Recommendations & Conclusions
7 items
4
Recommendation
Fifty-Seventh Report - AEA Technology P…
Accepted
This is another case of government not giving people enough time or support to make complex financial decisions. The government has a role to help people make good financial decisions, because of the detriment that bad choices can lead to. In the case of AEAT, it should have done this …
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This is another case of government not giving people enough time or support to make complex financial decisions. The government has a role to help people make good financial decisions, because of the detriment that bad choices can lead to. In the case of AEAT, it should have done this directly. This was a complex financial decision where members needed clear information on their options and time to seek appropriate financial advice. AEAT scheme members were only given one month to decide between their pension transfer options, and the information they received was insufficient. We have seen similar issues in other areas, including in the private sector where government oversees the regulation of independent financial advice. For example, our inquiry last year into the British Steel Pension Scheme covered the significant financial harm that many scheme members suffered from transferring their pensions after receiving unsuitable advice. We concluded that the regulatory system had left members open to being taken advantage of and that, seven years after the Pension Schemes Act 2015, regulated financial advisers were still not clear on what was expected of them. DWP is developing several initiatives aimed at supporting people to engage with their pensions, such as ‘Pensions Dashboards’ and a recent call for evidence on the support and information people need when accessing their pensions. However, it is not clear when these initiatives might come to fruition and lead to tangible improvements. Recommendation 4: The government should write to us within three months to set out what more it will do to support people to make informed financial decisions, including regarding their pensions. This should include what changes it will make in light of DWP’s recent call for evidence, and an update on progress with Pensions Dashboards. AEA Technology Pension Case 7 1 AEA Technology pensions
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Government response AI summary
The government agrees to write to the Committee detailing actions to support informed financial decisions regarding pensions. It cites specific initiatives already in place, such as the Stronger Nudge to Pensions Guidance and the national rollout of the mid-life MOT, and recent regulations made on …
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HM Treasury
5
Conclusion
Fifty-Seventh Report - AEA Technology P…
Accepted
When the Atomic Energy Authority Act 1995 was introduced to facilitate the privatisation of AEAT and outline the pension arrangements, it required that the pension benefits in the new AEAT scheme must be “no less favourable” than the previous scheme. Around that time, other privatisations had included government guarantees on …
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When the Atomic Energy Authority Act 1995 was introduced to facilitate the privatisation of AEAT and outline the pension arrangements, it required that the pension benefits in the new AEAT scheme must be “no less favourable” than the previous scheme. Around that time, other privatisations had included government guarantees on their pensions. Ministers also gave assurances in Parliament that pension benefits would be fully protected in the new scheme.5 We asked DWP and GAD how the AEAT pension scheme’s terms could be no less favourable if, as became clear after 2012, it did not have the protection of a government guarantee. The departments told us their understanding was that the phrase “no less favourable” used in legislation referred only to the pension 1 Comptroller & Auditor General, Pensions transferred to AEA Technology when it was privatised, Session 2022–23, HC 1169, 3 March 2023 2 ATC0023; C&AG’s Report, paras 2, 9 3 C&AG’s Report, paras 10–11, 1.5 4 C&AG’s Report, paras 12–14 5 C&AG’s Report, para 1.5, 1.10 8 AEA Technology Pension Case scheme benefits, not their security, meaning the 1995 Act did not provide for a public sector guarantee on the scheme. GAD said that it was on this basis that it will have certified that the new pension scheme met the terms of the 1995 Act.6
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Government response AI summary
The government states that its 2013 Fair Deal policy means that similar circumstances would not occur again, as pensions in future privatisations would remain in public sector schemes.
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HM Treasury
7
Recommendation
Fifty-Seventh Report - AEA Technology P…
Accepted
GAD’s note suggested that scheme members seek independent financial advice if they were unsure of the most suitable course of action.10 We asked GAD whether it was realistic for scheme members to get independent financial advice, particularly when GAD is a well-recognised authority on public sector pensions and members were …
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GAD’s note suggested that scheme members seek independent financial advice if they were unsure of the most suitable course of action.10 We asked GAD whether it was realistic for scheme members to get independent financial advice, particularly when GAD is a well-recognised authority on public sector pensions and members were only given one month to make their decision. GAD told us that the range of individual circumstances which members may have been in would have made it impossible for the note to provide appropriate financial advice for each individual. GAD also said that the fact the note mentions that it was not financial advice should have been a sign that this was a matter to take seriously. GAD told us it did not believe the note would have been the only basis on which members made their decision.11 However, nearly 90% of scheme members transferred their benefits. Scheme members have said their decision was heavily influenced by GAD’s note, given GAD’s role as a professional body independent of the pension scheme, and the stated intention of the note to “outline the main factors to take into consideration in deciding whether or not to transfer”. Scheme members have also reported that independent financial advisors who were consulted largely deferred to GAD’s note.12
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Government response AI summary
The government agrees to support informed pension decisions by September 2023, committing to write to the Committee with specific actions and highlighting initiatives like the Stronger Nudge to Pensions Guidance and Pensions Dashboards.
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HM Treasury
17
Conclusion
Fifty-Seventh Report - AEA Technology P…
Accepted
The AEAT case is one where government directly provided information intended to help pension scheme members decide what to do with their accrued pension benefits. Members were only given one month to make the decision, and consider that the information provided was insufficient and misleading.36 GAD acknowledged that in the …
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The AEAT case is one where government directly provided information intended to help pension scheme members decide what to do with their accrued pension benefits. Members were only given one month to make the decision, and consider that the information provided was insufficient and misleading.36 GAD acknowledged that in the present day, only giving people one month to make a financial decision of this kind would be judged to be inappropriate.37
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Government response AI summary
The government agrees with the recommendation and will inform the Committee of actions taken to support informed pension decisions. They cite recent steps like the Stronger Nudge to Pensions Guidance, national mid-life MOT delivery, and new regulations for Pensions Dashboards.
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HM Treasury
18
Conclusion
Fifty-Seventh Report - AEA Technology P…
Accepted
This committee has previously found similar issues with how government provides or oversees support for people making complex or long-term financial decisions, including through the regulation of independent financial advice. Most recently, our inquiry last year into the British Steel pension scheme found that pensions regulators had failed to provide …
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This committee has previously found similar issues with how government provides or oversees support for people making complex or long-term financial decisions, including through the regulation of independent financial advice. Most recently, our inquiry last year into the British Steel pension scheme found that pensions regulators had failed to provide adequate information and support to scheme members to make decisions within tight deadlines, leading to unsuitable financial advice that caused serious financial harm. We concluded that the regulatory system had left pension scheme members open to being manipulated and taken advantage of by unscrupulous financial advisers, and that regulated financial bodies were still not clear on what was expected of them.38
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Government response AI summary
The government agrees with the recommendation and will inform the Committee of actions taken to support informed pension decisions. They cite recent steps like the Stronger Nudge to Pensions Guidance, national mid-life MOT delivery, and new regulations for Pensions Dashboards.
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HM Treasury
19
Conclusion
Fifty-Seventh Report - AEA Technology P…
Accepted
This committee’s 2016 report on financial services mis-selling similarly concluded that the Financial Conduct Authority was not doing enough to ensure that consumers understand the financial products they are buying. The report found that even the most knowledgeable consumers can find financial services too complex to understand, which emphasises the …
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This committee’s 2016 report on financial services mis-selling similarly concluded that the Financial Conduct Authority was not doing enough to ensure that consumers understand the financial products they are buying. The report found that even the most knowledgeable consumers can find financial services too complex to understand, which emphasises the importance of providing adequate support to consumers making financial decisions.39 While not a financial product, this committee also saw similar themes in its 2018 inquiry into the higher education market. The report found that young people taking out student loans were not properly supported to make decisions on higher education that affected their future careers, in large part due to insufficient and inconsistent careers advice.40
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Government response AI summary
The government agrees with the recommendation and will inform the Committee of actions taken to support informed pension decisions. They cite recent steps like the Stronger Nudge to Pensions Guidance, national mid-life MOT delivery, and new regulations for Pensions Dashboards.
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HM Treasury
20
Conclusion
Fifty-Seventh Report - AEA Technology P…
Accepted
We asked DWP how government can ensure it gives clearer and more accessible financial advice in similar situations in future. DWP told us that changes to policy on privatisations and transfers of pensions meant that the specific circumstances affecting 33 Qq 50–51; C&AG’s Report, paras 3.10–3.11 34 Qq 44, 51 …
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We asked DWP how government can ensure it gives clearer and more accessible financial advice in similar situations in future. DWP told us that changes to policy on privatisations and transfers of pensions meant that the specific circumstances affecting 33 Qq 50–51; C&AG’s Report, paras 3.10–3.11 34 Qq 44, 51 35 Q 74 36 Q 66; C&AG’s Report: para 1.7 37 Q 55 38 Committee of Public Accounts, Investigation into the British Steel Pension Scheme, Fourteenth Report of Session 2022–23, HC 251, July 2022, paras 2, 5 39 Q 54; Committee of Public Accounts, Financial services mis-selling: regulation and redress, Forty-first Report of Session 2015–16, HC 847, May 2016, para 4 40 Committee of Public Accounts, The higher education market, Forty-fifth Report of Session 2017–19, HC 693, June 2018, para 2 AEA Technology Pension Case 13 AEAT pensioners would be unlikely to happen again. More generally, it told us it has worked with the Financial Conduct Authority and the Pensions Regulator to strengthen the protections around financial advice on pensions. DWP said that encouraging engagement with pensions is difficult, and government has been considering how best to nudge people to seek financial guidance or advice, such as through the introduction of a pensions dashboard. DWP wrote to us after our evidence session to explain the ways it is trying to support people to engage with their pensions. This includes new regulations that came into force in 2022 to ensure nobody can transfer their savings through pension freedoms without either receiving Pension Wise guidance or opting out of it. It also includes initiatives under development such as Pensions Dashboards and DWP’s recent call for evidence on the support and information people need when accessing their pensions. However, DWP did not indicate when these initiatives might come to fruition and lead to tangible improvements.41 41 DWP letter to Committee dated 4 April 2023 14 AEA Technology Pension Case
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Government response AI summary
The government agrees, committing to write to the Committee by September 2023 to outline actions for supporting informed pension decisions through advice, guidance, and reduced complexity, alongside ongoing initiatives like the Stronger Nudge and Pensions Dashboards.
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HM Treasury