Contribution
My Lords, I made these arguments at some length on Thursday. I have made them again now. The noble Lord disagrees with them; I can tell from his tone. He can read Hansard and pick up the relevant bits with me if he would like to.
Let me come back to the amendments. I will start with Amendments 91 and 95 from the noble Baroness, Lady Noakes. I thank her for introducing them with her customary clarity and brevity. These would create an exemption from the scale of requirements for master trusts and GPPs that can demonstrate investment performance exceeding the average of schemes that meet the scale conditions. I recognise the intent to reward strong performance, but obviously I am concerned the proposal would undermine the Government’s objective, which is a market of fewer, larger, better-run schemes, where economies of scale deliver sustained benefits to savers.
I should clarify the point about objectives. The Government’s primary objective is saver outcomes. I want to be clear about that. While I am here, I say to the noble Lord, Lord Palmer, that this is not about administrative simplicity but about member outcomes. At the centre of our policy is the drive for better membership outcomes. That does not mean a simple scheme, but one that has strong governance and is well run, including strong administration, because scale supports the scheme to have the resources and the expertise to do this.
To respond to the noble Baroness, Lady Noakes, in considering scale in the pensions landscape today, we have all shapes and sizes of schemes, in which value for members is important. We know that performance can be delivered across different sizes of scheme, but scale changes the landscape. Schemes that have scale will have the tools to deliver on value and performance in a way that a small scheme will not be able to in this future landscape. That is because scale enables greater expertise, efficiencies and buying power than a small scheme. That is the landscape we need to deliver for members because we want better outcomes for them. In considering the issue, it is therefore important to focus on the future landscape, the market at scale, and not the current landscape. In our view, there is not sufficient evidence that other approaches can deliver the same benefits for members and the economy.
On the specifics of the noble Baroness’s amendment, there are also some concerns around the impact; it could create an unstable landscape if we were to focus on the performance at any point in time. Of course, the intention for any exemption is that it is a permanent feature of the scheme and is not subject to regular assessment. As we all know, past investment performance is not a guarantee of future success. If we went down this road, there would be times when exempted sub-scale schemes found that they were no longer delivering investment performance that exceeds the average of those at scale. That is not stable for members or employers, and does not support their interests.
Amendment 98 proposes an innovation-based exemption from the scale requirement for master trust schemes offering specialist or innovative services. I agree with the noble Baroness, Lady Stedman-Scott, that innovation really matters; that is precisely why the Bill provides for a new entrant pathway so that novel propositions can enter the market and scale responsibly. But creating a parallel innovation pathway as an alternative to scale would dilute the fundamental objective of consolidation and risk maintaining a long tail of small schemes, with fragmented governance and limited access to productive investment.
I should say a few words on competition. Actually, I might come back to that.
Amendments 99 and 106 from the noble Baroness, Lady Altmann, would remove the £25 billion threshold from the Bill. We believe the threshold is a central pillar of the policy architecture. It has been set following consultation with industry and government analysis of the emerging evidence, to which I referred earlier, on the point at which the benefits of scale are realised. We believe that this is a key policy decision that should be in the Bill. We also believe, as the noble Baroness indicated, that it is very important that there is certainty for industry on this threshold at the earliest possible point. Putting the £25 billion on the face of the Bill assures industry that it cannot be changed without full parliamentary engagement.
I know the noble Baroness wants me to reassure her that this matter is open for further discussion. I regret that I will have to disappoint her. The Government are committed to this and have put it in the Bill for the reasons I just explained.