I beg to move, That the clause be read a Second time.
The new clause had an airing in the discussion on new clauses 5 and 14. It would give the Pensions Regulator, along with the trustees of such pension schemes, the power to encourage and make consolidation happen. The schemes we are talking about here are the 40,000 or so that the Minister mentioned in his response to our new clause 14. Let us be clear what we are talking about: there are about 200,000 pension schemes in the UK and about 150,000 are the type of scheme, such as group personal pensions and so on, that our new clause homes in on.
The issue around scale on the trust side is significant. It is true that on the trust side governance issues are usually around scale. There are also issues around the quality of trustees when there are so many pension schemes, as the hon. Member for Gloucester mentioned. Our answer is to encourage forcefully the reduction in the number of pension schemes to increase that scale, which is widely recognised as an important aspect of getting value for money, and to clarify the issue around the number of trustees available.
What is the international and pensions landscape evidence? The Pensions Regulator gave evidence, I think to the previous pensions Bill; there have been so many pensions Bills that it is hard to remember. The Pensions Regulator was clear that scale must be encouraged. It is critical to delivering value for money because it enables higher-quality governance and the economies of scale that can make a big difference when there is a lot of money under management. It also encourages a focus on the pooling of risk so that returns are greater; one can take more risk and hedge against it with a larger number of assets under management. That is something we discussed this morning.
The Committee does not have to my word for it, or that of other Opposition Members. In the pension world elsewhere, scale is seen as important. The most obvious examples are Canada and Australia, where we often look, not just for a Governor of the Bank of England, but for the governance of pension schemes. New Brunswick was mentioned in a different context. That ability to get scaled pension schemes can make a significant difference on a number of levels. First, it can provide economies of scale and, secondly, deal with the issue of finding high-quality trustees. If there are fewer schemes there is less need to find a large number of high-quality trustees.
Thirdly and importantly, Canada shows that if a scheme can get sufficient scale it can substantially reduce the intermediation that takes place through the investment chain. By intermediation I mean the middle men and women who handle a pension saver’s money—the pension fund money—through the investment phase. John Kay’s report for the Secretary of State for Business, Innovation and Skills was clear on the need to reduce intermediation.
Probably the best way to do that is to get pension schemes that are big enough to do a lot of their asset management in-house. That is something that Denmark and the Netherlands do very effectively. I recall a pensions observer famously writing on the wider topic of why Dutch fund houses were under pressure, saying that Dutch pension schemes do not like to pay high charges. That is something that we need to get to in the UK. Although the pension cap is welcome, the governance has to be right to drive down further to an appropriate overall level.