Baroness Altmann
Main Page: Baroness Altmann (Conservative - Life peer)Department Debates - View all Baroness Altmann's debates with the Leader of the House
Pension Schemes Bill [HL]
Baroness Altmann ExcerptsMonday 2nd March 2020
(4 years, 2 months ago)
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Baroness Altmann (Con)
My Lords, I will make a few observations about this suite of amendments. It strikes me that the demands to add even more to the current proposal for the dashboard are fraught with danger from the customer perspective. I agree that, from a strategic, overall macro perspective, if one is looking to plan one’s retirement income, it will be most helpful to have as many sources reflected in any dashboard that will contribute to that income. However, the problem we face in getting this dashboard up and running is that there are so many different types of pension and of scheme that we already face a monumental task in just trying to list people’s pensions and make sure that the dashboard reflects all the elements attached to them over the many decades: the different tax regimes they have been under; whether they have a guaranteed annuity or protected tax-free cash; a guaranteed return of some kind; whether benefits have to be taken at specified ages, otherwise certain things are lost; whether there is any extra insurance in there that might be attached to the pension from old-style schemes; protected rights, and so on. And that is just for defined contribution, before we even get on to the defined benefit records.
Equity release has significant dangers for any consumer who is considering it. My worry is that, if consumers look at this information on a dashboard, they will not understand those dangers and will think that the money is available. Recently I have seen very many cases where individuals or their families have taken out an equity release loan for something like 25% of the value of the equity of their home, with an interest rate rolling up at 6% per annum for 20 or 30 years, meaning not only that, if they were to pass away, no value would be left in the home but, more worryingly, if they needed to sell the home and move to a smaller one—if they took out equity release in their 50s or 60s and, in their 80s, needed to downsize for reasons of care or convenience—they would be unable to do so because there would be no equity left for them to use.
Therefore, I caution significantly against trying to go more broadly. I think that we have enough of a challenge in trying to get pensions alone on to a dashboard. I completely agree that it is important to have the state pension on there and, in that regard and in speaking to amendments in the name of my noble friend Lord Flight to which I have added my name, we want people to be able to see what their projected state pension will be. However, we will need an electronic system so that people can go online to check their state pension. If Verify is not the gateway to that, we will need to develop an alternative secure gateway. We need to make sure that the dashboard has a standardised protocol and standardised systems so that every pension provider has to use the same IT structure that can then be securely fed to a dashboard.
Lord Flight
With the state pension, you already get from social services advice on what your pension will be about a year before you draw it, so it strikes me that the state pension information is just sitting there waiting to be used by the dashboard.
Baroness Altmann
I thank my noble friend. Of course, he is absolutely right but the point of the dashboard is that much younger people can plan their future pension income. The current procedure is to encourage people to log on to the state pension checker, where they can verify their future predicted state pension income so that, as they get into their 50s and closer to retirement, they will be able to make more meaningful financial planning. However, as my noble friend Lord Young pointed out, there are significant security concerns with the current gateway system that allows you to find out what your state pension is. Therefore, if we want the state pension to be on the dashboard, we will need a certain level of security.
The aims of the amendments are correct. We want to be able to see the state pension and a comprehensive list of pensions, but I caution against trying to go more broadly. I also caution against commercial dashboards which might use their own IT systems that lock people out of checking their pensions on other providers’ systems and which try to encourage people to merge their pensions. Indeed, we have seen that the systems of some pension providers do not always flag up the guarantees that can be very valuable for individuals. If people are being not advised but merely guided, or if it is merely information and they are not aware of the guarantees, they could lose out and have no comeback.
Baroness Bowles of Berkhamsted (LD)
My Lords, I was not intending to speak to these amendments, but it has been quite an interesting debate to listen to. In some ways, I have changed my mind during the course of the debate. I found the notion of having everything all in one place, as put forward by the noble Lords, Lord Young and Lord Flight, an interesting idea. Of course, it can already be done, but for historic reasons—because I have been self-employed for most of my life, as has my husband, and we have quite a lot of pension schemes around—I am well versed on various different platforms. Yes, I do a lot of mystery shopping, as I call it, on these things. I have loaded up information and practised telling lies as well—putting in overvaluations of my house or saying what other things I have—to see how a platform projects what my income will be, so it is difficult to get right. I wonder about the house valuations that people might be tempted to put in, because there is a tendency to be optimistic when it comes to that.
In this last week, I was looking at one platform, thinking, “Where is the sell-all button for absolutely everything?” I could not do it; I had to go through several times, so I very much take the point made by the noble Baroness, Lady Drake, that you will take the path of least resistance when there is something that you think is urgent. If I can fall for that kind of wanting something to be there, others will too, but when I went through everything and had to think, “Do I really want to sell that or don’t I?”, I made different decisions from those I might have made if I had had a sell-all, transfer-all button. Given that I like to think that I know a thing or two about these things, I would rather err on the side of caution, as the noble Baroness, Lady Drake, pointed out. I do not want to interfere with people’s freedoms, but it has to be good to have a certain number of hurdles to give people a pause to think.
I tend to agree that equity release will have to be a big part of the future, and I wonder whether some of the people already taking out lump sums are thinking that way as well. Perhaps that is safer left until we can more broadly investigate what is going on there and make a rather safer and better environment, though I acknowledge that that there have been improvements that I have not tested yet.
Baroness Altmann
“( ) Requirements prescribed under subsection (2) must require that the provision of pensions dashboard services is an activity regulated by the FCA.”
Baroness Altmann
My Lords, the amendments in this group stand in my name and those of my noble friend Lord Flight, the noble Baroness, Lady Sherlock, and the noble Lords, Lord McKenzie and Lord Hutton. A number of us have tabled amendments in this group on similar themes. I will leave other noble Lords to talk specifically to their amendments but the main concern that we are trying to address is that there should be proper protection for consumers when using these dashboards. What is proposed in different formats is that the Financial Conduct Authority should oversee any dashboards—particularly the commercial ones—as a regulated activity. We have not seen that specified in the Bill and feel that clear regulatory protection for any consumers using a pensions dashboard needs to be on the face of the Bill.
Obviously there are different ways in which the FCA may impose regulatory protection. However, if this is meant to be an activity that benefits consumers, then, given all the experience that we have had in pensions and the issues that have arisen for consumers from time to time when there is an asymmetry of information and pension providers, and providers of different products are able to take advantage of the fact that consumers are not always totally au fait with the information on their pensions that they are presented with, it is really important, for example, that the FCA makes sure that the information is clear and that there is a recognised standard for a dashboard so that it cannot be misleading for consumers in some way, as might sometimes be the case. Sometimes providers do not intentionally try to mislead consumers but the language that they use every day is natural vernacular for them, although it does not mean a thing to a consumer. A provider might think that they have explained something very clearly for anyone who knows all about pensions but, on reading it, the customer might get totally the wrong idea or not understand what is being presented and perhaps take an incorrect conclusion from it.
Amendment 68 suggests that the provider of a pensions dashboard should have a fiduciary duty to the user of the dashboard. There is merit in our considering that as an extra layer of protection so that, once again, the provider of the dashboard is required to consider what the consumer might understand and need, and the provider therefore has a duty to help them rather than take advantage of them in some way, whether intentionally or not.
I am not sure that I need to take up the time of the Committee any further. That is the thrust of the intent behind these amendments, and I look forward to hearing from other noble Lords on this issue.
Lord Flight
My Lords, the point that I want to make is that there are four cases where the FCA is the regulator but no reference is made to where the Pensions Regulator will provide the regulatory task. It might be readily understood by the industry why regulation is divided but there is a question mark over whether citizens will automatically know to go to the FCA for certain things and to go to the Pensions Regulator for others. I am sure that there are sound reasons for it but I would be interested to hear the Government’s view on what the regulatory model should be.
Baroness Altmann
I thank my noble friend for his very thorough response to this group of amendments. Is it not possible that without a comprehensive, overarching regulatory framework for all dashboard activities, consumers could fall between different cracks, and the provider of the dashboard that has provided them with misleading or incorrect information could then say, “Well, it was the person who gave us the data who was misleading: it wasn’t us. We are just providing information.”? Or could this activity in some way be related to unregulated lead generation, which is part of the pensions landscape and has been so damaging to consumers? Therefore, what I hoped we might achieve with my amendment was an overarching regulated activity for anybody participating in or providing data to the dashboard and for the dashboard provider providing the data to a customer.
Earl Howe
We come back to the question of a liability model. I might as well deal with that now. We set out in the consultation response that we expect the industry delivery group to make recommendations on a robust liability model that ensures that there are clear roles and responsibilities and a clear process for dealing with complaints. The point made by my noble friend that there is a risk that something might fall through the cracks is a very good one. The best that I can do at the moment is to say that, as the service is developed, the detail of where liability exists will emerge. She will agree with me that we are not dealing with new data or with new financial transactions, but yes, potential service risks might emerge. The IDG will, as I have said, recommend robust liability models, and the framework of any new liability arrangements will be set out in regulations. That is one of the reasons why we need delegated powers in this area.
I think that the industry delivery group is the best forum to build a liability model to which all parties are signed up and that takes into account good practice and lessons learned from open banking. While I realise that there are many differences, there are certainly lessons that we can draw from that sphere.
Earl Howe
I will certainly go away and consider that point, even if “fiduciary” is not the appropriate word, and look in conjunction with my officials at whether there is a mechanism that would achieve that aim without inventing some new legal status. I am grateful to the noble Baroness and the noble Lord, Lord Hutton, for their points.
The question posed by the noble Baroness, Lady Drake, boils down to this: if MaPS or another specified person sets the data standards, how will they be accountable to Parliament? As I said, the regulations enable parliamentary scrutiny and debate on any specific future proposal as they come forward.
We need to ensure that dashboards are fit for purpose over the longer term. That cannot happen in a summary way. Delegating the ability to set and update standards and technical specifications support through secondary legislation will, in our view, ensure that dashboards remain beneficial and relevant to consumers.
Our approach recognises that ownership of the dashboard infrastructure and the responsibilities for the setting of standards may need to change over time, but I reiterate that, taking into account the good practice that exists, the industry delivery group will develop and make recommendations on a robust liability model to ensure that there are clear roles and responsibilities in the event of a breach. That includes a clear consumer redress mechanism. In answer to the noble Baroness, Lady Sherlock, the policy intent is that the FCA should authorise dashboard providers and that this should be achieved by order.
The FCA takes seriously the need to consult the public. It has a general duty to consult the public by publishing draft rules. This duty will apply equally in this case. The FCA will also consult the Secretary of State and Her Majesty’s Treasury prior to public consultation on draft rules. That will ensure that the rules have regard to the regulations that place obligations on trust-based schemes, which will provide a consistent and coherent approach.
We have covered quite a lot of ground, but I hope that I have effectively explained the role of the FCA in protecting consumers and provided the assurance that noble Lords are seeking that we will bring dashboard services within the FCA’s scope. If I have not covered all the ground, I hope that I can rely on meetings with noble Lords following Committee so that, by Report stage, I am able to come up with any further and better particulars that they seek. With that, I hope that for the time being the noble Baroness will feel comfortable in withdrawing the amendment.
Baroness Altmann
I thank my noble friend for his detailed response and the broadness of his willingness to consider the points that we have made on this important issue. I am delighted that he agrees that we all seem to have the same aim, which is to protect the consumer. However, I would be grateful if he went back to the department and perhaps wrote to me and other interested noble Lords about this. We all aim to have consumer protection but, if that is to be put in via a series of regulations with a liability model that we do not yet quite have, would there be any specific harm in putting in the Bill the regulatory framework and the requirement for FCA authorisation and protection for consumers, so that there is a comprehensive, overarching framework?
My concern is that, although this is portrayed as an information dashboard, we know that the provision of guidance and information has no consumer protection whatever—it is a matter of caveat emptor. If, for example, those dashboards carry advertisements that may be perceived as enticing people to buy products but they do not fall under such a regulation in FCA terms, we might be well advised at this stage to place an overriding emphasis from the consumer perspective on regulatory protection and authorisation for the entire framework, rather than relying on liability being proven later and redress being provided to the customer after a problem has occurred. For the moment, however, I beg leave to withdraw the amendment.
Baroness Altmann
“238FA Accuracy of occupational pension scheme informationRegulations must impose requirements on the trustees or managers or administrators of a relevant occupational pension scheme to ensure that information held in respect of each member which may be submitted to a pensions dashboard service is regularly checked for accuracy and any errors are corrected within six months.”Member’s explanatory statement
This amendment aims to ensure that those running pension schemes must check data for accuracy and any errors are corrected regularly to prevent incorrect and misleading information appearing on a user's pensions dashboard.
Baroness Altmann
My Lords, I rise to speak to Amendments 54 and 65, both of which are on the same topic. I beg the Committee’s indulgence. This is such an important issue that I want to expand on some of the areas involved and my reasons for tabling these amendments.
Accurate and complete member data is surely an essential prerequisite for the success of any pensions dashboard. I was struck by the Minister remarking that pension information is the lifeblood of the dashboard, which is absolutely right. These are probing amendments; I do not claim that they are the perfect answer to the issues that I am raising, but I have tried to insert into the Bill specific requirements that must be imposed on trustees, managers and administrators of occupational pension schemes to ensure that the information submitted to the dashboard has been checked regularly for accuracy. I have suggested that errors must be corrected within six months. That may not be a reasonable timeframe, but it is a start. That is Amendment 54.
Amendment 65 seeks to do the same kind of thing for personal and stakeholder pensions which Amendment 54 is seeking to do for occupational schemes. I am not sure whether I need to mention this each time I speak in Committee, but I draw noble Lords’ attention to my interests as set out in the register. Auto-enrolment has been a great success as all UK employers have set up pension schemes for their staff. Workers will be building towards a better retirement, which is a force for good, but it cannot be right that there are currently no formalised requirements that data records are verified as accurate regularly.
In the past, pensions have been plagued by data problems. Recently a number of pensioners have had to repay some of their pensions and face future pension cuts as they have been told that past errors in their pension entitlement have been discovered, many decades later in some cases. Records were not regularly updated or corrected. In the past there was manual record-keeping, which was prone to human error, and failure to ensure robust data reconciliation had been regularly carried out meant that errors were not discovered promptly, and they persisted over time without people knowing.
For any dashboard initiative to work, consumers have to be able to trust that their pension contribution records are accurate. This is a particular problem because the complexity of pension rules makes it almost impossible for individuals, especially workers enrolled in auto-enrolment schemes, to know whether the amounts being paid in on their behalf are correct. The complex calculations must calculate the employee contribution, the employer contribution, the tax relief, and potentially the national insurance relief as well. The member would naturally assume that their employer or their pension provider was ensuring that the amounts being recorded on their behalf were accurate, but unfortunately this has not been the case in the past and it is still not the case for new pension schemes. For example, a study I was involved in last year which analysed data representing more than 1 million contributions from more than 100,000 schemes—these were small employers —showed that the data had a 50% initial error rate. Some 50% of some aspects of the information was incorrect and had to be sent back for correction. Those error rates did not persist, but the data was not necessarily checked as thoroughly as it could have been.
Pension administration is the Cinderella of pensions. It is the low-margin end. It is not the sexy end. It is under cost pressure, and administrators seem to have been expected to absorb often very complex changes. Sometimes pension providers change their data requirements and their payroll software is not updated to reflect the latest version, so administrators then manually adjust spreadsheets to try to make sure that they have some data recorded. Data includes incorrect contribution amounts, contributions made for workers who did not belong to the scheme or who had already opted out, wrong identifiers for the pension scheme, inaccurate postcodes, incorrect pay period dates and so on and, for example, incorrectly believing that a pension scheme operates on a relief at source basis when it is net pay or the other way around so the amounts are simply not right.
Unfortunately there are no regulatory checks to ensure that data is verified for accuracy. What we have seen in legacy schemes is the detriment that this can cause to pensioner members, and if we have a pensions dashboard that people are relying upon to make their retirement plans, it is not good enough that administrators will just to try to make sure that by the time people reach retirement and get their pension all the errors are corrected because people will need that all along. For example, the auto-enrolment declaration of compliance does not have accuracy checks built in. Employers are asked to confirm that they have paid the right amount but nobody ensures that that is the case.
If they want to check, many pension providers currently do not collect the information that they need to verify because they are not getting the pensionable pay data sent over to them; they just get an amount of money and are told that it is correct, and that is that. We are in the middle of pensions master trust authorisation. Again, there is a risk of records being incorrect but the authorisation does not entail robust checks on data accuracy or proof that proper processes are in place to discover and correct errors.
I was trying to put into the Bill a mechanism whereby we can draw a line at a point in time and make sure that the pensions dashboard data has been through a process of cleansing and verification as a requirement for submitting the data. I am not saying that this will be simple or easy, but as more schemes emerge it will be more difficult to go back and try to reconcile past records. We have an opportunity now to put that sort of requirement into the Bill.
I quote from the Pensions Administration Standards Association, a body that oversees pensions administration and has been directly involved in some of these areas:
“Data cleansing is costly, so in low margin operations there is little appetite to invest in either clean data or in digitisation which depends on the quality of data. There is no incentive to do better than your competitor, as you are all in the same boat. Customers do not demand improvements and where they do trustees choose to ignore the calls either because of cost, resource constraints or other priorities for the scheme.”
It goes on:
“There is an expectation that introducing mandatory data provision as part of the dashboard project will act as an incentive to schemes and providers to clean up data that has been in a poor state for decades … The uncomfortable truth is that while compulsion will encourage some clean up, it will only be to the minimum level needed to show some data in a field, which essentially means that the presence of a data item will take precedence over the accuracy of it. Schemes already report 90% compliance with common data standards set by the Pensions Regulator. This should mean 90% of schemes will be able to present data that identifies an individual, but of course we know this is not reality, because it has been self-reported and not robustly checked.”
We have an opportunity to recognise the poor quality of data. This is not a blame game; it is about trying to put into the legislation a mechanism through which providers and everyone involved in the dashboard know that they can no longer rely on other people not correcting their data and no longer not attend to this themselves.
Of course, it will never be possible to ensure 100% accuracy, but having processes in place that constantly check and which allow errors to be corrected promptly is urgently required. Random regulatory checks, mystery shopping and systematic accuracy verification by an independent body would be of value and is surely a vital ingredient of any dashboard on which consumers are expected to rely.
As I said, I am not suggesting that the wording of the amendments is appropriate, in the right place or expressed correctly, but I hope that my noble friend the Minister can give us some information on and consideration of whether this could be built into a dashboard requirement. I beg to move.
Lord McKenzie of Luton (Lab)
The noble Baroness paints a bleak picture; I do not doubt that she is absolutely right.
Is there not a role in all this for the auditors, and a body whose feet can be held to the flames for not doing its job and not checking the systems, for example? It would not be a solution, but presumably it would contribute to an improvement.
Baroness Altmann
The noble Lord raises an important point which highlights that I have not necessarily covered all the areas to be dealt with on this. Including auditors and having a requirement for them to verify the accuracy of data is indeed another way of approaching the issue. I went to trustees and scheme managers widely, but auditors are another area which might be considered.
Baroness Sherlock
My Lords, I do not want to say very much, but I have a couple of questions on the back of what the noble Baroness, Lady Altmann, has said.
Can the Minister tell the Committee a little about what the regulators and the Government are doing to ensure that companies are ready to clean up data ready for transferring to the dashboard? Is there any intention for providers to check that members recognise the accuracy of the data at any point? Regarding what the noble Baroness described, if data had been wrong for decades, perhaps the member would not have known the details, but they might have known if they were not in a scheme, were in a different one, or if the basics were different.
The Cheviot Trust said that it was concerned that deferred members’ data would be less accurate. Is this on the DWP’s horizon? If so, what is being done about it?
Baroness Altmann
I thank my noble friend very much for his response. I said that this was a probing amendment, and I recognise that, in theory, such powers appear to exist. In practice, they do not seem to be used and there seems to be rather a reliance on self-reporting, which clearly has not produced the accuracy that one might wish. I am delighted that our honourable friend the Pensions Minister has been raising the issue of the need for accurate contributions. We need to encourage pension schemes to get going on cleansing the data. They do not need to wait for any regulations or legislation. If they already have the duty, perhaps they should just get going.
I also accept, and am delighted to hear, that the industry delivery group is working on some qualitative research and data standards. I have to express my concern that in 2015, there was an agreed data standard practice; unfortunately, the industry decided not to adopt it. I hope that there will be a different attitude this time to the importance of pension scheme data.
I beg leave to withdraw the amendment but I hope that this debate has at least raised the issue. Perhaps it may encourage some schemes to get on with data cleansing and have the regulators looking more closely at it.
Lord Vaux of Harrowden
I am staggered by the numbers on the cost of doing this that are bandied around. As far as I can see, the main work here is formatting data into a consistent format so that it can be uploaded to whichever platform it needs to be uploaded to. Frankly, the creation of a platform is pretty trivial stuff. It is not dramatically different to what happened with open banking in that respect; that was a question of formatting data and ensuring that it was in a consistent format. Do we have any idea of the open banking process costs so that we can compare them—and, if they are dramatically different, ask why?
Baroness Altmann
I echo the words of the noble Baroness, Lady Drake. A number of elements of the expense shown in the impact assessment are elements that one would have hoped that the industry would take upon itself in any case. I sometimes need to remind providers that automatic enrolment has been an absolute gift to them. It has brought them 10 million new customers on a plate, with all the associated tax relief money. Surely they need to take an obligation upon themselves to modernise their processes and bring their IT into the 21st century. The standard answer is: “It’ll cost too much”, or, “We’ve got our own system, we don’t want to change to a new one”, but in Australia, the Government mandated a particular system that everybody had to adopt so that there was a common standard. It worked very well. My noble friend suggested that the industry delivery group is working on such a potential procedure, which would be excellent. It would incur costs but it would set the industry up for much more business in future on a long-term, sustainable basis.
Earl Howe
I am grateful to my noble friend for raising this important issue.
The Government published impact assessments for each measure in the Bill at its introduction. As is usual practice, we will publish updated impact assessments when the Bill is enacted, setting out the impacts of any material amendments to the Bill. I assure my noble friend that for measures where regulations that are subject to consultation are required, we will publish impact assessments when those regulations are brought forward. This must be the most beneficial time to revisit the impacts, when further policy detail is set out and we are able to apply that element of further insight to our estimates of costs and benefits. I suggest that adding another impact assessment between Royal Assent and the laying of the regulations would not provide any further transparency.
Turning to dashboards specifically, the Government are well aware of the additional costs necessary to support the set-up and maintenance of pensions dashboards. As my noble friend knows, when we published an impact assessment that accompanied the Bill, we set out initial estimates of the possible costs. However, we should recognise that many schemes already provide similar levels of information directly to their consumer through annual benefit statements or digital platforms, so not all schemes will necessarily incur significant additional costs.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott)
My Lords, Amendment 77 seeks to extend the scope of Clause 124 to include transfers from unfunded public sector schemes: those where the pension promised is underwritten by the Exchequer. This amendment ensures parity of protection for those members of unfunded public service schemes.
Clause 124 relates to cash equivalent transfer rights and amends Section 95 of the Pension Schemes Act 1993. It provides the Secretary of State with a power to make regulations that can place new conditions on a member’s statutory right to transfer their pension rights to another scheme. This amendment seeks to ensure that members of unfunded public sector schemes can exercise their statutory right to transfer only once the conditions to be specified in the regulations made under this clause are satisfied. The intention is to apply the same conditions to transfers from unfunded pension schemes as will be applied to transfers from other pension schemes. These conditions can include the member providing evidence or information about their employment link with a pension scheme or their residency overseas.
Pension transfers from unfunded public sector schemes are rare. No concerns in relation to scams were raised during the 2016 government consultation, so transfers from unfunded pension schemes were not included in the original draft clause. The Department for Work and Pensions has since been made aware of criminals trying to set up a scheme that can receive unfunded pension transfers, so we believe this amendment is necessary to safeguard members of unfunded schemes from fraud. Amendment 99 mirrors the provision for Northern Ireland in paragraph 12 of Schedule 11. It is essential to provide the same protection when transferring savings to members of unfunded public sector schemes as those saving in other pension arrangements. For these reasons, I beg to move Amendment 77 standing in my name.
Baroness Altmann
My Lords, I support my noble friend’s amendment and will speak to my Amendment 78, which is grouped here. I fully agree with her that it is important to protect members’ pensions on transfer, whether they come from one type of scheme or another. I am delighted to see the government amendment and its intent.
My amendment would do something that I have sought for a time, and I wondered whether we might be able to get it into the Bill. It relates to partners of pension scheme members who transfer their pension from one scheme to another. One hears so often of a divorced couple where the wife has no pension of her own and has sometimes even had a pension-sharing order. However, when the member’s pension is transferred as a cash-equivalent transfer value, there is currently no mechanism to ensure that the spouse, who clearly has an interest in potentially half that amount, is made aware that that is happening. Of course, once the money has been transferred, should the previous partner have ill intent, it is possible that the spouse—usually the wife—will be left pensionless when in fact she had expected to share the partner’s pension.
This is a probing amendment. I support my noble friend’s amendments and would be grateful to hear whether any other Members of the Committee are interested in this type of protection, which we might be able to request be inserted in the Bill, so that if somebody calls up to transfer their pension, some procedure is in place before that is done to ensure that anyone else with an interest in the pension has given their consent or has at least been informed, which does not always happen.
Baroness Stedman-Scott
The suggestion made by the noble Baroness, Lady Sherlock, is very helpful. I would be happy to do that before we come back to this on Wednesday.
Baroness Altmann
I thank my noble friend for her reply, which does not come as a surprise to me. I also thank noble Lords for their useful contributions.
I believe that there may be an issue here. I hope that the department will consider it. As the noble Baroness, Lady Drake, specifically said, things are different now with pension freedoms, whether for DB or DC. If there is a pension-sharing order and a member transfers out of their DB scheme and takes a cash equivalent transfer value when their spouse had relied on a guaranteed pension income from half of that defined benefit pension, now that we have the freedoms, that pension could be dissipated. Certainly, a cash-equivalent transfer value, in terms of buying an annuity with an inflation protection to replace the income that could be lost, is not likely to be financially feasible. I accept that this would be an extra burden and that it would need careful consideration. I echo the request from the noble Baroness, Lady Sherlock, that the department considers this and sees whether there is a way of protecting these women. I beg leave to withdraw my amendment.
Baroness Altmann
My Lords, I have added my name to this amendment, which is a very important amendment in the context of consumer protection. As the noble Lord, Lord Sharkey, has so excellently explained, the amendment is an attempt to ensure protection, particularly against scams. What we tried and succeeded in doing during the passage of the Financial Guidance and Claims Act was to pass an amendment that would automatically see people before they transfer money out of a pension—or withdraw money from a pension—receiving at least the independent, impartial guidance that was originally intended to accompany the pension freedoms. When they were introduced, the aim was for everybody to be able to have this impartial guidance so they did not do the wrong thing and understood the risks of taking money out too quickly. This is another line of defence for the consumer given that that amendment, which was passed in the Lords, did not make it into the Bill. It was taken out in the Commons.
One line of defence would obviously be if someone has an authorised adviser or can demonstrate that they have received independent advice. A second line of defence would be the providers themselves asking a few very basic, approved questions: “Are you asking to transfer out because of an unsolicited communication of some kind?”, and, “Do you know anything about the scheme you are transferring into?”. The provider could ask two or three basic questions; should those questions raise red flags, there would be an opportunity to protect the member before they transferred out. Other than that, there is a 60-day limit because, again, scams normally require you to transfer your money very quickly.
I hope that there may be some consideration of the importance of this protection and the use of Pension Wise in the way that it was originally intended. As we look to introduce a new Pension Schemes Act, we might find ways in which we can enhance the consumer protection that I know my noble friend understands is so important.
Lord McKenzie of Luton
My Lords, this amendment goes to the heart of protecting people’s pensions. We have touched upon a number of issues surrounding the same sort of concepts during debate on the Bill and in other legislation, such as financial guidance provisions. We should see whether we cannot get together a comprehensive note of how these things are covered. I am bound to say I am unclear as to what is and is not covered in all circumstances, so it seems that would be beneficial.
Concerning the specifics of the amendment, we clearly give it broad support. It raises practical issues, as I am sure the noble Lord, Lord Sharkey, would identify, particularly on responding to approved questions. I am not sure who is on hand when the questions are being asked. We have seen what happened with taxi licences and such things in the past. The provision could give rise to challenges but the thrust is right: it is another attempt to make sure that people are aware of the consequences of what they do, to the fullest extent possible. As I say, I am not sure whether we have a comprehensive arrangement yet across all pensions and circumstances. It seems that it would be worth some effort to try to get that into place. With those words, I am happy to it give broad support. When the Minister replies, I am sure there will be some stumbling blocks in it but if we do not keep pushing and shoving, we are not going to make progress on this.