focusing our efforts on technological solutions. We recently commissioned research into how telematics can reduce accident rates among young drivers and the findings will help to shape future road safety policy.

Lord Jordan (Lab): I thank the Minister for that reply. Young drivers account for about 20% of all road deaths, yet they represent only 7% of all fully licensed drivers and have less mileage than older drivers. Measures have been tried for many years, and all have failed. It is now time for this issue to be grasped. I believe the time has come for an all-party commitment, before the next election, to a Green Paper on young drivers that is prepared to see more radical solutions than we have seen so far. This will not only harness those who want to support this but will certainly give some relief to all the parents in Britain who are terrified of the statistics I have quoted. Is the Minister prepared to be part of an all-party commitment to a new Green Paper?

Baroness Kramer: My Lords, the Government are not ruling out any programme that safeguards young drivers, but at the moment we are focusing our efforts on technological solutions, such as the telematics I described. We think they offer great potential and will help to get the right balance between safety and the freedom to use a car, which is so important to many young people.

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Baroness Gardner of Parkes (Con): Will the Minister consider looking at the Australian system, which is very much tougher on young drivers? Until a certain period has passed, you have to have a nil alcohol level, but the real secret is enforcement. Will she look at that policy?

Baroness Kramer: Obviously it is important to look around the world, and we do. I agree that enforcement is important, and that is one of the very important areas for telematics, which provide a running judgment on the way in which a car is being driven at any moment.

Lord Wills (Lab): My Lords, the Minister will be aware that of the serious accidents caused by young drivers, the great proportion of those accidents, and fatalities, are caused by young men drivers, not by young women drivers. This is as much a cultural problem as anything else. What are the Government doing specifically to tackle that aspect of the problem?

Baroness Kramer: We have extensive programmes on issues around drink driving, and I am sure your Lordships are aware of those campaigns. We have a very good safety record in this country, frankly, but we can never be complacent about that. As I say, the focus of the work is now on what we can do with telematics, which now enable us to tackle this problem in a much more targeted way. Research is under way so that we will be able to do that effectively.

Lord Bradshaw (LD): My Lords, I concentrated on road safety for many years when I was a member of the Thames Valley Police Authority. The injuries which young men suffer—often at night, usually driving too fast, usually driving in wet conditions—are horrendous, and they are horrendously expensive. I wonder whether, instead of a Green Paper, the Minister would consider some legislation to make things like provisional licences a reality rather than something which people refer to every few years and then forget about.

Baroness Kramer: My Lords, it is crucial that we use research and research-based evidence to design effective programmes. As noble Lords will know, there are many different examples around the world, but under its current system, which we are obviously seeking to improve, the UK actually scores very well on international measures.

Lord Howarth of Newport (Lab): My Lords, will the noble Baroness be kind enough to explain, for the benefit of elderly drivers who may not know, what telematics are?

Baroness Kramer: My Lords, that, I am sure, his Lordship does know. It is basically a gizmo—if I may use such language—that is in the car, which constantly communicates the driving performance to the insurance company, so erratic driving and speeding are picked up on a live basis.

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Earl Attlee (Con): My Lords, is it therefore correct that the Government have wimped out on introducing graduated licences, and why do we allow motor manufacturers to build motor cars that can far exceed the prevailing speed limit?

Baroness Kramer: My Lords, as I say, we have not ruled anything out, but we think telematics are a useful direction to pursue because they let us target problem driving, so that many other youngsters who are driving well still have the scope to reach various education and social events. As for the question of general speed limits in cars, I have never addressed that, but I will try to find the noble Lord an answer and write to him.

Lord Davies of Oldham (Lab): My Lords, is this the only Government who perceive a Green Paper as green grass into which they can kick difficult areas? In March last year the Minister made a commitment to produce this Green Paper. Subsequently it was quite clear that we would not see it before Christmas. We know the nature of the grass leading up to the next general election. This Government have no intention at all of tackling this significant road safety issue, and they stand condemned on that fact.

Baroness Kramer: My Lords, the review of telematics will be a two-phase study, and we should see the first phase in April. That will lay out what further work needs to be done. At the moment we do not have the evidence base or the research that we need to make sure that we are coming up with the most appropriate solution.

Baroness Walmsley (LD): My Lords, could I ask for a little more clarification about telematics? Does this mean that this gizmo has to be put in the car of every young driver for a period after they pass their test? Could my noble friend the Minister explain a little further?

Baroness Kramer: At the moment, Members of your Lordships' House may themselves have driving insurance that has telematics attached. Anyone going on to one of the websites and looking at various insurance premiums will see that discounts are available for most companies if there is an agreement to use the telematics system. It is still obviously fairly early on in its life. That is why we need to have research, because we want to understand whether there is a good relationship between this ongoing monitoring of what is happening in the car and the actual accidents about which we are all concerned.

Lord Dubs (Lab): The Minister has not mentioned young motorcyclists. Are they not the group that is particularly in danger of accidents?

Baroness Kramer: The noble Lord is right that young motorcyclists are also disproportionately engaged in accidents. I am frankly not clear on the insurance and telematics potential for motorcycles, and I will have to write to him on that.

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Battle of Waterloo: 200th Anniversary


2.51 pm

Asked by Lord Forsyth of Drumlean

To ask Her Majesty’s Government what plans they have to mark the 200th anniversary of the Battle of Waterloo.

Lord Gardiner of Kimble (Con): My Lords, the Government are working with Waterloo 200, a charitable trust, to commemorate the 200th anniversary of the battle. Many activities are planned across the United Kingdom and in Belgium. The Government announced, in June 2013, £1 million of funding to ensure that the famous farmhouse at Hougoumont is restored by 18 June. Activities to commemorate this anniversary and others have benefited from heritage lottery funding.

Lord Forsyth of Drumlean (Con): My Lords, I am grateful to my noble friend, and delighted to hear that. However, in commemorating a famous victory over Napoleon by the Iron Duke and his European allies, does my noble friend agree that we must never forget the sacrifices made by the peoples of these islands over the past 200 years in defence of peace, prosperity, democracy and freedom in Europe? In this week of all weeks, we must stand together as a United Kingdom with our allies in defending this precious legacy.

Lord Gardiner of Kimble: My Lords, I entirely agree with the sentiments that my noble friend expresses. Indeed, Waterloo secured peace in Europe for nearly 50 years. Men and women from all parts of the United Kingdom have made the ultimate sacrifice in the cause of freedom over the past 200 years. We rightly commemorate them; we are as united now as we have been before in the cause of freedom and tolerance.

Lord Anderson of Swansea (Lab): My Lords, for Blücher should we not read Merkel, and recognise that one suitable way of commemorating this is to recognise that we have a national interest in keeping in close touch with our German allies and partners?

Lord Gardiner of Kimble: My Lords, it is undoubtedly the case that we should be in touch and work with all our partners on current affairs, but it is of interest in relation to Waterloo that a number of Länder are commemorating the Battle of Waterloo. The noble Lord mentioned Germany. Hanover, Brunswick, Berlin, Hamburg and Wiesbaden are all commemorating the battle.

Earl Cathcart (Con): My Lords, I am fortunate to have in my family archives some original maps of the battlefield used by various members of my family who fought at Waterloo. One was aide-de-camp to Wellington and another had three horses shot from under him during the battle. Happily, both survived and went on to become generals like their father, grandfather and great-grandfather. So, naturally I welcome the Government’s donation to help the restoration of Hougoumont. However, can I ask about the overall cost of that project and the overall funding? Presumably, individuals have donated. Have any other countries made donations? Presumably not the French.

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Lord Gardiner of Kimble: My Lords, as well as the United Kingdom Government’s funding, the Government of Wallonia—part of Belgium—have contributed €900,000; there are also Belgian sponsors and UK sponsors of €1 million and £2 million respectively. The Hougoumont site is hugely important, as is known: it was the battle within the battle.

Baroness McIntosh of Hudnall (Lab): My Lords, this House has within its walls a remarkable commemoration of the Battle of Waterloo in the shape of the Daniel Maclise fresco in the Royal Gallery. It commemorates not only the triumph of Waterloo but also its great tragedy. Will the Minister give the House an up-to-date account of where we are with the restoration of that fresco and its partner?

Lord Gardiner of Kimble: My Lords, I spoke to the curator this morning, rightly anticipating this question. This is a very intricate and complex matter and the University of Cologne is considering all the points that come out of its research. After that careful consideration —because obviously we do not want to do anything at all that could further damage the paintings—this will come before the Works of Art Committee. The options before it will then be considered, and then all of us will hear more.

Baroness Bonham-Carter of Yarnbury (LD): My Lords, picking up on the artistic aspect, does the Minister agree that one of the most effective commemorations of the First World War was “Blood Swept Lands”—the ceramic poppies at the Tower of London? That was a very strong and evocative example of the power of artistic endeavour in bringing people together. I agree with my noble friend Lord Forsyth that Waterloo 200 should similarly emphasise not the triumph but the tragedy of conflict—tragedy that we experienced so starkly last week.

Lord Gardiner of Kimble: My Lords, I think that that is why we have all, rightly, used the word “commemoration” and never “celebration”; it precisely encapsulates what we all feel about the sacrifice of these dreadful battles. However, we are grateful that we prevailed.

Lord West of Spithead (Lab): My Lords, I understand that, as part of these celebrations, one of the events will be a re-creation of the dispatch from Brussels to London. It is a very good educational tool. HMS “Peruvian”, which took the dispatch from Ostend, was becalmed off Ostend and the captain and four sailors then rowed 18 miles to Broadstairs. Does the Minister not think that if we are going to re-create that, we need to start training some captains in the Royal Navy now to achieve it?

Lord Gardiner of Kimble: My Lords, the dispatch and delivery of this great news, and the peace that unfolded in Europe, were hugely important; and, indeed —as the noble Lord will confirm—the Battle of Trafalgar ensured that there was peace at sea for a very long time.

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Lord Spicer (Con): My Lords, on the morning of the Battle of Waterloo the Duke wrote: “I have no time to write a short letter so I will write a long one”. He was probably referring to a divorce case in which he was unfortunately one of the cited parties. Is it not the case that, had the journalistic practices that prevail today applied in that time, he might never have been supreme commander and we might have lost?

Lord Gardiner of Kimble: My Lords, we can all be extremely grateful for the Duke of Wellington’s courage and bravery.

Alcohol: Addiction


2.58 pm

Asked by Lord Avebury

To ask Her Majesty’s Government what are Public Health England’s plans for combatting alcohol addiction.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con): My Lords, Public Health England recognises that the harmful use of alcohol is a major health risk. The harm from alcohol is preventable; alcohol is one of seven key priorities that PHE is focusing on. It is implementing a programme to support national and local government, the NHS and partners to implement evidence-based policies and interventions. Included in this work is the reduction of alcohol addiction.

Lord Avebury (LD): Considering that three years ago, there were 1.1 million alcohol addicts in England and that abuse of alcohol was costing the nation £21 billion—and probably much more than that today—how can the Minister reconcile the fact that we spend only one-tenth as much on treating alcohol addiction as we do on patients suffering from drug addiction? Why is it taking until 2016 to update the guidance on access to mutual aid fellowships such as Alcoholics Anonymous, when the ACMD has shown that there are effective ways of combatting the addiction?

Earl Howe: My Lords, my noble friend was kind enough to give me advance warning of those questions. I have to say to him that we do not recognise the figures he quotes; nor do we think that the comparison he makes is like for like. In 2007, an estimated 1.6 million people had some degree of alcohol dependence, including those with a slight dependence. Of those, some 250,000 were believed to be moderately or severely dependent. The specialist treatment centre system continues to work well for many people. Many of the trends in terms of treatment are positive. As regards supportive relationships, I fully agree with what he said; they are a vital element in helping individuals build their own recovery. In October 2013, Public Health England produced a strategic action plan for supporting the treatment sector to strengthen its links with mutual aid organisations to ensure that everyone in treatment can benefit from that support.

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Lord Hunt of Kings Heath (Lab): My Lords, how many meetings have been held between Ministers and representatives of the alcohol industry since the last election? Why are the Government delaying the publication of the Chief Medical Officer’s review of safe drinking levels until after the election? Are the two connected?

Earl Howe: No, my Lords, they are not. The Government have regular dialogue with the industry, but the industry does not formulate policy and never will do. There has been a delay on the new guidelines; the consultation on them had been planned for December last year but will not now happen until shortly after the general election. That is simply due to problems with Public Health England commissioning expert advice on guideline methodologies, which took longer than intended. The academic body that PHE wanted to do the work decided that it did not have the capacity to do so. A tender exercise was therefore necessary and the work is being carried out by a team from Sheffield University.

Baroness Howarth of Breckland (CB): My Lords, the Minister is well aware of the effect of alcohol on unborn children. What are the Government doing for young mothers who are either addicted to drink or unaware of the difficulties that alcohol creates for their children in terms of education both through the health service and the education system?

Earl Howe: My Lords, the Royal College of GPs has a special focus at the moment on giving advice to GPs. We are also dramatically increasing the number of health visitors, who are, of course, highly instrumental in influencing the behaviours of mothers-to-be and young mothers.

Lord McColl of Dulwich (Con): My Lords, does the Minister accept that although alcohol was until recently the commonest cause of liver disease, the commonest cause is now the obesity epidemic, which is killing millions of people? Some 13 million people in this country are suffering from obesity—far more than are suffering from alcohol problems.

Earl Howe: My noble friend is absolutely right. More than 90% of liver disease is due to three main, preventable and treatable risk factors—alcohol, hepatitis B and C, and obesity. Alcohol accounts for 37% of liver disease deaths, but obesity is indeed a major factor in this.

Lord Brooke of Alverthorpe (Lab): Will the Minister explain to the House why, when his Government came to power, they tore up the draft strategy on liver disease that had been prepared by the previous Government? What are they going to do to put one in place and, given the complaints we have heard, make sure that the growth in the number of deaths is reversed?

Earl Howe: My Lords, Public Health England has a programme of work to ensure that all the bases are covered. It is producing a report for government that will be published later this year. Over the next 18 months,

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there will be a longer programme of work on such things as a framework for liver disease, setting out the evidence base for the introduction of a minimum unit price for alcohol and using alcohol as the trail-blazer for a new whole-system approach that establishes what works and is clear on the return on investment, to enable government to take action based on evidence.

Baroness Hollins (CB): My Lords, the Board of Science at the BMA, which I chair, believes that the availability of cheap alcohol, such as white cider, is one of the main causes of the rise in addiction. We believe that the sale of cheap alcohol needs to be tackled through the introduction of a minimum unit price and that prevention really is better—and cheaper—than cure. What does the Minister think about that?

Earl Howe: Minimum unit pricing remains under consideration while additional evidence becomes available. We are not taking it forward at the moment. We need to give careful consideration to any possible unintended consequences of minimum unit pricing, such as the potential impact on the cost of living, the economic impact of the policy and increases in illicit alcohol sales. It is, and has only ever been, part of the Government’s alcohol strategy—although, as I mentioned a moment ago, Public Health England will be assembling the evidence base for the introduction of a minimum unit price for alcohol to advise the next Government.

Lord Garel-Jones (Con): Does the Minister agree with me that alcohol is properly defined as a habit-forming, hallucinatory drug, and is it not about time that Governments began to treat the use and abuse of this particular drug with the same seriousness as they do the abuse of other drugs?

Earl Howe: My noble friend makes a very good point. Alcohol in moderation is something that we can all enjoy, but people who binge drink or drink drive cause problems for accident and emergency departments. They are the people we have to bear down upon. I believe that we do now have effective systems of regulation and enforcement, which are proving their worth.

Village Life


3.06 pm

Asked by Lord Roberts of Llandudno

To ask Her Majesty’s Government what steps they are taking to safeguard village life.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Lord Ahmad of Wimbledon) (Con): My Lords, this Government are safeguarding village life. We have already given community rights to give power to communities, enabling them to shape their place and protect their local assets. We have also delivered over 7,500 affordable homes in the smallest rural communities. The £20 million community branch fund is supporting Post Office community branches, enabling them to further enhance their sustainability

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and viability, and the Rural Development Programme for England has invested over £400 million to grow the rural economy.

Lord Roberts of Llandudno (LD): I thank the Minister for that reply, but I am sure he will agree that villages of, say, 1,000 or fewer residents are not just to be suburbs of larger towns, but places where people can live and earn their living. Can the Minister tell me what plans the Government have to encourage the liveliness and buoyancy of villages? Could we ask every community and parish council to draw up a plan so that they know what their present status is, what their problems are, and what their proposals are for the future?

Lord Ahmad of Wimbledon: I agree with my noble friend; he makes a very good point about the importance of village life. As I have already alluded to, the Government are investing a great deal in this respect. Let me draw the attention of the House to the Rural Community Buildings Loan Fund that the Government are supporting, which is a £700,000 Defra fund that is managed by ACRE and encourages communities to raise funds. Of course, the Government have also pushed and worked with the Post Office to ensure that post offices are retained at a local level and we are working alongside banks to ensure that communities in the most remote parts can access financial services. Indeed, I believe that RBS has just started a mobile scheme that goes out to about 90 rural towns that are hard to reach, which is quite innovative and certainly is supported by the Government.

Lord Clark of Windermere (Lab): Is the Minister aware that in many villages in national parks the fact that more than 50% of the houses are now used as holiday lets means, for example, that GP practices are having to close in places like Coniston and Hawkshead in the Lake District because there are insufficient permanent residents? What plans does the Minister have to consider the proposals from local authorities that they should have some say on the designation of holiday lets?

Lord Ahmad of Wimbledon: The Government have already outlined their commitment to the localism agenda. I have talked previously from the Dispatch Box about local enterprise partnerships. These are prevalent not just in towns but in villages and within the rural economy. Currently five pilot rural growth networks have been established in Warwickshire, the north-east, Swindon in Wiltshire, the heart of the south-west and Cumbria. These are all working with the local authorities and local lets to encourage local growth. The noble Lord’s point about holiday lets is well made. However, we are working with local authorities to ensure the vibrancy of local economies and local housing.

The Lord Bishop of Rochester: My Lords, reference has been made at various points to housing. The Minister will be well aware of the importance for the sustainability and vitality of rural communities of a good mix of housing, housing tenure and so forth. Does he agree that community land trusts are a valuable and perhaps essential way of ensuring a continuing

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and permanent supply of affordable housing in rural communities? If so, what commitment have the Government made to increasing the number of such trusts?

Lord Ahmad of Wimbledon: The right reverend Prelate makes a valid point. We work with local authorities to ensure that we identify trusts which can take forward development of the local economy. The community right to build was part of our localism agenda and we are encouraging that. However, I fully acknowledge that there is a lack of affordable housing in villages, which has a knock-on effect on sustainability. We are currently looking to deliver more than 73,000 affordable homes that have been provided for in rural local authorities in England since April 2010.

Lord Deben (Con): When my noble friend talks to local authorities, will he talk to them seriously about their partiality in these matters? Many of them will deal only with what they call larger villages—central villages that are convenient for them—rather than with small villages. I, for example, am told that I do live not in a village but in a scattered settlement. It has always been a village but it is now a scattered settlement. The reason is that the local authority does not want to treat us as it treats others because that would be inconvenient for its bureaucracy. Will the Minister please have a word about this partiality?

Lord Ahmad of Wimbledon: I of course recognise my noble friend’s concern, including his reference to a scattered development. I will certainly look into that. In Arun in the county of Sussex the country’s first three community right to build orders were successfully passed in Ferring, Arun district, in December last year.

Lord McKenzie of Luton (Lab): My Lords, the Minister has acknowledged the lack of affordable homes in rural areas. In particular, is there not a lack of smaller homes? In these circumstances, does not the bedroom tax have an especially pernicious effect on rural areas, and is not the only solution to get rid of this wretched tax?

Lord Ahmad of Wimbledon: The important point is how many homes are being built. I am sure the noble Lord recognises that we currently have a record number of housing starts and, indeed, housing builds, and that is what we need to encourage. I have already alluded to some of the initiatives that we are taking. I believe my noble friend Lord Freud has previously highlighted that, where difficulties with the bedroom tax are identified, the Government have made available funds to help people in that situation.

Health and Social Care (Safety and Quality) Bill

First Reading

3.13 pm

The Bill was brought from the Commons, read a first time and ordered to be printed.

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Self-build and Custom Housebuilding Bill

First Reading

3.14 pm

The Bill was brought from the Commons, read a first time and ordered to be printed.

Recall of MPs Bill

Order of Consideration Motion

3.14 pm

Moved by Lord Wallace of Saltaire

That it be an instruction to the Committee of the Whole House to which the Recall of MPs Bill has been committed that they consider the Bill in the following order:

Clauses 1 to 6, Schedule 1, Clauses 7 to 10, Schedule 2, Clauses 11 to 16, Schedules 3 to 5, Clauses 17 to 20, Schedule 6, Clauses 21 to 25.

Motion agreed.

Pension Schemes Bill

Committee (2nd Day)

3.15 pm

Clause 47: Pensions guidance

Amendment 29

Moved by Lord Newby

29: Clause 47, page 20, line 8, after “members” insert “, and survivors of pension scheme members,”

Lord Newby (LD): My Lords, the Government intend that all those who stand to benefit directly from the new pensions flexibilities provided by the Taxation of Pensions Act 2014 should have access to pensions guidance, which will help to empower them to make informed decisions about their pension savings.

The amendments to Clause 47 and Schedule 3 are technical amendments to ensure that this is the case. The amendments in this group adjust the definition of pensions guidance in new Sections 333A and 137FB of the Financial Services and Markets Act 2000, to extend pensions guidance to survivors of members who have benefits to which the flexibilities will apply, rather than just to members of pension schemes. This is needed because in some circumstances pension schemes may provide benefits to survivors of members of the scheme other than insurance-based products or cash lump sums—that is, flexible benefits—without their becoming members of the scheme. I beg to move.

Lord McAvoy (Lab): My Lords, a large number of government amendments have been tabled for today’s business. The impression given is of last-minute thoughts responding to last-minute contributions and suggestions. If the Government had been doing their groundwork properly, they would not have had to respond to such issues by moving the amendments.

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I thank the Minister for doing his best to explain the amendment. I think he has said that these are minor and technical amendments, but can he confirm that that is so and that they do not substantively change the effect of the Bill? Quite frankly, we know what the Government are saying in these amendments. I do not think there has been time to study them very well, so we will reflect on what the Minister has said and consider it very carefully ahead of Report.

Lord Newby: My Lords, I can absolutely confirm that these are minor and technical amendments.

Amendment 29 agreed.

Clause 47, as amended, agreed.

Amendment 30

Moved by Lord Bradley

30: After Clause 47, insert the following new Clause—

“Guidance guarantee: annual review

The Secretary of State must each year produce a report on the effectiveness of the guidance under Schedule 3, and that guidance must include—

(a) the number of people who have taken up the guidance;

(b) the number of people eligible to take up the guidance who did not do so;

(c) the effectiveness of the guidance in preventing instances of consumer detriment through the purchasing of inappropriate products.”

Lord Bradley (Lab): My Lords, I beg to move Amendment 30. At the start of our deliberations, it is worth reminding the Committee that at Second Reading we took two pension Bills together: the Pension Schemes Bill and the then Taxation of Pensions Bill. We did so because it was recognised that the two Bills were interrelated and that the issues to be scrutinised and debated were inextricably linked between them. While there was no debate in this House on the Taxation of Pensions Bill, as it was a money Bill, it would be impossible not to refer to these interrelationships in our deliberations today on such matters as pension guarantee, guidance guarantee, product development and the financial and economic consequences of the Bills.

Furthermore, we will continue the theme that we developed on day 1 in Committee: since so much of the Pension Schemes Bill relies on regulation—to date such regulations have not seen the light of day—we will continue to press the Government for far more information on the regulations, to try to make as much sense as possible of how the proposals in the Bill, and the Bills, will be implemented.

Similarly, we have highlighted the speed at which this legislation is being brought to the statute book, which further hinders scrutiny not only inside Parliament but by key stakeholders. These include those who will be responsible for delivering the crucial guidance guarantee—particularly Citizens Advice and the Pensions Advisory Service—and the pensions industry and its representative bodies, who will need to respond to the effects of the policy changes, some of which come into force in barely three months’ time.

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As we have made clear throughout our deliberations, the overriding objective is broadly to support the freedoms and flexibilities in the Bill and to ensure that the public have all the information they need and the guidance they seek to ensure their interests are protected, and that they receive the best outcomes for their retirement without the fear of the scandal, for example, of mis-selling, which the public encountered some years ago.

One example of what I am alluding to emerged only today with the revelation from the Government that only 45% of new pensioners will be entitled to the full new flat-rate state pension in the first five years of the system. That is 2 million people who will not get the full amount. Certainty of the amount of the new pension will be critical in the decisions people may make about how they plan their retirement income or draw down cash immediately after April. I know that the Minister will want to clarify the situation when he responds.

It is in that spirit that I move Amendment 30. At the heart of the amendment is our wish to ensure that the Bill works in the way that it is intended, and that the guidance will be both taken up and prove effective in helping people to choose the right products to fund their retirement or to make the right decisions about lump sums or other retirement income. We believe that guidance is needed but we are concerned that this House has, to date, been provided with too little information about what guidance will be offered. Additionally, will the quality of this guidance ensure that people make the right decisions for themselves and their families, now and in their later years?

I welcome the fact that more information about the guidance has been produced today and I thank the Minister for providing the Committee with it. In particular, we now have the title of the service, ‘Pension Wise’, and the branding, “Your Money. Your Choice”. However,I stress that at this point we are talking about guidance and not advice. We have made this point on a number of occasions during our deliberations and it is important to keep in mind the distinction between guidance and advice on which people rely.

I know it is intended that the guidance should be comprehensive—that has been elaborated on today in the announcement from the Treasury—which, to some extent, is reassuring. The assumption is part-based on the discussions in the Public Bill Committee in the House of Commons, especially the interchange between the Minister for Pensions, Steve Webb, and the shadow Minister, Gregg McClymont. The Minister said in the other place:

“Guidance will discuss the pros and cons of different financial products and services”.—[Official Report, Commons, Pension Schemes Bill Committee, 4/11/14; col. 283.]

He quoted the Financial Conduct Authority, saying that,

“guidance will need to be tailored, providing consumers with sufficient personalised information, so that they can understand their options and make confident, informed decisions about their retirement options”.

The FCA also thinks guidance should include information on tax matters. This is clearly an important consideration. The Minister responsible in the other place went on to

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say that a guidance session has to be person-specific and that he was consulting for opinions, attitudes and expectations on what is needed in good guidance.

I realise that the Treasury is taking this matter forward and leads on this. Again, I further welcome the information that has been provided in the guidance guarantee today. We have to ensure that we can digest the contents of that information that I received at lunchtime today, so that we can further consider the matters within it. That may lead to further consideration of the detail on Report.

It is reassuring to know that the Minister envisages guidance sessions to be comprehensive, but it raises the question of how much it will cost and how those costs will be met. The National Association of Pension Funds estimates the cost of advice for people seeking an annuity under the current system to be £681 million—I mean £681 per session. It does not go quite as far as millions; we might get to that at some later stage. That is hardly a simple assessment but it is not such a comprehensive session, in many ways, as the far-reaching guidance envisaged by Steve Webb, the Minister, and the Financial Conduct Authority.

At £681 per session, it will cost £480 million to provide those 600,000 people retiring in 2015-16 with guidance. But how many people will, in practice, seek guidance? It is safe to assume that some will not choose to take it up, perhaps because their pension pot is too small—maybe less than £10,000, although it could be argued that this group is the very one that will need the best advice. Others will pay an independent financial adviser. The Legal & General group helpfully undertook a trial of free advice to some 9,000 people. It reports that only 2.5% took up the offer. This would cost £154,000 at £681 per session. The Chartered Insurance Institute estimates a 90% take-up. This would cost £368 million. Which do the Government think most likely to be correct? Have the Government risk-assessed this? If so, can this information be available to the Committee? I note that the Treasury has today estimated a cost of the service at £35 million for 2015-16. I would therefore be grateful if the Minister would tell the Committee how this amount has been calculated.

The Minister also told the Public Bill Committee, on 4 November in the other place, that guidance providers will not be subject to FCA regulation. Instead, the FCA must put in place standards that designated providers must work within. Designated providers must be chosen and approved by the Treasury and the list will be available to the public. The FCA will have a duty to monitor compliance and the Treasury will take responsibility for ensuring that the FCA framework is sound enough. Is that sufficient? Monitoring may be comprehensive but fall short of regulation. Perhaps the Minister can assure us on how this compliance will work. As the Minister may imagine, at the heart of my concern is a strong desire to avoid another mis-selling scandal, which would put the guarantee for savers at risk, with savers therefore failing to get the retirement income they need and deserve.

The current designated partners, the Pensions Advisory Service and Citizens Advice, are very credible providers of advice and guidance generally. I am sure that Citizens

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Advice will ensure that all 380 independent bureaux, which will deliver that advice, have all the necessary public liability insurance in place to protect them from claims arising from the guidance tipping into advice and then being acted on. But is it right not to regulate this market? Will others seek to enter the market with far less credible track records than these two esteemed bodies? For example, will people selling products be able to offer guidance via the designated lists in the future? Furthermore, could the Minister explain what redress people will have in practice? With 600,000 people entitled to free advice, it is inconceivable that something will not go wrong. The fact that it is guidance, not advice, could prove to be an inadequate veil to hide behind. The Minister in the other place seemed to think that few people would seek redress. However, I remain concerned, and the implications could be huge.

3.30 pm

I turn to the specifics of our amendment on an annual review of the guidance guarantee. In spite of what has been provided today and throughout the deliberations at all the stages of the Bill, we are being asked to pass legislation here when we still have little real information on which to base full support for it. I hope the Minister can provide a great deal more detail to the Committee today, based on the information that has been provided. If necessary, as I said earlier, we can come back at a later stage for further deliberation.

I conclude with some points that I have gleaned from scrutinising the debates and evidence given in both Houses. First, the guidance is intended to be comprehensive and we welcome that. But we note the views of Rachael Badger of Citizens Advice, who told the Committee on the then Taxation of Pensions Bill last year:

“Guidance sessions will be tailored to people’s circumstances. They will cover things such as tax benefits, possible social care needs, savings and debt; there will also be signposting to regulated advice if that is appropriate”.—[Official Report, Commons, Taxation of Pensions Bill Committee, 11/11/14; col. 23.]

Will the Government confirm in their response today that all those matters will be properly covered?

Secondly, I recognise that guidance will also be available online and by telephone through the Pensions Advisory Service, but will the Minister give details of the proposed 45-minute sessions that we received details of in the information today and of how the cost of the £35 million that I have already alluded to has been calculated for 2015-16? Thirdly, will the Minister allay the fears identified by, among others, the Financial Services Consumer Panel? In the evidence session on the then Taxation of Pensions Bill, it said:

“We are very worried about the face-to-face guidance delivery. It is a huge challenge for CAB to get ready for April”.—[Official Report, Commons, Taxation of Pensions Bill Committee, 11/11/14; col. 12.]

The training and capacity of Citizens Advice and, of course, the Pensions Advisory Service must be in place. Can the Minister confirm that it will be—for the number of people who will be seeking that advice—perhaps before, but immediately after, the April implementation date? Fourthly, I repeat our concern that the delivery partners will not be regulated but merely monitored.

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The central argument, as we know, is that we are being asked to have faith that the Government have fully appreciated all the implications of the legislation, in spite of the speed of implementation and the fact that so much relies on regulation and not primary legislation. We are being asked to take too much on trust. Not unreasonably, this amendment seeks to reassure us that the legislation will work in the way intended. It is right to ensure the quality of the guidance and that adequate funding will be available so that people can have access to the guidance that they need. Specifically, we are asking for a review to include, first, how many people are accessing the guidance that they need. Given that the estimates vary between 2.5% and 90%, this is crucial. Given that many people have limited knowledge about pensions, we need to monitor this to ensure that people know of the guidance that is available to them and where to get it, and that the service is promoted. Secondly, the review should look at why people do not take up guidance. Given that we all agree that it is necessary to offer guidance to help people make informed choices about pension pots and financial planning for their retirement, we need to be sure that they have considered guidance, and if they have elected not to take it up, it would be useful to know why. Thirdly, we need to assess the quality of that guidance and whether it is preventing people from purchasing the most appropriate products. We need to be assured that, as the guidance rolls out, the first users of the service are not seen just as guinea pigs but are used to inform and change guidance that is then appropriate because of the consequences of the information provided by those first people using it.

I am sure that we all recognise the need to provide people with guidance to make our pensions products safe for future pensioners. Given the lack of detail in the Bill, I am sure the Minister will want to support this amendment so that we can have a regular review of the workings of the Bill, and in particular how the pension guidance guarantee works in practice for the benefit of the people who use it. I beg to move.

Lord Freeman (Con): My Lords, I find myself in sympathy with the spirit of the amendment but, I am afraid to say, the detail is somewhat defective. The spirit must be right because the more information that can be available and collected accurately, the better, so that the schemes in the Bill can be improved or amended in due course.

I draw the attention of my noble friend the Minister to the comments of the chartered institute and Royal London; first, on eligibility; secondly, on take-up; and, thirdly, on effectiveness. It is not really possible within a short period of time—that is, on an annual basis—to measure accurately the results of this legislation under those three categories. I look forward to what the Minister has to say, whether in response to this amendment or in due course on Report. I very much associate myself—and, I know, some of my colleagues—with the spirit of the amendment but I think the devil is in the detail.

Lord Newby: My Lords, I am grateful to the noble Lord, Lord Bradley, for the way in which he moved the amendment, and for setting out some of the broader issues that are covered by a number of groups. I hope

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the Committee will forgive me if I, too, take my introductory remarks slightly wider than the amendment itself, because I think they are both relevant to this amendment and spill across a number of groups.

First, I draw noble Lords’ attention to the publication today, which the noble Lord, Lord Bradley, referred to, of an update from the Treasury on the implementation of the pensions guidance service. It announced that the brand for the service will be Pension Wise, with the tagline, “Your money, your choice”. This branding will be used by all delivery partners and is designed to be easily recognisable. The HM Government logo will be used to support the Pension Wise brand where appropriate, to underline the credibility of the service. In answer to one of the points made by the noble Lord, Lord Bradley, potential scammers and fraudsters should be aware that the Bill introduces a new criminal offence which means that anyone passing themselves off as Pension Wise could face prosecution. I can reassure the noble Lord at this point about the way in which the guidance providers will themselves be regulated, and on the basis for the compliance.

The standards for designated guidance providers are in fact a Financial Conduct Authority instrument, so it is a legal document which it is exercising, I am sure the noble Lord will be pleased to know, under Section 333H, Standards for Giving of Pensions Guidance by Designated Guidance Providers, of the Financial Services and Markets Act 2000. It is therefore very much a statutory underpinning of all the guidance which guidance providers will have to follow. This is a detailed document to which I will refer later. Also from today, following the publication of the document, individuals have the opportunity to register their interest in early access to the service as part of the piloting activities. The publication also sets out details of how consumers can access and use the guidance, with further information on the progress and costs of implementation. I am sure that noble Lords will find this information useful.

I can assure the House that the Government are committed, in looking at the specific amendment, to a full programme of monitoring and evaluation which will look at the uptake of the guidance as well as how it is achieving its objective of informing consumer decision-making at the point of retirement. I share the noble Lord’s focus on ensuring that we maximise take-up of the guidance, and that is why the Treasury is legislating, through this Bill, to place a duty on the FCA to require pension providers to signpost people to the guidance as they approach retirement.

Last year, the FCA consulted on its proposals for delivering against this duty, and in November published a very detailed policy statement with its near final rules. Following Royal Assent, these rules will require pension providers not only to signpost individuals to the guidance service in wake-up packs issued four to six months ahead of an individual’s nominated retirement date, but to recommend to their customers that they seek guidance or advice whenever a consumer wishes to access their pension fund. That is one of the reasons the Government are announcing the Pension Wise brand now, so that the industry can get ready for these new requirements and start bringing the service to their customers’ attention as soon as possible.

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I will clarify a statement I made to the House at Second Reading in response, I think, to the noble Lord, Lord McKenzie, on the issue of requirements in the round and progress towards the standardisation of the pension statements that providers will send to their customers approaching retirement. While it is not yet a formal requirement, the Government are clear that progress must be made by industry more quickly. The FCA has clarified in its near final rules that will underpin the guidance service that information about a customer’s pension pot must include, at a minimum, the current value of the pension pot, along with information on guarantees and other relevant special features. Building on this, the Treasury is working with the industry to standardise how the key information is presented. We have made it absolutely clear that the Government consider this to be a key priority. A wide range of respondents to our consultation last year on the pension freedoms made a convincing case that it is necessary to help consumers understand and engage with decisions on what to do with their pension savings. The Government welcome the recent commitment from industry trade bodies to support the development of standardised materials by the Treasury and to encourage their members to use them in communications with their customers as soon as possible.

The Government welcome the FCA’s commitment to consider making such standardisation a mandatory requirement in the wide review of its rules that will take place in the first half of this year. If the trials show that such standardisation helps consumers, I imagine that will be a very strong case for the regulator to require it. We must recognise, however, that not all individuals will seek to take up the guidance offer. It is their choice to do so. They may have other sources of help and advice, such as an independent financial adviser or advice services provided by their employer. We must ensure that consumers know that the guidance service is available and how it can help them, and encourage consumers to use the guidance as far as possible. We must, however, respect the fact that there will be consumers who will be content and equipped, for a variety of reasons, to make decisions without taking guidance. The FCA has introduced a number of safeguards to ensure that consumers are encouraged to seek guidance or, if they do not, are provided with the necessary information to support decision-making.

In summary, it is made clear that firms should not do anything to dissuade customers from getting the guidance. It has reaffirmed the expectation that firms will encourage consumers to shop around on the open market. It has introduced a new requirement that when communicating with customers about accessing their pension funds, firms are required to ask whether they have taken guidance or relevant financial advice and, if not, to encourage them to do so. It has introduced a new requirement on firms to recommend that consumers should seek guidance or advice rather than simply signposting to it. It has also confirmed that firms will be required to give a description of the tax implications of the option selected by a consumer.

3.45 pm

Similarly, we must accept that some people may make decisions which may not result in the best outcome for them or may not seem to an outside observer to be

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“rational”, even after taking advice. That is their choice and their responsibility, and their decisions will be influenced by a range of factors unique to them, but it is worth noting that the FCA has clarified that where a firm is concerned that an individual is making a decision which does not seem consistent with their circumstances, it can check this with the consumer without it being regarded as regulated financial advice.

For too long, individuals’ ability to make choices about how they use their pension in retirement has been constrained by the majority of people being forced down a single route. It is therefore hardly surprising that this has resulted in a lack of engagement in the decision-making process, consumer inertia and a market that was not working in people’s interests. What the Government are working towards now, as they introduce much welcomed freedom and choice, is genuine consumer engagement with the decision-making process. Guidance will be key to that, and the Government will closely monitor and evaluate the effectiveness of the service in supporting consumer decision-making. However, requiring a box to be ticked to confirm guidance has been received or mandating guidance goes against the grain of consumer choice and consumer responsibility.

I apologise for setting out the background in such detail, but I hope that noble Lords will forgive me. Perhaps I may turn to one or two of the specific questions asked by the noble Lord, Lord Bradley. He asked about estimates for take-up of the guidance and how we had reached the figure of £35 million. As he pointed out, the estimates for the take-up of the guidance have been very wide, ranging from 2.5% to 92%—they could not be wider. In fixing a figure of £35 million, we have made our best estimate of the resources needed to deliver the advice in the first instance. It reflects the fact that demand is necessarily difficult to predict in the first year and we accept that the figure may need to be amended in the light of experience. In the document that we have published today, we have explained that if further funding is necessary to meet the demand, the Treasury will meet that cost in the short term. The guidance is funded on a levy. The levy has been set at £35 million this year. If we find that we have to spend £40 million or whatever, the Government will meet that cost in the short term to ensure that we meet the demand and reclaim it from subsequent years’ levies. There is no great science in getting the right figure at this stage. There is no figure for take-up around which there is consensus, but we think that we have reached a sensible starting figure.

On whether we think that training is in place, obviously a big programme is needed to achieve this, but we are confident that the training we are doing is adequate. Citizens’ Advice has a very good track record of giving advice to people in a whole range of circumstances, and this is just another. All CAB and TPAS staff delivering the guidance will receive training with a view to meeting the rigorous FCA standards. They will be required to demonstrate that they have the necessary pensions knowledge and the ability to deliver a quality guidance service before they talk to the public. There will also be a programme of continuous specialised improvement that maintains and develops their technical and professional skills.

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The noble Lord also referred to the story on the BBC this morning about the new state pension. We think that the story gets it completely wrong by seeming to pass off as a new feature of state pensions the need to reflect that millions of people have been contracted out into private pension schemes since SERPS started in 1978. When the new state pension starts on 6 April 2016, we will assess people’s national insurance record, we will value their contribution and record under the new rules and the existing rules, and the higher value will be the starting amount in the new state pension. We will make a deduction if someone has been contracted out of the additional state pension. We do this for people claiming their state pension now.

This is because contributions were made to a private pension and people have either paid national insurance contributions at a lower rate, or some of the national insurance contributions they paid were used to contribute to their private pension. If we were to ignore these contracted-out pensions, whether in the old scheme or the new, people would be paid twice for the same national insurance contributions, and that would be unfair on all of today’s pensioners and on people who have never been contracted out. The fact is that when we value people’s contributions in 2016 they will get at least what they would have got for their national insurance contributions under the current system. Many will get more, with women, carers, low earners and the self-employed set to benefit the most. Under the new state pension, people will need to have only 10 qualifying years to be entitled to a state pension. From 2016, contracting out will be withdrawn and people will all pay the same percentage rate of national insurance for the same state pension.

That is some way from the specific amendment we are discussing. Returning to it, I hope that I was able, in the early part of my remarks, to convince the noble Lord that we are taking the question of monitoring and evaluation seriously and that he will feel able to withdraw the amendment.

Lord McKenzie of Luton (Lab): My Lords, can the Minister help me on two points which arise from the Pension Wise document we got just this morning? Page 7, which recites progress to date, says that,

“until the service reaches maturity, overall responsibility for service design and implementation will remain within the Treasury”.

Will the Minister expand on that and say at what stage he believes the service will reach maturity?

Page 17 says:

“Telephone and face to face guidance sessions will initially be designed as a single session per consumer, though this will be kept under review”.

Will the Minister say something more about the components of that review? What will be taken into account in determining whether that single session for consumers is adequate?

Lord Newby: It is difficult to give a precise answer to the noble Lord’s first question, about maturity. The Treasury is, for good or ill, going to keep its mitts on this process until we are very satisfied that it is working well and is seen to be in a stable and successful state.

As for the single session, noble Lords will be aware that people will be able to access the service either online, on the phone or in person. The hope is that by

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giving people all the financial information that they require, by encouraging them, in the case of pension providers, and by explaining to people, before they turn up to their session, the kind of information that we are looking for, it will be possible to give adequate guidance in one session. We accept that that will not be enough for some people; they will have forgotten something or a thought will occur to them once they have left. We hope that of those cases, which we hope will be a small minority, a majority will be able to get an adequate response to a specific query by going to the website.

We accept, however, that for some people that will not be the case, and that in a minority of cases some people will need to go back, either to make a subsequent phone call or to have a subsequent meeting. However, we are working very hard to minimise that necessity—because, obviously, getting things right first time will be in everyone’s interest.

Lord German (LD): My Lords, perhaps I could follow the point that my noble friend and the noble Lord opposite have just raised in respect of the same document. Box 2.A on FCA standards requires the people delivering the service to have a range of skills, which are numbered i to viii. I shall refer to a report last week in a newspaper that prints on pink paper, in which it was trying to seek from Citizens Advice and the Pensions Advisory Service the qualities of the people that they would employ. The report in the Financial Timesthat I am quoting from says:

“Citizens Advice said details of where the”,

agents and case workers,

“would be deployed throughout its … bureaux … were still being finalised. However, it conceded that consumers could be required to make a further appointment if their questions could not be answered during their … guidance sessions”.

That raises two separate issues: one is the quality and skills of the people who are delivering the guidance service, and the other is whether Citizens Advice is on side with the idea of delivering it in one go. The comment seems to suggest that its people may not have answers to the questions that are being raised by those people seeking guidance in their first interview. I wonder whether the range of flexibility on the two is at all appropriate.

Lord Newby: My Lords, we are keen to make sure that by the time people have been through the guidance process, they are able to make the best decisions for themselves. As I say, we hope that that will be possible in the vast bulk of cases first time around.

I think that what will happen in giving guidance in this area, as happens elsewhere, is that there will be a number of very special cases, but the vast bulk of people will have the same issues as others. The CAB, which after all has to give advice on the whole benefits system, which if anything is even more complicated than the pensions system, has a proven track record of developing the skills of people, and is very good at this—while this is, of course, what the Pensions Advisory Service does.

So we are confident that there are going to be well qualified people. We are building flexibility into the system—partly by having three ways of accessing it and partly, as I say, by, in exceptional circumstances or in a minority of circumstances, allowing people to go back—and we hope we are going to make sure that at the end

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of the day people will all have the degree of guidance that they need, relevant to their needs, to enable them to make well informed decisions.

Lord Bradley: I thank the Minister for his comprehensive reply, particularly when he said that the Treasury would be keeping its mitts all over the service. I assume that that was meant to be reassuring.

I note that he said that he thought the BBC had got the story wrong today about flat-rate pensions, and I listened with great care to his explanation, which we will need to reflect on very carefully. It is vital that people are clear about what their pension income will be when they are making plans about their whole-pot retirement income. I hope that when I read his response, it will be clear that that information will be available to people well in advance of them taking advice from the CAB, the Pensions Advisory Service or whatever source they may choose, so that they can rely on the figures provided to them by the Pension Service.

4 pm

The report out today identifies a sum of £35 million. I accept that it is impossible to be very accurate about proposed take-up, but it is still not clear to me where in the range between 2.5% and 92% the £35 million is placed. I welcome the assurance that wherever it is placed, no one will be denied access to pension advice through lack of resources for those providing it.

The Minister said that the training will be “adequate”. We are seeking an absolute assurance that it will be of the highest quality. I recognise that Citizens Advice deals with very many complex issues. It will often have specialists in its offices who deal with particular aspects and services. Depending on the volume of uptake of pension guidance, we want to ensure that everyone within Citizens Advice who is expected to provide guidance is of the highest quality—not just of adequate quality—and understands all the implications of what the Minister rightly admitted is a very complex landscape to which we are moving.

There are still a number of issues to be considered. As I said in my opening remarks, we need to reflect further on the information that has been provided by the Treasury today. With the proviso that we may continue this debate at a later stage, I beg leave to withdraw the amendment.

Amendment 30 withdrawn.

Amendment 30A

Moved by Lord Bradley

30A: After Clause 47, insert the following new Clause—

“Pensions flexibility: impact on government revenues

(1) The Chancellor of the Exchequer shall, within a period of 2 years from 6 April 2015, publish and lay before both Houses of Parliament a review of the impact of pension flexibility on government revenue, with particular reference to opportunities for tax and national insurance contributions avoidance.

(2) The information published under subsection (1) should include an assessment of the impact on—

(a) the use of salary sacrifice arrangements;

(b) income tax receipts; and

(c) national insurance contributions.”

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Lord Bradley: My Lords, the two amendments in this group are intended to ensure that the effects of the pension flexibilities on the public finances and savers are adequately monitored by the Government. Their purpose is to ensure the publication and proper analysis of the information and that it is placed in the public domain to ensure transparency.

I shall speak first to Amendment 30B, which requires the Treasury to produce a review of the effects of the pension flexibilities 18 months after they are introduced. This reflects the question we need to consider around the guidance guarantee and wider issues of pensions flexibility. We support the introduction of pension freedoms and flexibilities, but we want to ensure that they are done in the right way and that consumers are adequately protected. However, the pace at which the reforms are being brought forward leaves open considerable concern about the effects of the rollout. On Report in the other place, the Minister said:

“The Bill was originally much shorter and obtaining the approval of, originally, the Government to bring it forward took place before the Budget … as we are in the final Session of a Parliament, everything has been on an accelerated timetable”.—[Official Report, Commons, 25/11/14; col. 804.]

The pace at which the wider pension flexibilities provided for in this Bill and in the Taxation of Pensions Act are being brought forward have also led to concerns among a number of other interested parties about whether the Government have fully bottomed out the policy and whether the rollout will go exactly as they are planning. A recent report in the Financial Times said that a lack of detail about the reforms has left the industry concerned that they were at risk of failure. The chairman of the National Association of Pension Funds said:

“There are 4.2 million savers over the age of 55 who from next April will have the right to ‘choose’ how they take their retirement savings”.

He also said that,

“this lack of detail—this lack of clarity—is severely limiting our opportunity to get things right for our members … and it’s increasing the risk of failure”.

I point this out by way of background to show that, come April, there will still be a lot of work to do in reviewing the effects of the changes. The details of this amendment enable the Government to do just that. Conveniently, they will be along the lines of the test that we have already set out for these reforms: they should be fair; there should be decent products for low and middle-income savers; and the reforms should not result in extra pressures on the public finances.

The ongoing position of annuities is one such matter that needs to be considered. For some people, annuities will remain an attractive product because of the security they provide. The Treasury have recognised that this is the case. Therefore, if the market for annuities were to suffer some major change, and perhaps products that were good value in the first place were no longer then available, that would be something for this House to consider carefully. This is why the amendment requires a review to consider that matter.

Noble Lords will also be able to see that a review would be required to conduct an analysis of the cumulative effect on the revenues of the Treasury. Our other amendment on this point is focussed on the potential

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effects of salary sacrifice arrangements. It is also important to consider the possible costs in what the state may end up having to provide. I am not aware of any Treasury analysis of this. The Minister may well want to correct me on this and I am happy for him to do so.

Further, we still do not know how this will interact with changes to social care. In its written evidence to the Committee on the Taxation of Pensions Bill, the Association of British Insurers expressed concern that,

“a continued focus on early access at the age of 55 means that there may be barely enough in the pension pots of some savers to cover their near-term retirement income needs, let alone enough left to stretch to care costs in older age”.

We have also seen a recent report in which it is anticipated that pension withdrawals of this nature are set to rise by £6 billion above what the Government currently estimate. The charity Age UK warned last week that significant numbers of people could run out of cash in later life by withdrawing funds under the new plans unless tougher safeguards are in place.

We do not believe that the Government have conducted sufficient analysis of the potential impact on the social care landscape. We also believe that there has been a disproportionate focus on the new freedom to access pensions early, and to take money out, which was not previously possible, as I have just alluded to. That is why we are calling on the Government to publish a review setting out the distributional impact by income decile of the reforms in the Bill. It is also unclear what effect having access to flexi-access pensions will have on means-testing for social care. I am not sure that the Government have the answer to this yet, but I would be grateful if the Minister could tell us what effect an amount of money that exceeds the means test level in a flexi-access draw-down account would have on the individual’s liability. As I have already pointed out, that money may be expected to last until death, as an annuity would have, but it may be accessible in a way that capital sitting in a bank is. Will that meet the means-test criteria or not?

Just a few months from the changes coming into effect, there are clearly still a number of unanswered questions. That is why our amendment also covers a proper behavioural analysis of consumers in the light of the new freedoms and flexibility. At this point, may I also ask the Minister a question about access to funds? Is the report in the Sunday Times correct that the Minister in the other place is considering whether someone who has already taken an annuity may be able to buy themselves out of that so that they can be included in the new flexibilities and freedoms?

The other amendment in this group requires the Secretary of State to produce a report on the revenue impact of the changes contained in the Bill and the Taxation of Pensions Act. Taken together, there is the potential for the Government to lose a great deal of revenue. As a result, we want to probe the impact that this is likely to have on the figures that the Government have presented in the Budget and in subsequent reanalysis. The main issue at the core of this is so-called salary sacrifice, a potential tax effect first highlighted by John Greenwood in the Telegraph, whereby someone over 55 pays a large part of their salary into their pension pot to avoid paying national insurance and income tax. The Budget freedoms would then make it

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possible for them to flexibly access their money through their pension fund, saving them and their employer a potentially large amount of national insurance. Some 25% of what they access will be tax-free and the rest will be charged at their marginal rate of income tax. This does not appear to have been the Government’s intention, and steps have been taken to try to prevent this. An annual contribution allowance of £10,000 a year for anyone who is accessing pension benefit restricts the possible tax leakage but does not prevent it. The reduced £10,000 limit is activated only after the pension has been flexibly accessed for the first time. As explained by the Association of Accounting Technicians:

“In the first year, before the £40,000 allowance is lost, individuals over the age of 55 will still have the scope to save … NI on the full £40,000, provided they have the necessary earnings, less their existing pension contributions. Where an individual flushes (passes) an extra £30,000 through pension rather than drawing salary they will achieve a saving of £3,600 in employee NI, more than £1,500 in income tax and, also, £4,140 in employer NI (13.8%) in the first year. A total loss to the public purse of £9,240. The ‘Freedom and choice in pensions’ rules mean this money can be withdrawn immediately if an individual is over 55. This fact means that there will not be clear distinction between salary and pension for this age group”.

Questions remain for the Minister to answer over, first, whether that possibility was adequately taken into account before the change was announced and, secondly, whether the revisions made since then are sufficient. For instance, the Government’s revised figures that take into account the changes made since the Budget forecast a loss of £35 million in the first year, and then £25 million for years after that. However, if we are to assume that the annual allowance reduces the potential for tax leakage, why do the revisions forecast a loss? The only conclusion I can draw is that the initial figures did not take into account the potential for salary sacrifice. Can the Minister confirm that this is the case?

It may be the Government’s intention to introduce a more stringent allowance, in which case the £10,000 annual allowance was in fact a relaxation of the rules. However, that would appear to conflict with the Government’s statement that salary sacrifice was not intended to be part of the reforms. If the intent was an annual allowance of zero once the pension has been accessed, what analysis did the Government conduct that persuaded them to change it to £10,000, and can they provide it to Members of this House before Report? It is therefore an issue that needs to be kept under active review, and the Government should report to Parliament on the effect of this matter.

As I have said, the purpose of our two amendments is to create clarity and transparency. As my honourable friend Cathy Jamieson said in the other House:

“It is fair and sensible for us to ask that the new clause is included in the Bill because it would ensure that the Government did not simply monitor quietly in the background, waiting for something to go wrong, but proactively looked at all these areas and then brought further information to Parliament so that we could consider how best to do things in the future and remedy any unintended consequences or loopholes”.—[Official Report, Commons, Taxation of Pensions Bill Committee, 20/11/14; col. 123.]

That is the purpose behind our review, and I hope that the Government will accept the amendment. I beg to move.

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4.15 pm

Lord Hutton of Furness (Lab): My Lords, there has been a great deal of rhetoric surrounding this Bill. Some of the claims for the Bill may be far-fetched, but in one respect they probably are not. Many people have claimed that the reforms in the Bill constitute the biggest shake-up of our pension system for 100 years. If that is true, it is incumbent on the Government to have a clear plan—rather as my noble friend has indicated—for keeping Parliament abreast of the impact of those changes and reporting appropriately on it. None of us knows at the beginning of the extraordinary journey on which we are embarking what will happen and what will be the consequences of giving pension savers these significant new freedoms and flexibilities. It is quite likely that these are responsible people. They have been saving in workplace schemes, in some cases, for decades. Perhaps they are not going to blow their pension pots in a reckless spending spree at the end of their working lives. I tend to agree with that, but we simply do not know. Whereas giving choices is a great policy and one that I can support, it competes with another policy that has similar standing: that is, we must ensure that people approach and enter retirement with enough income to meet their lifestyle requirements.

As has been said by many others in the course of this debate and in another place, these two policies are, to some extent, competing with each other through the Bill. My noble friend’s amendment is really seeking to do one important thing, which is to ensure that there is a proper appreciation of the risks inherent in this approach to the new legislation and a willingness to keep Parliament informed of them. If we get this wrong, not only are we going to impoverish future generations of retirees, but there is, as we know, some risk that the costs of that will fall back on to the shoulders of taxpayers. Either of those two outcomes would be a terrible result of these new freedoms and flexibilities which, in principle, I strongly support.

I hope that the Minister will be able to respond positively to my noble friend’s amendment. I suspect he will say that there is something wrong with the drafting of the amendment. We have all been there before and we know how this process unfolds. If he is not prepared to accept the amendment I hope that he will at least give the House some indication of what reporting the Government are planning to embark on so that future legislators will be able to look back at the detail of this legislation and conclude at some point whether it is working or not. If it is not working, we will have to change it. If it is working, we will all celebrate one of the great reforms of the Government. However, it is clear at the moment that there is no indication, either in the Bill or elsewhere, of what plans Ministers have to keep Parliament abreast of the impact of these changes, given their significance and importance. It is necessary that we hear from the Minister today what the Government’s plans might be.

Lord McKenzie of Luton: I will speak in favour of my noble friend’s amendment and address two points. The first is the point my noble friend raised about tax leakage and the risks of salary sacrifice arrangements. I draw the Minister’s attention to Clause 54, which looks at the issue of independent advice and provides,

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not unreasonably, that that will not be a taxable benefit. However, it precludes it from that exemption if it is the subject of a relevant salary sacrifice arrangement, which is defined in the Bill. Rather than rely on a reduction in the annual allowance as, seemingly, the protection against salary sacrifice arrangements and tax leakage, why not simply adopt the same formulation that is adopted in Clause 54 by precluding salary sacrifice arrangements being available on appropriate definitions?

My second point is to try to get a better handle on the Government’s assessment of behavioural change in the early years as a result of these flexibilities. We can do no better than to focus on the tax projections in the Red Book for March 2014 and the Green Book for the Autumn Statement because those must have been underpinned by some detailed calculations. I am not sure that we have seen that detail to date. I hope that the Minister will follow up in writing if he is not able to deal with all the detail today. How many cases of individuals taking lump sums or other drawdown arrangements rather than annuities are included in those estimates? That must have been the basis on which they were adduced. What is the additional aggregate taxable income expected each year until 2020? How many individuals are estimated to pay tax at higher rates as a result than they would under normal annuitisation? We probed this matter on Report in the Commons but did not get a reply. It would be helpful to have that detail as it would give us an understanding of the Government’s assessment of behavioural change and the number of people who will take more of their pension pots under these flexibilities than would if the annuity arrangements only had been available.

Lord Newby: My Lords, the two amendments in this group would require the Government to publish two reviews of the impact of pensions flexibility. I start by completely agreeing with the noble Lord, Lord Hutton, that these changes are welcome freedoms and flexibilities but, like all freedoms, they bring some risks that I hope, in a variety of ways, we shall be effective at mitigating.

Noble Lords will not be desperately surprised to hear that I do not believe that these amendments are necessary. First, when considering new Clause 1 and the parts of new Clause 2 which relate to Exchequer revenues, it is important to note that in the Autumn Statement the Government published estimates of the Exchequer impact of the policy as a whole. These costings, which were certified by the independent Office for Budget Responsibility, cover all the changes made to the policy since the Budget as a result of consultation. The total impact of these decisions was set out in table 2.1 of the Autumn Statement document.

To ensure that the Government were being sufficiently transparent, the Financial Secretary to the Treasury wrote to members of the former Taxation of Pensions Bill Committee setting out these costings. I will now outline them for the benefit of the Committee. Further detail on how these costs were calculated is set out in the policy costings document published alongside the Autumn Statement. However, in the letter sent by the Financial Secretary to the Treasury to the members of the former Taxation of Pensions Bill Committee, it

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was also explained that the costings published as part of the Autumn Statement were based on the same central assumptions that underpinned the costings published at the Budget. Since the Budget, the Government have explored in more detail two aspects of the policy that affect this costing, which takes us to a point made by the noble Lord, Lord Bradley, about the increased cost of salary sacrifice and the increased cost of welfare as a result of the reforms. The Government have produced costings for these, which have been scrutinised by the OBR. In line with standard practice, these are accounted for as changes to the forecast and are not therefore outlined in table 2.1 of the Autumn Statement document.

Given the concern that noble Lords have expressed, it may be helpful if I detail what those figures are. The revisions to the forecast to account for salary sacrifice, which take account of further discussions and considerations since the Budget, are £35 million in 2015-16, £30 million in 2016-17, and £25 million in each of the following three years. When the forecast was revised to account for the increased cost of welfare, the figures rose from £15 million in 2016-17 to £25 million in 2018-19 and 2019-20. The Government have therefore already published the information that these two new clauses are seeking on the Exchequer impacts of various aspects of flexibility, all of which have been certified by the independent OBR. The Government are committed to keeping the policy under review through the monitoring of information collected on tax returns and tax records. Additionally, HMRC regularly publishes data on tax receipts, which will reflect any impacts on the Exchequer. Any such impacts will be reflected in forecasts at future fiscal events and the Government of course keep tax policy under continuous review. Therefore, there is no need, in the Government’s view, for further reviews of the Exchequer impacts of the policy as the Government have already committed to keep these under review through the usual processes.

Lord Bradley: I am grateful to the Minister and thank him for his explanation of the figures. I want to be absolutely clear that my example of a person who transfers his salary into his pension pot and saves national insurance in the way that I have described has been fully taken into account in these figures.

Lord Newby: My Lords, I believe absolutely that they have. If I am wrong in that, obviously I will write to the noble Lord; but that is the purpose of having initially produced the figures on salary sacrifice and subsequently revised them.

I turn to the other elements of the amendments. Amendment 30B also seeks to require that the Government review the distributional impact of pensions flexibility, no less than 18 months after the Bill takes effect. As set out during debate of the Taxation of Pensions Act, pensions flexibility does not have a direct consequential impact on household incomes. Distributional effects will be driven by the choices that individuals make about how and when to take their pensions. In addition, household income is not necessarily a reliable measure of pension wealth, particularly in the years immediately prior to retirement. It is possible that the impacts of this policy could be misrepresented if we were to review them only against the distribution of household income.

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Additionally, Amendment 30B would require the Government to publish behavioural analysis. The costing of tax policies often involves an assessment of the behavioural impact of the measure and, in some cases, the capacity for additional tax planning and avoidance behaviour. These assumptions and methodologies are, of course, certified by the independent OBR. However, as a matter of policy, the Treasury considers that making these detailed behavioural assumptions public can have the potential to affect the behaviour they relate to, and as such can be potentially detrimental to policy-making. The policy costing note published alongside the Autumn Statement explains how the costings have been calculated. This is in line with the principles outlined in the government document Tax Policy Making: ANew Approach, which was published alongside the June Budget in 2010.

Amendment 30B would also require the Government to review any impact that pensions flexibility might have on the volume of annuity purchases. Data on the sales of annuities will continue to be available through other channels, such as the data published by trade bodies such as the ABI and publications by individual firms. Therefore we do not think that there is going to be any lack of this information being publicly available, so there is no need for a requirement in the Bill to achieve that.

Baroness Hollis of Heigham (Lab): My Lords, is the Minister saying that the information will be available to departments but that the Government do not wish to publish it because of the behavioural implications it may have, or is he saying that it is too soon to gather that information and therefore they will not actually do so? The problem with the second position is that this change is such that it is almost impossible to change policy direction once it is embedded because of the nature of the policy changes, which to my mind are extravagantly at risk. As a result, the Minister is denying Parliament the opportunity to make the modifications before that degree of risk is permanently embedded in public policy.

Lord Newby: My Lords, I was saying that the Government have made an assessment of behavioural changes and they have produced figures which take those changes into account. Therefore, there has been a full assessment of the behavioural changes as best as can be done in advance of the change coming into effect. As I said, it is Treasury policy not to publish those assumptions but that work has been done. In terms of the cost to the Exchequer of this policy change, the figures were published at the time of the Budget and were subsequently revised, as I set out, at the time of the Autumn Statement.

4.30 pm

Lord Hutton of Furness: My Lords, presumably that information will be subject to freedom of information requests.

Lord Newby: That, my Lords, is an extremely interesting question to which I do not know the answer.

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Baroness Hollis of Heigham: In that case, my Lords, the Minister is saying that we are being given the assumptions that go into the forecasts but we are not going to be given the information to see whether those forecasts are accurate.

Lord Newby: I am saying that in a whole raft of areas, no doubt under successive Governments, the Treasury has made behavioural assumptions. When I used to work in Customs and Excise, that was certainly the case when asking what would happen if the duty on whisky was put up. A whole raft of behavioural assumptions is made in policy-making and I do not think that it has been the policy to make those behavioural assumptions public. What obviously has been, and will remain, policy is to set out the impact of those behavioural changes. The noble Baroness shakes her head. Perhaps when she was a Minister behavioural assumptions were made available. My understanding is that that has not been the policy but I will go back to the Treasury and check.

Lord McKenzie of Luton: I wonder whether the Minister can help me. It seems to me that there is potentially a difference with behavioural change which is incidental to the fundamental policy issue. However, here we are talking about a system where the change and the data underlying the tax issues are absolutely fundamental—it is what the whole policy change is about. Just to be clear on that, the Budget Red Book for 2014 refers to extra tax in 2015-16 of £320 million, £600 million the year after, £910 million the year after that and £1.2 billion the year after that. I think we understand that work has been done on those figures and that the Office for Budget Responsibility has accepted them as realistic. However, as I understand it, the Government are not going to tell us the basis on which those figures have been derived. They are not going to give us the opportunity to make any judgment as to whether, ultimately, we support the policy.

Lord Newby: My Lords, I was simply saying that my understanding is that it is a long-standing convention regarding the behavioural assumptions that go into producing those figures. The only other thing I would say is that today we have seen another, very different, estimate of the costs. There is a very considerable degree of uncertainty about the figures at the moment but the Government made their best estimate at the time of the Budget and they amended it in the light of further consideration at the time of the Autumn Statement. They will obviously keep the situation under review as we see what people do rather than speculate about how the policy will work.

The noble Lord, Lord Bradley, asked about the effects of the new policy and flexible access on eligibility for means-tested benefits—in particular, social care. The policy aim is to ensure that the decisions people make in choosing between taking their pension as income and keeping more of their pension as capital and drawing it out periodically do not significantly impact on how they are assessed for social care support and how their means are assessed for social security purposes. New statutory guidance and regulations

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under the Care Act were published on 23 October. They include details on the changing rules for care and support.

In respect of social security, we announced a change in the rule for people above pension credit qualifying age who claim means-tested benefits. The notional income amount applied to pension pots which have not been used to purchase an annuity will be reduced from 150% to 100% of the income from an equivalent annuity, or to the actual income taken if that is higher, in line with the rules for care and support.

The noble Lord, Lord Bradley, asked about unwinding annuities already bought. This is not government policy. It was a suggestion of my colleague Steve Webb, the Pensions Minister, in the context of future Liberal Democrat party policy. It was not a statement of government policy.

I am sure that there are other specific issues raised by noble Lords in this debate to which I have not given a full answer. I will read it again.

Lord McKenzie of Luton: I promise not to delay the Committee any longer. However, I would just refer to the point about why the Government have not taken the opportunity to specifically deny the benefit of the flexibilities when there are salary sacrifice arrangements. They have done it in another small part of the Bill, so it is technically achievable. Why have they eschewed that—to allow at least some element of salary sacrifice arrangements to have the tax benefits that they are designed to?

Lord Newby: My Lords, one thing I have not responded adequately to—and I am not sure whether what I am going to say will adequately answer the noble Lord’s point, but I will write to him if I do not—is about salary sacrifice and the question about the £10,000 allowance, which the noble Lord, Lord Bradley, and others, referred to.

The £10,000 allowance is, we think, a sensible middle way to allow the majority of people the flexibility to withdraw or contribute to their pension as they choose from age 55, while also ensuring that individuals do not use the new flexibility to avoid paying tax on their current earnings. However, there are clearly circumstances in which it will be in an individual’s best interests to gain access to part of the pension pot early—at 55 or 56—while by the time they are 60 their circumstances have changed and they can then start contributing again to a pension. We did not want to deny that entirely. Equally, as noble Lords have said, we did not want individuals recycling money out of pension pots just in order to avoid tax. It is therefore a pragmatic compromise figure which we think strikes the right balance.

Lord Bradley: I again thank the Minister for his detailed response. In relation to buying out annuities, the Minister is right—the article in the Sunday Times did state that Steve Webb was a Liberal Democrat. However, it also stated that he was the Pensions Minister. I am sure that this is part of the tensions of coalition as we head towards the general election.

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I am grateful for the support for this amendment from the noble Lords, Lord Hutton and Lord McKenzie, both of whom are experts in this field and bring great value to our deliberations. I am grateful to the Minister for clarifying some of the points regarding social care, although again I suspect that there may be further devil in the detail that we may debate further this afternoon.

The Minister’s response made the most compelling case for why we need the review brought back to Parliament with all the information gathered in a coherent and digestible way. In his response to our amendment he identified various sources of information in various departments, and it would take great expertise to beaver away and gather all that information into a form that enables enlightened and informed debate, not only in this House but in Parliament generally, and—in terms of transparency—for the public to understand fully the implications of these amendments.

We need to look carefully at the way in which information is gathered, disseminated and presented to Parliament. This amendment was a very good start for the revolution that is likely to take place in pension provision and how freedoms and flexibilities are used by the public. For today, however, I beg leave to withdraw the amendment.

Amendment 30A withdrawn.

Amendment 30B not moved.

House resumed.



4.40 pm

The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con): My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend Hugo Swire to an Urgent Question in another place on Nigeria. The Statement is as follows:

“The Boko Haram terrorist group continues to wreak havoc across north-east Nigeria. Many colleagues will have seen the press reports over the last week highlighting their latest sickening attacks. Hundreds of people are believed to have been killed in the town of Baga in Borno state last week as Boko Haram continued their bloody insurgency campaign. Suicide bombings in urban areas are also a common feature of Boko Haram’s tactics. This weekend we saw another heinous example in the Yobe state town of Potiskum.

These attacks are just the latest example of the insurgents’ reign of terror. We believe that last year more than 4,000 people were killed by the group in north-east Nigeria. The United Nations estimates that more than 1.5 million people have been displaced by terrorist activities and at least 3 million have been affected by the insurgency.

The abductions of the Chibok schoolgirls on 14 April last year shocked the world and highlighted the mindless cruelty of Boko Haram. The group deliberately targets the weak and vulnerable, causing suffering in communities

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of different faiths and ethnicities. It is almost certainly the case that attacks by Boko Haram have killed more Muslims than Christians.

2015 is an important year for Nigeria’s future. Presidential and state elections will take place in February. It is crucial that these are free, fair and credible and that all Nigerians are able to exercise their vote without fear and intimidation. As Minister for the Commonwealth, I responded to the right honourable Member for Kirkcaldy and Cowdenbeath, the former Prime Minister, on behalf of the Government in the last debate in this House on this subject. I am grateful to the honourable Member for Brent Central for asking this timely Question. It will allow Members from across the House to give this important issue the attention it deserves”.

My Lords, that concludes the Statement.

4.43 pm

Baroness Morgan of Ely (Lab): My Lords, despite the shocking events in Paris last week it is essential that the world does not lose sight of the terrorist attacks happening elsewhere in the world, most notably in Nigeria. We were horrified by reports that up to 2,000 people were killed in northern Nigeria last week following a series of deadly and brutal attacks carried out by Boko Haram extremists. Terrorism is unacceptable wherever it takes place.

As the Minister has highlighted, this follows months of violence across northern Nigeria, with killings, mass abductions and attacks against innocent civilians. These attacks and this brutality have been condemned around the world. While many people have rightly praised the moving solidarity across Europe in recent days, there can be no doubt about the need for solidarity across continents in the wake of these appalling attacks. The world must not simply stand back and tolerate Boko Haram’s brutal campaign of violence.

I emphasise that here in the UK there is cross-party support for Britain to continue to provide support, alongside our allies, to the Nigerian authorities in their efforts to tackle Boko Haram. I ask the Minister to update the House on the level of that support and to confirm whether there have been any additional requests for British advice and expertise from the Nigerian Government. Is the Minister confident, in the light of the violence, that fair presidential and state elections can take place in February? Can they be fair?

The Minister referred to the appalling kidnappings in Chibok which brought much needed global attention to the security situation in northern Nigeria and the vulnerability of civilians—in particular women and girls—at the hands of Boko Haram extremists. Let us not forget the meaning of Boko Haram: “Western education is forbidden”. The recent testimonies collected by Human Rights Watch from victims who were able to escape show the appalling extent of the violent and brutal conditions in the Boko Haram camps where women and girls are still being held. Can the Minister provide the House with an assessment of the current plight of the girls who have been kidnapped by Boko Haram, and what discussions her department has held with the Nigerian authorities on working to secure their release?

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Stabilising Nigeria is essential as its population is expected to surpass that of the United States by 2050. According to UN projections, it could be the world’s third most populous nation by the end of this century, and Boko Haram risks becoming a regional threat to peace and stability. Can the Minister update the House on what discussions the Foreign and Commonwealth Office is initiating with regional and international partners to co-ordinate international action on this issue?

4.47 pm

Baroness Anelay of St Johns: My Lords, I am grateful to hear the noble Baroness repeat the support of the Opposition on this matter for resolving what is a horrific situation where we have an insurgency that does not differentiate between good and evil; beheading people seems to be of no account, regardless of who they are. We have read horrific descriptions of what has been happening over the past week. I know that the noble Baroness gave a particular figure. I would say that the figure for those who have been butchered over the past week is not actually confirmed, but clearly there have been significant massacres across northern Nigeria. The area affected, of course, is about the size of Belgium—it is a vast area.

The noble Baroness asked several questions in particular about the activity of the UK. She asked several questions, so perhaps I can be fairly brief in answering each one. We have continued to give our commitment to United Kingdom aid. We work through the UN Central Emergency Response Fund and the European Commission’s Humanitarian Aid and Civil Protection department. DfID has provided £1 million to support the Red Cross to provide humanitarian assistance in the north-east of Nigeria—the particular area to which the noble Baroness referred. In addition, we are working through existing education programmes to ensure that schools are safer in the eight other areas of northern Nigeria. The noble Baroness asked what we are doing in particular for children and rightly reminded us of what Boko Haram originally meant. It has gone a long way from that. This is a group of people who want power and they will kill anybody in their way—regardless of who they are.

Since 2011, 60% of DfID’s budget has been spent in the north of Nigeria, and a major focus of that work has been with regard to women and girls. Particularly, we have worked on education projects throughout the area. I am happy to talk to the noble Baroness about the detail of that later, but I am conscious of the nature of an Urgent Question. She rightly asked, of course, about the Chibok girls and the situation there. I again remind the House that as a Government we are concerned with more than those Chibok girls, serious as it was that they were seized. We have heard stories of seizures and kidnappings across the period since then as well—of boys as well as girls. We have continued our talks with the Nigerian authorities in order to be of as much help as we can, particularly in the provision of surveillance assets and intelligence expertise.

The noble Baroness asked about the position with regard to elections. Clearly, a security situation where people feel afraid to go out and vote is the last one you want when something as important as a presidential

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election is approaching. We are doing all we can to work with the Nigerian army to provide technical assistance, expertise and training. We are also working through DfID as hard as we can to provide some hope and expectation that there may be some way of elections going ahead that are free and fair, and open to all.

4.50 pm

Lord Hussain (LD): My Lords, the activities of Boko Haram are barbaric and brutal, as we know. Would the Minister not agree with me that it is just as brutal as the Taliban, which attacked children in Pakistan in recent weeks? More than 140 children were killed by the Taliban, and its activities are, no doubt, just as bad as those of al-Qaeda and Daesh in different parts of the world. Would the Minister tell the House what Her Majesty’s Government are doing to help Pakistan to protect its schoolchildren from such brutal attacks by the Taliban in future?

Baroness Anelay of St Johns: My Lords, it is the custom that, in answering a Question, we are confined to the particular country under consideration. I can say to my noble friend that, of course, terrorism is wrong per se. He will know our absolute commitment to ensuring that it is rooted out in whichever country it may be.

Lord Harries of Pentregarth (CB): Boko Haram has been creating havoc in north-eastern Nigeria for years now, yet Nigeria is a hugely wealthy country with a large army. Can the Minister shed any light as to why the Government in Nigeria seem so helpless in dealing with this situation? In an earlier reply, she mentioned the help the British Government were giving in terms of aid and intelligence. Could she say a little more about what help we might be able to give the Nigerian Government in terms of military strategy, so that they can deal with this much more forcibly than they are at the moment?

Baroness Anelay of St Johns: I entirely agree with the noble and right reverend Lord’s assessment of the situation. The economy of Nigeria is the largest in Africa currently, and if it were not so beset by corruption and by difficulties in administration—if I can put it that way—Nigeria would have a thriving economy. It clearly does not. It spends 20% of its budget on security, yet the security forces have great difficulty in facing and containing Boko Haram. We have ensured that there is technical assistance and advice; indeed, we have ongoing projects with the army to ensure that it can build up resilience over the coming years to try to defeat Boko Haram and that, having done that, Nigeria has an army capable of preventing a recurrence.

Lord Tebbit (Con): Would my noble friend not agree that what we are seeing is largely a continuation of the civil wars of the early 1980s in Nigeria, when the Hausas, who are mainly Muslim, were in conflict with the mainly Christian and pagan Igbos and Rivers people? This is now exacerbated both by the corruption of the Nigerian Government and the new spirit of the

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vicious Islamic group Boko Haram. Is there any help which we can sensibly offer to Nigeria, other than military help, to help its incompetent army defeat Boko Haram? Are we in any position to offer military help?

Baroness Anelay of St Johns: My Lords, we have made it clear that we are not going to become militarily involved in Nigeria with our own troops, but we have done everything reasonable to provide advice and assistance to the army there. We have ongoing projects to provide it with expertise and training. My noble friend referred in particular to the history of the area. However, Boko Haram is something new, not just in the utter viciousness with which it behaves but in the way that it is Muslim against Muslim—not Sunni against Shia but members of the same group against each other. These people have no thought about what one’s religion is. If you are in their way and they want your land, they will kill you.

Pension Schemes Bill

Committee (2nd Day) (Continued)

4.55 pm

Schedule 3: Pensions guidance

Amendments 31 to 33

Moved by Lord Bourne of Aberystwyth

31: Schedule 3, page 65, line 2, after “scheme” insert “, or a survivor of a member of a pension scheme,”

32: Schedule 3, page 65, line 3, at end insert “or survivor”

33: Schedule 3, page 65, line 9, at end insert—

““survivor” has the meaning given by section 74 of the Pension Schemes Act 2014.”

Amendments 31 to 33 agreed.

Amendment 34

Moved by Baroness Greengross

34: Schedule 3, page 65, line 17, at end insert—

“( ) The Treasury must publish an annual report on outcomes being experienced by people with flexible benefits.”

Baroness Greengross (CB): My Lords, I will take all the amendments in my name together. At Second Reading, I welcomed the overall intention of the Bill, which includes the creation of a new type of pension scheme—a collective benefits scheme. Potentially, such schemes could provide individuals with a greater degree of certainty over the level of pension benefit they might receive. As they enter retirement, it could help them make better choices and informed decisions, but the accompanying new freedoms and choices for people also hold many greater risks. To understand these risks, people have to be very much better informed. If they are unable to manage their money effectively over what in this day and age can be a 40-year retirement, and if they are poorly advised or sold poor-value products, the impact on pensioner poverty more widely could be significant.

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We have a narrow window of opportunity to ensure that these reforms work as intended because currently many people at the point of retirement still have the security of defined benefit pensions. Even so, the Pensions Policy Institute, of which I am privileged to be the president, has highlighted that 41% of people who are now aged between 50 and the state pension age—2.3 million people—have no DB savings and so are heavily reliant on DC savings to support their retirement.

On day one of Committee, the noble Lord, Lord Bradley, proposed a new clause on decumulation aimed at protecting savers who default into an annuity with the same savings provider. This was by providing safeguards for people who do not take advantage of the new flexibilities because, for them, an annuity remains the best product. It guarantees them a set income for the rest of their life. In his response to the noble Lord, Lord Bradley, the Minister reminded us that the recent FCA thematic review of annuities and the findings from its market study concluded that competition in the annuity market does not work effectively and consumers are not getting the most out of their hard-earned savings. These reports provided further evidence for the need for a route map through the annuity process for consumers, and the amendment moved by the noble Lord, Lord Bradley, would have established an independent annuity brokerage service to resolve this by providing scheme members with an assisted pathway through the annuity process, ensuring access to most annuity providers and minimising the cost. His amendment was withdrawn but perhaps we need to discuss this further because some sort of alternative navigation support across this fault line between guidance and advice must be necessary. Plainly, this is in the remit of the FCA, but the FCA itself has made it very clear that the supervision of guidance does not lie with it but with the Treasury, so there is something of a stalemate there.

5 pm

Last week’s debate also touched on the proposed role of the Pensions Regulator, as many of the annuities offered are bought by members of occupational pension schemes, using their defined contribution savings. These are provided by the FCA-regulated contract-based pension schemes. The Government, however, will define the exact role they see the Pensions Regulator playing in this busy landscape. I shall later come to how we might mitigate savers’ risks by having a second line of defence across all retirement income products.

In their earlier Amendment 30 to Clause 47, the noble Lords, Lord Bradley and Lord McAvoy, sought to mandate the Secretary of State each year to produce a report on the effectiveness of the guidance under Schedule 3, which would include the number of people who have taken up the guidance, the number of those eligible to take up the guidance who did not do so, and the effectiveness of the guidance in preventing instances of consumer detriment through the purchase of inappropriate products. My Amendment 34 similarly seeks to ensure regular monitoring and reporting on the outcomes of these reforms for everyone affected, whether or not they access the guidance. In particular, this reporting should include outcomes such as the number of people cashing in their pension pots in their

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entirety and the number taking out draw-down or purchasing an annuity, all broken down by pension pot size. The guidance guarantee should be regularly reviewed to ensure that suitable information is there to make sure that people can make the important decisions that really suit their own needs.

On Amendment 35, as I mentioned earlier, another pressing challenge that will have an impact from next April on those approaching retirement is the advice and information envelope, which will underpin the decision-making process here. This and my remaining amendments relate to the proposals for and the regulation of official guidance for people approaching retirement.

Schedule 3 to the Bill places a duty on the FCA to create and regulate the advice and information part of the “freedom and choice” pension reforms in the shape of the guidance guarantee, which is a crucial part of these reforms. The noble Lord, Lord Newby, alluded to this in his response to the previous amendment, but my worry is that individuals are not aware of the existence of this guidance, and not obliged to seek it or to follow it if they find it. Many people will remain seriously ill informed, and, as we heard on day one, they may make the wrong decisions. We mentioned the Sunday Times article on this.

In particular, Amendment 35 seeks to ensure that the guidance service provided under the new rules takes into account all potential sources of income in retirement, especially given that defined contribution pension savings make up a significantly smaller amount of an average saver’s total retirement income than housing wealth. Indeed, some estimates put the housing wealth of older people in the UK at £1.4 trillion.

On Report in the other place, the Minister gave assurances that the FCA’s principle-based standards will require delivery partners to take into account various sources of income, including housing wealth, in the provision of guidance. I have reviewed, however, the near-final rules and standards recently published by the FCA in the annexe to its policy statement on retirement reforms and the guidance guarantee. I thank the Minister for very kindly making those available to us. I believe that these rules will need to be stronger if they are really to better reflect the Government’s avowed intentions.

I welcome the fact that Part 1 of the standards—Standard 20—stipulates explicitly what the guidance must contain, including requesting information about the consumer’s financial situation—for example, whether the person is a home owner or renter—and personal circumstances that are relevant to their retirement options. However, there is no explicit reference to levels of housing wealth. While we can all sympathise with the Government’s reluctance to overpromise on what these relatively limited guidance conversations can be stretched to achieve, the guidance session should act as a prompt for people to consider their options for retirement funding. It would be remiss if this did not include a full picture of people’s financial health.

This amendment would ensure that the individuals providing the guidance service under the new rules were required to ask questions about other assets, including housing wealth specifically. I recognise that the guidance guarantee cannot and should not seek to

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replace regulated advice, but, as I have said, it should act as a prompt for consumers to consider their full range of options.

Guidance also needs to cover interactions with lending. Research from Prudential found that one in six people planning to retire in 2014 will have debts. The main sources of debts are credit cards followed by overdrafts and bank loans, but they might also include mortgages. Age UK has found that while the proportion of older people with debt had fallen between 2002 and 2010, the average size of the debt had increased. Currently, lenders are unwilling to lend to older people and, in particular, to extend mortgage terms so that they are repayable after retirement. This could mean that more consumers have to repay debts when they reach state pension age. Many of those with a need to repay a mortgage post-retirement will have an interest-only mortgage. I received this information from Age UK and a lot of what I am reading now came from its very full briefings to me.

FCA modelling predicts that just under half of interest-only mortgage holders whose loans mature before 2020 will have a shortfall between their mortgage and their expected repayment vehicle. In the near term, there is a peak of mortgages maturing in 2017 or 2018, many of which were sold as endowment mortgages in the early 1990s. Some of these shortfalls could be significant. The FCA estimates that a third of those with a shortfall will have a shortfall greater than £50,000. It would be a missed opportunity if people were not encouraged to consider those wider assets.

In response to my question at Second Reading regarding the impact of any drawn down money on any subsequent means test for local authority care fees funding eligibility, the Government have said that money held in draw-down funds will be treated as providing notional income and will be treated consistently with annuity income; that is, it will be included in any such means test. I hope that more detail will be available shortly when the Department of Health publishes the draft regulations for care charging under the Care Act 2014, particularly if any such draw-down, despite having been spent, is retrospectively included under the intentional deprivation of assets rules. It is vital that the guidance guarantee makes the full implications here crystal clear.

On Amendment 37, consumers, and therefore guidance, should also take account of the position regarding state pensions. Using your private pension to take up options such as deferring state pension or buying extra state pension could provide much more income than buying an annuity, unless it would affect means-tested benefits. For example, deferring a pension may provide a higher income when it is finally vested, so the individual’s current and future income, assets and liabilities need to be taken into account. Lenders will have to be much clearer on how they will treat small pension pots, and this clarity should be a key part of best-practice guidelines that balance the interests of borrowers and of lenders.

Amendment 37 seeks to ensure that the guidance guarantee and financial advisers take state pensions and benefits into account when offering advice and support to people. For an individual retiring, using their private

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pension to take up options such as deferring a state pension or buying extra pension could provide much more income than buying an annuity, unless it would affect means-tested benefits.

I turn to Amendments 39 and 40 together. Shopping around for income draw-down is likely to prove complex for many consumers. The Government really should consider introducing a cap on the level of charges for some products. However, it is not just about charges. Investment strategies will need to reflect the new flexibilities and cash held within a pension fund may actually lose money. For example, a money market fund held in a stakeholder pension has actually declined by 2% over the past five years. Both Government and regulators should ensure that scheme governance is strong and effective for the accumulation, saving and de-accumulation or income phases. These amendments seek to do that.

The range and impact of poor value products could increase with the increasing complexity of products on offer after the reforms come into effect. As we heard on day one, further examples can be seen in the recent findings from the FCA following its review of the retirement income market which showed that many consumers in the past have missed out on a higher level of payments from their annuity. In some cases this was because consumers had not been told about better value policies they could have taken out. In addition, a report from Which? and the Pensions Policy Institute believes that income draw-down will become the norm, rather than the exception. However, the research found that none of the alternative products to conventional annuities is currently suitable for the mass market, due to the costs and investment risks involved. It is crucial that this type of situation does not continue when consumers are presented with a far wider array of products when these reforms come into effect next April.

Building on the quality-standard idea, I believe that guidance alone will not be enough to ensure that everyone gets a good deal. The market has not served people with small to average-sized pension pots well in the past. Guidance should help many retirees make better decisions. I feel that the FCA needs to secure greater protection for individuals during the decision-making process, by including devices such as cooling-off periods and defaults. The problem is that, while the latter lie in the province of the FCA’s supervision, the guidance does not, so coherent co-ordination may prove difficult, especially as the FCA avows that it is not part of its consumer protection remit to do this.

The Pension Schemes Bill Committee in the other place heard evidence from a range of expert witnesses, including Dr Ros Altmann, the Government’s business champion for older workers, and representatives from the Financial Services Consumer Panel. They all called for the requirement of a second line of defence to underpin the guidance guarantee to be imposed on pension providers by the FCA. A second line of defence regulation would require pension providers to check crucial factors at the point when consumers accessed their DC pension savings. Specifically, they would have to draw the customer’s attention to a range of known risks which could have a negative impact on people’s finances on retirement, including outliving assets, running out of money, not providing benefits for a spouse on

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death or missing out on additional income resulting from a medical condition or lifestyle factors. It would also require pension providers to offer a cooling-off period for people who ask to take out all their money in one go.

5.15 pm

As the consumer moves post-guidance into what the noble Baroness, Lady Drake, in last week’s debate called,

“the purchase or decision activity which flows from that guidance”,—[

Official Report

, 7/1/15; col. 366.]

it is a pity that the FCA seems to have ignored these calls for a second line of defence requirement and has decided that it will simply rely on its supervisory role, which merely ensures that pension providers are required to signpost customers to the guidance service and to encourage them to use that service. That is not the complete solution, in my view. At a meeting on 17 December, the Work and Pensions Select Committee pressed the FCA forcefully on the absence of a regulatory backstop or a second line of defence for consumers, who will first come into contact with the reforms in April. However, no clear answers were forthcoming on this point, which is very concerning, given the growing calls from Age UK, the ABI and others for the FCA to include such a regulation. While I understand that the guidance is not intended to address the specific situation of every consumer—that is the purpose of advice—no one wants the costs of shopping around to mean the imposition of unnecessary additional costs on either some schemes or members. I still think that I am on the side of the Select Committee, which at this point of the proceedings wondered why, rather than emphasising the demarcation issues here, the FCA,

“would not introduce a conduct rule around the second line of defence. Why not?”.

Instead of providers,

“asking customers whether they have taken the guidance and then asking them again, require them to ask those specific few questions about tax, about health—those questions that are needed to make sure the person has made an informed decision”.

This is such a high-stakes decision, with lasting consequences for individuals and their families, that I think some additional measures are necessary. Indeed, similar measures already apply in the case of many routine and far less significant purchases that people make. Will the Minister assure us that both the Treasury and the FCA will be made to work more closely together to ensure that a seamless information and guidance process comes into existence, for the benefit of all consumers? I beg to move.

Lord Best (CB): My Lords, my name is down in support of these amendments from the noble Baroness, Lady Greengross. I declare an unremunerated role as a member of the Equity Release Council’s advisory board, and I speak particularly as chair of the All-Party Parliamentary Group on Housing and Care for Older People. I shall concentrate on the interrelationship of advice about pensions and advice about the use of capital assets to fund one’s retirement.

I strongly support the case made by the noble Baroness that the advice provided by Citizens Advice and the Pensions Advisory Service, under the guidance

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guarantee introduced by the Bill, should ensure that an individual’s assets, particularly their housing wealth, are taken into account properly. The resources in an individual’s pension pot—their defined contribution pension savings—account on average for around £20,000, which represents only some 4% of their total wealth, compared with over £270,000, 55% of their wealth, which is held in the equity of their home after deducting any outstanding mortgages. Four per cent of wealth in their pension savings and 55% in their property—talk about the elephant in the room. It seems essential that in these important advice sessions attention is drawn, where relevant, to the individual’s wealth bound up in their property, which of course can be turned into cash, either by downsizing to a cheaper home or through an equity release product.

When thinking about buying annuities or choosing other investments, it is extremely important to consider holistically one’s wealth as a whole. The DWP Minister in the other place Steve Webb has agreed that advisers, under the proposed arrangements as spelt out in the near-final version of his department’s rules for giving guidance, should ask whether the consumer is an owner-occupier or a tenant and should ask, perhaps a bit vaguely, about personal circumstances. However, the rules for this interview do not include any explicit reference to housing wealth.

Amendment 35 would make clear that the guaranteed guidance from Citizens Advice and the Pensions Advisory Service should include prompting individuals to look carefully at their housing assets. Without the guidance pre-empting the professional advice of an independent financial adviser, this should be the moment when the interplay of housing and pensions gets aired. Those fulfilling the guidance guarantee should help consumers ask the right questions of an independent financial adviser.

The All-Party Parliamentary Group on Housing and Care for Older People, supported by the think tank Demos, published a report at the end of last year on affordable downsizing. It called for new measures to assist those in their extended middle age who want to move from family housing to a tailor-made apartment or bungalow. Such moves, as well as preventing and pre-empting problems in later life, have very positive financial effects with savings in fuel bills, maintenance costs, garden upkeep and the rest. We also noted the complexities involved in the financial aspects of trading down or equity release. We called for a “help to move” package comprising access to equity loans for movers, as for young people through the Help to Buy scheme, plus concessions on stamp duty, which were partly answered by the Government’s reforms of that tax, and, very importantly, guaranteed guidance on the financial arrangements, piggybacking on the pensions guidance featured in this Bill. These amendments would use the guidance guarantee that covers people’s defined pension contributions to draw attention to bigger questions relating to other assets, particularly housing wealth. They would make the guidance sessions much more meaningful in a country where 14 times more of our wealth in older age is tied up in our properties than in our pension savings. I support the amendments.

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Lord German (LD): My Lords, I rise to support the remarks of the noble Lord, Lord Best. In doing so, I declare my interest as an unremunerated member of the advisory committee for the Equity Release Council. I am, I hope, still in extended middle age, which is a new term that I fully endorse.

Housing wealth, along with other assets, means that the guidance is crucial given the disparity between the amount that people tend to have in a DC pot and their housing wealth, which on average is more than 10 times as much. That is a considerable amount of money or resource which people will need to take into account. The FCA standards, which were helpfully published this morning by the Treasury, state that:

“In terms of content, the standards require that the guidance session must … request information about the consumer’s financial and personal circumstances that is relevant to their retirement options”.

That requires the adviser who is going to take people through the guidance session to ask them for information about their housing wealth, but it is not explicit in the standards, and while we know that they are nearly finalised, there is time for the Treasury to make them more transparent about what is required. Because of the relationship between the two amounts of money, the instruction ought to be clarified, perhaps not in the document but in the training so that it is always an issue which people take on board. Will the Minister indicate whether the sentence in the FCA standards set out in the document produced this morning by the Treasury implies that housing wealth, savings and investments will be taken into account? Will he consider making it more explicit in the information that is provided to the consumer and to those providing the guidance?

Baroness Hollis of Heigham: My Lords, I would like to ask the Minister a question which is triggered by the important issues raised by the noble Baroness, Lady Greengross, and the noble Lord, Lord Best. However, I want to look at it from the other way round, which is the situation of someone who is 55, is on housing benefit, and has £20,000 locked away in a small pension pot. At the moment, if you have capital of more than £16,000 and you are pre-retirement, that is an absolute block to any further income-related benefits. Different rules apply when you come to retirement. The assumption throughout is that you can access your pension only at the point of retirement, when different rules apply. What will happen now? Can the Minister help us on this? The rules are that if you have capital that you could get at if you applied for it, you are treated as having that capital. While it was tucked away in a pension and not accessible until you reached 60 or 65, you could not have access to it and so it did not affect your entitlement. But in future you will be able to access your capital in such a way that, under the Housing Benefit Regulations 2006, Regulation 49(2), because you can access your capital, you are treated as though you have that capital, which would therefore automatically cut you off at £16,000—you have £20,000 in your pot —from any access to housing benefit. Can the Minister clarify how this will work in the future?

Lord Newby: My Lords, I am grateful to the noble Baroness, Lady Greengross, for giving me the chance via the debate on these amendments to address a

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number of important issues in respect of the guidance service. I turn first to Amendment 34. This seeks to require an annual report on consumer outcomes. As I said in the earlier debate, in terms of the overall policy of greater flexibility, the Government are committed to keeping the policy under continual review, including through the monitoring of information collected on tax returns and tax records. This was confirmed in the debates in the other place late last year on the Taxation of Pensions Bill, which it then was.

How the market evolves to respond to consumer needs is where the regulators come in, in particular the Financial Conduct Authority. As I mentioned earlier in addressing the amendments tabled by the noble Lords, Lord Bradley and Lord McAvoy, the FCA has a strategic objective to ensure that the markets function well and a specific operational objective to ensure that consumers of financial services are appropriately protected. The FCA has recently published the provisional findings of its Retirement Income Market Study. In this report, the FCA committed to monitor the retirement income market, and if consumers appear not to be getting the support or products they need or if competition is failing to drive good value, it will make whatever intervention is appropriate. The noble Baroness will, I hope, be reassured by the specific commitment of the FCA to monitor consumer outcomes,

“we will monitor the market to track developments to assess whether these risks arise and if so, the impact on consumer outcomes”.

I am also grateful for the related amendment from the noble Baroness which seeks to expand the new duty of the FCA to protect consumers using guidance through its role in setting and monitoring standards for the provision of pensions guidance by designated guidance providers. The noble Baroness raised again the question asked earlier about the supervision of guidance and the respective roles of the FCA and the Treasury. To be clear, the FCA has the responsibility for supervising designated guidance providers’ compliance with the standards which it has set. While the Treasury itself is not a designated guidance provider, it has committed in the update published today that it will fully comply with the FCA standards as far as that is appropriate, because the Treasury is responsible for the online channel.

More generally in respect of the FCA and its powers, the noble Baroness will know, I am sure, that the Financial Services Act 2012 gave the FCA wide-ranging product intervention powers. For the first time it is equipped to ensure that new retirement income products are designed and sold in a way that does not cause detriment to consumers. As for assessing the consumer outcomes resulting from the guidance service specifically, with which Clause 3 is concerned, I can assure the noble Baroness, as I have already the noble Lords, Lord McAvoy and Lord Bradley, that the Government are committed to a full programme of monitoring and evaluation of the guidance service, which will encompass the delivery partners’ provision to ensure that the service is operating effectively and successfully in supporting people in their retirement decision-making.

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5.30 pm

I turn now to other aspects of the noble Baroness’s amendments. I can reassure her that the guidance service will ensure that consumers consider relevant issues related to pension decisions such as state pensions, debts and other assets, wealth and income. The Government are committed to ensuring that individuals are equipped and empowered to make informed decisions about how to use their pension savings which take account of their wider circumstances. But the Government believe that it is right that the content of the guidance session is set out in FCA standards rather than in legislation. This will enable the content of the session to be more freely adapted to consumer needs in response to the ongoing consumer research that we are undertaking as we prepare to launch the service.

The FCA standards make certain specific requirements on the guidance content with regard to collecting relevant information. They were consulted on last year and the near-final version of the guidance standards was published in November. The standards include a number of requirements on the content of the session itself, which I hope will allay the noble Baroness’s fears. Perhaps I may set them out. They state that the guidance must request all relevant information from the consumer about their pension entitlement; request relevant information about the consumer’s financial and personal circumstances that would inform the discussion; discuss the relevant options and the key facts and consequences for each option and, based on the information provided by the consumer, set out other issues for the consumer to consider. Ahead of the guidance session, consumers will be encouraged to gather such information as would be useful for the session. The FCA has been clear as to what information it would consider to be relevant under these standards and which it would expect the guidance service to ask for. In terms of financial information, this would include information about pension pots and benefits, or those of their spouse. By any view, that would include any potential state pension that the individual was going to get, although I am willing to go back to the FCA to make it absolutely clear that that is its understanding. I am sure that it is, and it may be that the wording could be tweaked.

Other things that fall under this heading are current and future sources of income; entitlement to state benefits, current and future; and whether they are a homeowner or renting. This gets to the point that a number of noble Lords have made about the importance of housing wealth, with which the Government obviously completely agree, and whether this statement on whether someone is a homeowner or renting should be expanded to include a reference to housing wealth as opposed to simply referring to housing status. One cannot imagine in the guidance session the discussion going, “Do you own a house or are you renting?” and someone saying, “I own a house”, with the response being, “Well, that’s jolly nice—now, next question”. The purpose of knowing what the housing status is to get some sense of housing wealth, but perhaps we should be more explicit, and I shall take it back. I agree completely with what the noble Lord, Lord Best, and my noble friend Lord

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German said about the relevance of housing wealth, because it overshadows all the other assets that most people have. As the noble Lord, Lord Best, knows, I am very supportive of many of the recommendations in his report on affordable downsizing. Having answered a Question on the subject in your Lordships’ House, I know that this issue raises many and various passions on both sides of the debate.

I should add that the standards already refer explicitly to debt provision. The noble Baroness said that it was important to take account of debts as well as assets. The standard already has that phrase in it, so I think that it covers the matter. The personal circumstances that would also have to be taken into account get us back to the question of the broader context of the guidance session. Those would include a discussion of dependants, state of health, and potential long-term needs. So I hope that I have been able to reassure the noble Baroness on these points.

The guidance aims to help people to prepare ahead of their session and identify the relevant information that they will need. The FCA has clarified in its rules for pension providers what information should be provided to consumers approaching retirement, and the Government are working with the FCA, the Pensions Regulator, industry and other stakeholders to consider how individuals can quickly and simply access information on their pension pots in an easily useable format. The guidance will also inform people that they can request a state pension statement from DWP to get an estimate of their state pension position. The FCA standards are designed with the aim of ensuring that the service delivers helpful guidance for consumers in considering their retirement options. Ensuring that consumers consider factors which are pertinent to their retirement decision, as relevant to them, is an important part of what the standards capture.

I hope that I have been able to reassure the noble Baroness, Lady Hollis, on most of her amendments. We are coming on to the second line of defence before long, so I shall deal with that once rather than twice. On the specific question raised by the noble Baroness about whether the £20,000 pension pot would be taken into account, as I said in response to an earlier amendment, the broad principle is that eligibility for benefits should not be significantly altered by this change. However, I will write to her to clarify that.

Baroness Hollis of Heigham: The point is that housing benefit is the one benefit that continues in its current form both before and after retirement. Nearly all other benefits change at the point of retirement. Therefore, the issue does not arise. For example, there is no assumption that there is a capital cut-off if you are on pension credit, merely an assumed tariff income. What you are doing now is introducing some of the potential privileges associated with protecting pensions to a pre-pension age. If you do that, that is fine, but if you do not, it means that housing benefit will be wiped out for someone who has capital that they can access, even if they choose not to do so. As the current rules stand, they would have to be treated as if they had accessed that capital, and then housing benefit would be wiped out for someone at the age of 55 in the way it would not be wiped out if that person was 65.

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Lord Newby: My understanding is that that is not the intention, but I shall write to the noble Baroness to clarify that point.

Baroness Greengross: My Lords, I thank the Minister for his very comprehensive reply. I also thank the noble Lords, Lord Best and Lord German, and the noble Baroness, Lady Hollis, who joined in the discussion.