The Economic Secretary to the Treasury (Andrew Griffith) With
permission, Mr Speaker, I will update the House on the Government’s
latest efforts to make the UK the most open, innovative and
competitive financial centre in the world. We know how important
financial and related professional services are to this country.
They employ more than 2.5 million people and generate more than
£100 billion in tax revenue. Two thirds of those jobs lie outside
the south-east and London....Request free trial
The Economic Secretary to the Treasury ()
With permission, Mr Speaker, I will update the House on the
Government’s latest efforts to make the UK the most open,
innovative and competitive financial centre in the world.
We know how important financial and related professional services
are to this country. They employ more than 2.5 million people and
generate more than £100 billion in tax revenue. Two thirds of
those jobs lie outside the south-east and London. As we lay the
foundations for long-term growth, it is vital that these sectors
continue to succeed.
Last night, at Mansion House, the Chancellor made clear some of
the policies that this Government will pursue, building on last
year’s Edinburgh reforms. The full package of policies was
published this morning, and I am pleased to share some of them
with the House at this first opportunity. They fall under three
themes: first, through a series of measures, improving outcomes
for long-term savers and increasing investment in high-growth
companies by reforming the UK’s pension market; secondly,
incentivising companies to start and stay in the UK by
strengthening our position as a listings destination; and
thirdly, reforming and simplifying our financial services
rulebook to ensure that we have the most growth-friendly markets
possible, without compromising our commitment to high-quality
regulation.
I begin with our pensions market, which is the largest in Europe
and worth more than £2.5 trillion. The market is meant to provide
safe retirement income for later life. In many cases, it does a
very good job of that, but it can do so much more. I pay huge
tribute to the Under-Secretary of State for Work and Pensions, my
hon. Friend the Member for Sevenoaks (), for her crucial work on
this.
In laying out our plan, the Chancellor has set three golden
rules: first, that in everything we do, we will seek to secure
the best possible outcomes for pension savers, with their needs
first and foremost; secondly, that we will always prioritise a
strong and diversified gilt market as we seek to deliver
evolutionary change in our pensions market; and thirdly, that the
decisions we take must always strengthen the UK’s competitive
position as a leading financial centre.
Today, however, UK institutional investors invest less in UK
high-growth companies than their international counterparts.
While many defined-benefit funds are in surplus, their returns
are lower than some international peers, and some may still be
underfunded. At the same time, on their current trajectory, some
defined-contribution schemes may not provide the returns that
their pension fund holders expect.
Critically, DC schemes also invest less than 1% in unlisted
equity. Australian schemes, for example, invest around 5%. To
bridge that gap, the Chancellor joined the Lord Mayor and chief
executives of many of our largest DC schemes to sign the Mansion
House compact. Its signatories, who represent around two thirds
of the entire market, are committed to the objective of
allocating at least 5% of their default funds to unlisted
equities by 2030, unlocking up to £50 billion of investment in
high-growth companies by that time—helping companies to grow
while improving rates of return for investors.
To further boost returns, we will facilitate a programme of DC
consolidation. As the Department for Work and Pensions, Pensions
Regulator and Financial Conduct Authority response to the value
for money framework consultation makes clear, investment
decisions should be made based on long-term returns and not
simply on cost. Pension schemes that are not achieving the best
outcome for their members will face being wound up by the
Pensions Regulator, and we will set out a road map to encourage
new collective DC funds.
To help schemes access a wider range of investment opportunities,
we have launched the LIFTS—long-term investment for technology
and science—competition, which enables them to invest quickly and
effectively in unlisted high-growth companies. Bids have already
started to come in for up to £250 million of Government support,
and we are considering them closely. We will also explore the
case for Government to play a greater role in establishing
investment vehicles, building on the skills and expertise of the
British Business Bank’s commercial arm.
Meanwhile, on defined-benefit schemes, we recognise that the
regulatory landscape is too fragmented and believe that there is
scope for consolidation. We have launched a call for evidence on
the role of the Pension Protection Fund and the part that
defined-benefit schemes play in productive investment.
Taken together, our pensions announcement will have a real and
significant impact. For an average earner who starts saving at
the age of 18, these measures could increase the size of their
pension pot by 12% over their career. That is more than £1,000 a
year in retirement. That is a real upgrade to the power and the
outcomes of our pension schemes.
We already have the largest stock market in Europe, and, in 2021,
we attracted the most IPOs—initial public offerings—outside the
US, but we want the world’s fastest growing companies to grow
here and to list here. We have now published our near-final draft
legislation on prospectus reforms, which will create a more
effective regime than its EU predecessor, giving companies more
flexibility to raise even larger sums from investors more
quickly. We welcome Rachel Kent’s excellent Investment Research
Review, which was published this morning, and the Government are
accepting all the recommendations made to us.
As we continue to free ourselves from outdated retained EU laws,
we have abolished protectionist rules, such as the share trading
obligation and double volume cap, so that UK businesses can
access the best and most liquid markets anywhere in the
world.
Finally, we are ensuring that our financial services sector has
the regulatory freedom to innovate at a speed that matches our
modern world. To that end, the House recently passed the
Financial Services and Markets Act 2023, which requires our
regulators to facilitate growth and international competitiveness
alongside their other objectives. With it, we have published
today legislation to repeal almost 100 pieces of retained EU law
for financial services that are irrelevant to our markets, such
as payment account regulations and long-term investment funds,
and we say farewell to the unloved packaged retail and
insurance-based investment products. This is not divergence for
divergence’s sake, but sensible reforms working with the
sector.
This is a significant body of work. This Government’s vision for
the UK is one of long-term growth, fuelled by strong British
finance, providing returns for savers, funding for businesses,
and investments for our economy. That is what we are focused on,
and that is what these reforms deliver.
12:47:00
(Hampstead and Kilburn)
(Lab)
I thank the Minister for an advance copy of his statement.
However, after 13 years of a low growth, low investment economy,
these promises are too little, too late. On this Government’s
watch, far too many high growth firms, particularly in the tech
sector, have been bought by foreign competitors or have chosen to
list in the US, in order to scale-up and grow.
Arm holdings, a UK tech success story, is now set to float in New
York rather than in London. The Chancellor has been completely
silent on this. When alarm bells were ringing, the Ministers
shrugged their shoulders. Capital held in pension funds is vital
for the growth of our most innovative companies. In the US,
approximately 70% of venture capital funding comes from pension
funds, while in the UK the figure is below 20%. That is just not
good enough. This Government’s failure to mobilise pension money
into productive assets comes at a cost. British pension savers
have not been getting the returns that they should expect. It
seems that a person is more likely to own a share in UK
infrastructure today if they are a Canadian teacher rather than a
British citizen.
Time and again, the Conservative party has promised action to
unlock the patient capital that British firms need to thrive and
grow, but has failed to deliver. There would surely be greater
confidence given to savers, growing firms and financial services
if the Government had provided more detail yesterday on how to
turn this around. The Chancellor’s compact for DC pension funds
lacks any plan to ensure that this will increase investment in UK
assets rather than simply going overseas. What guarantee can the
Government provide that British high growth firms will be able to
access the capital they need to thrive and create good jobs in
every part of the UK? With no clear roadmap, how will that be
achieved?
I turn to what the Chancellor said last night about wanting to
make London a listings destination. It is as though his party had
not been in government for 13 years now. I remind the Chancellor
that he was sitting around the Cabinet table for the best part of
a decade during that time. Labour has been calling for action on
listing for months and the Government have refused to listen. In
the first quarter of this year there were just four London
listings, raising only £81 million, the sixth-worst quarter for
IPOs in London since 1995. That is pitiful.
I acknowledge and indeed welcome the fact that in some areas the
Government are rather belatedly starting to follow Labour’s lead,
but what has taken them so long? Where was the urgency, the
ambition and the drive? Can the Minister explain why there was
nothing at all in the Chancellor’s speech on green finance? That
complacency puts our status as a net zero financial centre at
risk.
Labour is committed to ensuring that the City retains its
competitiveness outside the EU, whether through creating a
positive environment for fintech or reform of Solvency II, and
doing so without compromising on stability. Yet the Government
have promised Solvency II reform 10 times in recent years with
nothing to show for it.
We, and the country, will not take any lessons on financial
stability from a Government that set fire to the economy last
autumn with their mini Budget. That resulted in a Tory mortgage
bombshell, with families facing £240 per month in higher mortgage
costs when remortgaging, through no fault of their own. The truth
is that the Chancellor’s Mansion House speech was not a big bang
at all—it was a small splutter. There was none of the detail
required to build confidence, no responsibility taken for the
last 13 years of economic failure, and no strategy to end the
doom loop of Tory economic failure.
The Labour party has a plan to unlock the full potential of the
private sector to get the British economy growing again in the
national interest. Through our active partnership with the City,
reforms to the British Business Bank and a modern industrial
strategy, we will grow the economy and help Britain to become the
best place to start and grow a business. This tired Tory
Government are out of time. It is time for them to step aside so
that we can have a Government who will favour the national
British interest—[Interruption.] There is no point Conservative
Members laughing. The truth is that we need a Labour Government
to provide the energy, the ideas and the leadership that our
country and our constituents desperately need.
It is always a pleasure to listen to the hon. Lady. In general,
what I learn is that the Opposition have no plan. It is all
critique and no counter-proposal. She talked about this being too
little, too late, but this Government are moving at pace, in what
the sector acknowledges as one of the fastest rates of
implementation of financial services reform for a generation,
taking advantage of our Brexit freedoms and the regained control
of our rulebook, which she and her party seek to oppose again and
again.
The hon. Lady talked about the lack of growth, but under Labour I
am told that the percentage of the workforce with a private
pension declined by 20%. She also talked about patient capital,
which should not be a point of disagreement between us. This
Government have done an enormous amount to support British
patient capital, with £2.3 billion of investment, and we have
recently increased the length of the British patient capital
scheme for a further period.
The hon. Lady also talked about capital going overseas, but that
is nothing to the degree to which capital would be flooding
overseas were her party ever to return to power, accelerating us
to the point where once again the Chief Secretary to the Treasury
is writing notes to remind us there is no money left. I
potentially discern a point of difference between us, which
perhaps in due course she will clarify, in the approach to the
compact. It is not the position of this Government to mandate
where people’s pensions should be invested. Indeed, the last time
a Labour Chancellor decided what was good for our pension
schemes, it did not end well.
Finally, the hon. Lady talked about green finance. This
Government are doing a copious amount on green finance; only
yesterday my right hon. Friend the Secretary of State for Energy
Security and Net Zero met some of the world leaders in green
finance, and earlier this year we published an ambitious green
finance strategy, continuing the UK’s progression to being one of
the world’s first net zero-aligned financial centres.
Madam Deputy Speaker ( )
I call the Chair of the Treasury Committee.
(West Worcestershire)
(Con)
I should probably note in this context that I am a trustee of the
Parliamentary Contributory Pension Fund.
I warmly welcome the work that the Economic Secretary and the
pensions Minister have done in this important area, and strongly
endorse what the Economic Secretary says about its meaning that
future pensioners will be able to retire with higher pension
incomes. However, he will know that I have put another piece of
urgent work in his inbox, about helping the 93% of our
constituents who are unable to afford access to financial advice
and have to rely on bog-standard generic guidance. Can he update
the House on how his review of the advice-guidance boundary is
going and how he will help the majority of people who save in
defined-contribution schemes to get access to some sort of
personalised coaching or guidance?
It is always a pleasure to respond to my hon. Friend and to the
work of her tremendous Treasury Committee, which rages across
this broad financial sector. She is right to raise the question
of access to financial advice; I am afraid the world of financial
services regulation is fraught with unintended consequences, and
one unintended consequence of financial regulation and a growing
compensation culture is to move financial advice beyond the
financial ability of so many people who would benefit from
receiving it. That is called the advice gap. I and my officials
continue to work on that and I look forward to sharing proposals
with the House and with my hon. Friend and her Committee in the
autumn.
Madam Deputy Speaker ( )
I call the SNP spokesperson.
(Dundee East) (SNP)
I thank the Economic Secretary for his statement. I agree with
him on regulation, where he said that regulators would be
required to facilitate growth and competitiveness alongside their
other objectives. However, as he knows, unless the central bank
is obliged to do the same, we might end up in the rather odd and
undesirable position of regulators and the central bank taking
contradictory actions. I want to ask mainly about pension reform:
under the Mansion House compact, potentially 5% of the DC funds
are to go towards unlisted equities. There is huge potential in
that for growth, for innovation, for jobs, for global
competitiveness and for scaling up to compete, but that comes
with a commensurate risk, which is presumably up to 5% of the
value of the DC fund, should the value of that unlisted equity be
wiped out.
While I hope the scheme succeeds, what liability would fall on
the Pension Protection Fund should it fail? What liability might
there be on the taxpayer? If the scheme works and the value of
the funds increases, what guarantee is there that the pension
holder will receive the entire value of that increase and it will
not be gobbled up by unnecessary and excessive fees?
I thank the right hon. Gentleman for his support for growth and
competitiveness. We have talked regularly about the need for
regulators to improve their performance and deliver better
outcomes for those whom they regulate. He talked about the 5%,
and I emphasise that, ultimately, it is a voluntary pact; it is
for the individual trustees to make those decisions, and the
Government continue to have in place a strong programme of
regulation. However, I hope he respects the fact that there is
risk in inaction as well—the risk that our pension beneficiaries
do not receive the pensions that they deserve or the sort of
performance from their pension that other international long-term
savers benefit from. He raises the issue of Defined
contribution and the liability for the taxpayer. Of course,
that does not attach to defined-contribution schemes, which is
why it is so important that they continue to benefit from the
highest-quality regulation. I and my colleague the pensions
Minister remain very committed to that and will continue to work
with TPR and the FCA to ensure that that remains the case.
(Wimbledon) (Con)
I refer the House to my entry in the Register of Members’
Financial Interests. Like my hon. Friend the Member for West
Worcestershire (), I warmly welcome the
work that my hon. Friends on the Front Bench have done. The
Mansion House compact is a huge step forward, but does my hon.
Friend the Minister agree that getting the Kent investment review
reforms right, particularly on unbundling, will also help us to
have high-quality research, enabling better decisions and more
investment into high-quality firms?
My hon. Friend, who knows so much about this topic and has
engaged so lucidly on it, is absolutely right about the
importance of investment research. It provides access to markets,
makes our UK stock exchanges an attractive international venue,
narrows spreads and drives fair valuations for investors and
companies seeking investment. This is one example of where we
inherited a European fact pattern that was not quite right for
the UK. I look forward to pensioners, investors, savers and
companies benefiting from our research review.
Madam Deputy Speaker ( )
I call the Chair of the Work and Pensions Committee.
Sir (East Ham) (Lab)
Defined-benefit pension funds have long been under pressure to
invest in Government gilts rather than the productive economy, so
I welcome the change of direction that the Minister has
announced. He has indicated how much extra pension fund
investment will go into high-growth companies in future. Will he
indicate what share of that he expects to go into UK high-growth
firms rather than overseas? He has indicated, I think, a
replacement for the current charge caps on pension funds, with a
wider value-for-money assessment, but can he indicate when we are
likely to see the detail on what exactly he and the
Under-Secretary of State for Work and Pensions, the hon. Member
for Sevenoaks (), have in mind for that?
I thank the right hon. Gentleman for his contributions on how we
can deliver the best pensions for long-term savers. There are no
estimates for the share of the UK. We are mobilising an
additional £50 billion of assets over time. That is evolution,
not revolution. We would expect—and it is the job of this
Government—to present that investment capital with a wave of
attractive options across some of the fastest-growing sectors, as
the Prime Minister and Chancellor have laid out, and to remove
frictions and obstacles as people seek to invest in the UK,
creating a conducive environment for that investment but falling
short of mandating it, in the knowledge that the allocation to
international investments for some of our actively managed
schemes already exceeds that of other comparable companies. On
the charge cap, we are this morning publishing a consultation on
the new value for money framework. Clearly, we want to continue
ensuring that pensioners benefit from fair charges, but also that
that does not come at the expense of the underlying performance
that they receive.
(Basildon and Billericay)
(Con)
I welcome this set of measures, particularly the ending of the
packaged retail and insurance-based investment products regime
and the introduction of the Mansion House compact, on which some
of us have lobbied the Government. I will share two key concerns
with the Minister. On fintech and early-stage businesses, we have
a problem in this country because the pension fund industry has
divested itself of UK equities, to the detriment of the London
stock exchange and, ultimately, of financial services generally.
It troubles me that that 5% is not focused on early-stage
start-ups in the UK, unlike many other domestic pension funds,
which do support their own. More generally, a bigger piece of the
jigsaw is missing in my view. Pension funds have generally
divested themselves of UK equities to such a great extent—some
estimates suggest a 90% reduction since 2000—that we need to see
more encouragement by Government to get the pension funds to use
their wealth by putting it into UK equities for the betterment of
the UK economy. After all, they do benefit from tax breaks.
I thank my hon. Friend for his, as ever, apposite points. That
encouragement is exactly what the proposals are all about:
working voluntarily with the sector and encouraging it to lean
in. I want people to see 5% as a potential floor, not a ceiling.
Many will seek to go much further forward. The broad objective of
the Government is to provide good access to capital at every
stage of a Government’s life, whether it is our support for the
seed enterprise investment scheme, the enterprise investment
scheme or the venture capital trust; the expansion of the pool of
individual investors who are able to invest directly in the stock
market; and some of the opportunities that he talked about, all
the way through to ensuring that our listed and private capital
markets work extremely well. That is the objective of the
reforms.
Madam Deputy Speaker ( )
I call the Chair of the Public Accounts Committee.
Dame (Hackney South and Shoreditch) (Lab/Co-op)
I draw the House’s attention to the fact that I am a trustee of
the parliamentary contributory pension fund. Forgive me if I am a
little sceptical about Government involvement in pension funds.
We have seen how the annual and lifetime allowances, announced at
the Dispatch Box by a former Chancellor, have played out. It was
also this Government who took us through McCloud in the public
sector. The Minister said that the average earner who starts
saving at 18 could increase the size of their pension pot by 12%
over their career. Can he give the House examples of the
assumptions behind that figure, and will he publish the modelling
behind it?
The Government Actuary’s Department is the source of those
figures, which we published this morning—I draw the hon. Lady’s
attention to that fact. Clearly, there are a number of
assumptions within that. I do not think it is right to be
sceptical. These are reforms that have been formed with wide
consultation, including from across the House. I hope that we can
form a growing consensus so that the industry receives a signal
from this place that it is ultimately time to stop talking and to
get on with investing. That is the outcome that we seek.
(Keighley) (Con)
I welcome the statement, particularly the aim to unlock assets in
the local government pension scheme through an acceleration of
pooling with the aim of doubling existing investments in private
equity to 10%, which could unlock £25 billion by 2030. Does the
Economic Secretary agree that the reforms are a welcome step to
improve our growth prospects and boost investments?
I absolutely agree with my hon. Friend. The local government
pension scheme is a huge opportunity for this country. In many
cases, it is already very progressive. It is investing in local
opportunities and allocating its capital to the sort of private
growth assets that we wish to seek. With £365 billion under
management, an increased rate of progress towards asset pooling,
which, as the Government have made clear, should attract at least
£50 billion, will provide the scale to invest well on behalf of
beneficiaries. That is a great opportunity for us all.
(Richmond Park) (LD)
The number of companies listed on the London stock exchange has
plummeted to such an extent that the market value of Apple is now
greater than the entire FTSE 100. Recently, Cambridge-based chip
giant Arm decided to list in New York rather than in London. Does
the Minister think that the Mansion House compact will reverse
the trend of British-based companies deciding to list
elsewhere?
Yes.
(New Forest West) (Con)
This is an excellent package, but one way to ensure that
investment flows to productive enterprise is to prevent it from
being crowded out by growing Government debt, isn’t it?
Our objectives are threefold in that respect: to bear down on
inflation; to reduce Government debt, with the benefits that my
right hon. Friend seeks; and to grow the economy. These are
long-term plans and ambitious programmes, and ultimately, the
acid test will be how we can grow our economy.
(Blaenau Gwent) (Lab)
The Minister says that he wants the “best possible outcomes” for
pension savers. The pensions dashboard, which is designed to help
pensioners understand their pension’s performance, was promised
by Chancellor , but it is still delayed.
When will the pensions dashboard be delivered to support UK
pensioners?
My hon. Friend the Minister for pensions is proceeding at pace to
deliver that important element in people’s ability to access the
most information. It is just one component. We want people to
have good pension choices and to understand the ways that
investments are being made. The hon. Gentleman will understand,
because we have engaged in the past about pensioners not
necessarily having had the best information available to them in
a regulated way, that it is better to be right in this case than
to be fast.
(Cities of London and
Westminster) (Con)
I was delighted to attend the Mansion House dinner last night as
the Member of Parliament representing the City of London and to
listen to excellent speeches by the Lord Mayor and the Chancellor
of the Exchequer. Does the Minister agree that the Mansion House
compact will do much to secure the City of London’s position as a
global powerhouse in the financial services sector and will also
create more jobs across the country?
My hon. Friend, who knows so much and speaks so lucidly for
Cities of London and Westminster, is absolutely right. These are
a bold and ambitious set of reforms. They will not just help
communities across the whole of the United Kingdom—I never fail
to remind the House that financial services touch almost every
constituency—but continue to underwrite the strong and leading
position of the City of London, which she so ably represents.
(Sefton Central) (Lab)
It is always fascinating to hear Ministers justifying their
failure over the last 13 years. The Minister would do well to
recognise that business investment is at a record low in this
country. One way to address the record low in business investment
is to listen to the professional services sector, which says that
a mutual recognition agreement with the EU would increase that
performance and contribution. Why have the Government made no
progress on that mutual recognition agreement?
I am enormously proud of the fact that we have recently reached
agreement with all the member nations of the European Union on
the memorandum of understanding in respect of financial services.
That joins a number of such agreements, all of which have the
objective of seeking access to as many of the growing markets in
the world as possible for our financial and professional
services. Only last week I met my opposite number, the German
deputy Finance Minister, and next week I will be meeting the
Luxembourg Finance Minister.
(Christchurch) (Con)
By how much will today’s announcement reduce the burden of
regulation on UK business? I ask that because the Government
promised that there would be no net increase in the burden of
regulation on business during this Parliament, but so far we are
£14.3 billion in the wrong direction.
My hon. Friend may wish to ask that question in due course. With
respect to the Secretary of State for Business and Trade, I can
only speak for the financial services sector. Today we are
publishing documents to repeal 100 elements of retained EU law.
That builds on reforms we already had in train, such as the
prospectus directive. I can certainly give him my confidence and
assurance that we are significantly lightening the burden of
regulation, but more importantly, making it appropriate for the
unique fact pattern of the UK as an open, innovative global
market.
(Oldham East and
Saddleworth) (Lab)
The Minister will be aware that the Bank of England had to
intervene in the gilt market after the disastrous mini-Budget
last September to restore market functioning, when sharp and
rapid rises in gilt yields led to widespread selling of gilts by
pension schemes’ liability-driven investment arrangements. We all
recognise that we need to do more to ensure that our
pensions—especially our defined-contribution schemes—are better.
My question is about the risk. What risk assessment has been made
of this proposed reform, particularly in terms of where the
burden of risk falls?
We have published today a consultation, and I hope the hon. Lady
will feel that she can raise points during that. My hon. Friend
the Minister responsible for pensions will always be happy to
undertake engagement with the sector. Needless to say, we believe
that we have the right balance of risk. The hon. Lady talks about
volatility in the gilt market. That is one of the reasons we are
so focused on not making unfunded spending commitments. The last
thing that pensioners or the wider economy need is Labour’s £28
billion unfunded spending plans.
(North East Bedfordshire)
(Con)
I welcome the announcement of these reforms, but will the
Chancellor and the Minister look further at two consequential
areas? First, to make the most of the newly available capital,
this country needs to attract the world’s best innovators,
insurgents and entrepreneurs. The Labour party has already said
that it does not want them here and will change tax policy to
make sure they look to other countries. This Government need to
come forward with measures that say, “We want the best and the
brightest to come to the UK.”
Secondly, to make the most of these reforms, we need to ensure
that our businesses can work speedily and with clarity. That
means that regulators need to focus on what our companies are
doing with these reforms, as well as protecting customers and
consumers. Will my hon. Friend look at what further measures we
can take on regulatory reform?
The work of regulatory reform to make this country globally
competitive and an attractive place to invest is never done, as
my hon. Friend knows. He will also know that we are seeing right
now the fruits of the Prime Minister’s vision and strategy, with
firms such as OpenAI and Andreessen Horowitz—two of the leading
technology firms changing our world—both choosing in recent weeks
the United Kingdom out of the entire rest of the world as the
place to do business.
(Carmarthen East and
Dinefwr) (Ind)
Further to the question from the hon. Member for Blaenau Gwent
(), what assurances can the
Minister give that when the pensions dashboard is launched, it
will be mandatory for all providers to participate in it and will
not be done on a voluntary basis, to avoid it being what one
analyst described as “half-baked”?
The hon. Member is quite right: it will be mandatory for all
providers. That will be underwritten by legislation. The focus is
to ensure that it is a usable, well regulated and well understood
user experience for members.
(Kettering) (Con)
Over the last decade, thanks to automatic pension enrolment, an
extra 10 million people have been able to save more for their
retirement, but until now, due to investment restrictions, those
returns have been limited. What my constituents want to know is,
would the reforms announced today have been possible without
Brexit, and how much better off will they be when it comes to
retirement?
I hope that my hon. Friend can reassure the constituents he so
diligently represents that on average, as supported by the
Government Actuary’s Department, if they started their working
life now under the new assumptions about the compact, they could
be up to £1,000 a year better off in retirement. That is a
meaningful difference. At the end of the day, this is about
making people’s money work better for them and harder for them
and delivering them better outcomes. He is also right to observe
that our ambitious programme of regulatory reforms, although it
will never be divergence for divergence’s sake, could not have
been achieved if it were not for the ability of this place to set
the corpus of regulations under which financial services
operate.
(Amber Valley) (Con)
I welcome the Mansion House compact and the focus on
auto-enrolment pensions delivering a better pension for their
scheme members, but if the Minister looks at the websites of the
firms that have signed up to his compact, he will see that they
are all still marketing themselves as being cheap and simple for
employers, rather than the best quality and best return for
savers. What more can we do to give individual members a choice
of which scheme they are auto-enrolled in? Will he look at a
clearing house scheme, under which it would be individual
employees who choose where their pension savings go, not their
employer a few years ago based on what was easy and cheap?
My hon. Friend is absolutely right to talk about the need for
that culture to change, moving away from an excess focus on cost
to the detriment of performance—that is what these reforms will
achieve over time. He is also right to talk about giving agency
to individual long-term savers over time. Making sure that we
have that usable journey for pensioners that delivers across the
whole of their life is something that my colleague, the pensions
Minister, is passionate about.
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