My Lords, this amendment is connected to Amendment 22. We had an extremely interesting debate in Committee on the merits of what is known as the second line of defence, and I am pleased that we are able to return to it today as a result of our amendment.
I preface my brief remarks on this matter with our general approach to the Bill throughout its passage in the House. While we broadly support the new freedoms and flexibilities in the Bill and its related Bill on taxation, we have sought throughout to ensure that the interests of pensioners—customers—are protected in what has often been a very dysfunctional annuities market. Our overriding aim has been to ensure that those protections for the public are in place before the Bill is enacted at the beginning of April.
To return to this specific amendment, we argued in Committee that a second line of defence was vital. We discussed evidence from two reports from the Financial Conduct Authority, quoted in Committee, that the market is often not functioning as it should and is letting consumers down. We believed that action was needed immediately to protect savers when making possibly the most complex financial decision that they will ever have to make.
In Committee, the Minister did not seem to accept that action for a second line of defence should be in place by April this year, when the new freedoms and flexibilities are implemented. Instead, he suggested that, because the FCA is a relatively new body with new powers, and has committed to reviewing all its rules in the first half of this year, we should in effect await the outcome of its deliberations before any further action was taken. In response to the Minister, I said that while I would reflect on what he had said, I believed that the public sought reassurance and the confidence that a second line of defence would give them. That is why we have continued to champion a second line of defence throughout the passage of the Bill in both Houses, as have many pension groups and organisations outside this House.
I and my noble friends therefore welcome the Government’s apparent change of heart today, and the fact that they have recognised the strength of the arguments to protect pensioners that we have been making. It is with pleasure we received, and read, the very welcome letter from the Financial Conduct Authority, dated 26 January, saying that it would ensure the,
“appropriate protection of consumers, accessing their pension saving”.
This is extremely welcome, and starts to put together a proper second line of defence.
At this stage of the debate, though, I have three questions for the Minister. First, as the letter says,
“Subject to agreement of the Board, we are minded that it is appropriate to bring these rules into force on a temporary basis from 6 April, and prior to consultation, to provide important additional protection for consumers”.
Will the Minister confirm that the Board will agree to putting this second line of defence in place and that, at a future stage, the Board may decide that it is not necessary?
Secondly, the letter goes on to say,
“As part of that consultation we will also consult on whether to retain or modify the temporary rules that we are proposing to introduce in April”.
Will the Minister assure the House that, after the temporary period that the Financial Conduct Authority is proposing, there are no circumstances in which it would then remove the second line of defence?
Thirdly, in relation to trust-based schemes, it is my understanding that the Pensions Regulator is responsible for these schemes, not the Financial Conduct Authority. Will the Minister assure the House that similar protections for trust-based defined contribution schemes will be made by the Pensions Regulator, in parallel with the FCA?
The merits for a second line of defence seem now to be accepted. I look forward to the Minister’s responses.