Pension Schemes Bill

Kit Malthouse Excerpts

2nd reading
Monday 7th July 2025 Commons Chamber

[Kit Malthouse (North West Hampshire) (Con)]

I congratulate the hon. Member for Tamworth (Sarah Edwards) on her speech. I am afraid, however, that you, Madam Deputy Speaker, will have to forgive me for puncturing the air of bonhomie and positivity about the Bill, because I am really not content with it.

Frankly, I feel it is my duty as an Opposition Back Bencher to be suspicious of consensus, particularly when the City of London is conspiring with a Labour Government to muck about with our pensions. We have seen that before. I am old enough to remember Gordon Brown’s so-called reforms in 1997, which struck a hammer blow to the British people’s pension funds. You will remember, Madam Deputy Speaker, that the late, great Frank Field—who was then the Pensions Minister—later called those changes a spectacular mistake that struck a hammer blow to the solvency of British pension funds and drove a dagger deep into the heart of the defined-benefit landscape, resulting in its extinction.

As such, I am afraid that must rise to raise some very significant reservations about this bit of legislation—and not just its technical execution, but the political instinct that it betrays. While the Bill is wrapped in the warm words of reform and modernisation, what it actually does is centralise control, unsettle previously settled rights, and risk disenfranchising precisely those people whom it purports to help.

To begin with the Bill’s technical aspects, I reiterate my point of order. I am a member of the local government pension scheme through my membership of the London Pension Funds Authority, and I am uniquely affected by this legislation, as are 6.5 million other former and current public sector workers. My view is that, under this Bill, those people’s rights are being denied, and that through the hybrid legislation process, they or their representatives should have the right to petition the Bill Committee and explain why they feel they are affected by investment pooling, the changes to fiduciary delegation and the asset consolidation. They are uniquely affected by this Bill, which strikes profoundly at the governance of the pension funds they have paid into in a way that it does not for other pension funds in this country. That is the definition of hybridity—if that is a word—so if we are going to stick to the rules in this House, we really should stick to them. I look forward to getting the letter that you promised me, Madam Deputy Speaker, and I know that you have asked me not to refer to procedure in the other place, but this is not the only Chamber that will be looking at this legislation.

The hon. Member for Oldham East and Saddleworth (Debbie Abrahams), who is just about to leave—I am sorry to detain her but will be brief—asked the Minister what the problem is. I repeat her question, but in relation to the local government pension scheme, I also ask what it has to do with him. It is my money, not his, and it is for scheme members to make decisions about how they wish their money to be used. It is not taxpayers’ money; it is my money. It is a defined-contribution and benefit scheme, and we have all paid into it. He is the second Minister in the space of 18 months to try to interfere with the local government pension scheme, and I stood in this Chamber and opposed Michael Gove, now Lord Gove in the other place, when he attempted to manipulate the local government pension scheme for political reasons. I urge the Minister to think twice before he does so.

Secondly, I believe that this Bill is conceptually flawed. If we are being generous—[Interruption.] By all means, the hon. Member for Oldham East and Saddleworth is free to go—I will not be mentioning her again. She was hesitantly rising to leave. If I am being generous, the ambition behind this Bill is to unlock capital that can be invested for the purposes of growth, but the methods it proposes are chillingly dirigiste and make the dangerous assumption that Whitehall knows best and that central direction by the Government can outperform the dispersed judgment of hundreds of experienced trustees managing diverse funds in varied contexts. Essentially, with this Bill the Minister is turning the pension fund industry into an element of Government procurement by the back door.

There are three further points that I want to put on the radar on Second Reading. I understand that the Bill will go through, but I hope the Minister will take them into account. First, it is simply not true that megafunds perform better. There is plenty of academic and empirical evidence that the picture is much more mixed. Often, smaller funds with better governance and a more focused investment strategy can perform better. These supertanker monopoly funds lose agility, lack accountability and become distant from pensioners and members of the fund. Their investment discretion and their ability to move quickly on investment decisions becomes sclerotic and bureaucratic. In particular, it is true that these megafunds specifically underperform when they invest in exactly the kind of illiquid assets that the Government are hoping to push them into: infrastructure and private equity. I urge the Government and the Minister please to examine carefully the evidence from the United States and elsewhere that shows that these very large funds do not necessarily produce better returns for investors. They may well be able to reduce costs because of scale, but I am afraid that the evidence is just not there on fundamental investment returns.

My second point is on the danger of politicisation. We have seen elsewhere in the world where pension funds have been pushed into the Government’s priorities to their own detriment. In Canada, large pension funds have come under significant Government pressure to invest in state infrastructure. In France, pension fund surpluses have been directed into Government bond-buying programmes effectively against their will. Once those assets become controlled and directed into state-favoured investment vehicles, which is what the Government are proposing through this Bill, the temptation for Ministers—not necessarily this Minister, but future Ministers—is to go further and push funds into politically convenient infrastructure projects that may prove to be financially disastrous. If that power had been available to the political team that decided to instigate the frankly financially disastrous HS2, and my pension fund had been put in it, where would I be now? I urge the Minister to think carefully about the responsibility for my retirement and my future. By me, I am referring to myself as a member of the local government pension fund. I am everyman for these purposes.

I am afraid that essentially what has happened in France and in Canada, and what may happen under this legislation in the UK, is that the pension fund system effectively becomes a tool of Government fiscal policy. Effectively, absent capital spending available directly from the taxpayer, the Government direct capital spending from pension funds—from private money—and plug holes that they create by writing cheques that they cannot fulfil. I would be interested in the Minister’s response to that.

[Lincoln Jopp]

I was just googling “dirigiste” and my right hon. Friend’s everyman quote. Will he comment on the fact that OMERS, which he would probably agree is one of these megafunds that he thinks are slow and unwieldy and invest in infrastructure and illiquids, returned a 7.1% net return over the last 10 years and the London Pensions Fund Authority returned a 7% return over the last 10 years?

[Kit Malthouse]

As I said, the evidence about performance across the population of funds is mixed. Some smaller funds do extremely well, because they have strong governance and a focused and nimble investment strategy. Some megafunds do reasonably well, because they can spread their risk across a variety of asset classes, but it is not a given that a big fund will perform better than a smaller fund. In fact, in certain circumstances smaller funds, because they have better accountability and can have a more focused investment strategy, may well perform better.

Frankly, and this speaks to my hon. Friend’s point, it is for me as a member of the pension fund to decide what I want to do, performance or otherwise, because it is my money. Given that I have contracted with this pension fund under circumstances made clear to me when I contracted with it as part of my employment or otherwise, it is not necessarily for the Government to steam in and tell me what I should or should not do with my own money. That means I carry a certain element of risk—absolutely—but unless we are going full-throated for the total financial infantilisation of the British people, I cannot see that we have any other way to preserve our financial freedom and autonomy.

[Debbie Abrahams]

Does the right hon. Member accept that he might be atypical among scheme members?

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[Kit Malthouse]

That may well be true, but that is a different question. There is a question about financial education and the ability of large numbers of our fellow citizens to understand these financial complexities. We have a large and professional independent financial adviser community, and all pension funds are required to have pension advisers who can speak to members, tell them what is going on and explain the decisions before them. I do think that over the years, such steps have disenfranchised the British people from their financial decisions, yet we hold them responsible for their debts, their mortgages and their future. There is a larger question for us in this House about how much we have subtracted from the autonomy of the British people, and therefore how much blame attaches to us as politicians when their financial circumstances are not what they expect.

[Torsten Bell]

The right hon. Member is giving a lucid speech, as he always does—he speaks very well—but I am failing to understand exactly the point he is making. He is talking about a local government pension scheme, which is guaranteeing him an income in retirement, as if it is a defined-contribution scheme where he is the one at risk from changes in the investment performance. It is local taxpayers with their employer contribution who ultimately bear the risk in the scheme he is talking about. It is our job to make sure that those taxpayers have the best possible chance of not having bad returns, leading to bad outcomes for them. He is not at risk in the way he is talking about.

[Kit Malthouse]

But I have paid into that scheme.

[Torsten Bell]

You have.

[Kit Malthouse]

Yes, I have. I paid contributions through my employment at City Hall, as did my employer. Admittedly, it was a scheme based on a defined benefit, rather than a defined contribution, but that was the deal done with me on a settled contract, saying that this was what I would be provided for from my contribution. Every year, I review my pension benefit forecast. I am consulted by the fund about how it should conduct its affairs. I am asked to turn up to my pensioners’ conference to discuss with trustees how they are looking after my future. The point is that the Government are steaming in with absolutely no consultation with me as a pensioner and I have no right to be represented, although I am uniquely affected, beyond other pension schemes. I consider that to be high-handed and, as the hon. Member for Oldham East and Saddleworth said, to be solving a problem that does not exist.

My third point was also raised by my hon. Friend the Member for Wyre Forest (Mark Garnier): who carries the can? What happens when the Minister tells my private pension scheme or the parliamentary pension scheme that it must invest in, for instance, HS2 and it turns out to be a disaster? What happens when whichever ministerial pet project rises to the top of the priority list for pension allocation—what rough beast, its hour come round at last, slouches towards Whitehall to get its finance—and it all goes horribly wrong? I am sorry to quote Yeats to the Minister, but who will pay when that happens? When there is a deficit in defined-contribution pension funds that have been so directed by the Minister, who will pay for that deficit?

[Torsten Bell]

rose—

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[Kit Malthouse]

I have already given way to the Minister. He said that the Bill contained an opt-out for pension funds, but that is not strictly accurate. It does not create an opt-out for trustees; it creates an opportunity for them to request the ability to opt out from the regulator, with whom the discretion to opt out lies. It also reverses the burden of proof. Even if it is on their own judgment, the trustees must prove, empirically, that investing as the Minister so directs will be to the detriment of their fund. That is not a true opt-out. It is not at the discretion of the trustees. All they can do is request, and all they can do is try to offer whatever evidence they may have. We must reflect on the fact that an awful lot of investment decisions are made by trustees on their judgment—yes, on advice, but on their judgment—and that is a very hard thing to disprove.

I am afraid I feel that the Bill is bulldozing into an area of highly sensitive financial structure, and is not taking care of the interests of those whom it purports to protect. It is reclassifying risk, it is recentralising power, and it is rewriting contracts that have hitherto been extant for many years. It is too important to my future, and the future of millions of pensioners, for us to rush into this consensus-driven Bill without proper examination in Committee, with pensioners and pension funds themselves able to petition, as they should be, under a hybrid Bill structure.

[Callum Anderson (Buckingham and Bletchley) (Lab)]

I am probably a parliamentary oddity, given that I have been looking forward hugely to rising to support the Bill—and what luck to follow such a colourful and interesting speech from the right hon. Member for North West Hampshire (Kit Malthouse).

I believe that this landmark piece of legislation, which builds on the progress made by the last Administration, has the potential to fundamentally reshape the trajectory of British capitalism by addressing one of the most important long-term challenges facing our country, namely how we can unlock and unleash the full potential of British savings to support growth and prosperity here at home. It is a challenge that we must overcome if we are to tackle a number of deep-rooted structural weaknesses in our economy: low productivity, low business investment and regional inequalities, as well as the financial insecurity that pervades the lives of too many of our older citizens, especially those who do not own their homes.

Before I go any further, I must pay tribute to my hon. Friend the Minister—the Bill bears the hallmarks of his serious and determined leadership—and also commend my hon. Friend the Member for Tamworth (Sarah Edwards) for her very interesting speech.

The Bill seeks to address the lack of alignment between our nation’s vast pool of domestic savings and the long-term investment needs of our economy. Over recent decades, that growing misalignment has become all too evident in communities across the United Kingdom. During that time, our domestic pension funds, which now amount to about £.3 trillion, have steadily retreated from investment in the UK, although the trend has not been replicated in other comparable developed economies. Despite taxpayer support amounting to more than £60 billion a year—or £70 billion, according to the right hon. Member for Salisbury (John Glen)—too little capital is finding its way into British companies, infrastructure and innovation.

Data from the Capital Markets Industry Taskforce—I must disclose the fact that I once worked for one of its member firms before entering this place—lays bare the scale of the problem. The data focuses primarily on public equity markets, but when we look at the largest pension schemes and funds in other countries and compare the size of their total equity allocations relative to their domestic equity markets, we see that Canada’s pensions are 2.5 times overweighting their home market, while France’s are nine times overweight, Italy’s 10 times overweight, Australia’s 27 times overweight, and South Korea’s are 30 times overweight. The UK is, massively, an international anomaly. Our domestic pension funds are underweighting our equity market by about 40%. That, I think, represents a structural weakness, with direct consequences for the global competitiveness of our economy, the vitality of our industries and, ultimately, our national economic resilience. If we are unwilling to invest in ourselves, we hold back our growth prospects.

The UK has long needed catalysts for a modern economic renaissance. The Government have taken important first steps through their industrial and infrastructure strategies, the artificial intelligence opportunities action plan and the reforms of our planning system, but the common ingredient that is required to ensure their success is a reliable source of long-term capital. Even a modest rebalancing of that £3 trillion could unlock billions in investment for domestic growth. In real currency that our constituents can understand, that means investment in digital, physical and social infrastructure, and it means greater opportunities for entrepreneurs to not only start up businesses but scale them into something globally consequential, providing better jobs and higher incomes for families throughout the country.

These investments are not just good for local economies. If we get the broader fundamentals right, they can also deliver stronger returns for tomorrow’s growing cohort of retirees, so the Government are right to propose tackling fragmentation across the UK pensions system. In particular, the private defined-contribution market and the local government pension scheme remain too fragmented. I must gently disagree with the right hon. Member for North West Hampshire: I think that there are too many small, sub-scale schemes that have not only driven up costs and created market inefficiencies, but resulted overall in suboptimal investment outcomes. I think that larger funds can manage risk better, and can invest in opportunities that can deliver higher returns for savers.

[Kit Malthouse]

I do not dispute the fact that there are too many small funds that are suboptimal; my question is whether it should be the Government who correct that. If, for example, I am a member of a small suboptimal pension fund and the Government, through the Bill, consolidate it with another pension fund, and it turns out that this reduces my return, who carries the can?

[Callum Anderson]

As I have said, I think that larger funds can manage risk better and deliver better outcomes for savers, which means that they can take greater ownership of how they spend their retirement years. I also think that the £25 billion threshold for megafunds in the defined-contribution market is the right level to deliver the objective. Other jurisdictions, especially Australia, Canada, and the Netherlands, have demonstrated that scale drives better governance, lower fees and stronger returns.

I welcome consolidation and the path towards the professionalisation of the local government pension scheme. I disclose that before I entered this place, I chaired a local authority pension fund, so I know at first hand the potential of pooling, and share many experiences of pension fund meetings with the shadow Minister. I fully acknowledge that there will be resistance to pooling in some quarters.

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[Kirsty Blackman (Aberdeen North) (SNP)]

I start with an apology to the Minister, because I had a bit of a giggle when the timeline for pensions dashboards was mentioned. I have been here quite a long time, and I feel like we have been talking about pensions dashboards for that entire time. It has been suggested that they are just around the corner for most of the last 10 years. It feels like this is something that we rehash on a regular basis. It would be great if they really were just around the corner; I look forward to seeing them.

The right hon. Member for North West Hampshire (Kit Malthouse) will not be surprised to hear that our political ideologies are slightly different when it comes to interventionism and what the Government should or should not do. It is completely acceptable for the Government to give some direction on the largest assets, but I am specifically not talking about the LGPS, because it does not exist in Scotland. That part of the Bill does not apply to my constituents, so I will not touch too much on that.

[Kit Malthouse]

I understand where the hon. Lady is coming from. She is keen on Government intervention in our pensions, but does she recognise that that represents a fairly significant transfer of investment risk, and that the Government should underwrite that risk in all fairness to pensioners, who may lose money as a result?

[Kirsty Blackman]

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.

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[John Grady (Glasgow East) (Lab)]

I rise to speak in favour of the Bill. On a policy basis, the Bill addresses a number of very important challenges.

The first is ensuring that the pension system delivers good outcomes for the millions of pension savers in Britain. That is absolutely critical. In my lifetime, the risk of pension savings has shifted from the employer to the employee—in other words, to our constituents. At the heart of the reforms is one essential fact: investment in a diverse set of assets leads to better returns and better outcomes than investment in a narrow set of assets. We need to move away from a focus on cost in the industry and on to a focus on overall value and the outcomes that savers get, so they have comfortable retirements. I am determined that the working people in Glasgow East have comfortable retirements and are properly rewarded for their hard work. Therefore, the Bill’s objective of ensuring that savers in Glasgow East and across the United Kingdom ultimately have access to a wider pool of investments, which have historically been restricted, is a good outcome and a good policy.

The second challenge the Bill seeks to address is growth. People in Glasgow East are very ambitious, as I know they are in Aberdeen North and in Hampshire. As I knocked on doors ahead of last year’s election, people would say to me, “Britain has lost its way.” And many people said that they felt their children would be better off working abroad, or that there were more opportunities for their children abroad. That is the challenge the Bill plays a part in addressing. We do not invest enough in our productive capacity so we have lower, sclerotic economic growth.

Pension savings are an essential source of finance for British industry and infrastructure. In that regard, the Bill includes, in chapter 3 of part 2, something that seems to be causing anxiety: the backstop mandation of investment by defined-contribution pension funds into private asset classes linked to the United Kingdom. Private non-listed shares and debt are now central to investment in a way that they were not when I started off as a junior lawyer many years ago. Growth companies in areas such as medicine, AI, technology and, of course, space remain in private hands for much longer, and list on public markets much later, if at all. The mandation power must be viewed in that context. If UK pension funds do not invest in those classes of domestic assets, working people may miss out on significant returns, and we risk losing the opportunity of growth and of developing the great innovations from our fantastic universities, including the University of Strathclyde.

[Kit Malthouse]

The hon. Gentleman is making a good point, but does he accept that illiquid investments, by their very nature, tend to be more volatile, and that from a risk-adjusted point of view they therefore represent much higher risk for investors? He mentioned investment in life sciences companies; he will be aware of the collapse a couple of years ago of the fund led by Neil Woodford, which was a significant investor in illiquid private sector life sciences companies and, because of that illiquidity, collapsed. The point is that if we are mandated to do that stuff—I ask the same question as I asked the Minister—who will pay? Who carries the can?

[John Grady]

I hope the right hon. Gentleman would accept that diversification is critical here. Of course, illiquid private assets are not something that one holds for a couple of years and then sells, but the funds are designed to be large enough to bear the risk from diversification. That is the critical point.

Pension funds are a statutory arrangement, with significant taxation and other legal benefits. That creates a business opportunity for pension providers—and quite right, too. Against that background, it is right that the Government review whether, under the existing arrangements, savers are getting a fair return from that special statutory and legal arrangement. Given the tax breaks, it is not unreasonable to address the question of whether there is sufficient investment in the United Kingdom.

Let me turn to our attitude to risk in the UK, on which the success of pension arrangements turns, as does our desire for more economic growth. We will not get more economic growth unless we take more reasonable risks, as the Chancellor of the Exchequer and others have made clear. It is essential for banks and fund managers to consider whether they take enough risk.

The chief executive of the National Wealth Fund, John Flint, made the point last Tuesday at the Treasury Committee, when he said,

“I would encourage the stewards of private capital to go back and challenge themselves on their risk appetite…the country’s growth outcomes are, for me, largely consistent with the country’s risk appetite generally.”

I venture to say that our great fund managers and banks need to turn their minds to whether they are taking enough risk, because that drives economic growth and drives successful outcomes for savers.

Another aspect of pensions reform and risk taking is the individual savers, as was brought home to me in a quite different context, when I was on a football history tour organised by Football’s Square Mile, which promotes the history of football in Glasgow East. As we stood mainly in Glasgow East—I must admit that some of it was in Glasgow South—the guides explained to us that when Queen’s Park decided to organise the first international football match between Scotland and England in 1872, the club had just over £7. It had a choice: the low risk was to hold the match at a rugby club, free of charge; the higher risk was to hold the match at the West of Scotland cricket club at Partick, an old, closed ground where tickets could be sold and there was potential revenue. The problem was that the West of Scotland cricket club wanted more by way of rent than the Queen’s Park had—much more than £7. The guides put the choice to us all as we stood just in Glasgow South constituency, and just outside my constituency. The vast majority of people on the tour picked the low-risk option: an indication, at the end of the week, of how risk-averse we have become in Britain.

Encouraging sensible risk taking is critical to pension saving and if we want more economic growth. In fact, Queen’s Park took the higher-risk option: it rented the cricket ground and made a huge profit. The game transformed the profile of football and was the foundation for Queen’s Park’s building the first international football stadium in the world, which opened a year later in 1873 in my constituency. Queen’s Park took a risk that was pivotal to the development of modern football, and modern football contributes billions to the Exchequer. My point is that risk is essential to economic activity, as Mr Flint explained and as was illustrated later in the week.

The Bill is critical for economic growth. It takes active steps to ensure that money flows to the entrepreneurs and risk takers who will create wealth across Britain. It ensures that working people have access to better pensions. On that basis, I support the Bill.

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[Kit Malthouse]

My hon. Friend is making a strong speech and some strong points. Does he agree that the alarm bells he is ringing about financial education, the under-provision of pensions and longevity are even more stark and alarming next to the demographic change that means that over the next 30 years, we will see the number of workers per pensioner plummet? We will go from about 3.6 workers per pensioner at the moment to well under three by 2070, which means that even if pensions are not enough, the country will not be able to afford to plug the gap as it does at the moment?

[Mr Bedford]

My right hon. Friend makes a compelling case. As I said in my speech, this goes back to financial education and ensuring that we all understand the implications of pensions adequacy.

My concern about adequacy does not mean that the Bill does not have its merits. The continuation of Conservative policy, the small pots consolidation and the creation of megafunds are sensible reforms that will increase individuals’ pension pots by reducing dormant pots and increasing economies of scale. However, this is a missed opportunity for a Government with a large majority. They could have acted more boldly, moved faster and improved pension adequacy throughout the United Kingdom.

I would like a clear commitment from the Government that they are actively looking at improving pensions adequacy. The Labour party has long professed to be the party of workers, yet some who look at the Bill will sense that it does not go far enough in preventing the UK from declining into being a society funded by welfare in retirement. Let us encourage people to strive, work hard and save more for a better future. I very much hope that the Government will work collegiately and cross party with His Majesty’s Opposition in Committee to ensure that our constituents do not sleepwalk into a retirement crisis.

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[The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)]

At the outset, I take the opportunity to declare my own interest. Unlike the hon. Member for South West Devon (Rebecca Smith), I was elected prior to Lord Cameron ejecting councillors from the local government pension scheme. As a former member of Trafford metropolitan borough council, I also have savings in the local government pension scheme. I am therefore set to benefit from the improved governance of the LGPS initiated by the Bill.

These measures are testament to our dedication to building a resilient, efficient and fair pension system, galvanising and creating the potential to boost our economy at every opportunity. It is our aim to build a future in which every saver can look forward to a secure and prosperous retirement.

I welcome the broad, if not entirely universal, support for the Bill. The open discussion in which we have engaged today is important because, as a responsible Government, we want the House to be assured that the new powers in the Bill come with appropriate mitigations. We understand that Members will have questions, and I have listened carefully to those that have been raised. I remind everyone that the highly fragmented pensions framework has not served savers well, and there is a need for improvement as both the industry and savers demand a better service. The Bill goes to the core of what is needed, providing big solutions to the big problems that are undermining so much potential for savers and the economy.

Let me now turn to some of the comments and queries that have arisen throughout the debate. I thank my hon. Friends the Members for Tamworth (Sarah Edwards), for Luton South and South Bedfordshire (Rachel Hopkins), for Buckingham and Bletchley (Callum Anderson), for Poole (Neil Duncan-Jordan), for Truro and Falmouth (Jayne Kirkham) and for Glasgow East (John Grady) for speaking in favour of some elements in the Bill, and for their recognition of the investment and growth opportunities that it can unleash.

I am grateful for the constructive support and consensus that we heard from both the hon. Member for Wyre Forest (Mark Garnier), who opened the debate for the Opposition, and the hon. Member for South West Devon, who closed it. They were right to mention the specular success of automatic enrolment, but that was half the job, as pointed out by the Pensions Minister, and I think the hon. Member for South West Devon acknowledged that we now need to move on to the pressing task of dealing with pension adequacy, which will be taken forward by the pensions review. They were also right to refer to the complexity and fragmentation of pension pots.

I welcomed the support from the hon. Member for Wyre Forest for the long-awaited pensions dashboard, and was particularly pleased to hear of his support for changes in the local government pension scheme, although he expressed concern about certain parts of the Bill and the potential for propping up a failing scheme that arises from those changes. Let me reassure him that no cross-subsidising between administering authorities would be caused by any changes made by the Bill. As for the question of safeguards in respect of surplus release, we cannot stop share buy-backs and the like, but we have confidence in the ability of trustees to adhere to their fiduciary duties.

I understand that mandation has given rise to the fundamental objection of not just the hon. Gentleman but a number of other speakers, but I do not believe that it undermines fiduciary duties, and I do not agree with that analysis. The Bill contains clear safeguards that are consistent with those duties, not least in clause 38, which refers to an opt-out in the event of material detriment to members of a fund. The hon. Gentleman also raised questions relating to gilts; we believe that nothing in the Bill would undermine a well-functioning gilt market. However, as I have said, I welcome the broad support for the Bill, particularly with regard to value for money, small pots, guided retirement products and terminal illness changes.

[Kit Malthouse]

I want to be clear—so that the House is clear—about the opt-out to which both Ministers have referred. Is it a correct interpretation to say that it is not an opt-out at the discretion of the trustees of the fund, and that the Bill requires them to apply to the regulator with evidence for the regulator to make a decision to grant them the ability to opt out? The idea that trustees are somehow free to make a decision in the interests of the fund is not actually correct, is it?

[Andrew Western]

The right hon. Gentleman is correct in his interpretation, although I do not entirely agree with his characterisation. It is, I think, perfectly reasonable that we would ask trustees to explain how they feel that what is proposed would be to the detriment of their scheme members.

I welcomed the support of the Liberal Democrat spokesperson, the hon. Member for Torbay (Steve Darling), for many of the general proposals in the Bill. I entirely agreed with his comments about the need to give savers the best possible advice and protections. I also agreed with what he said about the opportunities to deliver further investment in our economy. As for social housing, which others also raised, he will know that many pension schemes already make such investments, and I certainly support their continuing to do so.

We then heard an excellent speech from my hon. Friend the Member for Tamworth. I particularly welcome her comments on the value-for-money changes, and she is absolutely correct to highlight the importance of looking at schemes in the round, not just on cost. On the pipeline of investments that she set out, I hope she is reassured by some of the steps that the Government are taking—for instance, through the Planning and Infrastructure Bill—to ensure that there are a range of exciting major projects, such a reservoirs and houses, that people will be able to invest in.

The right hon. Member for North West Hampshire (Kit Malthouse) is certainly correct to say that he punctured the air of consensus in outlining his reservations. I know that my hon. Friend the Pensions Minister has agreed to have a conversation with the right hon. Member next week, and I hope that he will find that incredibly helpful. Clearly, it is not for me to comment on whether this should be a hybrid Bill. On the question of megafunds, he is right that not all large schemes provide a better return, but the evidence shows that while that is not always the case, they do see better returns on average. That is an important point.

The hon. Member for Aberdeen North (Kirsty Blackman) was correct to raise how long we have been waiting for the pensions dashboard, and I am similarly excited and anticipate its arrival. I promise that it will be worth the wait when it finally arrives. On her point about the scope of the Bill, the pensions review will take forward a number of the issues on which she and other Members said the Bill could have gone further. The pensions review is under way, and we will say more about that incredibly soon.