Contribution
My Lords, it is a pleasure to open Report on the Pension Schemes Bill. As we start, we should be clear that the Bill’s success will be measured on the extent to which it makes it easier for people to take personal responsibility and save for their future, and make their savings secure, while permitting appropriate risk-taking and capital to grow the economy.
I should declare some interests. I have been a trustee of the Norfolk pension scheme for well over 20 years and a member of the Local Government Pension Scheme advisory board since its inception—in fact, I will retire from that on Monday. During that period, I have served on the Firefighters’ Pension Scheme and been chair and vice-chair of the Local Government Pension Committee, which is the body representing the employers in the scheme.
Today is about the Local Government Pension Scheme. The LGPS is different from most of the other public schemes because members have put money aside for their retirement—and that is important. My Amendments 1, 2 and 5—to which the noble Baroness, Lady Altmann, has added her name—relate to the overarching structural organisation of the 87 schemes that feed into a number of pools.
Let us dispose of Amendment 1 first. In my personal experience, I have found that just limiting the list of consultees to the FCA would be insufficient. I think there has probably been a misunderstanding in the department about the fact that the Government Actuary’s Department and the Pensions Regulator really do get involved there. While I would not press the amendment to a vote, I think it is pretty straightforward. If we do not have the Pensions Regulator and GAD—which look after 50 or so other things, apart from investment—the Bill would be holey.
I have my reservations about government interference in the structure of pools. It damages the purity of the relationship and accountability of the trustees to act in the members’ best interests. Rachel Reeves will be a footnote in history by the time the cows come home with the consequences of some of the provisions in Clause 1. The approach of mandating pools has already damaged the scheme. For no good reason, the exemplar ACCESS scheme was told to disband; it had £40 billion-worth of assets under management, but that was not good enough. It had access to the best FCA global professionals in the City of London. Now it is being forced to join a provincial pool, which—for goodness’ sake—does not even have an FCA qualification.
Elsewhere in the Bill, there are restrictions that prevent a scheme from belonging to more than one pool. For reasons I will now explain, this incomprehensible restriction will mean that the Government thwart their own ambitions to bring the LGPS assets to bear to invest in other wise and appropriate investible infrastructure opportunities outside their home patch.
My amendment would allow any good opportunity that has been signed off, so to speak, by one LGPS fund to be available to all the others, whether the fund was in that pool or not. The LGPS is the closest we have to a national wealth fund. Two years ago, its total assets under management were valued at more than £390 billion—and it is much more than that now. These things change but, by some measures, it is the world’s fourth- or fifth-largest scheme. Some 6.68 million Britons belong to that scheme. It may be a large scheme, but the members are not fat cats: the typical member is a 47 year-old person earning £18,000 a year and who may, after a period of very long service, attain a pension of £5,000 a year. In the next group, I will refer to this number, but investment returns for 2024 on the LGPS were 8.9%, with a broad asset allocation of equities, bonds, property, and so forth. The investment and management costs grew by much less than inflation—2.9%.
The scheme that I am a member of in Norfolk has a cost per member of less than £20; it is half the cost of anywhere else. When I came to that scheme in 2007, there were £1.8 billion of assets. That is now nearly £6 billion. When I leave the trusteeship in May, I will look back with satisfaction. It is a British success story. The noble Lord, Lord Davies, trumpeted this in Committee. With all this interference and fettering of the ability of the trustees to put the members’ best interests first, what is the problem that the Government are trying to solve here?
I make no apology for rehearsing this as I open Report. The success story that is the LGPS should play an important part in investing in and renewing our nation. I am not against scale. I know there are some schemes at £500 million that need to bulk up, although I am bound to say that one of the smaller schemes in the Orkneys has the best performance of all the schemes in the whole scheme. There is something to be learned there.