The noble Lord is quite right to describe the order as filling a hole in the regulatory structure. That is exactly what it does. He talked about two separate changes that are taking place from 1 April. The relatively narrow one in terms of the number of people we think are likely to take advantage of it is the flexibility for people with a defined benefit scheme or other safeguarded scheme to move to a more flexible scheme. That is what the order covers. People in that category are required to take advice via a regulated adviser. We think that the majority of people with safeguarded pensions will find, on taking that advice, that it is in their best interests to retain them. However, it is for them, in discussion with the IFA community, to decide on a case-by-case basis.
I was asked whether there are enough properly qualified people to do the work. There are about 20,000 registered IFAs and around 7,000 of those are pension transfer specialists so it is quite a body of people. Given all the other changes that have taken place in the financial services sector, the concern of the IFAs in recent years has been that there was not enough work to go around—or would not be in future—on their old model of operating. I suspect that for this category of people, there will be adequate advice.
The article to which the noble Lord referred and many of his later comments were about the more general freedoms under which, from April, people will
no longer have to take an annuity. There is a different and larger challenge there in terms of providing support for people in that category. As the noble Lord knows, we are setting up a completely new guidance service to advise people in that category. That service will have three strands—web-based, telephone and face-to-face—and is being developed by my colleagues in the Treasury. When I talked to them about this earlier, they assured me that they feel they are on track to have enough people and adequate systems in place to deal with the very large number of requests they will get.
One other thing that my colleague, Steve Webb, said about the change on 1 April was that he suggested people spend the day in bed rather than worry about changing their pensions literally on day one. It is important that people take time to get not just the guidance but also to think about how they want to dispose of the funding they have in their pension pot.
I completely share the concern of the noble Lord and several commentators that many people do not understand pensions at all. They have a pension but that is about all they know about it. One of the great potential benefits of this change and the fact that everybody will get free guidance is that it will help people to understand how a pension works. I think there is a view in a lot of people’s minds that a pot of money called a pension is somehow different in some mysterious way from any other pot of money. The truth is that it is a pot of money available for them to dispose of, now pretty flexibly. People will need to confront their own mortality, possibly in a way that they did not feel they needed to in the past. That is undoubtedly a challenge to people but one that they should face up to, and not just because of how they deal with their pensions. It also affects a whole raft of ways in which they think about their later years. For many people on the normal retirement age, that period will be 30 years or more—a third of their life.
It is a challenge. We are putting in place robust, we hope, measures through the guidance systems in terms of these safeguarded pensions—the subject of this order. That advice will ensure that people get the level of support they need to take the correct decisions and enable them to get the very best out of their pension savings. Of course, at this stage we do not know whether our systems will be as robust as we hope they will be. We do not know quite how people will respond to this. However, I think we have behaved responsibly in not only opening up the freedoms but also putting in place a system to ensure that people can exercise those freedoms in a responsible manner for their own benefit.