That was powerfully put, if I may say so. However, the hon. Gentleman is trying to portray a workplace pensions sector that is ludicrously fragmented and all over the place, and in which most people are in tiny schemes. In fact, most people are in big schemes. The number of medium-sized schemes is falling, and the quality standards that we are introducing will accelerate an existing trend. Pot follows member will be even more fitting as time goes by, because we are overseeing and hastening a process of consolidation in the pensions industry.
I will not say too much about baked beans, with which the hon. Gentleman seems to be even more obsessed than I am, but the point of the baked beans analogy is that the baked beans market works. As the hon. Gentleman said, in the pensions market the demand side is weak, and leaving everything to market forces is not the answer.
The model that the hon. Gentleman has embodied in his amendments and new clauses is a very confused one. He seems to be suggesting that small pension pots will go off to the new aggregator schemes, which are really good, so a silly little amount of money will automatically go to a really good scheme, whereas in the case of large amounts, the quality standard will be more relaxed. I understand that his party advocates a 1% charge cap, but he wants a 0.5% charge cap for the aggregator. That would bring about bizarre circumstances in which people with serious amounts of pensions money could pay
1% charges, but people with small amounts in a scheme that they never chose pay 0.5%. How is that coherent? I am happy to give way to the hon. Gentleman, but he cannot explain how it is coherent because it ain’t.
We need to ensure that high quality standards apply not just to small pension pots in an aggregator, but across the board, so that when people’s pots follow them from scheme to scheme, they move from a good-quality scheme to another good-quality scheme. The hon. Gentleman quoted the National Association of Pension Funds. The association is, of course, right. If we were simply going to allow money to be transferred automatically from a good scheme to a bad scheme, we would have a problem, but because we will regulate for quality, no bad pension schemes will be used for the purpose of automatic enrolment.
The hon. Gentleman said that nothing was happening about annuities. In fact, the Financial Conduct Authority is reviewing them. It has already surveyed the rates offered to existing customers and those offered to customers accessing rates through the open market option, and is trying to establish whether profits in the internal annuities market are too high because too few people are exercising that option. Action on annuities is not just about what my Department does; the FCA is considering the issue actively, and we are working with our colleagues in the Treasury.
New clause 11 requires savers people to consult an annuity broker. The hon. Member for Edinburgh East (Sheila Gilmore), who is no longer in the Chamber, said that that would mean that people were given advice, but annuity brokers do not give regulated advice; people must pay for that. The broker will no doubt charge a fee, and those who want advice will either have to consult someone else or pay again for the broker’s advice.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East wants to require those in charge of auto-enrolment schemes to send people to brokers who may charge, so those people may have to go elsewhere for advice. He says that that must happen in order for a scheme to qualify as an auto-enrolment scheme. We consider his to be a backward-looking and restrictive model. Let me give an example. What about pension schemes that annuitise internally—which, in other words, provide the annuity themselves? They may provide a guaranteed annuity rate, but in the hon. Gentleman’s world people will still have to go off to an annuity broker and shop around, rather than taking advantage of the product that is in the scheme already. That is an example of where he is trying to be over-prescriptive. [Interruption.] He says it is all in my head; I am not quite sure what he is talking about. The point is that we are trying to provide forward-looking provision for decumulation. Annuities is one model, with deferring taking a pension, for example, or draw-down, or enabling people to swap their annuities around, as my hon. Friend the Member for Gloucester (Richard Graham) said. We need to be examining all these things, but the hon. Gentleman wants to hard-wire into primary legislation a single model for a single product, which is not the future of decumulation.
4.15 pm
Another aspect of the lack of coherence in the hon. Gentleman’s model of aggregators is that if he envisages
an average transfer of £5,000, we estimate that per year the amount going to aggregators would be between £7 billion and £10 billion. Over five years, therefore, between £35 billion to £50 billion will go to these schemes. How does that affect the market? What is his model? We have a small number of what will become vast aggregator schemes. How does that relate to the active schemes that people are members of? He is taking money out of active schemes and putting it in aggregators; what does that do to the cost structure for the people who are left behind? Bizarrely, active members of a company pension will find that their costs go up if all the deferred members move out and take their money with them. The hon. Gentleman does not want to regulate the costs for the active members as hard as he does for the aggregators. I simply do not understand what his model is.