Personal Accounts Delivery Authority Winding Up Order 2010

My Lords, the noble Lord, Lord Taylor, is selling himself short. He did at least as good a forensic job as the noble Baroness, Lady Noakes, would have done in his place and he should not be modest about it. We broadly support these orders. We support the principle of auto-enrolment and we believe there is now a desperate need to rebuild private pensions after the collapse—that is not too strong a word—of provision under this Government. In 1997, a third of private sector employees enjoyed a defined benefit—that is, final salary—public sector-style pension scheme. Today the figure is 12.3 per cent. That is a dramatic collapse by any standards. The latest figure for private sector employees who have no private pension provision at all is 64.6 per cent. We are starting from a desperate position. On the detailed points, I do not propose to rehearse, as the noble Lord, Lord Taylor, has, the now broadly sensible and supportive comments of the National Association of Pension Funds, the Association of British Insurers and the Confederation of British Industry. Having worked closely on the Bill and with these important interest groups over the last few years, I am pleased to see that the Association of British Insurers in particular is now taking less of what started as a rather "dog in the manger" attitude towards PADA and NEST. I think everyone is now working in the same way to try to make the scheme a success. Having said that, the task is enormous and this will be a very modest and slow-moving contribution. We on these Benches are concerned about the slow staging of bringing this in. Does the Minister see and share those concerns? It seems that people believe that their pension is being covered when a total 8 per cent contribution to a DC scheme is very much on the fringe of whether, over a lifetime, it will provide a decent pension. Starting off at the lower levels risks sending the wrong message. If people think that a 1 or 2 per cent contribution will be enough, they are making a very big mistake. The biggest concern is about the investment policy that NEST will now carry out. I should like to press the Minister on this, although he may not have the full answer today. I would be grateful if he could look into it because it is a serious concern on these Benches. I do not want to name the individual because I do not have any objection to him or even know him, but we are particularly concerned about the background of the investment director who has been appointed and comes from the hedge fund Thames River Capital. He has been quoted as saying that hedge funds must certainly be a part of the NEST investment policy. I was horrified to read that, given the tenor of our discussions on the Bill and the Minister’s assurances that there would be a small number of low-cost, simple investment options—probably a bond fund, a mixed fund, a default fund and maybe an ethical fund. I was shocked by the idea that there could be hedge funds or private equity funds with their very high charging structures and costs. I do not know what the recruitment process was, and I wonder if, again, the Minister could look into that and come back. One would have thought that the investment policy and the people running this would come very much from the mainstream of the investment world, such as pension funds or big insurance companies. This causes us serious concerns and I would be grateful if it could be looked into so that we can be reassured about the options on that front. It will be difficult to persuade many people that part of their pension fund should be in even a mainstream equity index product—which, in my view if there is a long-term horizon, it should. I should have declared my interest at the beginning as a pension fund manager for the last 34 years. I speak with some knowledge of these matters. They are very important, and I was concerned to see those remarks. The Minister will not be surprised to hear that the other key concern on these Benches is the gaping advice gap. It will not pay for people, particularly those aged over 50, to save a small amount in NEST when there is clearly a high risk that many of them will lose it in means-tested benefits and therefore not be any better off. Again, we are concerned that not enough serious attention is being paid to this worry. Having said all that, within the existing framework that the Government are working to, this is a sensible way forward, but we are very concerned about the individual points that I have raised.