That is why we are bringing in the guidance guarantee. That is why we want to ensure that people can make informed decisions. That is what drives everything we are doing here and that will be an important part of the Bill. My hon. Friend the Member for Cities of London and Westminster asked whether the guidance would undermine or replace financial advice. The Government intend that the guidance will be a critical first step for consumers at the point of retirement. It will be designed to help consumers navigate the options available and it is not intended to replicate the services of professional financial advisers. The Government expect
that many consumers will go on to seek further advice and will ensure that the guidance equips consumers to choose the advisory service that suits their needs.
The guidance service will not stray into areas such as specific product or provider recommendations, which would be better handled by an authorised independent financial adviser. Guidance will signpost consumers to other sources of guidance and advice as appropriate, including professional financial advice. The Government expect that many consumers will go on to seek further advice and will ensure that the guidance equips consumers to choose the advisory service that suits their needs.
The Government believe that it is right that those firms that are likely to benefit from better informed consumers who are more confident about engaging with the financial services industry should help to fund the service. The FCA has proposed that advisers should be included in the cohort of firms paying the guidance levy, as they stand to gain from the better informed consumers who understand how regulated advice can help and protect them in their retirement needs. It is also worth pointing out that the FCA has committed to a proportionate approach. The levy will reflect the size of the firm and the nature and extent of its business.
My hon. Friend the Member for Cities of London and Westminster asked about the Australians’ system and to what extent they were looking to reverse their move to end the obligation to annuitise. The interim report from the Murray review suggests that a variety of different policy options should be considered to improve the Australian retirement income system. These options include maintaining the current system where individuals have access to their pension savings as they wish but with improved provision of financial advice and removal of impediments to product development. As for whether annuities are dead under the new regime, we do not believe so. The Government are clear that annuities will remain the right choice for many at some point during their retirement and believe that many people will still value the security of an annuity.
The right hon. Member for Neath asked how the FCA will protect consumers through regulation. The FCA has a statutory objective to protect consumers. It requires pension companies to comply with its rules and principles, including the principle of treating customers fairly. In creating the FCA, the Government gave it new powers in relation to financial products that it can use to restrict features or products or to prescribe how products must be sold.
I was asked whether the guidance will ensure that people understand the tax implications of flexibility. Guidance will cover the tax implications of accessing pensions in different ways in retirement. This is covered in the standards for guidance on which the FCA is currently consulting. As for whether the guidance will be delivered by qualified people, the FCA is currently consulting on the standards that providers of guidance will need to meet, one of which is that they are suitably trained and qualified.
The hon. Member for Birmingham, Ladywood (Shabana Mahmood) and the right hon. Member for Neath asked about flexibility increasing welfare and social care spending. We do not expect the impact to be significant in the context of the steps that this Government have taken to
improve the sustainability of pensions spending. For example, regarding the changes to the state pension age and reforms to public service pensions, the estimated net impact of the Government’s key pension policy is a saving of about £17 billion in 2030 in today’s terms.
My hon. Friend the Member for Cities of London and Westminster asked me to explain the principles behind the Government’s pension reforms. We are putting the interests of savers first, but we also believe that people should be free to make their own choice about how to use their savings. Individuals who have worked hard and saved responsibly throughout their adult lives should be trusted to make their own decisions with their pension savings. The reforms announced in the Budget will deliver this, and it is an important part of the Bill. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.