Yes, we have given a lot of thought to that. There are various ways to do that. At the start, a solvency buffer might be needed. Because there is a target, in order to be reasonably confident of reaching it, the scheme must put some money aside that is not invested aggressively. Although that helps to achieve the target, it does not give people as big a pension as they might otherwise get. One potential way around that is for the target-setting to take account of the stream of future contributions that we know are going to come. Because we know that money is coming in future years, we can take account of that on day one when modelling a scheme’s ability to reach its targets. We do not say, “Well it might not be there in a few years’ time, so we have to hoard the money now and not invest it aggressively.” That is one example.
A lot depends on where such collective schemes come from. For example, if a former DB scheme, which could potentially have tens of thousands of members, decides to become a collective DC scheme, it could quickly build up scale and volume of assets, so that might be another route in. I am not speaking for the National Employment Savings Trust at this point, but one could imagine scenarios in which NEST has a role to play. I have not discussed that at length with NEST, but I can see immediately that that is a scheme with scale. Some of the master trusts that exist at scale could come into this space. Although there is a blank sheet of paper problems, I regard those problems as opportunities because they mean that we can learn from the mistakes of others. Of course, auto-enrolment has a great advantage. Due to very low opt-out rates, if an employer uses a CDC scheme for auto-enrolment, people would, on the whole, stay in and volume would potentially build up relatively quickly. My hon. Friend raises an important issue, but there are ways in which we can seek to mitigate it.
There are obviously a lot of detailed issues to discuss on collective benefits in this part, and clause 19 gives us some introductory concepts and definitions.