Pensions Guidance and Advice

Gareth Davies Excerpts

Tuesday 1st March 2022 Westminster Hall

[Gareth Davies (Grantham and Stamford) (Con)]

It is a pleasure to serve under your chairmanship, Ms Bardell. I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing this debate. I was not going to speak today, but felt compelled to do so because I was so impressed that there was yet another debate in this House on the pension fund industry. It is a fantastic thing. Since leaving the fund management industry in 2019 to start this new job, I have been struck by how infrequently we discuss pensions and savings, yet it is so important to all the things that we care about across the House.

We should not forget that Britain is a global leader in pension fund investing. We are one of the largest pension fund markets in the world, with £3 trillion under investment. Some £9.9 trillion is invested through the City of London and fund managers like my old shop. I can tell all Members present that the industry is full of some fantastic advisers and investors, and some of the brightest and best minds in the world.

However, we clearly have some issues that we need to tackle. My hon. Friend the Member for Amber Valley highlighted many of them—maybe too many for the Minister’s liking. In my region, the east midlands, 69% of people who are investing in a pension do not receive advice, so there is a problem. I want to talk for a couple of minutes on how we can tackle the root causes, because we do not have an adequate culture of savings in this country, and I believe that starts from the very beginning of people’s working lives. I will offer a few suggestions as to how the Minister could address the problem in future Bills.

First, let me say that the power of our pension market is astronomical, tackling the things that we all care about. Whether it is levelling up our communities in Leeds, Hull or Grantham, or building infrastructure, our pension funds have the power and capital to do it. If we want to tackle climate change, unlocking pension assets to invest in renewable energy is vital. We can also do more to help younger people get on the housing ladder. The New Zealand Government introduced KiwiSaver, which allows young people to dip into their pension pot to put down a deposit to buy a first home, and there is more that we can do to unlock pension assets and tackle the things that we all care about.

However, the reality is that 12 million people in this country are under-saving, putting at risk their safety and security in older age. What can we do about that? First, we need to get people saving at an earlier age. We can do that by building on the success of auto-enrolment, which has seen 10 million additional people saving into a pension fund. I do not think they are being tricked; I think it is raising awareness of the importance of saving. That has of course been a cross-party effort. Auto-enrolment was introduced under a Labour Government in 2008 and brought forward by the Liberal Democrat and Conservative coalition in 2012. It is an example of what we can do when we work together. Let us expand auto-enrolment to 18 to 22-year-olds and start them saving earlier. Of course, it is that age group of people who will benefit most from the compounding benefits of saving.

I am sympathetic to the Social Market Foundation report on this very subject of advice on the use of technology. We can use technology and encourage fintech entrepreneurs to develop technology to enable people to view their pension pots and investments a lot more clearly. We should get behind the efforts of the Minister and the Government to give a stronger nudge towards pension guidance, which will be much more important than Members have said in the debate so far.

I am struck by the number of job adverts in this country that do not mention pension contributions, even though they can contribute about a third of total take-home income. When a job advert goes out, often it states the salary but not the contribution to a pension, which is bonkers. If we could change that somehow, it would encourage people to be much more mindful of how the jobs they are taking can contribute to their retirement.

Finally, there are things that we can do to make pension saving much more practical in meeting young people’s challenges. The No. 1 challenge for a lot of people in Grantham and Stamford, which I represent, is buying a house, and the Minister could look at that.

I applaud my hon. Friend the Member for Amber Valley for securing the debate, and I am grateful to the House for letting me speak.