Speeches by Garnier.

“Q But is that right? Do you think that is a good use? Ultimately, as we have discussed, there is always the tricky question about how a fund could go back into deficit again. The flipside of that is that deficit then appears on the balance sheet of the host company, so there is an incentive not to raid it too much. A l…”

“And you war game it? Michelle Ostermann: Yes. The biggest variable that we have a hard time predicting in those scenarios is the likelihood of this being used and the manner in which it is used, but we test deep into the tail. We try several scenarios that give us a high probability of it being abused or overused, and …”

“Q Do you stress test the pensions industry in the same way as the Bank of England stress tests the banking system? Michelle Ostermann: Yes—it is very similar.”

“Q One thing we have not talked about is what the surplus extraction will be used for. If a host company starts taking advantage of this and they invest in building the business, most people would probably agree that that is rather a good thing. However, if they pay out dividends, is that a good thing? If they do share …”

“Q Thank you very much for coming along to give evidence this morning. I want to start with a general question: what do you see as the risks associated with surplus extraction? As we know, a lot of the funds are now in surplus, but we only need interest rates to start crashing back again—it is probably unlikely—and they…”

“Q Christopher, do you have any thoughts on that, quickly? Christopher Brooks: We do not work on final salary pensions, so I do not take a view on it.”

“Q Do you feel the Bill covers that management? Jack Jones: I think it puts a lot of responsibility on trustees to make that assessment. I think it is fair enough to set out the criteria under which trustees might consider surplus release—that is where you have sustained and high surpluses on quite a prudent basis. Whet…”

“Q My last question—Chris, leap in at any point if you feel you have an answer—is about paying out surpluses, either to local government or defined benefit pension schemes. Lots of people have argued why it is a good idea and good for the country, and all that kind of stuff, but are there any concerns in the TUC or Age …”

“Q You raise a very interesting point. Members could come up with an idea. For example, you mentioned ESG, which is a fine thing—I would not disagree with that—but sometimes it could be right to invest in something that a lot of people feel uncomfortable about, such as the arms trade or weapons manufacturers. Very sadly…”

“Q Thank you. I am particularly interested to hear from the two of you, because one of the interesting things about this Bill is that we have had a lot of lobbying from the profession but very little on behalf of the members of these pension funds, who are so important. Mr Jones, if I may start with you, Unison made the…”

“Or, indeed, when they first start to work. As somebody once said, compound interest is the eighth wonder of the world.”

“Q You just triggered another question. Charlotte, can I quickly ask you about the retail distribution review? The retail distribution review came into effect on 1 January 2013. One of the criticisms at the time was that moving from a commission-based model, where IFAs were paid by commission, to being paid by cash, red…”

“Q I will turn to DB pension schemes—where you have a sponsor company. For example, I have heard the British Telecom pension scheme described as a pension scheme with a telephone provider attached to it. One of the criticisms I have heard is that, because of the rules that were brought in as a result of Maxwell raiding …”

“Q Would you be happy if the full £130 billion was released, and therefore these pension funds were right down to the wire, even if they are still technically in surplus? Patrick Coyne: I think it is highly unlikely that that scenario would happen. Our engagement with the marketplace tends to show that firms considering…”

“Q I agree that is an important principle, but if you are a trustee, you are potentially personally liable for any deficits, and you could get yourself in trouble. I will come on to the defined benefit pension schemes in a minute, in relation to the same point. At the end of the day, if you have an actuary who is advisi…”

“Q Thank you very much for coming to give evidence. Can I get straight into a detailed question regarding the repayment of surpluses, starting with the local government pension scheme? I am advised that regulations 64 and 64A of the Local Government Pension Scheme Regulations 2013 currently allow for surpluses to be pai…”

“Q I have one final question. The key point, from the point of view of your members and the local government pension scheme, is that the interest of the members should not be trumped by the interest of the wider economy—their interest comes first. Is that right? Zoe Alexander: That is right, but often those things are c…”

“Q Ironically, I met some annuity providers who are enthusiastic to invest in equities, but they told me that they are being prevented from doing so. For example, an investment in the equity of a wind farm is a very good asset, because there are predictable returns from it, contracts for difference in the price, and all…”

“Q To summarise, you are saying that the general direction of the policy, which is to get more investment into the UK and therefore more infrastructure, is not in itself a bad thing. Zoe Alexander: We absolutely support the general direction of the policy. Our members are very committed to investing more in the UK and t…”

“Q Thank you very much for coming to give evidence. It can be a little intimidating, even for us, to see so many Government Back Benchers sitting across the table. I will start with the most controversial point: the mandation of local government pension schemes when it comes to amalgamation and being forced to go into a…”