Pension Schemes Bill (First sitting)

Debate between Steve Darling and Alice Macdonald

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Steve Darling]

Q Thank you both for coming. Reflecting on pensions systems around the world, what one silver bullet would you both say would help drive positive change through this Bill and strengthen it if applied to it?

Colin Clarke: That is a good question. Both our companies have recently been on various trips, to Australia, in particular, and there are various references in the Bill impact assessment to measures that are being or have been done there. One of the key learnings is around improving adequacy. In the round, there are lots of measures in the Bill that will help achieve that—for example, the introduction of the value for money test and the potential for better returns. One of the learnings we took away was around Australia’s “Your Future, Your Super” test, how they define value for money and how appropriate it is to set certain benchmarks. What are the risks if you do set those benchmarks, like the risk of investment herding and things like that? I think the value for money framework, if it is done right, has the potential to improve outcomes for members.

Contributions, obviously, is one big thing—I know that is not in the Bill. The Pensions Commission is going to be looking at that for adequacy in the round. I think that the measures around performance and value, and ensuring that the focus shifts away from cost to value, are among the key things that the Bill will seek to deliver.

[Alice Macdonald (Norwich North) (Lab/Co-op)]

Q My question is related to that. Aviva, in your written evidence, you spoke quite a lot about the value for money framework. Could you expand on what you think the benefits and challenges are? You also referred to the Australian regulator’s model, in terms of learning. You have already covered a bit of it, but if there anything you could add on what we could learn from that model about incentivising investments in the right areas, that would be great.

Dale Critchley: What we have heard from Australia is that the thing to avoid is regulator-defined targets, which will probably lead to herding, and can lead to schemes avoiding certain investments. For example, in Australia, property includes social housing and commercial property, but there is one benchmark for everything. So pension schemes do not invest in social housing, because they cannot achieve the benchmark through investing in social housing, as the benchmark is common across all property. Those are things to watch out for.

The other piece is that if you have set benchmarks, people will look to achieve the benchmark and not exceed it—they do not want to be the white chicken among all the brown chickens. Those are the things to avoid, in terms of the value for money benchmarks.