The amendment is being introduced as Amendment 77 –

put forward by excepted hereditary Conservative peer Viscount Younger of Leckie and voted for by the Lords on Thursday (19 March) – added an exemption from the scale requirement for DC multi-employer schemes to hold at least £25bn in assets from 2030.

Lord Younger who makes his money from recruitment and from being a Lord

I do not know of any reason why Lord Younger has been  involved in this amendment other than the Conservatives needed someone to put it forward.

This amendment is supported  by Penfold (a GPP that offers workplace “pensions”). The amendment every small DC scheme will take some hope from and an amendment which will get thrown out by a lower house that’s getting used to dispensing with frivolous pension amendments.

Frankly, it has no place being discussed seriously when it is clear the only intention of the Conservatives is to wreck the bill.

Just about every DC workplace scheme (apart from NOW pensions) can show some people whose pot has passed a VFM test in terms of performance and the fluffy bits around the side.

But as we all know, the point of the VFM test is to find another route to get rid of small workplace pension schemes, especially the non-commercial ones that don’t get clobbered by the commercial scale test.

So is the Government going to give all the workplace pensions (including the commercial ones) an escape hatch?

Well let’s look at some of the options available to Penfold, and other commercial GPP workplace schemes.

1. They can sell out to a commercial scheme which has got scale (or are likely to)
2. They can convert to a CDC that do have the contention that DC schemes don’t get
3. They can go and buy something very big and get scale PDQ

The proposal from threatened small commercial DC schemes will look like this (thanks Professional Pensions).

The Lords’ amendment to clause 40 of the bill would give TPR the power to determine a relevant master trust or group personal pension scheme is meeting the scale requirement if it was satisfied there was “no reasonable evidence that consolidation of the scheme into another arrangement would be likely to improve outcomes for members”.

It said that, in making the determination for an exemption, TPR must look at areas such as net risk-adjusted investment performance; governance quality and operational capability; and whether or not the scheme benefited from integrated, pooled or cross-scheme investment arrangements.

I’m sorry but I have no idea what good this will do other than keep a small number of small commercial DC savings schemes going. I say “savings” as Penfold have made it clear they are looking to use somebody else’s default retirement income arrangement (R-CDC or Flex and Fix).

The amendment also said TPR should consider the extent to which the scheme invests in a default arrangement operated by another scheme or manager meeting the scale requirement; and whether the scheme benefits from participation in a wider asset management group of substantial scale.

So what have we got left from schemes like Penfold and other workplace arrangements? As far as I can see they are there to collect contributions via auto-enrolment from employers and act as feeders to other schemes that are prepared to offer retirement income.

Isn’t it time that option 1-2-3 (see above) is put into place so that by 2030, these workplace pensions are either CDC, sold to a current rival or owning a bigger current rival? The reason for Penfold and Collegia and others to exist is to bring new ideas to the market. They excel in adapting new technology but mimic what is already there in terms of GPP schemes and the same could be said of excellent commercial mastertrusts (Lewis master trust springs to mind).

There is of course a non-workplace version of what these schemes do, it is demonstrated with brilliance by Pension Bee. This type of scheme does not solve its distribution problem by using AE to connect with employers providing a “workplace” solution. It is not subject to the scale test because it is chosen by savers not by bosses.

The alternative  solution for schemes like Penfold involves a different VFM assessment. It would be tested by consumers who know what they want, choosing their savings plan on merit.