My Lords, I congratulate my noble friend the Minister on introducing this group of amendments and particularly thank her, the Bill team officials and the Pensions Regulator for engaging with us in such a collegiate manner. The co-operativeness and openness that have been shown to all noble Lords across the House have been hugely welcomed and already commented upon; I reiterate that this approach has improved the Bill and that this will continue into the future when it comes to the regulations. I congratulate the noble Baroness, Lady Bowles, the noble Lord, Lord Vaux, my noble friend Lord Young of Cookham, as well as the noble Baronesses, Lady Sherlock and Lady Drake, on the way in which we have all been able to co-operate on this important issue.
I briefly express concerns about the MaPS dashboard being sidelined and the data-security issues that may be involved in the dashboard, as well as, importantly, the fairness issues that will be dealt with in regulations of CDC schemes. Having dealt with that, I turn to Motions 4A and 4C. It is important that my noble
friend can provide reassurance that scheme-specific approaches that have endured so far will be preserved. As the noble Baroness, Lady Bowles, has outlined—echoed by the noble Baroness, Lady Sherlock—there are issues on which I am confident my noble friend will be able to reassure us.
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I certainly hope that this is the case: that any new defined benefit funding code, and the regulations that will encompass it in respect of any bespoke route to funding, will continue to be scheme-specific and flexible to accommodate appropriate integrated risk management that trustees—having carefully assessed the appropriate long-term time horizon, employer covenant and liquidity forecasts for their scheme—can use to build a diversified portfolio that will benefit from long-term expected returns and risk premia on assets such as infrastructure, social housing and early-stage growth businesses. This would enable pension assets to be used to boost growth directly and conserve corporate assets, as well as ensuring that pension schemes are sustainable, both in the sense of them being able to continue to provide benefits and in terms of being sustainable relative to the climate challenge that we all face.
Especially with the current monetary policy of quantitative easing having driven long-term interest rates down to exceptional, unprecedented low levels, forcing schemes with long-term time horizons—or even leading trustees and their advisers to believe that it is appropriate—to sell higher expected return assets and buy much lower return investments, in competition with the Bank of England and other financial firms, seems to be a recipe for failure rather than success. Member benefits are not necessarily best protected by so-called derisking. Clause 123 was an attempt, sadly removed in the Commons, to give some reassurance on these points, particularly to open schemes but, indeed, also to other schemes, which have no intention to buy out and are not close to doing so.
I am grateful to my noble friend the Minister and my honourable friend the Pensions Minister for recognising, and now, I hope, publicly endorsing, the idea that these pension assets could be valuable to the economy. Lower expected return investments mean that employers must put more money into pensions now, in the short term. Not only is this a waste of corporate resources and an unnecessary extra cost on sponsoring employers—whose assets are particularly valuable right now as we try to recover from the damage of the pandemic—but it is a massive drain on the Exchequer. This point is not often mentioned but the vast majority of the £50 billion a year that goes on pensions tax relief has been spent on deficit-reduction contributions in defined benefit schemes. This money would surely be better used to allow pension fund assets directly to boost growth. Pension funds are the ideal long-term investors for infrastructure, for projects to mitigate and offset climate change, and for social housing; all these should be able to deliver better returns than gilt. Equity participation too adds upside to everyone’s benefit.
I believe and fervently hope that my noble friend the Minister will confirm the Government to be in agreement with the issues raised by the noble Baronesses,
Lady Bowles and Lady Sherlock, and the noble Lord, Lord Vaux, about avoiding what might be called reckless conservatism or counterproductive caution, so that our £2 trillion worth of defined benefit scheme assets can feed into the rebuilding of our economy and support sustainability both of the schemes and of the environment. I once again thank my noble friend and her team for all their hard work on the Bill, and thank colleagues across the House for all the work they have done.