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My Lords, I shall speak briefly in the gap. Your Lordships will be spared the longer speech that I had intended to make, as I failed to put my name down before the cut-off time.
Broadly, I welcome the changes that the Government wish to make to master trusts, building on the success of the auto-enrolment scheme. If the Bill is successful in improving standards and in building confidence in pension savings, perhaps fewer people will take advantage of the pension freedoms introduced in the March 2014 Budget than have done during the past two years.
In her column in the Financial Times on Saturday, Merryn Somerset Webb expressed concern at the rate of withdrawal of savings from pension pots. It is to be hoped that those withdrawing their pensions under the new freedoms do not underestimate the extent of their future lifespan and need for income, or overestimate their ability to manage the withdrawn funds more profitably and efficiently than the schemes from which they have withdrawn their assets. It is worrying that one in three of those withdrawing funds are placing them in low-interest bank accounts with no tax advantages.
The improvements in regulation of master trusts are in principle welcome, but I worry that the requirements and obligations are in danger of becoming too burdensome and therefore expensive. Should master trusts not be required to publish annually their administration charges in the form of total expense ratios, similar to those provided by investment funds? Can the Minister explain why the structure requires separate legal entities called scheme funders? Is it not unduly burdensome for small employers to have to set them up? Similarly, why does a master trust need a separate scheme strategist when a trustee or committee of trustees might perform this role, perhaps delegated to a discretionary fund manager?
I agree with my noble friends Lord Flight and Lord Naseby that in a very low-interest rate environment the valuation method that schemes are required to adopt produces an absurdly high deficit figure which can negatively affect companies’ share prices and strategies, including mergers and acquisition plans. I look forward to the Minister’s winding-up speech and to answers to the questions raised.