I beg to move,

That leave be given to bring in a Bill to require the installation of closed circuit television in licensed hackney carriages and private hire vehicles; to establish a minimum standard for such installations; and for connected purposes.

Like many right hon. and hon. Members on both sides of the House, I am sceptical about the value of the pervasiveness of CCTV in our lives and in our communities, but I wish to explain to the House why I believe that its provision in private hire vehicles and taxis is warranted and justified. For too long our private hire and taxi drivers have been treated like second-class citizens. Indeed, they are an overlooked community when it comes to personal safety. Yet they are an essential part of our public transport system, for in many towns across the country, who is going to take people home in the evenings? It will be a private hire cab or a licensed taxi. However, the safety provided in those circumstances is below that provided in other forms of public transport. It is the most trusting of circumstances: one, two or three people in a single vehicle late at night, with nothing to provide any evidence if a crime is committed.

The types of crime that are committed run the gamut, from theft to racial abuse and assault. Many of our taxi drivers are drawn from ethnic minorities. Racial abuse, wherever it happens, is unacceptable. In Doncaster, taxi drivers requested that the local council bring in CCTV because they were concerned about the incidence of racial abuse. They noted a significant decline in racial abuse following the introduction of CCTV. Theft is almost thought of as a cost of doing business. We should consider what it must be like for a taxi driver when two or three people they have driven home simply refuse to pay. What evidence does the driver have that a crime has been committed? What power does he or she have to stop those people perpetrating that crime? There is little ability to stop the crime and little evidence that it has happened. The number of assaults that occur in disputes between drivers and passengers is horrifying, and occasionally they lead to murder.

Having CCTV in taxis is about providing safety not only for drivers but for passengers, because there are sometimes instances of passengers attacking each other in the back of taxis. In my conversations with the Metropolitan police, I was interested to hear that they regard the provision of CCTV in taxis and private hire vehicles as helpful in cases of sexual assault or rape that occur after people have been taken by taxi to a place of residence.

Those are some general examples, but I have been moved to seek to bring in this Bill by specific examples in my constituency. A year ago one of my constituents, Mehar Dhariwal, was murdered. His murder brought into sharp relief the dangers that men and women in our taxis can be under when they are put in situations of risk. I met his widow, Mrs Dhariwal, last weekend. Although her loss can never be made up for, her encouragement to me was to say, “Richard, it’s important that we bring in this measure so that other people do not have to go through the suffering that I and my family have gone through.”

The dangers faced by taxi drivers were also brought into sharp relief when a friend of mine who works for 24-7 Cars was held at knife point between Bedford and Luton. He managed to escape only because he was smart enough to realise that there was a police car parked at a petrol station he was approaching. He rolled out of the taxi, sustaining injuries, and the taxi came to a halt. The two perpetrators of the crime got out and were chased by two police officers. One of those idiots threw a knife at the police officers and the other turned a gun on them, but the officers bravely dodged the knife and one of them knocked the gun away. I am pleased to say that our chief constable was prepared to take all necessary measures to ensure that those criminals faced the full force of justice.

This Bill proposes to provide for secure and encrypted CCTV in taxi cabs. It is important from the point of view of privacy that the information is secure and encrypted. It should also be accessible by the police only in circumstances in which a crime is reported to have been committed. The system should be mandatory, because then the citizen would know that it was being used when they got into a taxi cab. If the take-up were voluntary rather than mandatory, people would not know exactly what type of safety provision was in use. Councils around the country have seen the value of introducing a mandatory system over a voluntary one.

There is a question about whether CCTV should provide just video coverage or audio coverage as well. This issue was subject to an Information Commissioner review involving Southampton council earlier this year. The consequence was not to ban audio recording outright, but to say that it could be provided only in a panic situation—a short burst of audio at the particular point when a driver felt a crime was being committed. I believe that that is the correct approach.

There are also issues with costs. The last thing I would wish as a result of this Bill is to place additional costs on drivers. We do not ask bus drivers to pay for the CCTV that protects them, and nor should we ask taxi drivers to pay for their own personal safety while they ply their trade. Southampton has built on its work with the Information Commissioner and has a very good approach to covering costs: the council covers the cost of the camera and the taxi drivers are responsible for the maintenance and installation of the system. That also allows the driver to recoup their costs through insurance reductions, because CCTV is able to look outside as well as inside the vehicle and can therefore be used as evidence in claims when crashes or whiplash are caused. In such circumstances, I believe that the costs that would fall on the drivers would be negligible at best.

This Bill seeks to provide a level of security for our taxi drivers that is long overdue. Workers in other high-risk transport situations already benefit from it and I believe it would have a significant impact. A US study recently compared the effect of measures such as CCTV and barriers between the driver and passengers. It found that only one method contributed to a significant reduction in crimes against drivers, and that was CCTV.

This Bill has many benefits, but to my mind the most important is that it will start to give respect to our taxi drivers and stop people treating them as second-class citizens.

Question put and agreed to.

Ordered,

That Richard Fuller, Meg Hillier, Mr Adam Holloway, Siobhain McDonagh, Stephen McPartland and Priti Patel present the Bill.

Richard Fuller accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 8 November, and to be printed (Bill 121).

On a point of order, Mr Speaker. Has the Secretary of State for Transport indicated that he intends to make a statement to the House on the fourth revised version of the justification for High Speed 2? I heard him say on the television this morning that the £50 billion was perfectly justified and that he was producing a report for Parliament. However, as far as I can make out, there has been no report to Parliament.

I have received no indication that the Secretary of State intends to make a statement to the House on that matter. However, the House will be treating of these issues on Thursday. I expect that a significant number of Members will wish to contribute to that debate and I fancy that the right hon. Gentleman might be among them.

Further to that point of order, Mr Speaker.

I am not sure that there is anything further, but the right hon. Gentleman is an immensely senior Member and I must give him the benefit of the doubt.

The proceedings on Report are likely to be fairly specific to the amendments that are tabled, whereas what needs to be discussed is the new financial justification for the scheme. I suspect that it will be rather difficult to discuss that and to remain in order on Thursday.

I note the point that the right hon. Gentleman makes. I am advised that there is a written ministerial statement, although I readily recognise that that will not satisfy him because it does not afford an opportunity for oral questioning. I have got the point that he wishes to hear a spoken justification from a Minister, however senior, and to have the opportunity to question them on the matter. If the right hon. Gentleman is in his place and seeks to catch my eye, he might find favour. I hope that that satisfies him for now.

Pensions Bill (Programme) (No. 2)

Ordered,

That the Order of 17 June 2013 (Pensions Bill (Programme)) be varied as follows:

(1) Paragraphs (4) and (5) of the Order shall be omitted.

(2) Proceedings on Consideration shall be taken in the order shown in the first column of the following Table.

(3) The proceedings shall (so far as not previously concluded) be brought to a conclusion at today’s sitting at the times specified in the second column of the Table.

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following:

Amendment (a) to Government new clause 1, line 6 at end add—

‘(2) In this section—

(a) “charges”; and

(b) “transaction costs”

shall be defined in regulations by the Secretary of State.

(3) Before making regulations under subsection (2), the Secretary of State must undertake a public consultation, which must include the views of—

(a) the Financial Conduct Authority; and

(b) the Pensions Regulator.

(4) With reference to paragraph (2)(a), any public consultation must consider the different elements which comprise charges and not just the annual management charge.

(5) Such charges, together with any transaction costs incurred by the funds in which qualifying schemes are invested, shall be declared on an annual basis to the Pensions Regulator, which shall maintain a public register thereof.

(6) The Secretary of State shall by regulations set the standards by which pension schemes must declare charges and transaction costs for the purposes of the register and for declaration to their members and their members’ employers.

(7) The standards set out in regulations under subsection (6) shall be reviewed every three years.

(8) The Secretary of State shall have power to make regulations ordering other disclosure arrangements on administration charges.

(9) Regulations under this section may not be made unless a draft has been laid before and approved by resolution of both Houses of Parliament.’.

New clause 7—Railways pension scheme—

‘(1) The Railways Act 1993 is amended as follows.

(2) In Schedule 11 (Pensions), after paragraph 11 there is inserted—

“Employers insolvency

11A (1) This paragraph applies if an insolvency event occurs in relation to the employer or former employer of a protected person.

(2) Where this paragraph applies the Secretary of State shall become liable to discharge any liabilities in respect of relevant pension rights, to the extent that they are not discharged by the trustees of a new scheme in which the employer was a participating employer.

(3) For the purposes of this paragraph—

(a) “insolvency event” has the meaning set out in section 121 of the Pensions Act 2004;

(b) “relevant pension rights” means the relevant pension rights referred to in paragraph 6(3) above.

11B The duty referred to in paragraph 11A also applies if an insolvency event has occurred in relation to the employer or former employer of a protected person on or after 1 October 1994.”.’.

New clause 9—Fiduciary duty of independent trustees—

‘(1) The Secretary of State may by regulations—

(a) require any pension scheme, which is not already overseen by independent trustees, to appoint a board of independent trustees; and

(b) set out the powers and duties of a board appointed under paragraph (1)(a).

(2) Regulations under this section—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(3) The board of independent trustees shall have a fiduciary duty towards members of the scheme overseen by them.

(4) The fiduciary duty set out in subsection (3) shall take precedence over any duty to—

(a) the shareholders in, or

(b) other owners of,

the operators of the scheme.

(5) In relation to any matters of member interest, decisions of the board of independent trustees shall be binding on the board of directors or other analogous management board of any undertaking operating a pension scheme.’.

New clause 10—Promotion of good value in scheme size—

‘(1) The fiduciary duty of pension scheme trustees shall include a duty to consider whether the scheme has sufficient scale to deliver good value for members.

(2) Where trustees take the view that the scheme has insufficient scale, they must consider whether merger with another scheme would be in the members’ interests.

(3) The Pensions Regulator shall have power to direct merger of pensions schemes where it would be in the interests of the members of each of the relevant schemes for merger to take place.

(4) The Pensions Regulator shall exercise this power in accordance with a methodology on which it has publicly consulted and which has been agreed with the Secretary of State.

(5) The methodology set out in subsection (4) shall be kept under regular review and revised when necessary, subject to further consultation and agreement from the Secretary of State.’.

New clause 11—Decumulation—

‘(1) Any qualifying money purchase scheme must direct its savers to an independent annuity brokerage service or offer such a brokerage service itself.

(2) Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with—

(a) an assisted path through the annuity process;

(b) ensuring access to most annuity providers; and

(c) minimising costs.

(3) The standards meeting best practice on decumulation shall be defined by the Pensions Regulator after public consultation.

(4) The standards set out in subsection (3) shall be reviewed every three years and, if required, updated.’.

New clause 12—Sustainability of private pensions: review of implications of climate change and natural resource constraints—

‘(1) The Secretary of State shall commission an independent review of the implications of climate change and natural resource constraints for the sustainability of private pensions.

(2) In particular, the review must consider the implications for long-term investment outcomes for members of work-based pension schemes of potential—

(a) systemic risks posed by high levels of exposure to fossil fuels and other carbon-intensive assets;

(b) economic and physical impacts of climate change under various climate mitigation scenarios; and

(c) constraints on the availability of non-renewable resources.

(3) In subsection (2)(c), “non-renewable resources” includes food, water, land and energy resources.

(4) A report of the review’s findings, including recommendations to government, must be laid before Parliament no later than 30 October 2014.

(5) The government must lay before Parliament its response to the review’s recommendations no later than 30 January 2015.’.

Government new schedule 1—‘Work-based schemes: power to restrict charges or impose requirements.

Amendment 38, in clause 29, page 15, line 24, leave out from ‘scheme’ to end of line.

Government amendments 5 to 10.

Amendment 53, in clause 34, page 18, line 22, at end insert—

‘(5) Regulations under this section shall not exempt entire classes of business or businesses, such as small and medium-sized businesses, from automatic enrolment.’.

Government amendment 11.

Amendment 54, in clause 42, page 23, line 7, at end add—

‘“(czb) to promote, and to improve understanding of long-term and sustainable investment amongst work-based pension schemes,”.’.

Amendment 39, in schedule 16, page 84, line 37, leave out from ‘of’ to ‘transfer’ in line 1 on page 85, and insert

‘a transferable benefits scheme, the cash equivalent of the transferable benefits—

‘(a) is transferred to a nominated’.

Amendment 40, page 85, line 3, leave out ‘automatic transfer’ and insert ‘transferable benefits’.

Amendment 41,  page 85, line 8, leave out from ‘an’ to end of line 9, and insert

‘a transferable benefits scheme, means a member of the scheme who is no longer having contributions made to their benefits.’.

Amendment 42,  page 85, line 22, leave out sub-paragraph (5) and insert—

‘(5) In this Schedule “nominated transfer scheme” means—

(a) a work-based pension scheme which is registered under Chapter 2 of Part 4 of the Finance Act 2004 and is a money purchase scheme;

(b) a scheme in which the qualifying member is a member, or that has been nominated by the member or the transferable benefits scheme for the purposes of transferring pots;

(c) a pension scheme which meets quality standards as set out by the Secretary of State;

(d) a pension scheme that meets any other requirements set out in regulations.’.

Amendment 43,  page 85, line 38, leave out from beginning to end of line 29 on page 87, and insert—

‘Transferable benefits scheme to transfer to nominated transfer scheme

2 (1) The regulations must require the trustees or managers of a transferable benefits scheme to establish an agreement with a nominated transfer scheme to make provision—

(a) for the transfer of qualifying members’ benefits to the nominated transfer scheme; and

(b) describing how and when steps are to be taken in order to effect the transfer.

(2) The regulations may make provision for a protocol through which a transferable benefits scheme may establish an agreement with a nominated transfer scheme.

(3) The regulations must ensure that where the duty to transfer qualifying members’ benefits to a nominated transfer scheme, has arisen, the member may opt out of the transfer or identify an alternative nominated transfer scheme to which the members’ benefits will be transferred.’.

Amendment 44,  page 88, line 25, at end insert—

‘Nominated transfer schemes: quality requirements and administration charges

10A (1) The regulations may impose requirements that must be satisfied by any nominated transfer scheme.

(2) The requirements may in particular relate to—

(a) the governance of the scheme;

(b) the administration of the scheme; and

(c) the certification of the scheme by the Regulator.

(3) The regulations may make provision limiting or prohibiting any administration charge that may otherwise be imposed on a member of an automatic transfer scheme.

(4) Regulations made because of sub-paragraph (3)—

(a) may make provision for the manner of, and criteria for, determining whether an administration charge exceeds any limit or is prohibited; and

(b) may provide for the determination to be made in accordance with guidance issued from time to time by the Secretary of State.

(5) The requirements that may be imposed, and the charges that may be limited or prohibited, because of this paragraph need not relate to things done under the regulations.’.

Amendment 45,  page 88, line 27, leave out paragraphs 11 and 12.

Government amendment 28.

Amendment 55,  page 88, line 38, at end insert—

‘(c) the ability of the scheme to generate sustainable investment returns.’.

Amendment 46, page 89, line 39, leave out ‘an automatic’ and insert ‘a nominated’.

Amendment 47,  page 90, line 1, leave out ‘current’.

Amendment 48,  page 90, line 2, after ‘member’, insert ‘in a nominated transfer scheme’.

Amendment 49,  page 90, line 3, leave out sub-paragraph (2).

Government amendment 29.

Amendment 50,  page 91, leave out line 11.

Amendment 51,  page 91, line 21, at end insert

‘“nominated transfer scheme” has the meaning given by sub-paragraph 1(5);’.

Amendment 52, page 91, leave out lines 36 and 37.

Government amendments 30, 31 and 12.

This group of amendments contains a long list of disparate topics. To give the House a feel for what we are discussing, it includes an attempt to limit the scope of automatic enrolment, the transfer of small pension pots, short service refunds, the vexed issue of pension scheme charges, issues with governance and administration, the decumulation of pension pots, the specific issue of rail pensions and the pension protection fund compensation cap. I shall do my best to whizz through all those issues to minimise or obviate as far as is possible the need for me to return to the Dispatch Box on this group.

I should start on a note of consensus. This part of the Bill deals with private pensions and I think that the House would agree that the process of automatic enrolment into workplace pensions is going exceptionally well. The process started a year ago. British industry has automatically enrolled about 1.7 million employees into workplace pensions. The rate of not opting out, or of staying in, has been far better than anybody predicted. Our survey evidence suggests that of the order of nine in 10 workers have chosen to remain in their workplace pensions. That is something that we should all welcome.

The Bill is designed to improve that situation further and to deal with some unfinished business. Although the principle of automatic enrolment was legislated for in the previous Parliament, many issues were not dealt with. If those are not dealt with, it will undermine the success of automatic enrolment.

Amendment 53 relates to the scope of automatic enrolment. Clause 34 gives the Government the power to exclude some people from the employer duty for automatic enrolment. I will give the House a flavour of the sorts of people that we might be talking about. In automatic enrolment, we have sought to strike a balance between setting out the rules at the start and giving employers and the industry certainty, and learning and listening and then changing the rules when we have got something wrong or when something needs to be refined or streamlined. We could have changed the rules and constantly tweaked things, or we could have said at the start, “These are the rules for the next five or six years until everybody’s in. Go and deal with it”, but we tried to strike a balance.

As we have learned, the rules require employers to put a certain set of people into workplace pensions who may immediately opt out. For example, people with what is called enhanced or fixed tax protection status—high net wealth individuals—could face a tax surcharge if their pension pot exceeds the lifetime allowance. In general, such individuals will want to opt straight back out of the scheme, and their employers have said, “Why are you making us put these people into pension schemes? We all know they are going to opt out, and indeed they will be cross with us if they fail to opt out and later face a tax penalty.” At the moment, the Government do not have the power to enable firms not to enrol those people, so clause 34 provides the power to exempt them from enrolment.

The second example concerns those who have already given notice. Someone may have given a month’s notice, but in the middle of that period the Government require the employer to put them in a pension scheme. As Members will understand, that is silly, because that person will probably opt out immediately. In any case, asking firms to enrol people who have already given notice does not do much for our relations with the CBI. Those are examples of where we have given employers a comprehensive, rigid legal duty that creates perverse outcomes. Clause 34 therefore allows employers to exempt certain categories of workers, and I have mentioned the sorts of examples it would cover.

Amendment 53 says, “That’s all very well, but we don’t want you using the power to exempt categories of business such as small and medium-sized firms.” Leaving aside the fact that the amendment does not define an SME and it is not clear who would be covered, and that any amendment with “such as” suggests it is a bit vague to begin with, in responding to the spirit of the amendment I assure the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) and the House that the Government have no intention of using the power to exclude small and medium-sixed firms. That is not what this is about.

Amendment 53 is otiose, because if we were the evil Government that the hon. Gentleman thinks we are and wanted to exclude small and medium-sized firms, we could do that anyway. The staging schedule is set in statutory instrument, subject to negative procedure. Therefore, if we wanted to exclude Britain’s small firms, we would have only to produce a statutory instrument that would say that small firms will be required to stage in 2099. That would not even be subject to a vote in the House. If the amendment seeks to stop the Government doing something that, in any case, we do not want to do, it would not work; we could still do it even if the amendment were successful. I hope I have reassured the House that amendment 53 is unnecessary, because we do not plan to do such a thing. Secondly, the amendment is not well drafted because it is not clear who it means. Thirdly, even if passed, it would not achieve the desired objective. An unnecessary, poorly drafted amendment that does not work should probably not be approved by the House.

Amendments 38 to 52 concern what happens to small pension pots—an issue that was not addressed when the original legislation for automatic enrolment was drawn up. People change jobs perhaps 10 or 11 times in their working life, and they leave behind small pension pots. From the Australian experience, we know that can mean lots of people losing track of their pension pots and not engaging with pension saving because they have large numbers of small, silly pension pots all over the place.

Australia is often mentioned as having one of the world’s best pension systems, and the Australians say that the one thing they wish they had addressed at the start was small dormant pension pots. The Australian Government have been going at this for longer than we have, and they estimate that they have 5 million lost pension accounts containing 20 billion Australian dollars. It is a serious issue. Clause 29 in schedule 16 sets out the Government’s response to the issue, which is what we call pot follows member. When someone moves from an auto-enrolment defined contribution pot to another one, their pot—as long as it is below a £10,000 threshold—automatically follows them unless they opt for that not to be the case.

Interestingly, Nick Sherry, former Australian superannuation Minister and highly regarded in the field, said of pot follows member:

“It’s the only practical way. It’s better off”—

because the money is in the worker’s last account—

“which is why I think it’s the only practical solution”.

We are delighted to have Nick Sherry’s support for our approach, as well as that of the Association of British Insurers. In the briefing sent to hon. Members the ABI welcomes the fact that the Bill includes provisions for the automatic transfer of small pension pots, which will lead to greater engagement and help people make savings decisions that are right for them and should lead to greater income in retirement. That is a welcome level of support for the proposition.

The Opposition amendments suggest a different route and would mean that when someone changes job, the dormant pension pot is automatically transferred to a third-party pension scheme called an aggregator. As I understand it, there would not be just one aggregator but multiple aggregators, and I have multiple concerns about that. First, such a policy would clearly lead to greater fragmentation of pension saving—it must do. Let us imagine the simplest example in which someone moves from firm A to firm B, and works only for two firms in their working life. In our model, the small dormant pension pot follows them from firm A to firm B—or scheme A to scheme B—and they end up with a single pension pot. In the model suggested by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, the dormant pension pot gets shunted off to some third-party provider with whom the employee has never engaged. They therefore have a pot with the current employer and with the third-party provider.

We are trying not just to hoover up small pension pots but to get people engaged in pension saving. The problem with someone shunting their money off to a third-party provider, perhaps one they did not choose—there is not much detail in the hon. Gentleman’s model, but I do not think it involves a person choosing a third-party provider, although perhaps it does—is that they get a letter from a pension company they have never heard of saying, “Guess what, we’ve got your dormant pension pot.” It is not exactly a ransom note, but it might be the first that someone knows about it, and that will not lead them to becoming engaged.

Under our model, someone’s pension savings are with their current employer. That is what they are interested in and where workplace pension engagement takes place. We therefore believe that our model provides better consolidation of pension saving and better engagement. Our model also saves on the cost of running pension schemes, compared with the model set out in the amendments. With a pot size limit of £10,000—obviously our published research relates to the £2,000 pot size limit on the aggregator model—which is the same across the two systems, we still estimate that the aggregate approach will achieve only half the cumulative administrative savings by 2050 of our pot follows member system. While aggregators are worth a look—we considered that option—it is clear that pot follows member is the best solution.

There is an issue of what happens if money is automatically transferred from a “good” scheme to a “bad” scheme, and I accept that point. That is why we are regulating for scheme quality. It should not just be a worry that someone’s small pension pot gets auto-transferred to a bad scheme; it should be a worry that an entire work force have been auto-enrolled into a bad scheme. We should not have bad schemes and must deal with that. That is why we are tackling pension scheme quality, which includes a range of issues such as governance, investment, costs and charges. In a few moments I will have news for my hon. Friends and the House about what action we are taking on charges. For those reasons, we are not convinced by the multiple aggregator model, as it is catchily known. We believe that the someone changing job and their money following them is a simple, attractive notion that I commend to the House. I therefore ask the House to reject amendments 38 to 52.

Amendments 5 to 10 are largely technical and deal with short service refunds. There is a category of money purchase pension schemes through which someone who has worked for a firm for under two years can have their money back when they leave. That is not in the spirit of what we are trying to achieve through our pension reforms. We want people, even those who put in relatively small amounts of pension savings, to accumulate that, build up what I call a big fat pot, and have a decent retirement. Short service refunds fly in the face of the view that even modest pension savings are worth having, and we therefore propose to eliminate them. The danger with the current legislation is that although someone joined to a pension scheme through a contract has 30 days to opt out, under the Bill they would be in the scheme on day one, and a day’s or month’s worth of pension contribution would be lodged. On purely pragmatic grounds we took that view that we ought to apply the same 30-day rule to short service refunds. Clause 32 abolishes short service refunds, and technical amendments 5 to 10 deliver a 30-day breathing space so that someone who is a member of a scheme for fewer than 30 days can receive a refund of what are essentially nominal contributions. I hope that amendments 5 to 10 will be welcomed across the House.

I thank the Minister very much for the announcement that he will consider a 0.75% cap in the consultation. Will he ensure that, in the consultation, there is clarity about what the 0.75% includes? As he is aware, there are an awful lot of different interpretations of costs by different people. That is part of the problem.

My hon. Friend is right. The consultation document discusses what should be included in the charge cap. My instinct is to prefer a comprehensive definition of charges. Clearly, we do not want to cap annual management charges and find out that the industry has cunningly managed to get its money back by some other route or a disguised charge. We therefore discuss what should be included.

My instinct is to go for a broad measure. There is an issue with transaction costs—we clearly want to know about them. Including transaction costs in the cap could lead to a slightly odd situation. Towards the end of the financial year, the fund and the trustees might believe that conducting a transaction is the right thing to do for the benefit of the pension fund. However, they might be unable to do that because the transaction costs would take them over the annual limit. We would be grateful for feedback on that and need to address those issues. One reason why we are having a consultation rather than laying down a definite answer is that we want insight on the fine detail, as my hon. Friend says. The basic principle is that we are looking at ensuring that 99p-plus of every £1 put into a pension goes into a pension. I am grateful for his comments.

I should add that there has been a suite of activity on charges. To remind the House, we announced a ban on consultancy charges earlier in the year. Government new schedule 1 and Government new clause 1 give us the power to put a set of powers to cap and regulate charges and quality all in one place. That includes automatic enrolment schemes, qualifying schemes and closed schemes. Lots of people have lots of money tied up in closed schemes. Without those measures, we would not necessarily have the powers we need to regulate the charges they pay. In some ways, the charges that people in closed schemes are paying—they are often old, high-charge schemes—are worrying, because people are often not engaged with their pension saving in a closed pension scheme.

Prompted by the OFT and working with the ABI, we are looking at legacy schemes—schemes introduced before 2001. The average charges in legacy schemes are 26% higher than charges in schemes sold after 2001. This is a full-frontal assault on pension scheme charges. We have banned consultancy charges; we are taking powers in the Bill to go further for auto-enrolment schemes; and we are looking at legacy schemes, charges and charge caps. We are taking effective action on issues that previous Governments have only dabbled with. That is why I urge my hon. Friends to support our new clause and our other proposals. They deliver, whereas the Opposition’s proposals mess about around the edges.

On governance and administration—in the context of new clauses 9, 10, 11 and 12, and amendments 54 and 55—quality in pension saving is not only about charges. How well schemes are governed and administered is important. Interesting issues are raised by the Opposition’s proposals—obviously, they are flawed, but I acknowledge that they raise important issues. New clause 9 would impose a trust-based structure for all pension schemes, with independent trustees across the board. But interestingly, the Office of Fair Trading’s project leader on the workplace pensions report that has just been published was recently quoted as saying that although trusts feel like an intuitively better way of looking after people’s pensions, that

“is largely dependent on the quality of the trustees.”

Given the many pension schemes we have at the moment, including many defined-benefit schemes, a requirement for every scheme to have a particular sort of trustee could be a real challenge, especially for smaller DB schemes.

Some of the Opposition’s suggestions may not be in the interests of members of schemes. I think the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East was at the recent conference of the National Association of Pension Funds, where he would have heard Fiona Reynolds, the chief of the Australian Institute of Superannuation Trustees—our friends the Australians again—commenting on his suggestion. She said:

“Looking at the Australian system, we conducted a lot of research into whether there should be more independent trustees but in actual fact we found there was a greater alignment of interest within trust based schemes, and these schemes outperformed other schemes where independent directors were present.”

In other words, these are interesting ideas, but they have been tried elsewhere and they are not a panacea or golden bullet.

If that is the case for Australia—and I looked very closely at Ms Reynolds’s comments—why are the Australian Government giving the regulator and trustees a duty to consider how to improve the Australian pension system in the future?

I do not see any incompatibility. The specific finding in Australia that independent trustees are not a magic bullet is not inconsistent with requiring schemes to ensure they are doing a good job. We will require schemes to meet quality standards that we will set out shortly.

Our call for evidence earlier this year sought views on provider-level governance structures, and the OFT has announced that the Association of British Insurers will work on independent governance committees for the big insurance-based schemes. We welcome that development and will consider our own proposals in detail in our response to the call for evidence.

The second set of governance issues relates to fiduciary duty and sustainability, addressed in new clause 12, tabled by the hon. Member for Brighton, Pavilion (Caroline Lucas) and amendments 54 and 55. By happy coincidence, I took part in a conference this morning organised by ShareAction. The hon. Lady was on the attendance list—perhaps she was sitting at the back heckling, but I did not see her there. The conference was to launch ShareAction’s green light project, which aims to get pension funds to take sustainability and climate change seriously. I was delighted to take part in that conference and I am very supportive of that agenda.

Clearly, the duty of trustees to their members is a cornerstone of trust-based governance, but we are looking at whether we have got the definition of fiduciary duty right. I welcome the fact that the Law Commission has consulted on this. Its interim conclusion is that fiduciaries should look at longer-term issues, and it is legitimate for them to look at environmental, social and governance—ESG—issues. The Government are therefore considering what the fiduciary duty on trustees means and how far we can deal with it through a better understanding of that work.

One of the issues that came out of the conference this morning—I shall try not to deviate too much from the new clauses, Mr Speaker—was that the trustee toolkit that the Pensions Regulator provides could be amended to take account of some of these concerns. One of the challenges is to try to ensure that the trustees do their job properly and have a broad understanding of what it entails. As I say, the Law Commission’s interim conclusion was that trustees should—note “should”, not just “may”—consider

“in general terms, whether their policy will be to take account of ESG factors in their decision-making”.

I am grateful to the Minister for his positive comments. I take the point that the pension aspect is not the full picture, but it is a big part of it. If we want to make quicker progress on this issue, can he advise where we should best table our next amendments?

In someone else’s legislation—[Laughter.] Just between ourselves, I encourage the hon. Lady to keep up the pressure across Government, including at Business, Innovation and Skills questions, Energy and Climate Change questions and Work and Pensions questions. To be frank, this issue is not always at the top of the pension agenda, so I welcome the amendments for that reason. I am reluctant, however, to amend the Bill in a piecemeal fashion, when I hope that we can have a more overarching framework affecting company law, business regulation and the duties of trustees not only in pensions but beyond. I am sympathetic to what she is trying to achieve, but we want to do it in a systematic, cross-Government way rather than dealing with just a bit of the issue. I look forward to hearing what she has to say, but I hope that she will withdraw new clause 12.

Scale is important. I do not think anyone doubts that, on average, bigger schemes produce better outcomes than smaller schemes, in the sense that, typically, bigger schemes have lower costs; they have the potential to diversify and pool risk; they have access to investment vehicles that smaller schemes perhaps do not; they have access to better quality investment advice; and they have more experienced trustees. We can see why, on average, a big scheme will probably do better than a small scheme. Just as the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East is searching for golden bullets on independent trustees—

Silver bullets.

Apparently he is searching for silver bullets. In any case, we are already seeing consolidation. To give the House a sense of scale, let us consider small and medium occupational defined-contribution schemes for between 12 and 1,000 members. The number of such schemes fell by more than a third in three years—a dramatic fall—from 3,300 to 2,110. The number of micro-schemes, with between two and 11 members, fell by a fifth over the same period, from some 45,000 to 36,000. In a sense, the Opposition amendments seek to force the pace on scale, but it is already happening quite quickly. That is a welcome development, and once we implement our measures on scheme quality—which, subject to consultation, may include tough action on charges—there will be a seismic effect on the pensions industry.

If a scheme cannot be used for auto-enrolment unless it delivers seriously low charges, many small, sub-scale schemes will fall by the wayside. The trends are already in that direction, and the measures we shall implement will substantively accelerate that. Rather than presume that scale is the right answer, we have to regulate the quality. If a small scheme can demonstrate that it is, for example, tailored to the characteristics of its membership and is delivering for them, great.

We do not want to kill good-quality small pension schemes, which is what the Opposition’s slightly bureaucratic amendment could do. Instead, we will say, “This is what we think good looks like. If you, as a big or small scheme, can deliver that, we will not tell you what to do. We will set parameters for what good looks like and you have to deliver.” Consolidation is already happening, and the quality requirements we are putting in place will deliver the outcomes that the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East wants.

Moving on—I apologise for the jargon—to decumulation, or “turning pension pots into retirement income,” as I think I am required to call it, new clause 11 suggests that it should be a requirement on schemes to feed in an annuity broker at the end. The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East touches on an important issue, albeit again in an overly rigid way. Getting pension pots into a good profile of retirement income is crucial, which is why we at the Department for Work and Pensions are working with our colleagues at the Treasury on annuities and decumulation. Decumulation is about more than annuities. That is not a snappy soundbite, but in other words, turning a pension pot into a retirement income has to be about the whole process of retirement, not just a single event on a single day that fixes one’s retirement income for perhaps 30 years.

The danger with the rigidity of new clause 11 is that it presumes a backward-looking annuity model. Annuities in their current form were designed for a world where people lived for 10 years with pensions and then died. We now have a world where people might annuitise in their early 60s, or want to stop contributing to their pension pot in their early 60s, and live into their 90s. There are serious questions about the suitability of annuities for everybody. For example, people with big pension pots might want to look at a mixture of draw-down. They might want to look at alternatives, deferral or a range of options. It would be a backward step to hardwire into primary legislation that the only good thing that can be done with a pension is to annuitise through this particular model. We should give people new options at decumulation, not hardwire them into the annuity model. Of course, even an annuity broker may not necessarily guarantee that someone will get, for example, an impaired life annuity or enhanced annuity for disability or low life expectancy.

There is a lot that needs looking at in this section of the market. The initiatives that the industry has already taken—for example, the ABI code that came into practice earlier this year—are welcome, but we need to go further. We need a creative approach to turning pension pots into pension income, not a single product hardwired into a primary legislation model. I understand where the hon. Gentleman is coming from and I believe that the annuity market is in need of further reform, but hardwiring into primary legislation does not seem to us to be the way to go.

The House will be pleased to know that there are two final sections left, both of which are brief. The hon. Member for Hayes and Harlington (John McDonnell), who does not appear to be in his place, tabled new clause 7, on rail pensions. The new clause relates to whether the Government should underwrite the shortfalls in the pension funds of employees who worked for the nationalised rail industry, which was then privatised, and where some companies, such as Jarvis Facilities, Relayfast and Fastline, went to the wall. We sympathise with any worker whose firm goes to the wall, but I say to the hon. Gentleman in absentia that the notion of protected persons in this case was simply that the terms of the pension scheme of the private employer would be as good as in the public sector. It was never a guarantee against the insolvency of the sponsoring employer. All private sector employees are covered by the Pension Protection Fund, provided that their firm pays the PPF levy. That is how these workers will get all or most, depending on their circumstances, of the pensions they were expecting. It would be wrong to give special treatment to that group when many other people work for firms that went to the wall and will not get that treatment.

Does the hon. Gentleman not accept that to enable privatisations to go ahead—we are not just talking about the railways; the electricity sector and the miners were affected in similar ways—promises were made that people’s pensions would not suffer any detriment as a result of privatisation? Our experience is that privatised companies go bust more often than others. Surely we are reneging on those promises.

Just to be clear, new clause 7 makes a specific suggestion regarding a private sector employer going to the wall. The promise was never, “You’ll get absolutely everything, even if your firm goes bankrupt”; it was that the terms of the pension would be as good as in the public sector. Clearly, in this case people are working for a private sector firm and could, if they wish, transfer their pension rights to somewhere else. They chose to keep them with the sponsoring employer.

Bear in mind that the money to pay for any shortfall in those pensions will come from the general taxpayer. Somebody is paying for that shortfall and many general taxpayers have no pension provision at all. If a private company knows that the pension fund is completely insured by the Government, that may influence its behaviour in a way we would not want. If feels unfair to say, “If your private employer used to be nationalised not only do you still have access to a very good pension scheme, but it is absolutely protected, whereas if you worked for any other private firm you are not protected.” I can understand why the hon. Member for Hayes and Harlington, given his trade union links, supports the railway workers—that is fair enough—but it seems like special pleading for that industry and I think there are many others who might make the same argument.

I am sorry to take my hon. Friend back to annuities, but I have been reflecting on his remarks. I agree with the need for us to be more creative in that interface as annuities are taken out, and he is right to say that the annuity broker is overly prescriptive. However, it is also true, as I think he said, that there are market abuses in the annuity system. Is there any more we can do in the consultation to look at the transition from pension fund to annuity and ensure that, for example, the Association of British Insurers code of conduct is more rigorously applied than it has been? It has not been very successful up till now.

Although the ABI code, for example, no longer requires the providers to send the application form with the wake-up letter, I gather the early evidence is that it has not substantially changed the proportion of people who shop around and then move to a new provider. I agree with my hon. Friend that there is a big agenda on decumulation—I apologise again for the word. It is not just about annuities. The new clause is too narrow and too prescriptive, but I assure my hon. Friend that we do not regard decumulation as a job done—on the contrary.

I have been contacted by a number of constituents who are in difficulties because of the current regime. The Minister clearly accepts that there is a need for change. When will he come forward with proposals? He has been in post for a number of years and is clearly on top of his brief. We need the Government to act. When will they do so?

My particular responsibility is automatic enrolment. We are about to put 10 million people into mainly defined-contribution pensions, the vast majority of whom, all things being equal, will then buy an annuity at the end. For understandable reasons, our focus in the past few years has been to get the infrastructure in place to get those 10 million people into pension saving and building up pension pots. Then, when they have a pension pot, we will ensure that they receive good value at the other end. There will be a set of people who will be auto-enrolled today and will retire tomorrow, but they are a minority. We need to get to grips with this issue. Annuity policy is led by our colleagues in the Treasury, which is why we are working closely with them. We hope to make further announcements soon.

Government amendment 31 relates to the Pension Protection Fund compensation cap. In Committee, we amended the Bill so that workers entering the PPF would have a more generous cap if they had been long-serving employees. The amendment applies the same provisions to people who are already in the PPF. We will not go back years and increase pensions retrospectively, but once the Bill and secondary legislation are passed we will increase their pensions going forward in line with the provisions we have already made for new employees going into the PPF.

Will the Minister explain what the position will be with regard to the cap for those who are in the financial assistance scheme and are not yet in the PPF?

I am grateful to the Chair of the Select Committee. As she knows, the PPF scheme is funded by the PPF levy, and the financial assistance scheme is funded directly by the taxpayer. I think the FAS will be moving next year to the Department’s annually managed expenditure budget, so we will then have to find taxpayers’ money to make a parallel change to the FAS. We are continuing to reflect on whether we should do so. No final decision has been made, but I understand the case for some matching change.

To conclude, the change to the compensation cap will mean that relatively small numbers of people—who, having worked for their firm all their life, should have got a good pension, but on whom the cap was biting particularly harshly—will now get a fairer pension, which has been widely welcomed by those affected.

In summary, this section of the Bill deals with making automatic enrolment and private pensions work. Automatic enrolment has been a great success so far, but there have always been a lot more aspects to sort out, small pension pots being one in particular, scheme quality another. I am delighted to say, therefore, that this is the week we finally tackle the scourge of excessive pension charges, and I commend the Government amendments to the House.

I have listened closely to the Minister. When one listens to him, particularly on pension charges, one has to listen very closely, because—how shall I put this politely?—there is a gap between the rhetoric and the reality. I will analyse the extent to which there remains a gap. In one sense, he has caught up with the questions that need to be asked about pension charges, but from the detail—or lack of detail—in his announcements, it seems we are still a long way from getting answers.

On other matters first, however, the Minister says that auto-enrolment is going “exceptionally well”. I think that that is accurate, but I am sure he would agree that we have to be cautious, given that it is very large employers that have enrolled and that the percentage of savers’ income going into the new pension schemes is very small—in many cases, it is hard to notice. We welcome the developments, however, and pay tribute to him for taking forward the previous Labour Government’s auto-enrolment scheme; there is consensus, I think, on both sides of the House that auto-enrolment has to work effectively. It is crucial that every single one of the 10 million people being auto-enrolled between 2012 and 2017 can be sure of getting value for money from that pension scheme. The necessity of value for money for all auto-enrolment schemes is what drives my amendments.

I wish to say a little about why that matters so much and how the Minister’s wind-up of the state pension interacts crucially with auto-enrolment. Essentially, he has gone for a hard and fast wind-up of the second state pension. No doubt, he will justify that move, and there are reasons to think it is sensible, but if we are to have a quick wind-up of the second state pension and a fast move to a flat-rate state pension, the biggest losers from that switch—this might be defensible, because there are always winners and losers—are likely to be lower-paid workers in the private sector who did well out of the redistribution accrual mechanism in the second state pension. If someone was low paid in the private sector, they accrued in a way that brought them closer to those on higher incomes. In many cases, therefore, the same people now being auto-enrolled will be the same people losing out from the hard and fast wind-up of the second state pension, or losing out in the longer term. That makes getting auto-enrolment right all the more important. The first thing he should have done when he took office—I know he will have an enormous in-tray—was work out how to ensure that every one of the 10 million people enrolled got value for money. That is the context of this debate.

The Minister says that the Bill will further improve the situation, so let me pursue some of his comments and then turn to Labour’s vision for private pensions. Amendments 5 to 10 to clause 32, on short service refunds, are more or less uncontroversial. On clause 34 and exemptions from auto-enrolment, he referred to our amendment 53 and said that I saw this as an “evil Government”.

Hear, hear!

That is a lesson in not posing a rhetorical question. Whatever my hon. Friend believes, I do not see this as an evil Government—in particular, no one doubts the Minister’s good intentions—but our amendment must be understood in the context of the Beecroft report.

As you will remember, Mr Speaker, Adrian Beecroft is a Tory donor who has produced a report in the last 18 months arguing that red tape and bureaucracy on small businesses are far too heavy and that micro-employers should be removed from auto-enrolment. I know the Minister does not support that and said the Government had no intention of doing it—no one is suggesting he would do such an awful thing—but he will not be there for eternity. Given his recent comments about God being a liberal, perhaps he does intend to be around for eternity, but for those of us of a more sceptical temper, I think we can say he will not be around for ever, so it would be sensible to constrain a future Government, or even this Government—anything could happen—who might be under pressure from the Beecrofts of this world, in a way that is consonant with the best objectives of public policy.

The Minister said that amendment 53 did not even define a small and medium-sized enterprise, but he will know that the Companies Act 2006 clearly defines an SME as an enterprise with 50 or fewer employees. That is a common definition of an SME. The broader point, however, is exactly the one I have already expressed: we are trying to do him a favour by protecting him from those within the coalition Government who take a less enlightened view of the benefits of auto-enrolment. We tabled the amendment in that spirit.

On clause 29 and the debate around schedule 16, the Minister mentioned the Australian example. I was at the National Association of Pension Funds last week, and I have even watched him in the video—I was hoping he would entertain us with the song from “Les Misérables”, but I will come to that when I deal with costs and charges. He said that Australia is doing pot follows member—the inference is that I often point to the benefits of the Australian system—but that is not surprising, because Australia has several hundred schemes, whereas we have 200,000, and that is not including personal private pensions. To compare a system so scaled with our system is to let one’s a priori views of the world get in advance of the evidence, or to put it more simply: he is comparing apples and pears. Australia has several hundred pension schemes; we have 200,000, and that is a fundamental problem with comparing our system. Australia is in a much better place in terms of scale.

The Minister says that pot follows member will be simple and effective and that we will regulate for quality, by which he means there will be minimum standards—or at least he tells us there will be minimum standards, but, guess what, that is also currently part of a consultation. There is a broader theme to which I shall return; when the Minister feels under pressure from the Labour agenda on private pensions, he calls for consultation. He says that this and that will happen but when we study the detail, we see that what he has called for is a consultation. That is not the same as decisive action.

On pot follows member, the problem is that the UK has a fragmented pensions system; we have 200,000 pension schemes. We have—to put it in a simple fashion—great variations in quality. The Minister is being asked repeatedly by the pensions world how pot follows member will work in those circumstances. It is again worth listening closely to what he says, because he has not yet explained how it will work. He has set out his plan and objective to get to pot follows member but not how the mechanism will work. One of the reasons for that is that it is very difficult to do. To go back to the Australian point, pot follows member would be a sensible approach if we started from a very different place, but we do not. We start from a very fragmented private pensions system with a massive variation in quality.

On costs and charges, the Minister does not actually know what is going on in the pensions world. We had a very interesting conversation, or debate on this in Committee. In arguing a point with me, he pointed to DWP evidence. It turned out that the way in which he quoted that evidence was not appropriate, but my point is not to criticise him for making a mistake, which does happen; it is much broader. The DWP is forced to take surveys of employers to try to find out what pension providers are charging them. The Minister talks about evidence. Would not a much more effective way to approach things to have the costs and charges laid out for everyone to see in the first place? Why has he not got on with ensuring that costs and charges are disclosed? Instead, the DWP has to take surveys of employers who, in many cases—as his own survey evidenced—are not aware of what they are buying in terms of a pension scheme.

That brings us to the broader issue of who buys pensions. The Minister wants to move to pot follows member and says that there will be quality criteria; these will be minimum quality criteria. But, as things stand, he could not explain to the House all the costs and charges that exist in a pension scheme. Neither the Government nor the regulator gather that evidence. That is a fundamental point about the pensions market today.

Similarities are often drawn between energy and pensions. One way in which they are similar is that the vertical integration of pension providers—the same as with energy companies—means that it is very hard to crack where the costs and charges lie. I put that point on the table. The Minister wants to move to pot follows member but has not set out in detail the mechanism and the IT by which he would do this. More widely, he is not able to say at this stage what the costs and charges are in pension schemes. So how can he be sure that no one will move from a superior to an inferior scheme? He will say, and has said, that he will ensure that this happens. Again, I do not doubt his good intentions, but he has not so far delivered on costs and charges. More widely, if he does deliver—as I am sure he has every intention of doing—the amount of regulation that it will take to make a pot follows member pension automatic transfer system work is enormous. That is why so many stakeholders in pensions do not think it is a feasible way to proceed. The Minister said that the Association of British Insurers supports it. That is hardly surprising, because this is a system that will have the least detriment to the ABI’s members.

1.45pm

The Minister feels that he is now catching up with the pension charges debate; that is evident from his language and from the extent to which he talks about the Labour agenda, which is quite striking for the Report stage of a Bill. But he is still caught in the mindset of “If only I can get the industry round the table, it will deliver.” There is no evidence of delivery so far and no evidence therefore that that will happen. The reason that there is no evidence relates to a point made by my right hon. Friend the Leader of the Opposition in his powerful 2013 conference speech, which still reverberates around British politics. He asked, rightly, why one would expect an industry to take the decisions necessary to reform a market when it is not in its interests to do so. Why, indeed? I say to the Minister that, on pot follows member, he has to look beyond the ABI’s interests and look to the interests of the wider pensions community and of the most important people, savers.

The Minister mentioned the National Association of Pension Funds conference, where he mentioned pot follows member. I am sure that he got a very warm reception, because the national association is very clear not only that pot follows member is not the best way to proceed, but that there is a serious possibility of significant consumer detriment, which, in everyday language, means rip-offs. The national association, which the Minister so eloquently addressed the other week, is very clear on that. Not only is the association clear that we should have no truck with pot follows member, but it supports—the House will be surprised to learn—aggregators.

The Minister sets out my approach to aggregators as being, “Labour wants several aggregators, but how would they work?” He said that aggregators stop individuals engaging with their pension, or make that engagement impossible. He knows very well that the whole logic of auto-enrolment, which Labour began and which he has followed through, is that we have to use the power of inertia in pensions, because all the evidence is that many people will find it difficult to engage with pensions whatever the circumstances, given their complexity. Also, as he must be all too aware, auto-enrolment involves employers buying pensions, not the saver.

A criticism that I would make more widely of the Minister is that he approaches the pensions market as if it were a functioning market; functioning in the sense that we can and do have a consumer who is engaged, informed and sovereign, and a seller. The Minister knows that that is not the basis on which auto-enrolment proceeds because it is the employer who buys the pension. In other spheres, he has shown that he is fully aware that there is a big problem in the pensions market, which develops from the fact that the saver in many cases cannot be the sovereign—the person who makes the decisions—first, because the employer buys the pension and, secondly, because the pensions are so complex and their annual statements so opaque.

In those circumstances and with the Minister being aware of that, to claim that the aggregators should be excluded and rejected on the basis that they do not allow consumer engagement is a bit of a straw man. Let me say a little about why I think aggregators are so important. This relates to my other new clauses and I should iterate at this stage that these new clauses must, if we are to develop a serious policy to improve auto-enrolment outcomes, go together. For example, the Minister talked about trustees and said that the OFT says that the key is the quality of the trustees. He is of course right. My view, and that of the Labour party, is that trustees, in scaling up the pensions system, and aggregators go together to try to make a significant difference to the 10 million people being automatically enrolled in pensions.

My hon. Friend is making an excellent speech. I recognise that the Minister is sincere in his intention to improve pensions but, in relation to costs and charges, does my hon. Friend think that the inertia might be a result of the Government not wanting to challenge the vested interests of the big pension providers in order to stand up for ordinary, hard-working people?

I thank my hon. Friend for her shrewd intervention.

The Minister has been slow to understand the depth of the problems in the pensions market, and the House does not have to take my word for that. Earlier this week, I wrote to the Conservative MPs in the 40 most marginal Conservative seats, who have recently published a manifesto-cum-policy document. The language therein is—how shall I put this?—tougher on the private pensions market even than mine. The document, “40 Policy Ideas from the 40”, describes it as a failed market. It also states:

“Pension providers still refuse to clearly identify hidden charges such as churn and related fees…91% of retirees buy their pension annuity from their fund manager without checking other market options…the problem is that the private pensions market in the UK is a failed industry with higher charges than in any other country.”

That was not written by the Labour party. It was written by the Conservative MPs in the 40 most marginal constituencies. It seems a bit odd that they should take a tougher line on the pensions market than the Liberal Democrat Pensions Minister.

The way to explain that conundrum—I will not call it a paradox—is to say that anyone who believes in markets and thinks that they should work properly will support Labour’s proposals on reforming the private pensions industry. We want to reform it to ensure that the 10 million new savers going into automatically enrolled pensions get a fair deal. This pertains in particular to clause 29 and schedule 16, and the amendments thereto. It comes down to whether we believe that the pensions market is ready and able to proceed with pot follows member, given its fragmentation. The evidence shows that it clearly is not. Again, Members need not take my word for that. The National Association of Pension Funds has made it clear that we need to move to an aggregator system.

Given that the Minister was kind enough to spend a considerable period of time talking about the Labour amendments, I will do the same. I want to say a little about why aggregators are important. When the Minister addressed the NAPF, he gave a lucid, walk-around-the-stage performance that I enjoyed very much. He referred to two songs from “Les Misérables”. It would be unfair of me to sing either of those songs to him now. I have to confess that I am not a musicals man, although I suspect that the Minister might be a man for musicals—

indicated assent.

It seems that he is, and that is fair enough. I myself am not. Musicals are not my thing. He quoted from the innkeeper’s song, which I am certainly not going to sing. For one thing, I do not know the words. He used the song as a basis to talk about 2% here, 3% there and charges everywhere, and presented that as the problem in the UK pensions market. That is very different from what he was saying not long ago. It is just over a year since he accused Labour of scaremongering about pension charges, but he has moved a long way since then—rhetorically, if not perhaps substantially. He talked about that ditty and made it clear that there was a problem, but he still does not grasp the fact that pot follows member is impossible because of the fragmentation in the pensions market.

Labour’s new clauses would enable the restructuring of the UK pensions market so that savers’ interests would be appropriately represented. The Minister referred to our new clause 9, which deals with trustees, and he quoted the OFT’s view that the trustees would have to be good ones. He also quoted someone from Australia who is over here at the moment, who had said that in some cases trustees were not the answer.

Our proposals involve having trustees in every scheme, the scaling up of the UK pensions industry to reduce the fragmentation born of 200,000 different schemes—it is the most fragmented private pension system in the world—and the reform of the annuities market. Our amendment (a) to new clause 1 proposes that all costs and charges should be disclosed. Those measures need to be taken together as a package, as a Labour Government would do, and they would provide a starting point for tackling the fundamental problem in the UK pensions industry.

Our proposals would deal with the first problem, the system’s fragmentation. Secondly, they would deal with the problem that, as history tells us, pension savers are not the same engaged, informed consumers as those who buy tins of beans. The Minister seems to have undergone a damascene conversion on the merits and demerits of comparing the pensions market to the tin of beans market, and I will come back to that point. Savers are not informed and engaged in that way.

Buying a pension is not like buying a tin of beans. The consumer does not exert the same pressure. Someone buying a tin of beans might be given a choice of five different kinds. With pensions, such a choice would not be available to the saver anyway, because the employer buys the product. But let us use the Minister’s metaphor and compare the pensions market with the tin of beans market. First, if there were a pensions market in a supermarket, the saver would not choose the pension themselves; their employer would do so. That would be an odd arrangement in the tin of beans market. Secondly, the buyer of beans can taste the various kinds, from the cheaper ones to the more expensive, and come to a judgment based on taste relative to cost. It would be difficult for them to make a similar comparison with pensions; historically, it has never happened. Thirdly, I return to the point that it is the employer who makes the purchase of a pension.

The Minister has done something significant in the state pension sphere. He and I have been exchanging views across the Dispatch Box for almost two years now, and I say to him gently that he is still approaching the private pensions market on the basis that it has the ability to function like other markets, including the market for beans, even though, as he looks at it more closely, he can see that there are big problems. It cannot function like that. If we are to make it work properly, we have to ensure that the people acting in the pension saver’s interests are muscled, scaled and resourced.

That is what our new clauses would achieve. They would enable the scaling up of the pensions system, so that schemes would be able to get an effective deal from providers. Let us be clear: the providers in the pensions market have scale. In that sense, it is a bit like the energy market. They are large-scale, efficient organisations. It is the people saving into pensions who do not have scale, and that is because there are 200,000 pension schemes. They do not have the necessary representation because the smaller employers, in particular, who are auto-enrolling their employees are not pension experts. I know that the Minister is aware of those facts—we have discussed them a number of times—and I urge him to think about how all that relates to restructuring the private pensions system so that it takes cognisance of that reality. It is in that area that he is not taking on what the Opposition are saying.

We are clear that we need to move to an aggregator system, because otherwise pot follows member will not work and because if we enable the creation of aggregators, we have a chance to bring down charges in the auto-enrolment market. We know that there are millions of stranded pension pots, and the Minister rightly and repeatedly talks about them. How do we use the stranded pots issue to generate some change in the interests of pension savers, particularly the 10 million new savers automatically being enrolled in pensions for the first time? How do we do that? That is what our new clauses wink towards.

The hon. Gentleman is making a thoughtful contribution, but what he seems to be saying is that if I have a small amount of money, I can have a 50 basis points pension fund, but his proposal for the charge cap for active members is 100 basis points or 1%. If I have a lot of money in pensions, I have to pay 1%, but if I go off to an aggregator, it is 0.5%. Why is that a good deal?