Pensions Bill

I thank all noble Lords who have spoken on the amendment. It has given us the opportunity to discuss two issues: the return which individuals can expect from saving, and the provision of financial advice. I expect I shall disappoint noble Lords in not being able to provide some of the detail at this stage that people are seeking, but I hope I can satisfy them that work is in hand which is directed in the right way and will produce the kind of information they reasonably seek.. I understand the concerns that have led to both amendments being tabled and I agree that the matters are important and appropriate subjects for public debate. However, I cannot agree that it is either necessary or effective to amend this legislation on the Personal Accounts Delivery Authority in order to achieve the desired outcome. Amendment No. 111 proposes that the Personal Accounts Delivery Authority should be required by December 2007 to produce reports on the returns to savings for individuals and the provision of generic financial advice. Such activities are not appropriate for the authority in its initial phase. The Bill sets up the authority initially to act as an adviser to government, and this amendment would place an unnecessary extra pressure on the delivery authority in its initial phase by requiring it to carry out an extensive and complex analysis in a short space of time and to duplicate work already being undertaken in other areas. The department has already published a detailed analysis on possible returns, particularly in Financial Incentives to Save, which was published alongside the Bill. This topic has also been the subject of some debate during the passage of the Bill. The analysis shows that the large majority of those eligible to be automatically enrolled can expect to benefit from saving in a personal account or exempt scheme. Many long-term savers, including many who may be entitled to some pension credit in retirement, could expect£2 plus inflation for every £1 they contribute. Of course, as with all investments, this will depend on stock market returns and other risks. We are continuing to develop this analysis of incentives to save and how particular levels of payback could be expected by different groups. The Pensions Policy Institute independently conductsan analysis in this area, and it would place an unnecessary burden on the delivery authority in its very initial stage to require it to do the same. Amendment No. 111 also refers to generic financial advice, an issue which is the focus of Amendment No. 120. Let me, therefore, turn to that matter. In our White Paper, Personal Accounts: A New Way to Save, we recognise that providing good-quality information will be critical to the success of personal accounts. Advice on saving for retirement is specific to individuals and is regulated by the Financial Services Authority. The personal account scheme, like many other schemes that operate automatic enrolment, is being designed so that regulated financial advice is not required, but that does not mean that people will not have the right information. The noble Lord, Lord Blackwell, is right: regulated financial advice is expensive and has deterred people from entering into fairly modest pension arrangements. It is a key part of the design of personal accounts to address that issue. We recognise that individuals will need information to enable them to make decisions regarding their participation in the scheme—for example, on deciding levels of contributions, fund choices and on whether they should opt out—but it will be for the delivery authority to determine the information strategy for personal accounts. It is recognised that individuals and employers should have information to enable them to understand their rights and responsibilities. In deciding how this information should be provided, the delivery authority will need to take account of the target group. A number of noble Lords recognised that Otto Thoresen is conducting an independent review, and we should await its outcome before we discussin more detail generic financial advice and how it will impact on personal accounts. It is a very important task he has under way. In summary, I suggest that noble Lords can be assured that the matters with which the amendments are concerned will be properly dealt with, and that it is neither necessary nor appropriate to make them the subject of additional legal obligations on the Personal Accounts Delivery Authority. I therefore urge the noble Lord to withdraw his amendment. Further, in relation to the analysis of returns on savings and the effect that may have on different groups, we are continuing to develop our analysis of the size of the groups that might expect particular levels of payback. That is, as I think noble Lords will acknowledge,a complex area that requires information about individuals’ characteristics over 60 or 70 years. We are hoping to release the results in the autumn, so that is very much work in progress. I hope that has assured noble Lords that we accept that the issues have been raised are relevant, important and serious, and that work is in hand to address them. It would be wrong, however, to deal with them in the way that the amendments suggest.