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
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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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
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.