Pension Schemes Bill

Debate between Matt Rodda and Callum Anderson

2nd reading
Monday 7th July 2025 Commons Chamber

[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.

[Matt Rodda]

My hon. Friend is making an excellent speech. Does he agree that there is a growing consensus in the pensions industry? Indeed, some of the trade bodies have been heavily involved in promoting the idea of consolidation for some time, and perhaps what he is describing is a growing body of opinion in the pensions industry.

[Callum Anderson]

My hon. Friend is absolutely right. Stakeholders and firms that I have spoken to—in the local government pension sector, the private sector and the City of London—are unanimous that scale is very much an economic imperative. Have the Government considered what role fiscal incentives can play in helping to accelerate the consolidation of private DC funds, and whether there is scope to reduce the number of LGPS pools in the year ahead?

I particularly welcome the Bill’s proposal for a comprehensive value-for-money framework to guide DC consolidation, which my hon. Friend the Member for Tamworth (Sarah Edwards) mentioned. This correctly tackles head-on the trustee cost mindset, which too often prioritises the cheapest over the most appropriate asset allocation. That approach has frequently been tried and tested, and it delivers poorer returns for savers and missed opportunities for the wider economy, so I very much hope that DC consolidation can be implemented as soon as possible.

Finally, I want to address the issue of mandation, which, to be honest, probably warrants a debate all by itself. I appreciate the concerns that have been raised by Members from across the House, and by people in the investment industry. My hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier) referred to the parliamentary fund, and I note non-facetiously that the parliamentary fund, of which we are all ultimately beneficiaries, allocates barely 1% of its assets to UK companies.