The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)

I am grateful to noble Lords who have introduced and spoken to amendments. Clause 40 delivers the Government’s commitment to ensure that DC workplace pension savers benefit from the advantages that flow from scale and consolidation. It establishes a clear, measurable threshold and a framework centred on a single main scale default arrangement—MSDA—so that governance and investment decisions can be applied consistently across large pools of assets. This approach is integral to securing better member outcomes, improved access to productive investment and stronger in-house capability. We had a preliminary conversation about all this on Thursday, but I know that not all noble Lords were there so, before I dive into specific points on the amendments, I will pick up a couple of the headlines. In response to the noble Lords, Lord Ashcombe and Lord Palmer, the UK’s workplace pension industry accounts for more than £2 trillion in assets, serving more than 16 million savers who have been automatically enrolled and are not engaged in pension savings. It is particularly important that these assets are working as hard as possible to provide better saver returns and security in retirement and, to do that, scale and provision really matter. Evidence suggests that there are direct benefits derived from scale; they include better governance and economies of scale, whereby greater size reduces average cost per member and creates the ability to move investment in-house, which reduces investment costs in turn. It also enables access to a wider range of assets, including diversification and the ability to invest directly in assets rather than having to be part of a pooled fund. With improved bargaining power, schemes can negotiate lower investment fees, improving net returns. There is a lot more that I could say, but I have said quite a lot of this before. I will say just a word just about the level of scale and why it is £25 billion. As I explained last week, our evidence shows that, across a range of domestic and international studies, a greater number of benefits can arise from a scale of around £25 billion to £50 billion of assets under management, including investment expertise, improved governance and access to a wider range of assets. That is supported by industry analysis, showing that schemes of this size find it easier to invest in productive finance. International evidence shows that funds in the region of £25 billion invest nearly double the level of private market investment compared to a £1 billion pound fund. We selected the lower band, but there is further evidence that demonstrates that the greater the scale, the greater the benefits. I can point to a range of studies. Analysis from Australia’s pensions regulator found that funds with around £25 billion were able to spread costs over their membership, keeping fees lower. Pensions UK reported that schemes with £25 billion to £50 billion of assets have considerable governance capability and find it easier to invest directly. The Conexus Institute again found in favour of funds of £25 billion to £50 billion. We have been transparently reporting the evidence via the impact assessment and the previous publication of Pension Fund Investment and the UK Economy, which outlined the evidence. The noble Lord, Lord Fuller, will have to forgive me; I am not going back to LGPS. We spent two entire days in Committee on the first 10 pages of the Bill and I am not going back there. We can do it on Report. He is not going to stand up; I have not responded to a word he has said yet. Give me a moment. The noble Lord’s point is about scale. The evidence shows that larger schemes are better placed to invest—