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Pensions minister warns scale push could damage competition


Pensions minister Steve Webb has warned proposals to reduce the UK market to a small number of large scale schemes could damage competition.

Last month, Labour published a policy paper setting out plans to encourage the development of scale pension schemes in the UK. It argues that members of large trust-based schemes benefit from lower costs and better governance.

Speaking at the launch of the annual Scottish Widows UK pensions report in London last week, Webb warned the relentless pursuit of scale could diminish competition.

He said: “I can think of a market where there are half a dozen household name providers and few others, and that is the energy market. I am not sure that is the model I want for pensions.

“There are those who would like a few super trusts to take up 90 per cent of the market but you have to think about the implications that would have for competition.”

Webb also criticised the previous Labour government for proposing automatic enrolment without also introducing quality standards for defined contribution schemes.

He said: “I often feel like a bicycle repair man when it comes to auto-enrolment. Auto-enrolment was created but I am constantly dealing with the punctures in the tyres because the bike wasn’t made properly.

“How did any of us, and I was in Parliament at the time, allow people to be automatically enrolled into any old rubbish?”

Labour shadow pensions minister Gregg McClymont said: “At the moment we have a pension market where the smallest employers have to deal with a proliferation of complex products and complex choices.

“We need to get to a situation where there are simple, straightforward, scale products available in the market.”

Scottish Widows chief executive Toby Strauss said: “Purely commercially, it would suit us if there was greater scale in the market because we would get less competition.

“But in terms of having a vibrant, competitive market, there is a basic counter argument to scale about allowing firms to compete.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. Julian Stevens 15th June 2013 at 9:59 am

    More flatulent posturing from the Treasury’s glove puppet. Mr Webb, you need to address the real issues that are increasingly deterring ordinary people from committing their money to retirement savings plans instead of talking about everything and anything else in an attempt to distract attention from what really needs to be done.

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