Speeches by Garnier.

“Q Michelle, you run the compensation scheme. Do you see any risk in surplus extraction? I know that by definition, it is surplus and therefore you should be able to take it out, but at the moment, a lot of funds are in surplus. We went through a period of low interest rates, where it was a bit tricky, but now interest …”

“Q One of the questions around that is what drives a removal. We heard from previous witnesses that if a host employer puts in more money than is necessary, it seems perfectly reasonable for them to get some of that back. In some cases, that money could be used for investment in plant and machinery to expand the employe…”

“Q For defined-benefit pension funds? Morten Nilsson: Yes.”

“Q The Bill provides for surplus extraction from funds. Do you see that as a good or a bad thing? Morten Nilsson: I see it as a good thing. I think it will change the pension industry quite a bit as a positive innovation. Closed DB schemes, which we focus on, might be seen more as an asset for sponsors, rather than a li…”

“Q So you could run into the same problems that we saw recently where the Financial Ombudsman Service was publishing who has been under investigation, which caused problems. That has now been changed, but we could be entering into that same problem. Tim Fassam: If you see very strong market or regulatory consequences fo…”

“Q Very quickly, if you get an intermediate rating, is it published? Tim Fassam: Your value for money rating will be published.”

“Q Ian, can I start with you? One of the problems with auto-enrolment is where individuals move from one job to the next, not with a small pot under £1,000 but with a slightly bigger pot that is none the less still administratively tricky. Do you think that the Bill sufficiently tackles that problem? Ian Cornelius: I do…”

“Q I have one final question. Various clauses look at the asset manager and the trustees effectively marking their own homework on this. There are consequences of an intermediate rating, consequences of a “not delivering” rating and various other issues. Is that the best way of doing it? To a certain extent, the manager…”

“Q I want to ask about the value for money framework. There seem to be a lot of fans of the value for money framework. Are Phoenix as enthusiastic about it as everyone else seems to be, if that is not too loaded a question? Tim Fassam: The short answer is yes, we are big fans of the value for money framework, but it is …”

“Q I completely agree: I think it is absolutely right that the more money you have, the more negotiating power you have and the more you can diversify risk and all the rest of it. But part of what I am worried about is this: how is anybody going to prove to the regulator that they will have £25 billion of assets under m…”

“Q Yes, that is kind of helpful. Patrick, could I turn to you? We met and had a very interesting chat. One thing we discussed was the scale of the funds. There is a requirement in the Bill that funds such as yours will need to be valued at £25 billion by 2035. One thing we discussed at the time was whether that creates …”

“Q Do they know that they can do that? Somebody who is changing jobs quite a lot would not necessarily be the sort of person who is making strategic decisions about their retirement. Ian Cornelius: I think that is right. It probably goes back to dashboards. They are key to helping to increase visibility. That will get p…”

“But you would rather see the opportunities first? Sophia Singleton: Absolutely—we would love to see the opportunities first. Helen Forrest Hall: The other dynamic there is that international pension funds, for example, are often looking to invest in the UK for reasons different from the reasons UK pension funds might w…”

“Q It is happening; that is very good, and it is good to hear that there is a pipeline being developed. It is certainly something that has been talked about for a number of years. When I was the investment Minister back in 2017-18, we were very keen to get foreign direct investment coming in to the UK, so there was the …”

“Q It has been suggested to me that the mere fact that this reserve power is in existence may subconsciously encourage funds to invest in the UK, and that therefore they can naturally find 5% investment into the UK and infrastructure, or maybe even more. Do you think that is a valid point? Sophia Singleton: What I would…”

“Q So if this clause is passed, we could potentially see a drop-off in the performance of pension funds? Helen Forrest Hall: I am not sure that we would draw a direct correlation, but the point is that it will start to influence investment decisions. Those may be good decisions, or not, and they may be decisions that tr…”

“Q Helen, can I pick up on your comment that you have to make long-term decisions? These reserve powers have a sunset clause that will apply in 2035. Presumably, if you are making an investment decision, you have to take that into account. An investment decision could be expected to pay out in 2040, and in making that d…”

“Q I have one final question, if I may. You run a pool of 11 funds. This is taking 87 into six. Everybody seems to think that is a good idea. Are you included in the “everybody”? Rachel Elwell: I do think there is a fantastic opportunity for us to harness the benefits of scale that come from being one of the top 10 glob…”

“Q There has been a lot of talk about mandation, which you will be well aware of. Over the time that I have been researching it, over the last few months, we have had pretty much exclusively commentary that it is not a very good thing. Tell me that that is wrong. Why is it possibly a good thing? Helen Forrest Hall: I wo…”

“Q Would you support that? Robert McInroy: I support looking at the range of options, which includes reducing employer contributions and flexing investment strategy, including for some of the areas that we have talked about and will be talking about, that could be available to the LGPS in terms of investments.”