My Lords, these amendments give expression to the recommendations of the Delegated Powers and Regulatory Reform Committee concerning Clause 48. Amendments 47 and 48 make the regulations under subsections (3) and (7) subject to the affirmative procedure. Amendment 44A narrows the power taken in Clause 48(7) in such a way that regulations could not be made setting out the nature of appropriate advice but would instead focus on the characteristics of an appropriate person. As the noble Baroness has
just pointed out, my colleague Steve Webb, the Minister for Pensions, wrote to the noble Baroness, Lady Thomas, chair of the Delegated Powers and Regulatory Reform Committee, acknowledging the committee’s concerns, providing a commitment to address them as far as we can and explaining why we were unable to accept the committee’s exact recommendations. The letter details alternative ways in which we will be able to address the concerns of the committee and the House. As Amendments 47 and 48 implement the committee’s recommendations, the government response is along similar lines to the letter, which can be found in the Library.
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Regulations under subsection (7) of Clause 48 of the Pension Schemes Bill will set out the definition of “appropriate independent advice” that underpins the advice safeguard. We recognise the concerns about the lack of the definition of appropriate independent advice in the Bill. In the response document to the consultation on freedom and choice in pensions, we set out that appropriate independent advice would be delivered by an adviser who is authorised by the FCA. In response to the concerns expressed by the Delegated Powers and Regulatory Reform Committee and in Amendment 48, we are now looking into bringing forward an amendment to Clause 48 on Report to provide more detail about the meaning of appropriate independent advice in the Bill.
Our intention is to define appropriate independent advice in regulations by reference to activity regulated by the Financial Conduct Authority. To facilitate this, the Treasury intends to legislate to add a new activity to the FCA’s regulated activity order. This will be done by means of a statutory instrument amending the Financial Services and Markets Act (Regulated Activities) Order 2000. We do not think it is appropriate to refer to subordinate legislation which has yet to be made in the Pension Schemes Bill but this statutory instrument, which we intend to lay later this month, will be subject to the affirmative procedure.
In order to ensure that the definition in the Bill fits with any definition in the regulated activity order, we will still need to leave at least some of the detail of the definition in Clause 48 to regulations. We think it is appropriate that such regulations be subject to negative procedure, especially if the parameters of the definition can be expanded upon in the Bill. We do not think, however, that it would be appropriate for these amendments to require the regulations to become subject to the affirmative procedure as this would mean they would not be in place by April this year, when the flexibilities come into force. Schemes would then find themselves subject to a requirement that was legally uncertain and there would be no effective advice safeguard in place to protect members or survivors.
Subsection (3) of Clause 48 provides for regulations to be made which set out exceptions to the appropriate independent advice safeguard. We set out in the consultation response document on freedom and choice in pensions, published in July last year, that we intended to exempt those with pensions wealth below £30,000 from having to obtain advice if they wished to transfer
safeguarded benefits. This remains our only intended use of the exemption. However, once the new flexibilities come into force, it may prove necessary to create an exemption for other special circumstances.
The exemption threshold of £30,000 and below will need to be adjusted and up-rated over time and therefore we feel the affirmative procedure would not be suitable. However, in response to the concerns raised by the Delegated Powers and Regulatory Reform Committee report, we are looking into bringing forward an amendment on Report to subsection (3) to ensure that exemptions to the advice safeguard, other than for members with small amounts of safeguarded benefits, would be subject to the affirmative procedure. This would ensure that the House had the opportunity to scrutinise any other exemptions that are required to the appropriate advice safeguard.
We understand that Amendment 44A proceeds from nervousness in the industry that under this new safeguard trustees or managers might have to examine the advice that has been provided to their members, as opposed to simply checking that the advice has been received. I can assure the House that it is not our intention that trustees or managers should have to evaluate the content of the advice or check its quality.
We recognise the concerns about the lack of detail in the Bill with regard to the definition of appropriate independent advice. I have already mentioned that we are now looking into bringing forward an amendment to Clause 48 on Report to provide more detail about the meaning of appropriate independent advice in the Bill. The approach suggested in Amendment 44A is useful to us in our considerations about the amendments we are considering to clarify the nature of the advice. We will therefore consider Amendment 44A but regret that we are not in a position to accept it at this stage of the Bill in its current form.
The concerns expressed by Amendments 44A, 47 and 48 and by the Delegated Powers and Regulatory Reform Committee are understandable. However, I hope noble Lords are reassured that I have been able to offer enough to address them and that Members appreciate that it is not in the interests of the consumer or the industry for the tax flexibilities to come into force without a meaningful, clear and effective advice safeguard coming into force alongside them. We will therefore be considering this further and, as such, I ask the noble Lord not to press the amendments given the planned forthcoming government amendments.