Labour peers are lining up a fresh push to introduce an amendment to the pension freedoms rules to bring in a ‘second line of defence’ for pension savers at the point of sale of an at-retirement income product.
Speaking during a debate in the House of Lords last night (7 January) Lord Bradley said he and his colleagues would consider how best to ensure protection for consumers who face detriment when making retirement income decisions potentially long after their “one-off” guidance session.
It is likely an amendment will eventually be tabled to the Taxation of Pensions Bill to introduce “a second line of defence provision to control the conduct of providers selling retirement income products... and enhance consumers’ protection when they are in the purchasing process”.
His comments came during a debate on a tabled amendment to the Pension Schemes Bill, which will inaugurate new ‘collective defined contribution’ occupational pension solutions, that would have required providers to refer clients to independent brokers before purchasing an annuity.
Lord Bradley said the amendment affecting those “who default into an annuity with their same savings provider” would ensure customers shop around “in the most effective way”.
The amendment was eventually withdrawn following a rebuttal from Conservative peer Lord Bourne, who referenced the guidance service to be offered from April as ensuring “individuals can access the support that they need to understand and navigate their retirement choices”.
In particular Lord Bourne said the amendment would require “all schemes that offer an annuity to provide or source an independent annuity broker” and that the government was not convinced “imposing additional costs on either some schemes or members is the best way to facilitate... shopping around”.
He added there was also a question over the role of the Pensions Regulator, which regulates occupational pension schemes and would overlap with the Financial Conduct Authority which regulates contract-based schemes and annuity brokerages.
On the guidance service, Lord Bourne stressed that consumer protection was ensured by guidance allowing “the provider to draw that to a customer’s attention where the... customer’s action is potentially inconsistent with their circumstances”.
The opposition has raised concerns over future consumer detriment arising out of the new rules before, with shadow minister for employment Stephen Timms warning during a Commons debate last year of a potential ‘mis-selling’ scandal.
While Labour has said it supports the broad thrust of the hugely popular changes it has repeatedly raised the question of a second line of defence beyond guidance, with Mr Timms saying during the November debate the government was treating the first retirees next April like “guinea pigs”.
ashley.wassall@ft.com
