Ros Altmann could be appointed Minister for financial consumer protection in next Government
by Dr. Ros Altmann
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Review of financial fairness and extending financial guidance to younger savers
David Cameron and George Osborne have offered me the opportunity to become a Minister with responsibility for financial consumer protection and financial education. Following on from the pensions and savings reforms introduced in the past year, I know how important it will be to ensure that customers are treated fairly by the large financial companies. I also believe it is vital to roll out financial education to everyone, not just those nearing the end of their working life, as well as checking that all fees and charges are fair and clear.
I will be asked to carry out a major review of financial fairness for consumers, including:
- charge caps for pension products to protect savers from excessive fees;
- improved rights for older consumers especially in the mortgage market;
- promoting competition and innovation for all savers;
- developing the Pension Wise service to offer financial education and guidance to working people at every stage of their lives – not just nearer retirement
I have worked so hard for so many years to help ordinary pension savers and expose injustice. I’ve been calling for financial fairness and trying to make pensions and savings work better for ordinary people. I hope I will now have a chance to ensure customers are treated more fairly, and are better educated, informed and protected.
The reforms to savings and pensions in the past year have been so exciting. At last, we have had Ministers who were willing to stand up to powerful financial firms to break their stranglehold on people’s pension savings. These reforms have proved to me that the Conservatives really do care about all savers, not just the wealthiest. They really do seem to want to make long-term savings work for the many, not just the few at the top. The wealthiest already had the freedoms and flexibility that are now open to everyone, but of course we now need to ensure financial services firms move with the times and adapt to the new environment.
The whole point of the reforms is to make long-term savings work better for ordinary families who put their hard-earned savings aside for their future, which is so important to restoring the strong British savings culture.
Of course it won’t be easy, but I’m determined to make a difference. I will remain a champion for consumers, but also want to work with the industry to adapt to the new environment. I can do this far more effectively from within Government than as an independent outsider.
I will also continue to champion the need for fairness and inclusiveness for women and for customers of all ages – which is where I believe financial education and guidance can be particularly powerful.
There are some who say the financial industry, or Government, know best what people should do with their money and that most people can’t make sensible decisions for themselves. Well, I disagree. Yes, some may be reckless but I truly believe most British savers will be responsible and can be trusted to make the right choices. They will need protection, they will need guidance and many will also need advice, but that is where I hope I can make a difference.
The savings and pension reforms are only a start, the next steps are yet to come. Making financial services work better for the customers they are trying to serve will ultimately also benefit the industry itself. We have strong, vibrant firms who are world leaders, but their long-term success will require a new approach. Modernising and adapting are vital. Some are already recognising this and I look forward to engaging constructively with them. Too many, however, are still relying on past captive customers being locked into expensive, inflexible products. Such practices need to be abandoned, in favour of more customer-friendly approaches, that will bring far more money into long-term savings in future.
I hope to help this happen.
NOTES FOR EDITORS
The following is the official release from the Prime Minister:
Strict no approach embargo 00.01 Saturday 18th April, 2015
Ros Altmann to be a Minister in the next Conservative government – leading a review of financial consumer protection and financial education
Today the Prime Minister is announcing that consumer champion and pensions expert Dr. Ros Altmann is to be nominated as a Conservative peer and will be appointed as a Minister with responsibility for financial consumer protection and financial education in a Conservative government.
Improving dignity and security in retirement for working people lies at the heart of the Conservatives’ long-term economic plan.
Following the biggest pension reforms in a generation, one of her first roles will be to lead a review of financial fairness for consumers, including:
* consideration of charge caps for pension products to protect savers from excessive fees;
* improved rights for older consumers especially in the mortgage market;
* promoting competition and innovation for all savers;
* developing the Pension Wise service to offer financial education and guidance to working people at every stage of their lives – not just nearer retirement – also ensuring finance works well for women, with no gender or age biases.
This announcement reinforces the Conservatives’ commitment to fairer financial services for all, and comes as Chancellor George Osborne also unveils new reforms to ensure banking services will be cheaper and better for customers. Ensuring that all financial firms treat customers fairly and helping hard-working families make the most of their savings is at the heart of these plans. Increased competition in the banking market is needed, and we will make it far easier for customers to move to another bank by encouraging more new banks to set up and looking at whether customers’ should be able to take their own bank account number with them to a new bank, just like their mobile phone number.
Ros Altmann said:
“For my entire career I’ve been an independent consumer champion. I have always tried to make pensions and savings work better for customers, help ordinary savers understand finance and stand up for pensions justice. Until now, my work has focused on policy, rather than politics, but I am excited to have the opportunity to be more directly involved. For too many years, consumer rights have played second fiddle to the interests of large financial firms, but the new pension freedoms show that the Conservatives have put the interests of British savers first and that is a real game-changer.
“I passionately believe the new pension reforms, trusting people with their own money, are an essential step to helping everyone make the most of their hard-earned savings. David Cameron and George Osborne have proved to me that they want to help the many, not just the few at the top, by giving the same freedoms to everyone as were already enjoyed by the wealthiest.
“In doing so, they took on the large companies who had too often taken advantage of their customers and have paved the way for a new environment for long-term savings. The Conservatives have created the opportunity for working families to save more if and when they can, knowing they will be allowed to use the money as best suits their circumstances. That is right, but of course it will also require a change of mindset from providers and potentially further action from Government to protect consumers. It will be my job to try to ensure customers get a better deal and I am delighted to be offered the chance to do so. Charge caps, impartial financial guidance, help with financial planning, financial education at all ages, and more competition for savers’ money will all help and it will be great to have the opportunity to play a direct role in looking after the public.”
The Prime Minister said:
“What we’re doing is taking the country’s leading expert on pensions, on savings, on financial education, Ros Altmann, and saying that if we’re re-elected, she’ll be at the heart of government, making sure we complete this great revolution where we’re giving people much more power to save, to access their pension, to pass their pension on to their children, because we want to create a real savings culture in our country for everybody. Not for the rich at the top, but for everybody who saves or has a pension.
“This will be good for everybody. We’ve got millions more people saving for a pension because of auto-enrolment – having an automatic pension in your workplace – so there are many more people saving. There are also great new products like the flexible ISA, a real encouragement for savings with the single tier pension, and now at the heart of government, if we’re elected, Ros Altmann – the country’s leading pensions, savings, and financial education expert to make sure that we make the most of this great revolution in favour of savings and financial security for many in our country.”
Notes to Editors:
Ros Altmann will review financial consumer protection and financial education
* Cap on charges. The Pensions Act 2014 gives ministers the power to limit or ban charges borne by members of any pension scheme if this proves necessary to protect consumers. Ros Altmann will review how the Government should best use these powers.
* Protection for older consumers especially in the mortgage market. Many older borrowers are facing age discrimination in the mortgage market, with companies refusing to lend purely on the grounds of their age, rather than their income. This is unfair and older borrowers need protection against such discrimination.
* Extending the new Pension Wise service to working people at every stage of their life.
* The new Pension Wise service started this month. People near or over age 55 will get free, impartial guidance on what to do with the money in their defined contribution schemes as part of the Conservatives’ pension changes.
* Ros Altmann will look at whether the Government should extend the Pension Wise service to younger age groups too, as part of pensions auto-enrolment.
* We want people who work hard and decide to save to get the most from their pensions under the new pension freedoms. That means ensuring they receive help with financial planning, information, education and guidance to decide what is best for them throughout their lives.
Better banking services for consumers with cheaper, clearer charges
The next Conservative government will increase and improve banking competition:
* Set a target of issuing 15 new banking licenses. We will work with the Bank of England Prudential Regulation Authority (PRA) to ensure that they fulfil their secondary objective of increasing competition, and expect them to issue at least 15 new banking licenses. We hope this will encourage more new entrants and more innovation so that UK consumers can take advantage of new ways to bank.
* Account number portability. We will work with the Payments System Regulator on whether to introduce total account portability, either through technology based solutions or account number portability. Giving consumers a single identifying number which they can use to transfer from bank to bank could make it much easier for consumers to switch accounts, creating more competition and more choice.
* Require transparency on charges. We will require all mortgage lenders to standardise, and make transparent, the fees they charge on mortgages. We will also ensure all foreign exchange transactions include a clear breakdown of the cost of the service alongside a publication of the mid-market rate and the offered rate. This should be available before a transaction is made and communicated in a way that can be understood by the average consumer. And we will ask the FCA to ensure that nobody uses misleading terms such as ‘free’ and ‘0% commission’ when fees are hidden in the rates being charged.
Success of banking reforms so far have already significantly increased competition in retail banking.
* New competitors have entered the market. Eight completely new UK banks (One Savings Bank, Cambridge and Counties, GE Capital Bank, Virgin Money, Paragon, Hampden & Co, Charter Savings Bank, and OakNorth) have been authorised by regulators since May 2010. The first seven are now up and running, with OakNorth looking to follow suit in the near future. This compares to just one new authorisation of a UK bank under the previous Labour Government.
* Customers are switching more. Within a year of introducing the 7-day Current Account Switch Service, account switching figures rose 22 per cent. New players, such as Tesco and Virgin Money are offering current accounts for the first time, and existing players are offering more varied products.
* Businesses have more choice. New banks such as Aldermore, Shawbrook and Metro expanded their business lending to over £3 billion in the course of the past year. Innovative new sources of finance are also growing: between 2012 and 2014 the average annual growth rate of peer-to-peer (P2P) business lending was 250 per cent, while crowd-funded equity grew 450 per cent and crowd-funded debt grew by 117 per cent.
Under Labour the banking system failed consumers.
* Labour let retail banks in Britain become uncompetitive – meaning consumers got a worse deal. There were more than twenty inquiries into competitiveness under Labour, but after thirteen years in power they failed to create ‘effective competition in the retail banking market’. That meant banks not working hard enough to compete and provide customers with as good a deal as possible (HoC Treasury Select Committee, Competition and choice in retail banking, Ninth Report of Session 2010-11, pp 5-7, link<http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/612/612i.pdf>).
* And they created the system of regulation that resulted in the financial crisis, handing power to a new Financial Services Authority where nobody was clear who was in charge. Labour took power away from the Bank of England. Sir Mervyn King, the former Governor of the Bank, said: ‘why…did the Bank of England not do more to prevent the disaster? We should have. But the power to regulate banks had been taken away from us in 1997…Our power was limited to…preaching sermons’ (Sir Mervyn King, Today Lecture, 2 May 2012, link<http://news.bbc.co.uk/today/hi/today/newsid_9718000/9718062.stm>).