Pension Schemes Bill

Debate between Meg Hillier and Mark Garnier

2nd reading
Monday 7th July 2025 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

It is a great pleasure to be here with you, Madam Deputy Speaker, and I welcome the Minister to his place. He has been here a couple of days over a year and is already taking an important Bill through Parliament. It is good to see him, and I very much look forward to working constructively with him as the Bill progresses through the House.

While the Bill is not perfect, the Minister will be pleased to hear that there is cross-party consensus on many of the planned changes. That is because we all want our pension system to be working better. If we rewind back to 2010, we inherited from Labour—dare I say it—a private pension system that was not quite ideal. The move from a defined-benefit pension-dominated market to a defined-contribution system had left millions of people behind. Back in 2011, only 42% of people were saving for a workplace pension. The cornerstone of change was auto-enrolment, which has been an overwhelming success, as I am sure the Minister will agree. Now around 88% of eligible employees are saving into a pension, and the remaining 10% who opt out tend to do so because of sound investment advice.

The Conservatives are proud of our rock-solid support in government for our pensioners. The triple lock ensured that we lifted 200,000 pensioners out of absolute poverty over the course of the last Government. Workers deserve dignity in retirement, not just a safety net in old age. They deserve to look forward to their later years with hope, not anxiety, and with choice, not constraint. That is why before the last election, the previous Government had turned their attention to two central issues: first, getting the best value for money out of our pension schemes and, secondly, pensions adequacy. I will come to pensions adequacy later, but let me start by recognising some of the positive measures contained in the Bill to make our pension funds work better for savers.

When Labour gets pensions policy right, it is often by building on the Conservative legacy, recognising what works and seeking to extend it. That is why we broadly support the measures in the Bill that seek to consolidate and strengthen the gains of auto-enrolment. We also welcome the continued progress towards the pensions dashboard, which will revolutionise the way people access their pension information and plan for their financial future.

For too long, the complexity and fragmentation of pension pots has left savers confused and disengaged, as we have heard. If you are anything like me, Madam Deputy Speaker, and are thinking more actively, dare I say it, about your retirement income—actually not like me; you are a lot younger. [Interruption.] Mr Speaker is like me; he is thinking about his pension. He will have spent countless hours trying to track down old pensions. The dashboard, however, will put power back into the hands of savers, and we will support measures in the Bill to improve its implementation and delivery.

I want to highlight the creation of larger megafunds in both the public and private sectors, as well as the consolidation of the local government pension scheme, as sensible and pragmatic steps. The LGPS is one of the largest pension schemes in the UK, as we have heard. It has 6.7 million members with a capital of £391 billion, yet it is highly fragmented into 86 locally administering authorities. There is a great deal of divergence in the funding positions of those councils, even among geographic neighbours. They range from Kensington and Chelsea, which has a scheme funding level of 207%, to neighbouring local authorities like Waltham Forest, Brent, and Havering, which were underfunded in the 2022 triennial review. While we support the concept of these megafunds, there are legitimate questions that I hope the Minister will address in Committee. We do not want to see constituents from one council area unwittingly funding shortfalls from neighbouring areas.

Like many people in this House, I first cut my teeth in politics as a councillor. Soon after being elected, I was appointed chairman of the finance committee on Forest of Dean district council. One of our tasks was to oversee the performance of our local pension fund. Let me assure the House: the Forest of Dean is a truly wonderful place, but it is not the City of London. Our finance committee was made up of dedicated local councillors, but when it came to scrutinising the pension fund, we were—to put it kindly—out of our depth. Meanwhile, the pension fund managers, with their packed diaries and weary expressions, seemed to treat a trip to rural Gloucestershire as a rare expedition to the outer reaches of the Earth.

One thing struck me about small local government pension funds: they simply did not work. But it is not just in local government, small funds are—albeit with some notable exceptions for bespoke funds—not fit for purpose in a global investment environment, as we heard from the Minister. The creation of larger funds will enable greater scale, better investment efficiency and, ultimately, better value for money for members. It will allow our pension funds to compete on the world stage, to invest more in UK infrastructure and to deliver higher returns for British savers.

There are other areas of the Bill that we support and welcome. The consolidation of small, fragmented pension pots is a long-overdue reform. Bringing those together will reduce administrative costs and prevent the erosion of savings through unnecessary fees. The introduction of a value-for-money framework is essential to ensure that savers are getting the best possible deal, not just on charges, but on investment performance and retirement outcomes. We also welcome the development of guided retirement products. We cannot simply leave savers on their own to navigate complex choices at retirement. Changes to provide greater support for those facing terminal illness will provide comfort to those in extremely challenging circumstances. These are all positive steps, and we will work constructively with the Government to ensure they are delivered effectively.

While there is much to welcome, there are also significant areas where the Bill falls short and areas that require attention if we are to deliver a pensions system that is truly fit for the future. Most fundamentally, the Bill does not address pensions adequacy. The uncomfortable truth is that millions of people in this country are simply not saving enough for their retirement. The amounts people are saving, even with auto-enrolment, are too low to deliver a decent standard of living in old age. Research by Pensions UK shows that more than 50% of savers will fail to meet the retirement income targets set by the 2005 pensions commission. Closing the gap between what people are saving and what they will need must be the pressing concern of this Government. We urgently need the second part of the pensions review to be fast-tracked, with a laser-like focus on pensions adequacy. We need a bold, ambitious plan to ensure that every worker in this country can look forward to a retirement free from poverty and insecurity.

[Dame Meg Hillier]

The hon. Gentleman is not wrong on this point. In fact, the Public Accounts Committee looked a number of years ago at enrolment in pension schemes and found that a lot of young people were not enrolling because of the cost of living, which his Government have to take responsibility for. There is no easy answer to this, but I would be interested to know if the Conservative party now have policies to resolve this problem.

[Mark Garnier]

It is an important question, and one that I will come to in due course. Watch this space for a fascinating manifesto in the run-up to the next general election—I am sure everybody looks forward to it.

Water Bill

Debate between Meg Hillier and Mark Garnier

2nd reading
Friday 28th March 2025 Commons Chamber

[Dame Meg Hillier]

I thank my hon. Friend for that point. I hear his passion and his helpful iteration of those historic examples. However, I would also say that we need to be clear about who the shareholders are—very often, they are our pension funds. Pension fund trustees have a fiduciary duty to ensure they are maximising the income for those pensioners. If that does not happen, we know that, effectively, the taxpayer picks up the tab. A reality of privatisation was a drive to have a shareholder society. We can argue about whether that was the right or wrong thing to do, and I think we would probably agree in many respects on that. However, that is the reality of the situation now.

Earlier today, before the House was sitting, I was on a call about constituents who had lost money in an investment and are in a desperate situation. In that case, it was because of criminal activity by a fraudster. Their life savings have gone. The people who have invested and bought those shares, often very humble families who have worked hard all their lives, need some compensation. A student debating society might be tempted to say, “Let’s take it all back, and forget about the impact,” but we cannot forget about the impact, because it often falls on low-paid, hard-working people who are taxpayers too—they would end up paying a double whammy.

[Mark Garnier (Wyre Forest) (Con)]

I thank the Chair of the Treasury Committee for her wise words about the risks that shareholders take when they invest. Has she considered the alternative? At the moment, we are talking about privatisation versus nationalisation, but the alternative is mutualisation, where a water company’s customers would own and control the company on their own behalf.

[Dame Meg Hillier]

It seems there are an awful lot of mind readers in the Chamber today, because the hon. Gentleman anticipates my comments. I am proud to be a Labour and Co-operative Member, so I have thoughts on how, one day, we may be able to move to that nirvana of co-ownership.

We have seen too often that dividends and bonuses are paid without investment in infrastructure, which is where my hon. Friend and I would agree. We have a privatisation model that was supposed to deliver investment on the back of people investing in shares. In return for getting a dividend, there would also be an investment, but we have not seen enough of that.

Of course, under Ofwat rules, water customers bear a share of the cost. In Hackney, under Thames Water, which has been a poster company for the problems in this sector, bills are going up by more than a third. A number of constituents who are very worried about their water bills have written to me just in the last fortnight. When we talk about money in this place, we sometimes talk about millions or billions of pounds, but £100 a month is a great deal of money for many of my constituents.

To set that in context, I have a number of fantastic street markets in my constituency—ones where people can buy fruit and veg, and clothes and underwear at a reasonable price—and I also have the lovely Broadway market, where sourdough bread costs about £5 a loaf. I have constituents who do not have £5 left at the end of the week, let alone at the end of the month—those are the margins that people are working with. Water bills are therefore a significant issue, which is another reason why I am delighted to be here today, supported by colleagues of all parties who want to talk about the challenges of water.

On the face of it, the argument for nationalisation sounds appealing to many, but there is a cost—and it is not a hidden cost: to those who bought shares in good faith, to those pension funds that are investing, and in the upheaval of turning around these companies. Where would we get the people to run a nationalised water company? It is likely to be the same executives, if they would take the pay cut. There is not a wealth of expertise.

I spent a decade examining the work of Whitehall, and there are some excellent civil servants in this country who have done amazing work—many of the civil servants who did not do such amazing work appeared before the Public Accounts Committee—but finding somebody overnight with the technical and management expertise to run a major water company is a challenge.

To take the corollary, I am passionate about seeing insourced services in our hospitals, but after having intense conversations with executives at my local hospital, I know that, when the public sector has not done something for many years, it takes a very long time to build up the expertise. Let us take catering. If hospitals do not cater well, they could kill patients, so they need to make sure they have the management structure in place to deliver those skills. It is the same with water companies—it is not as easy as saying, “One day it’s private, and the next day it’s national. No problem at all.” The upheaval would be immense, so we need a measured plan, and I think this Government have begun to develop that plan, for all the reasons I will outline.

I will talk a little about what the Government will do to improve the situation, and then I will talk about the Bill, but I want first to touch on the comments of the hon. Member for Bristol Central (Carla Denyer). I am very interested in her passionate commitment to citizens’ juries. She has been elected, which is a privilege as we all know, to represent her constituents in this place, yet months after her election, she wants to pass responsibility for this big, difficult decision to a citizens’ jury, rather than taking responsibility for that decision as an elected MP.