Auto-enrolment was a fairly substantial intervention by the Government in pensions. Since 1997, pensions have had to increase in line with inflation, and that was an intervention by the Government. There has been a long trail of interventions by the Government in how assets are managed and where they are held, but pension trustees are still required to get a return. I agree with the right hon. Gentleman about specific projects, and I would be particularly concerned if we were looking at specific projects, but the mandation relates to UK assets, and the funds in which they could be invested.
I would love to see much more investment of pension funds in social housing, for example, where the trustees can get a pretty great return, but they will still have a fiduciary duty and responsibility. For defined-benefit schemes, the member will always get what they have been promised they will get. No matter how the fund is managed, they have a defined benefit from the scheme, unlike in a defined-contribution scheme, where it depends on the size of the pot as it grows—but I am going to carry on, because I have a lot to cover that is not to do with mandation, and as I say, the LGPS does not apply in Scotland.
On value for money, I think the Bill is good, because comparing pension schemes is difficult. Comparing any financial schemes is difficult because they are all laid out in different ways and the fees are calculated in different ways, so it does not make sense to most people. Some of stuff on requiring the publication of information on value for money in certain ways is important, and the surveys are also important. I have slight concerns about the chapter on value for money because, in comparison with the small pots consolidation section, there is no requirement to publish the regulations in draft before they actually become regulations. There is a requirement for consultation, as there is in both those chapters, but not a requirement for publication in draft. I think it is important for those to be published, so the widest possible range of views can come forward, because value for money is so important for such a wide range of people, whereas some of the other stuff in the Bill is much more technical and will have an impact on far fewer people. The point about publishing the regulations in draft is important.
I am disappointed that the Government have not made more moves on adequacy, but given where we are in the cost of living crisis, I can understand why it may be difficult to get cross-party political consensus on the creation of adequacy provisions. This Bill could have taken more of a look at pensions in general, rather than being about pensions specifically, because in a lot of ways the Bill is seeking to do is improve every individual’s pension pot’s potential for growth. That is an admirable aim, but some of the larger picture could have been included—for example, in relation to auto-enrolment, the under-22s and people earning small amounts of money who do not qualify.
The right hon. Member for Salisbury (John Glen) alluded to the mid-life MOT, which I have previously shouted about. I agree that people should be sent an appointment for a mid-life MOT, in the same way as they are asked to get their bowel cancer screening sent through the post. It should be exactly the same with a mid-life MOT, which is so important, but so many people duck and dive about it. Millennials are coming up to reaching this point, but millennials are a generation particularly averse to thinking about retirement, because we do not think it will happen to us. We think we will die before we get there, because there is an incredible amount of cynicism among millennials. We tend to avoid thinking about it because we are not going to reach that point, so forcing millennials—in the nicest possible way—by giving them such an appointment and making it for them means they are much more likely to undertake it.
On guided retirement, again I think the Bill tackles the issue pretty well by ensuring that people have more information. I am particularly concerned about the people who draw down the 25% tax-free sum of money, and then do not have a plan for the rest of it. How many of them have just thought about the 25%, and have not thought about the rest of it, or about how complicated and unpredictable annuities can be depending on the year? I am thinking about somebody I know who does not smoke or drink and runs 10 km a couple of times a week, but they will get a smaller annuity than somebody who does the opposite. Do people know how unpredictable it is—how much they will get and the fact that they cannot tell from what the pot looks like the actual outcome to cover their living expenses? Any kind of understanding people can be given about that is really important. I do still have concerns about some of the issues with freedoms and how financially disadvantageous it can be for a significant number of people.
I agree with some of the stuff on the consolidation of small pots. I have a concern about the fact that the Secretary of State or the Minister can make changes to the definition of small pots by looking at some consultation and then bringing a statutory instrument to the House. I would appreciate some clarification, and agreement that the Minister will consult pretty widely before taking a decision about changing the definition of small pots in secondary legislation.
On surplus release, I would disagree with a chunk of the Conservative Members who would use it for slightly different things. I press the Minister on the balance between the economic growth mission and what employees will get as a result of surplus release. I am pleased to hear that trustees will have some flexibility, but I am concerned that that creates a system with a number of tiers, because it depends on how passionate the trustees are about helping the employees or helping the Government’s growth mission. I would ask for some guidance from the Government about what they expect. When they are making that deal with employers, they have to agree with the employer where that money will go—how much of the money will go to increasing the pension pots and how much into people’s salaries. There will need to be a significant amount of guidance for trustees on where the Government expect money to go. It would be appreciated if we could be involved in the creation of that guidance, or at least be consulted on what it is supposed to look like.
On megafunds, there is a bit of a “wait and see” on what megafunds, both master trusts and the superfunds, will look like and how they will pan out. I can understand looking at other places the Government consider to be successful in how pension funds are managed and the very large investments that could be created as a result of huge funds. I appreciate that overheads can be reduced and that funds can be run more efficiently as a result, and that investments can be made into very large, long-term patient capital projects if the fund is significant.
My specific question on superfunds is about new entrants to the market. The Bill states that there is an ability for transitions. Organisations likely to meet superfund status at some point, given a certain amount of time, will be given slack until they can reach that status, which is utterly sensible. But then it talks about new entrants coming in to become a superfund. There is a pathway and the ability to get approval to do that, but only if they are innovative. I am slightly concerned about what innovative means, because it is not defined—I think it will be defined in secondary legislation. Why should they be innovative? Surely, if a new entrant is excellent, that should be enough? Innovative concerns me. I do not really understand what it means, or why it is in the rules for new entrants. Anything the Government can say to explain what they think that is supposed to mean, and what they intend it to mean in the secondary legislation, would be helpful.
On the whole, the SNP is cautiously optimistic about the Bill. We believe there need to be some changes and we have specific questions in various areas, such as: on the rationale in relation to mandating; on the rules on value for money and how they will impact individuals; and on the consolidation of small pots and how they will ensure individuals have better outcomes. It is not in the Bill, but ensuring the pension dashboard happens so that people can see the consolidation of small pots happening in real time would be incredibly helpful. The best outcome we can get is for everybody to have an adequate pension when they reach retirement. We will not get that if people cannot see and cannot understand what they have in their pensions and if those small pots are not consolidated.