Shailesh Vara outlines the advice and guidance available on pension freedoms

6th July 2016

Shailesh Vara outlines the availability of advice and guidance offered by Pension Wise on pension freedoms and efforts to raise awareness of the service.

It is a pleasure to serve under your chairmanship this morning, Mr Gray. I thank the hon. Member for Leeds West (Rachel Reeves) for setting out her case. She speaks with considerable experience, given that she was the shadow Work and Pensions Secretary. I am glad to see the right hon. Member for East Ham (Stephen Timms) also joining us for this debate.

Pension freedoms, which have been widely welcomed, have raised interest and engagement in pensions significantly. The freedoms give people the opportunity to take responsibility for their own retirement. In the first nine months we saw nearly 540,000 pensions being accessed. People are clearly taking control, but, as the hon. Member for Leeds West said, they need to do so after receiving the appropriate information at the right time so that they can make decisions that suit their circumstances.

The Government recognised that in order for people to make the most of the new freedoms they needed to equip them with the tools to make decisions that suit their circumstances, so Pension Wise was launched. This service provides free and impartial guidance to those aged 50 and over to help them to understand what they can do with their defined contribution pensions following the reforms. I am happy to say that it has been very successful. I hope to give some information to the hon. Lady during the course of this debate that will give her some comfort.

I agree that Pension Wise is providing a good service, but does the Minister acknowledge that, as my hon. Friend the Member for Leeds West (Rachel Reeves) pointed out, take-up of the service has been very low? In my area there is certainly evidence of skilled advisers sitting around twiddling their thumbs quite a lot of the time because the demand has not yet come through.

The right hon. Gentleman makes a good point. I accept that we have more to do. I hope my comments will give him and the hon. Lady some assurance that we are doing things and we recognise there is more to be done. The hon. Lady referred to the number of appointments—73,000 so far—but 2.7 million visits have been made to the Pension Wise website. It is important to look at the two together, rather than just the appointments, because the information provided in the appointments is all available on the website. Many people are accessing the website and finding that they do not need an appointment. That needs to be borne in mind.

I appreciate that, as the right hon. Gentleman said, there is concern about take-up. It is important to remember that the service is not compulsory for everyone who wants to access their pension pot. Using Pension Wise is a voluntary option and people should be given the choice to plan for their retirement in the manner they see fit. However—I emphasise this point—it is important that people know the service is there to support them if they wish to use it.

Pension Wise has already run three national marketing campaigns across TV, radio, print and digital media. Those campaigns complement the current requirement for all pension scheme providers to signpost to Pension Wise whenever a wake-up pack is sent out to a member.

I am grateful to the Minister for giving way again. As he said, Pension Wise is a voluntary service. Has he noticed the point made by the Association of British Insurers that guidance for people transacting in the secondary annuity market, where the pitfalls are particularly troubling, should be mandatory?

The right hon. Gentleman raises another good point. This is something we are looking at, although he will forgive me for not making any instant decisions. The secondary market is a broad market, with a huge amount of rules and regulations. We started with the initial concept of providing access to pension pots. That is now leading to other issues that rightly need to be looked at, but he will forgive me if I do not comment on those right now.

We have had three national awareness campaigns and we are working on a fourth. This is not an area where we feel we have done enough. There is more to do and we recognise that. The subject of pensions is complex and the Government recognise that there is more to be done.

Last year we consulted on how the provision of free, impartial financial guidance could be structured to make it more effective. The review confirmed that the current guidance offer can be confusing to the public. There is also an overlap in some services. That is why we have consulted on our plans to restructure the delivery of public financial guidance to make it more effective, by directing more funding to the frontline and providing more targeted support.

The latest consultation outlined our proposal for a new guidance model, which involves setting up a new pensions guidance body where individuals can get all their queries on private pensions answered in one place. There will also be a new, slimmed down money guidance body, to ensure people can access the debt advice and money guidance they need. The two bodies will work together to ensure that people who need both pensions and wider financial guidance are directed to the right place. The consultation ended last month and we are currently considering all the responses with a view to publishing our response this autumn.

Most people who seek information on pensions do not distinguish between guidance and advice; they simply want help. Regulated advice will be appropriate for some people, so there is still a need to make sure that affordable and accessible financial advice is available for those who want it. That is why the Government intend to consult, over summer 2016, on introducing the pensions advice allowance, whereby individuals will be able to withdraw up to £500 tax-free from their defined contribution pension pot to redeem against the cost of financial advice before the age of 55.

Employees often look to their employers for help when it comes to pensions. To further encourage employer involvement, the Government will increase the current £150 tax and national insurance contributions relief to £500 for those employers who arrange pension advice for their employees. It is our view that that proposal and the pensions advice allowance could be complementary, so it would be possible for those who are able to use both to access up to £1000 of tax-advantaged advice. Such initiatives can give people an understanding of their options, but no one knows their customers better than the pension providers themselves, and I know that organisations within the industry are starting to look at new and innovative ways of engaging with their customers. I hope we can work with the industry so that information and guidance is provided in a way that meets the individual’s needs.

The hon. Member for Leeds West spoke eloquently of the need to increase the take-up of Pension Wise. As well as the fourth awareness campaign that we are working on, Pension Wise delivery partners also promote the service locally in businesses and libraries, for example. A concern was also raised about getting proper advice. Pension Wise offers guidance on how to spot a scam, how people can protect themselves and what to do if they think they have been scammed, on its website and in appointments. If someone suspects they have been scammed, the service will signpost them to the Pensions Advisory Service and Action Fraud. In addition, Pension Wise is a member of Project Bloom and works with other members to raise awareness of scams.

The right hon. Member for East Ham spoke about the secondary market. I can tell him that Pension Wise guidance will be available to those selling their annuity, once the market launches in April 2017.

I thank the Minister for that answer. May I raise one other issue with him? The ABI says that it

“would like to see the new guidance arrangements enhanced so that providers who want to block transfers to protect their customers (because of concern about the receiving scheme) can refer their customers to the new body to receive impartial guidance on the risks from transferring funds to potential scams and fraudulent investments.”

Is that proposal from the ABI also something that he is reflecting on?

Let me assure the right hon. Gentleman that we are keen to make sure that this works. We are not in any way restricting the stakeholders with whom we speak. We are working with all of them, including the ABI and a whole host of other organisations and people, to make sure that whatever guidance and regulations we put in place are right. We want to get it right as best as possible first time round. I assure him that we are very much taking on board the views of others out there.

To conclude, the hon. Lady was right to raise this important issue. I thank and commend her for doing so.

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