Morten Nilsson:

I come from Denmark originally and I think, to echo some of what Michelle said, scale just matters in pensions. The Danish pension industry has been fortunate to have few and relatively large schemes. One of the things I saw when I came over to the UK 15 years ago was that the industry here is very fragmented, and that fragmentation means also that there are so many conflicts of interest in the market. That in a way makes it quite hard to get the best outcomes, and that of course leads into the governance models that Michelle talks about. So this Bill is something we very much welcome across what it is covering. I think it is a really good initiative, but I think scale matters, and governance really matters. I would not underestimate how big a change it is, in the defined benefit sector, that we are moving from two decades of worrying about deficit into suddenly worrying about surpluses and having very mature schemes, which is the other thing that is important. Most of the DB schemes are closed.

If I talk about the BT pension scheme, the average age is 71, so they are pretty old members and that means there is a risk level, from an investment perspective, that really matters. We are paying out £2.8 billion a year in member benefits. That means liquidity is really important. It is really important that we have the money to pay the members and that we do not end up being a distressed seller of assets.

So there is quite a lot in that evolution we are on, and when we go into surplus management or excess funds—Michelle was talking about this at macro level; we would be managing at our micro level in each scheme— I think it becomes really critical that we have the right governance to manage what is a new era. I would really recommend that the Pensions Regulator issue guidance as soon as possible on all this, because it will be quite uncomfortable for a lot of trustees. It will be quite difficult also for the advisers in how we manage this new era.