House of Lords

Thursday 18th December 2025 Lords Chamber

Thursday 18 December 2025

11:00

Prayers—read by the Lord Bishop of Derby.

Royal Assent

Thursday 18th December 2025 Lords Chamber

11:07

Royal Assent was notified for the following Acts:

Dogs (Protection of Livestock) (Amendment) Act,

Mental Health Act,

Planning and Infrastructure Act,

Space Industry (Indemnities) Act,

Employment Rights Act.

Royal Assent was notified for the following Measures:

Armed Forces Chaplains (Licensing) Measure,

Abuse Redress Measure.

Retirement of a Member: Baroness Ford

Thursday 18th December 2025 Lords Chamber

Announcement

11:07

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, I should like to notify the House of the retirement, with effect from today, of the noble Baroness, Lady Ford, pursuant to Section 1 of the House of Lords Reform Act 2014. On behalf of the House, I should like to thank her for her much-valued service to the House.

Girls: Science, Technology, Engineering and Mathematics

Thursday 18th December 2025 Lords Chamber

Question

11:07

Asked by

[Baroness Hunter of Auchenreoch]

To ask His Majesty’s Government what progress they are making in increasing the numbers of girls studying science, technology, engineering and mathematics.

[Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)]

My Lords, encouraging more girls into STEM is vital for a diverse, skilled workforce. We have seen progress, with more girls taking STEM A-levels, particularly in biology and chemistry, although challenges remain in other STEM subjects. We are concerned at the barriers in front of girls, which particularly contribute to the low take-up of maths, physics, and computing after GCSEs, which, of course, has a knock-on effect in higher education and the workplace. On Monday, the Government launched the Women in Tech Taskforce, led by Technology Secretary Liz Kendall, which will take action to address these barriers.

[Baroness Hunter of Auchenreoch (Lab)]

My Lords, I have a long-standing association with the Royal Academy of Engineering, so I warmly welcome the establishment of this task force and the strong commitment of the Secretary of State to encourage girls to pursue STEM subjects from a young age, which I am sure has the support of all noble Lords. Only 17% of the engineering and technology workforce are women, and a key area for reform is the unwelcoming workplace culture that puts women and girls off. Will my noble friend set out what the Government are doing to remedy what I would call the tech bro culture?

[Baroness Blake of Leeds (Lab)]

We share the concerns outlined by my noble friend about workplace culture, and particularly its impact on women in STEM careers. We know that the STEM sector is crucial for future economic growth, employing 9.4 million people. Currently, women make up just 25% of the total STEM workforce in the UK. Workplace attitudes start in school, and this is where we are beginning to challenge stereotypes early, working in primary schools. We fund the STEM Ambassadors and I Belong programmes, which inspire girls and aim to break down cultural barriers. We are also refreshing the curriculum to make it more inclusive, with a greater focus on digital literacy and skills.

[Lord Hayward (Con)]

My Lords, the Minister is replying specifically in relation to science and the like, but women play an inadequate role in very many parts of society, most notably, for example, in sport. Will she take this opportunity to congratulate the England women’s football team and, in particular, the England women’s rugby team on their successes this year and hope that the likes of Ellie Kildunne will set an example for women in society to take up more sport, whether at a higher level or just at a general activity level?

[Baroness Blake of Leeds (Lab)]

I think it is fair to say that I was not expecting that question, but I absolutely acknowledge and accept everything the noble Lord has said. The most important thing, of course, is that we all send our huge congratulations and recognise the contribution these young women are making, but we also have to understand that all sportspeople can be incredible ambassadors and role models. In my local area, rugby league is huge; they are getting the kids in and training. Girls’ rugby is, I think, the fastest growing sport in Leeds. If they misbehave or do not come along, they are out. The discipline is extraordinary. I thank the noble Lord for the question, and I hope he will please pass on my messages.

[Lord Mohammed of Tinsley (LD)]

My Lords, I want to follow up on the Minister’s previous answer concerning primary education. What steps are being taken to encourage not only science teachers but other teachers to ensure that girls get that early education that will inspire them to take this subject at a later stage in life?

[Baroness Blake of Leeds (Lab)]

I answered this question in the sense of needing to get into primary schools to start to change attitudes. Working with teachers and professionals is critical in this, and that is why we are investing in the workforce and training, and in getting a greater awareness of why there are these barriers. We have to work with families across the piece. Families do not understand the complexity of the system. We need to break down that complexity and ensure greater ownership of young people’s futures.

[The Lord Bishop of Derby]

My Lords, I warmly welcome the recent launch of the Women in Tech Taskforce and commend this Government on recognising the important contribution that women and girls make to the technology sector in particular. What steps are being taken to ensure that the TechYouth programme, part of the wider TechFirst programme, opens pathways to support and encourages young women and girls in further education and vocational training who are interested in pursuing apprenticeships and careers in this field?

[Baroness Blake of Leeds (Lab)]

I am somewhat disappointed that the noble Lord, Lord Baker, is not in his place because he would, I am sure, stand up to talk about university technical colleges. The work they are doing is a real template, and it just proves that, given the right opportunities, the right background and the right culture, women can excel at everything, as we heard earlier today.

[Lord Hampton (CB)]

My Lords, it is me again; apologies. Four days in a row—and I think noble Lords all know my profession. STEM/STEAM, girls/boys: there is a bigger picture here. Every student, every young person, should be guided to their full potential so that they can become the workers of the future to the best of their ability, whether it be as social workers or engineers, whether they be boys or girls, whether they be female submarine commanders. Does the Minister agree that, alongside excellent education, you need excellent careers education? I would like to hear what the Government are thinking about that.

[Baroness Blake of Leeds (Lab)]

I completely agree. The DfE funds the Careers & Enterprise Company, which works with 20 sector bodies and much wider. I emphasise the need for every school to take up the requirement for a qualified careers adviser to speak to every child in their school. One of the most heartbreaking experiences I have had is going to a careers fair with incredible companies there offering opportunities, and young people being absolutely astounded and saying, “We never imagined these companies would be interested in us”. There is a huge job to do in building confidence, and I believe that we are putting the steps in place to achieve that.

[Baroness Barran (Con)]

I very much welcome the reference by the noble Baroness, Lady Hunter, to women in engineering. I heard recently that one of the best predictors of economic growth can be seen in the ratio of engineers to lawyers. Our current ratio is a little heavily weighted to lawyers, so we need more engineers. On maths, as the Minister knows, girls get the same percentage of grades 7 to 9 as boys at GCSE, but there is half the uptake of maths A-level among girls. What specifically are the Government going to do to address that?

[Baroness Blake of Leeds (Lab)]

First, we have to acknowledge that there is an issue, and the statistics are stark. Of course, maths is compulsory, as has been said. Following on into A-levels and beyond GCSEs, only 37% of girls take maths and only 27% take further maths. They are absolutely stepping stones to so many different careers. We have set up maths hubs, working with 85% of primary and secondary schools. It is about that emphasis on primary and getting across the point of maths, which I have to say when I was young often escaped me. It is about getting in there, making it inspiring, encouraging young people and explaining the opportunities it will open when they pursue those subjects.

[Viscount Stansgate (Lab)]

My Lords, in respect of my noble friend’s Question, men outnumber women by four to one in computer science degrees. It has also been said that the economy loses between £2 billion and £3 billion a year because women leave the tech sector or change jobs due to barriers that should not exist. Is that not exactly the type of thing the Women in Tech Taskforce is being set up to tackle?

[Baroness Blake of Leeds (Lab)]

I shall be honest: I have three girls, and they found their computing courses absolutely boring, and yet it should be one of the most inspiring subjects they can learn, so my noble friend is right. We are investing in this area and funding the National Centre for Computing Education’s I Belong programme, which is targeting this. It is a hugely important issue and is probably getting even more so as we go forward.

Preschool Children: Digital Technology

Thursday 18th December 2025 Lords Chamber

Question

11:18

Asked by

[Baroness Penn]

To ask His Majesty’s Government what information they provide to parents and early-years providers about safe and appropriate use of digital technology by pre-school children.

[The Minister of State, Department for Education and Department for Work and Pensions (Baroness Smith of Malvern) (Lab)]

My Lords, the Government recognise concerns about the impacts of screen time on young children. We have produced guidance for the Help for Early Years Providers platform, which refers to the World Health Organization’s screen time recommendations. On screen time specifically, we are continuing to assess evidence gaps through ongoing research and will consider what, if any, further research and action is needed.

[Baroness Penn (Con)]

My Lords, I thank the Minister for taking time to meet me and the noble Baroness, Lady Cass, last month to discuss this issue. The evidence shows that digital device use among early years children is growing rapidly, and education and health professionals, researchers and academics are deeply concerned about how this is leading to identifiable changes in behaviour, language development, social skills and mental and physical health. More than 40 members of the Digital Standards for Early Years Action Group wrote to the Government more than a year ago to call for action in this area, but there is nothing in the early years strategy, there is nothing in the early years foundation stage statutory framework and there is no public health information for family hubs, health visitors or GPs, so the digital action group wrote again to the Government last week to call for real action in this area. Will the Minister outline what further steps the Government are going to take to address this important issue?

[Baroness Smith of Malvern (Lab)]

I thank the noble Baroness for our useful and informative meeting, from which we have already taken further action. She is right about, and we particularly discussed in that meeting, the concerns of parents for the advice that they receive. I outlined in my initial Answer some of the action that we are taking to provide more clarity for early years providers, but we are also working to provide parents with clear, specific advice on early years screen time and home learning. In advance of specific early years screen time guidance for parents, we have streamlined content on the Best Start in Life website, an issue that she raised with us, to ensure that relevant home learning content appears in search results for screen time. We are exploring options to prioritise search results, ensuring that the most relevant home learning page appears first to further strengthen discoverability. Any new specific guidance for parents on early years and screen time will also be signposted clearly on the website. I look forward to the opportunity, when the Children’s Wellbeing and Schools Bill returns to this House for Report in January, to continue this conversation and provide further information about action that the Government are taking.

[Lord Storey (LD)]

My Lords, this is an important question and the Minister’s replies have been very helpful. With regard to the safeguarding side of nurseries, the Minister will be aware of the tragic occurrences of two nursery children in my colleagues’ constituencies of Cheadle and Twickenham. I know she has engaged with those two MPs. What progress is being made to support children, particularly in those nurseries that are part of a group of nurseries?

[Baroness Smith of Malvern (Lab)]

The noble Lord raises an important point, and of course we have had other very distressing cases that have taken place recently in nurseries. My right honourable friend the Secretary of State made a Statement about action that the Government are taking. Specifically on this issue, we will be appointing an expert panel to inform the development of guidance for the early years sector on CCTV and digital devices within safeguarding. That guidance will set out best practice, technical information and clear expectations about how those devices are used, along with the use of CCTV. I would be happy to send the noble Lord further information about the action that we have taken post that particular case.

[Baroness McIntosh of Hudnall (Lab)]

My Lords, does my noble friend agree that there is an adjacent problem to the one that we are discussing, which the noble Baroness, Lady Penn, has raised, which is parents’ own use of technology and the way that that impacts on their interaction with very young children? Most of us, if we travel on public transport, will often see a child in a pushchair and a parent or carer using their phone and the child being completely isolated from any contact. In the support for parents, will there be advice for parents about how their own use of technology can impact on their ability to interact effectively with their very young children?

[Baroness Smith of Malvern (Lab)]

My noble friend makes an important point. I note, for example, the Children’s Commissioner’s suggestions and advice this morning that Christmas would be a good time for us as adults to put down our phones and focus on family time and interaction with children in particular, while the NHS website provides advice on the activities that are important for children’s health and development. Sometimes the issue about screen time is that it displaces other important activities, so the NHS website provides advice on the importance of sleep at all ages for good physical and mental health and well-being—I am sure that noble Lords will be keen on that one—and guidelines for parents on physical activity for children under the age of five. Those types of activities and the face-to-face interaction that parents can have with their children are one of the most important ways in which we can ensure healthy child development.

[Baroness Foster of Aghadrumsee (Non-Afl)]

My Lords, as it is Christmas, parents are looking at all the available toys. One area that concerns me is the use of AI now in toys for very young children. Do the Government have any plans to look at that area, because it is of great concern?

[Baroness Smith of Malvern (Lab)]

This is an issue that we touched on with respect to educational technology in particular during the course of the Bill. There are wider developments in how we can regulate the use of AI with respect to individuals’ data that are being taken forward, particularly by the Information Commissioner’s Office. The noble Baroness raises an important point that I am sure parents will have borne in mind when thinking about presents that they are buying for their children. However, she is also right that we cannot leave parents, schools or other settings to make these decisions on their own, which is why we need to keep up with the evidence in order to provide the best possible advice to parents, to education settings and to others.

[Baroness Barran (Con)]

My Lords, I very much welcome the Minister’s comments about producing guidance for parents and early years settings in this area. Could she clarify the timing of that appearing and confirm whether it will be accompanied by a public health communications campaign?

[Baroness Smith of Malvern (Lab)]

I have probably gone as far as I can today in talking about the work that the Government are doing in thinking about how we can improve the guidance for parents. We will have more to say about this in the near future. As I said, we will also have the opportunity to consider this in more detail when we come back to Report on the Children’s Wellbeing and Schools Bill. However, any guidance that we produce needs to be easily accessible to parents. That will mean, for example, using the Best Start in Life hubs and website. We will also require public health dissemination as well.

[Lord Clement-Jones (LD)]

My Lords, I welcome what the Minister has said today, but can she explain how any DfE guidance is co-ordinated with the work of Ofcom under the Online Safety Act, the ICO’s age-appropriate design code and DHSC advice, so that parents and providers receive a clear and consistent message rather than a patchwork of partial guidance?

[Baroness Smith of Malvern (Lab)]

The noble Lord makes a very important point: in all this work, it is important that we are evidence led—as I suggested, we are developing that evidence through ongoing research—and, secondly, that we are able to provide clear information for parents and for early years settings, for example, with respect to the youngest children. There is considerable work going on between the DfE, DSIT and Ofcom to make sure both that the research is coherent and that the results of that research are appropriately communicated and go alongside some of the regulatory measures that the noble Lord mentioned.

Jobs Market: Wider Economic Implications

Thursday 18th December 2025 Lords Chamber

Question

11:28

Asked by

[Lord Hunt of Wirral]

To ask His Majesty’s Government what assessment they have made of the jobs market, and of the implications for the wider economy.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, there is positive information in the labour market. The claimant count is falling. Over 350,000 more people have moved into work this year. Real wages have risen more since July last year than they did in the first 10 years of the previous Government, and UK growth is forecast to be the second fastest in the G7 after only the United States. However, the latest figures also highlight the challenges and the importance of our Get Britain Working plan, which includes creating a new jobs and careers service, tackling economic inactivity due to ill health and delivering our youth guarantee.

[Lord Hunt of Wirral (Con)]

The Minister omitted to mention that unemployment has now risen to 1,830,000 and, perhaps most chilling of all, that the number of young people without the dignity of work has risen to 735,000. Do the Government now accept that the triple blow of the jobs tax in last year’s Budget, the increased income tax levels in this year’s Budget and the unemployment Act, which received Royal Assent earlier today, have all contributed to the fact that unemployment is rising to 2 million people? What is she going to do about it?

[Baroness Sherlock (Lab)]

I will tell the House what we are going to do about it: something the last Government never did, which is to take seriously the challenge of so many young people in our country who are not in employment, education or training. What did the last Government do about that? They did nothing. What are this Government doing? A huge amount: in the Budget, we have put hundreds of millions of pounds into a youth guarantee. We are creating guaranteed jobs for young people who are long-term unemployed on universal credit, and we have the former Health Secretary, Alan Milburn, digging down deep into what the driving reason is for why so many of our young people are not out there in the labour market. We are going to solve the problems we inherited; we are doing something about it.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, I call on the noble Lord, Lord Campbell-Savours, who is participating remotely.

[Lord Campbell-Savours (Lab) [V]]

With the jobs market hugely influenced by the availability of training, in particular apprenticeship training, should we not positively welcome the £820 million for the youth guarantee scheme, with its emphasis on quality? Is not the lesson that the Government have learned from the YOPs and community programmes of the 1980s that such schemes work only when they incorporate quality, real skills development, and the prospect of long-term employment? Are they not the hallmark of this much expanded and brilliant training programme?

[Baroness Sherlock (Lab)]

I welcome a particularly fine question from my noble friend. I could almost have said that myself; in fact, maybe I will. He makes a really important point. We need to have support in the investment of skills for young people: skills for today and for tomorrow. Simply putting them on to some kind of make-job scheme does not work. We actually need to invest in them, so my noble friend is quite right. At the Budget, we announced £820 million of investment into the youth guarantee to support young people to earn or learn, but there was another £725 million for the growth and skills levy. We are trying to invest in young people so that they will find ways of getting the skills and be inspired to get out there and make a difference.

We also need to understand those who are not engaging. Alan Milburn issued a call for evidence this week. He is asking two questions: what is stopping more young people participating in employment, education or training, and what would make the biggest difference to support more young people to participate? We want to hear from anyone with knowledge, expertise or lived experience, so I urge noble Lords, with all their connections: let us all together try to get the answer to one of the most pressing questions facing our country.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the Bank of England has canvassed for resignations to cut jobs to save £45 million and use more AI, and many other jobs continue to be lost to AI. What strategy have the Government got to ensure that their AI and tech procurements support British jobs? If mandating is okay for pension fund investments, where is it for government?

[Baroness Sherlock (Lab)]

My Lords, I think I might save the pension fund for the extensive debate we will have later, which is my Christmas present from the Chief Whip. That is all I can conclude. The noble Baroness makes a very important point. One of the things that the Government as a whole are doing is looking across the piece. The truth is that it is still quite early days in working out what, in the medium to long term, will be the impact of AI on the economy. There is evidence that jobs may be displaced in some sectors while in others jobs are created. While we are understanding the full impact, the challenge for us is to make sure we equip people with the skills that enable them to compete in the markets that are to come. There is a lot of work going on in my department, but also in DSIT and across government, to monitor this and develop strategies. In particular, there is work on investing in homegrown tech companies to make sure that we have the opportunities here in which we can invest and our young people can work.

[The Earl of Clancarty (CB)]

My Lords, further to the points made about skills, will the Minister look at a new report by the Creative Industries Policy and Evidence Centre that finds that arts, culture and heritage sectors are all

“losing skilled employees due to low pay, limited progression and lack of flexibility”.

Although our freelance workers should certainly be better supported, there is concern over the levels of permanent creative staffing, including in theatre. How will the Government address these concerns?

[Baroness Sherlock (Lab)]

The noble Earl makes an excellent point. He is a fine ambassador for the creative sectors, for which I commend him. The Government are looking sector by sector at how we can support the development of skills. I am aware that we have had to work quite hard to protect some quite specialist skills, because if we lose them we will not get them back, certainly in the heritage sector. I am happy to look at how our sector work can do that, but what we are trying to do in DWP is to work with a wide range of employers to make sure that we know what they want, what skills they need and how we can support them. One thing that has made the biggest difference—I slightly bang on about it—is my noble friend Lady Smith’s welcome joining up of adult skills and the DWP. That can make a real difference, so I will make sure that we look carefully into that.

[Viscount Younger of Leckie (Con)]

My Lords, I am afraid that I am not yet in the Christmas spirit because, as the Minister herself said, there are huge challenges in the deteriorating jobs market. It is of great concern that jobs in the all-important retail sector have fallen by 74,000, and the chief executive of the BRC has stated that the number of people in work in that sector is at a record low, namely 2.82 million jobs. What are the Government going to do to change the situation, as a matter of urgency, in that sector?

[Baroness Sherlock (Lab)]

My Lords, the noble Viscount will know that we have a number of what we call sector work programmes to develop skills and support people into many areas of our economy, including hospitality and retail, and many others. I come back to the fact that there are challenges across the globe. The UK unemployment rate is firmly below the EU 27 average. The UK has the third-highest employment rate among the G7—higher than Canada, the USA, France and Italy. I fully accept that these have been challenging times but there has been a reduction in demand across the globe, for a range of reasons. I am confident that things are looking good. We are seeing, for example, that vacancies have stabilised. We are seeing interest rates coming down and businesses getting more certainty, not least from the fact that we now have an Employment Rights Act.

[Lord Mohammed of Tinsley (LD)]

My Lords—

[Lord Spellar (Lab)]

My Lords—

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

My Lords, we will hear from the Lib Dems next, please.

[Lord Mohammed of Tinsley (LD)]

My Lords, I am more than happy to speak to Alan Milburn, given my long experience of working with NEETs. The question I will ask the Minister is about His Majesty’s Government having two key priorities. One is around net zero and the other is building 1.5 million homes. I want to know: what is the strategy around young people and apprenticeships? I ask this because I spoke to a young person studying at Sheffield College who is doing an electrician course. He is really stressed out that he is unable to get the apprenticeship course he needs to get properly qualified and contribute to the economy, because otherwise he told me that he will look for a job in McDonald’s.

[Baroness Sherlock (Lab)]

I am not going to diss looking for a job in McDonald’s, but I do not want to see anyone unable to pursue the things that they want to do. The noble Lord is absolutely right. We have invested £600 million in a construction package and are working closely with the industry. We have a strategic relationship team in DWP that works with key sectors to try to make sure, if jobs come on stream, that our people get them. We want young people and people who are not in the labour market to get them—those who are struggling with economic inactivity. I am grateful to him for raising that.

[Lord Spellar (Lab)]

My Lords, should not the Government look at the incredible difficulty that youngsters have in getting into work, with very bureaucratic HR processes for making applications? Should they also not say to employers who are on contracts to the Government that they need to provide a certain ratio of training places to qualify for being on government contracts?

[Baroness Sherlock (Lab)]

My Lords, those are two important points. The second quite often happens. I know that the social value element of contracts is something important that we in DWP take especially seriously. On the first point, we must all have had that experience of knowing young people and their heartbreaking experience of sending out application after application, and getting nothing back at all. I understand how tough it is for businesses to manage that, but if any employer is able to do that—to make it as easy as possible to support young people—that is great. One thing we can do in DWP is to support the young people in doing that: to connect them with employers, give them the skills and make sure they are putting in the best possible application in the first place.

Lithuania: Balloon Incursions

Thursday 18th December 2025 Lords Chamber

Question

11:39

Asked by

[Baroness Rawlings]

To ask His Majesty’s Government what assessment they have made of the defence implications of balloon incursions into Lithuania for British forces stationed in the Baltic states.

[The Minister of State, Ministry of Defence (Lord Coaker) (Lab)]

My Lords, for the avoidance of doubt, my son-in-law, as a reservist, has served recently in the Balkans and may well do so again in the future.

Lithuania has experienced over 600 balloon incursions and over 200 drone violations in 2025. It has requested support from a NATO counter-hybrid support team. The UK is the framework nation of NATO’s forward land forces in Estonia. UK forces stationed in the Baltic states as part of NATO’s forward presence remain safe and able to operate effectively. There has been no change to force protection posture for UK personnel as a result of this incident.

[Baroness Rawlings (Con)]

My Lords, I thank the Minister for his comprehensive Answer; he always gives very good answers. Balloons are not just for Christmas or festival treats. Sadly, these balloons can be serious weapons, as we have heard. Can the Minister enlighten us further about the deadly balloon incursions in Lithuania at the moment?

[Lord Coaker (Lab)]

The Lithuanian intelligence is that the vast majority of the balloons in the drone incursions to which I have referred are for criminal activity and relate mainly to tobacco and cigarettes. Of course, that does not alter that Lithuania believes, with some credibility, that this is part of Belarus weaponising that sort of activity in order to destabilise and disrupt Lithuania and elsewhere.

[Lord Craig of Radley (CB)]

My Lords, have any Royal Air Force flights been affected by these balloons? More serious even than that, this type of activity could become more widespread. What attempt are the Government making to deal with the possibility of further attacks? For example, have they tasked the Advanced Research + Invention Agency with working on this problem?

[Lord Coaker (Lab)]

We are looking at all the various options to deter such activity, as the noble and gallant Lord will know from his own experience. Through Eastern Sentry we have tasked Royal Air Force assets to try to deter right across the eastern flank of NATO. More of that will be done. In January 2026, SACEUR will be announcing further measures that will be taken with respect to that. I point out, as I often do, the importance of deterrents. I am not talking about balloons, but since the introduction of Eastern Sentry on 10 September, there have been no Russian military aircraft incursions into NATO airspace.

[Lord Browne of Ladyton (Lab)]

My Lords, the media coverage of this universally describes a significant proportion of it being done by Belarus as a proxy for Russia. Last month, Admiral Dragone, the head of NATO’s Military Committee, said that the western military alliance was considering a more aggressive or proactive stance to Russia’s hybrid warfare, which this is. To what extent are we contributing to that process of consideration?

[Lord Coaker (Lab)]

We are contributing to a whole range of efforts to deter Belarus’s activity, or Belarus acting as a Russian proxy. Lithuania and a number of other states have requested a NATO counter-hybrid support team from us. In the next couple of weeks it will work with Lithuania to assess what is going on there and what needs to be done, and to support Lithuania and others, if necessary, in order to deter this activity and respond appropriately.

[Lord Bruce of Bennachie (LD)]

My Lords—

[Lord Ahmad of Wimbledon (Con)]

My Lords—

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

We have plenty of time. We will hear from the Lib Dem Benches next.

[Lord Bruce of Bennachie (LD)]

My Lords, in a normal world, Belarus would be offering co-operation to stop this smuggling, rather than sneering and saying that Lithuania has to solve it. Lithuania has offered €1 million to anybody who can work out how to deal with these balloons. What are we doing, in co-operation with NATO’s centres of excellence in Tallinn and in Helsinki for countering hybrid and cyber threats, to ensure that we can find ways of dealing with the balloons? They represent a threat to the whole of NATO.

[Lord Coaker (Lab)]

I agree with the threat that they represent, and the destabilisation and disruption that they cause. We are doing exactly what Lithuania has asked us to do. It has asked us, with NATO, to send a counter-hybrid team to Lithuania to work with it and establish what it needs to do to deal with the threat from the balloons, and the drone incursions, and find the most appropriate way forward. We are doing exactly what Lithuania is asking us to do within the auspices of NATO.

[Lord Ahmad of Wimbledon (Con)]

My Lords, I welcome and support the Government’s announcement of support through NATO. I have visited troops in that part of the world, and I know we do a lot of work in the JEF as well. Can the Minister say, particularly with regard to countries in the Balkans, what extra support is planned within the context and framework of the JEF to send a straight signal to Belarus and Russia that the threat from Belarus—we have also seen challenges in the airspace of Poland—will not be accepted or tolerated?

[Lord Coaker (Lab)]

It is an important question, and one that both the previous Government and this Government have sought to deal with. The noble Lord will know that there are 1,000 British troops in Estonia as part of the forward land forces, along with defence attachés and others in support in other JEF nations. The noble Lord will know of Baltic Sentry, the maritime defence in and around underwater cables in the Baltic. So we have forward land forces, Baltic Sentry and, alongside that, the Eastern Sentry, which is the aerial operation. At a land force level, a maritime level and an air level, within the auspices of NATO, this country is contributing to deter Russia and to deal with the threats. We can be proud of what we are trying to do to deter Russia from the activity it is seeking to pursue.

[Lord Beamish (Lab)]

My Lords, as we approach Christmas, I am sure that my noble friend and all Members of the House would wish to thank the members of our Armed Forces and security services, who will be working over Christmas, at home and abroad, to keep us all safe. The Baltic states are on the front line against Russian aggression, and are doing a sterling job through the efforts of not only their armed forces but their populations. What more can NATO partners do to meet the defence expenditure goals that were set at The Hague earlier this year?

[Lord Coaker (Lab)]

I join my noble friend in his congratulations and recognition of our serving Armed Forces personnel and their families who stand behind them. It is important to recognise that, particularly at this time of the year, as my noble friend has just done. I am sure that the whole House joins him in that.

Discussions are ongoing about how we can meet NATO expenditure targets. While those discussions around expenditure and budgets are ongoing, we can point to the many things that we are already doing. This includes through RAF fighter support within Eastern Sentry, the troops that we are committing, maritime support of Nordic Warden, and responding to the request directly from the Lithuanian Government, through NATO, to provide the counter-hybrid support team. Whatever is needed, we will do it. I say again that, in order to stop Russia and the aggression we face, this has to be deterred. As I said to the noble and gallant Lord, since 10 September and the adoption by NATO of Eastern Sentry, there have been no Russian military incursions into NATO airspace. That shows us all the value of deterrents.

[The Earl of Effingham (Con)]

My Lords, the Royal Navy does a brilliant job of helping to stop smugglers in various parts of the world. If the situation in Lithuania is cigarette smuggling, will the Government consider allowing our forces on the ground to assist with ending the illegal smuggling trade in the region?

[Lord Coaker (Lab)]

We are doing all that we can. Lithuania is telling us that it is cigarettes and tobacco smuggling, in the vast majority of cases, with respect to the balloons and the drones. It sees this as criminal activity. Lithuania is saying to us that the weaponisation of that criminal activity is being used by Belarus, and Belarus as a proxy, to disrupt and destabilise. That is why the counter-hybrid support team, under the auspices of NATO, is going to Lithuania. It is going there to talk about what specifically Lithuania believes is necessary to deter and deal with the threat that it faces. That is the proper way forward.

[Lord Hogan-Howe (CB)]

My Lords, we may be approaching Christmas, but the people of Ukraine will face no peace. Yesterday, the noble Lord, Lord Hannay, highlighted the comments of the head of MI6 and the Chief of the Defence Staff—to which he might have added the Secretary General of NATO—that we are planning for war. This is a clear statement that starts to match the passion that the noble Lord, Lord Coaker, represents in this House every time he speaks about this issue. I wonder why we and our Government are not planning to increase spending on defence in 2030, or increase it again in 2035. Our opponents are doing something now. Is it not time to redress that priority?

[Lord Coaker (Lab)]

The noble Lord will know the Government’s defence spending policy, and he and others will no doubt continue to make the case they do. As we approach Christmas and beyond, and the search for peace in a way that is consistent with what Ukraine would want goes on, this country can be proud of what it is doing with respect to Ukraine. It stood up for the people of Ukraine and defended freedom, democracy and the international borders that international law represents. The noble Lord will continue to press the case for defence spending. But even within the auspices of current spending and the increases the Government have agreed to over the next couple of years, there will be no doubt that we will stand up to Russian aggression and seek to deter it. We will stand with the Ukrainian people in defence of freedom and democracy.

Tributes

Thursday 18th December 2025 Lords Chamber

11:51

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

My Lords, I am delighted to lead the customary and important tradition of giving thanks to staff across the House, especially those who have retired this year, as we head towards the Christmas Recess. As 2025 draws an end, it is nice to have a moment to reflect on the excellent work of the House and the teams that support us. I hope that noble Lords will find this more jolly than my usual reminders about short questions and references to the Companion.

Before turning to individual tributes, I want to start by thanking all the staff across the House, a team of 700 strong, for their work. I will not attempt to name all teams, through fear of missing some that are equally as important, but the House simply would not function without the work of each and every one of the people who support us, and our vital scrutiny could not be done. I know I speak for the whole House when I say thank you for your hard work; we appreciate everything you do for us. We all have examples of staff going the extra mile in service of the House and showing us their unique kindness.

I now turn to some individual members of staff who have retired from the House this year. I will name a few, and my usual channels colleagues will name others when they speak.

First, I pay tribute to Carell Roberts, a valued member of the housekeeping team who retired in April. Carell worked in the team for just under 20 years and was involved in managing some high-profile and important areas, including the second-floor galleries above the Chamber. Carell also looked after a space much loved and used by noble Lords, the Library. Carell has retired to spend more time relaxing with family and friends, including much overseas travel. We wish her well.

Secondly, following the Library theme, I give thanks to Christine Martin, a senior Library assistant, who retired in July after 23 years. Christine started in 2002, looking after the main Palace Library suite, keeping it shipshape and tidy for Members, and ensuring they had newspapers to read—no mean feat when navigating the height of those Library ladders. In 2007, Christine was promoted to senior Library assistant and became the Library’s quartermaster. Christine had left a lasting impression on all colleagues with her calm demeanour, sense of humour, teamwork and kind counsel. Always ready to lend a hand in a crisis, her help was invaluable when the Library had a major flood in 2008 and during Covid when she was instrumental in keeping the Library running. We wish her a well-deserved and enjoyable retirement, attending to her garden and putting her feet up.

Next, I pay tribute to Gordon Rock, a senior doorkeeper who is due to leave us on 31 December. Gordon started work as a precision engineer toolmaker in 1977. He joined the Royal Marines in 1986 and served his country until 2008. He joined as a doorkeeper in 2012. Since his promotion to senior doorkeeper, he has enjoyed keeping everybody in step, including during the important state visits of President Macron, Prime Minister Trudeau and President Zelensky.

Although Gordon is not related to the noble Baroness, Lady Rock—I have checked that she is very happy for me to mention this—they have huge respect for each other. I am told by the doorkeeping team that he refers to her as “auntie”. A few years ago, I did the Armed Forces Parliamentary Scheme. Gordon came up to me and said, “I understand you’re going to a particular Army base at the weekend”. I said that I was. He said, “I’ve got lots of friends down there. I’ve given them a briefing and they’re all waiting for you”. I am pleased and very relieved to report that I had a wonderful time, and I wish Gordon a very restful and long retirement.

Finally, I must pay special thanks to Fiona Channon, who worked in the heart of government and Parliament for over 30 years, first in the Civil Service and, since 2019, as our much-loved, admired and respected Deputy Yeoman Usher. Throughout her roles in the Civil Service, Fiona worked with a number of colleagues, including my noble friends Lady Harman and Lady Jay of Paddington, alongside other noble Lords. Fiona went from the Civil Service to lead a number of important functions in the House of Commons, including as director of accommodation and logistics, a good training ground for the ceremonial wonders of your Lordships’ House. Fiona had an exceptional eye for detail and was instrumental in the delivery of a number of critical events, including the funeral of Her late Majesty Queen Elizabeth and the coronation of His Majesty King Charles. I am told that Fiona was able to enjoy over 1,000 sitting days in her time in the House of Lords and is well-known for her never-ending patience and calm manner in the face of a crisis and a long day. While Fiona was well acquainted with the building, I am told that, equally, the building wanted to give something back to Fiona, when she was attacked by a decapitated pigeon in State Officers Court near the Guy Fawkes plaque. Colleagues were able to rush to her rescue and lend her a shirt to enable her to continue her duties that day. I hope she will enjoy a slightly slower pace and a well-deserved actual rest without any pigeons.

In addition to individual members of staff, I thank all colleagues across the House for their good humour and support. I love the House very much and I am very privileged to be the Government Chief Whip and the Captain of the Honourable Corps of Gentlemen-at-Arms. I do my best to be accessible to everyone and be on hand to deal with issues as they arise. I thank all Members across the House for their friendly engagement with me throughout the year; I really appreciate that.

The House has reviewed 70 Bills this year alone and we always manage to debate topics, even the most difficult topics, with kindness and respect. This extends especially to my usual channel colleagues. While sometimes we have difficult conversations throughout the year—I am sure we have many more to look forward to next year—I appreciate their continued support and frank discussions. I have huge respect for the noble Baroness, Lady Williams of Trafford, the noble Lord, Lord Stoneham of Droxford, and the noble Earl, Lord Kinnoull. We can usually smile and laugh in between more difficult conversations, and I count each of them as good friends. I hope we can continue to make progress together in guiding the House through its important work.

Finally, it seems a shame to waste the opportunity not to announce another recess date, as I fear colleagues are already getting anxious to book their Christmas holidays in 2026, perhaps even as a present for a loved one. I am therefore pleased to tell the House—with the usual, not very festive caveat that it is subject to the progress of business in the House—I intend for the House to rise for the Christmas Recess next year on Thursday 17 December 2026 and return on Tuesday 5 January 2027.

I hope colleagues will consider this a well-deserved Christmas gift, as I think it is important that noble Lords and staff have time to plan for activities with family and friends outside the House. I wish everyone across the House and all the teams so expertly supporting us a very Merry Christmas, a restful Recess and very happy new year. I look forward to seeing you all back on 5 January for a three-line Whip.

[Baroness Williams of Trafford (Con)]

My Lords, sometimes in this House, it feels like our years should be measured in dog years, particularly when you are in opposition. As this year draws to a close, it is a pleasure to follow the Government Chief Whip in paying tribute to those who make the work of this House possible and who will be leaving us for pastures new.

Not only do all staff members play a crucial role in the operation of this House but their kindness and courtesy make for a welcoming place for all of us. Joao De Frietas, more affectionately known as Alberto, began his career just before the turn of this century in the Peers’ Dining Room. He soon became a familiar face, successfully going on to manage events in the Cholmondeley Room and the Terrace. Since 2018, he has been bar manager for the Woolsack, where he has been keeping morale high on the Parliamentary Estate. Throughout his time here, he was very well liked by his colleagues and regulars at the Woolsack. He will be much missed, and we wish him and his family very well for the future.

Neil Baverstock will be leaving Black Rod’s office this Christmas. For the past 12 years, he has been known for his unfailing dependability as the 23rd Yeoman Usher—the longest serving for 65 years. His sense of public duty, from when he trained at Sandhurst until now, is one from which we can all take inspiration. He has been a model of high standards, with a very cool head in challenging moments. I am told that his buzz-phrases are now a permanent part of parliamentary folklore. My favourite has to be, “My Lords, I’m going to run through the plan. I must be clear that this is a plan, not a discussion document”. He has certainly left his mark, being trusted with the Palace’s arrangements for the late Queen Elizabeth II’s lying in state and Operation Marquee. We know that behind every good man is a good woman, and we must thank his wife Alison for her support. This is a legacy of which they should both be proud, and they leave with our sincere gratitude.

12:00

I pay tribute to Sally Carter, who has been with us for 36 years working for Lords Hansard and seen by all as a wonderful colleague. In that time, she has worked with no fewer than five editors, providing a steady hand and no doubt a calming and knowledgeable presence throughout the occasional IT crises. She was a screen corrector—we have seen many things corrected. She was also a proofreader—we have seen many things smoothed out in the reading—a personal assistant and, finally, gatekeeper for Written Answers and Questions. She was known to be efficient and effective in those important roles. The Lords Hansard team will not be the same without her, but we hope she enjoys a very happy and well-deserved retirement.

Finally, I come to Andrew Makower, who joined the House in 1984 and who is now leaving us after 42 years of exceptional service. Over his career, he has served as the clerk to the Science and Technology Committee, private secretary to the Leader of the House and Government Chief Whip, Clerk of the Journals, Principal Clerk of Select Committees, finance director and Clerk of Legislation. In his role as Clerk of Legislation in particular, he oversaw the handling of an unprecedented number of amendments during the UK’s exit from the European Union, at a time when procedural matters could be said to be challenging. His dedication and professionalism certainly shone through those difficult years. We have him to thank for Members’ explanatory statements accompanying amendments as well as several other innovations we can now not imagine working without. He is known for going over and above the call of duty and, outside the House, supporting children in his local church and volunteering to help the homeless and as a school governor. Moreover, I understand that he and his family were hosts under the Homes for Ukraine scheme. For this and for all he has done for this House, I thank him. I know that we will all wait in anticipation for what he does next.

Finally, I join the Government Chief Whip in paying tribute to the usual channels. Contrary to appearances sometimes, we work very well together. I mentioned at this Dispatch Box last year the Government Chief Whip’s lack of biscuit provision in meetings, which has continued. It has done something for my waistline, but nothing to dint the usual operation of the usual channels. I wish all staff and noble Lords a very happy Christmas, and I look forward to working with everyone in the new year.

[Lord Stoneham of Droxford (LD)]

My Lords, in continuing these staff tributes from the Liberal Democrat Benches, I want to talk about three individuals. First, Ola Diya was a valued member of the housekeeping team. She spent just under 20 years as an early housekeeper, starting in Millbank House with the cleaning contractors and then later transferring to the in-house team, cleaning high-profile areas of the House of Lords, including the first floor offices of the West Front, and covering duties in the Chamber and the Royal Gallery. Housekeepers are vital to the functioning of the House, and the House thanks Ola for her hard work over two decades. She retired in September to spend more time with her family overseas. We wish her all health and happiness.

Secondly, Nicholas Beach retired as deputy counsel to the Chairman of Committees in the House of Lords at the end of October, after a remarkable 40-year career as a lawyer in Whitehall and Westminster. Nick joined the counsel’s office in the House of Lords in 2010, with 25 years’ experience as a government lawyer in the Treasury Solicitor’s Department, the Department for Education, the Ministry of Defence and the Department for Culture, Media and Sport. He came to us with a well-deserved reputation as a public law expert, with an enviable reputation as a drafter of statutory instruments. This expertise has been put to very effective use over the last 15 years, particularly in the House’s scrutiny of delegated powers in Bills and of statutory instruments.

The burden of scrutinising secondary legislation grew considerably during the Brexit and pandemic years. Nick rose admirably to the challenge, with quiet professionalism of the highest order, combined with his trademark patience and good humour. Nick also spent many years advising on the legal aspects of restoration and renewal. He assisted with the transfer of the Parliamentary Archives to the National Archives at Kew, and he advised the archives on the loan to Parliament, in 2015, of the four original copies of Magna Carta. Nick could always be relied upon to keep cool in a crisis, and this ability will be put to good use in his retirement. He hopes to become an expert ice cream maker as well as a cake baker. We wish him all the best in these ventures and all health and happiness in retirement.

Finally, Amanda McGrath is retiring on 31 December, after 13 years as a committee assistant and, later, a committee operations officer in the Lords Committee Office. During her career in the Lords, Amanda developed a specialism working for several sub-committees of the former European Union Committee, including the Home Affairs Sub-Committee, the Justice Sub-Committee, and the Security and Justice Sub-Committee. She has been a committee operations officer for the Justice and Home Affairs Committee since it was established in 2021, guiding it through several high-profile inquiries and handling a high volume of sensitive evidence. She has organised many committee visits, including the Justice and Home Affairs Committee visits to His Majesty’s Prisons Belmarsh and Isis—and getting the committee out again—the Port of Dover, Eurotunnel, and the Eurostar terminal at St Pancras. Before joining the Committee Office, Amanda was a civil servant in the Ministry of Defence. She is planning a number of projects in retirement and will spend more time travelling and at the theatre. We wish her all the best and all health and happiness.

I join in the tributes to my colleagues in the usual channels and the House at large. As we near the Christmas Recess, I take this opportunity from these Benches to wish everyone, Members and staff, a very happy Christmas, a good rest over the two and a half weeks and all the best for the new year.

[The Earl of Kinnoull (CB)]

My Lords, I associate myself with all the warm comments made by my fellow members of the usual channels about the staff of the House. I note the kindness, the courtesy and the huge help that those staff provide to Cross-Bench and all Members, and I am very grateful. Before I pay tribute to four very special colleagues, I reflect particularly on the moment in March of the confetti in the Chamber, when protesters interrupted our proceedings by throwing leaflets from the gallery. Our doorkeepers ushered them away, clutching as they were leaflets that called for “aristocrats out, nurses in”. I felt that my noble friend Lady Watkins came very close to declaring a conflict. But, thanks to the skill of the doorkeepers, we were back up and running in just four minutes. We owe a great debt and give great thanks to our doorkeepers, and their head doorkeeper John Ingram. I for one am very grateful for them.

My first tribute is to David Prior. David worked in the Parliamentary Archives, joining in April 1992 as the assistant clerk of the records, a role latterly not so snappily renamed head of public services and outreach. He has transformed the way in which our archives are presented to the public, through many exhibitions, large and small. He oversaw loans such as the Stamp Act 1765, which went to the USA; this was the legislation that gave rise to the cry, “No taxation without representation”, giving great succour to the independence movement over there. He arranged for the Articles of Union between England and Scotland, and the Act of Union 1707, to be displayed at the Scottish Parliament in 2007, which was the tercentenary. Most remarkably, David arranged for the four inward loans for the four surviving Magna Cartas, which were displayed in the Robing Room in February 2015, a task that others observed was more complex than organising a western Balkans conference. I have not mentioned his technological thrust in bringing the archive to our public, for which I hope he will forgive me. I thank him for all 33 years and wish him well.

Mary Nottingham and Mandy Marks retired as senior internal auditors in September. Mary and Mandy met when working for the Ministry of Defence internal audit department, and while Mary moved to the House some time before Mandy, the role they took on when Mandy arrived was quickly adapted so that they were a job share. They brought great audit experience to the Lords team, with humour and professionalism and no hint of sinister purpose, an approach that was much appreciated by all whom they worked with during their parliamentary careers. They were consummate team players. That is not to say they did not have strong opinions, as their colleagues recall: their head of section observed that they were masters of upwards management, always done with such charming subtlety that to this day he was never entirely sure whether he was managing them or they were managing him. I think we know the answer. Mary and Mandy will take their opinions on that question into a long and very well-earned retirement, which I understand will include visits to Cyprus, where they both used to own homes. They were wonderful colleagues and respected professionals, and we are all very grateful to them for their contribution to the House.

Finally, I pay tribute to one of our greatest generals in our longest-running war. I speak, of course, of the war against moth and mouse. Maureen Shoults led the early-morning sorties on the front line of the Principal Floor corridor for 27 years before retiring in November. She started as a housekeeper, was promoted to a team leader and latterly had a team of 15 housekeepers. Her particular personal theatre of battle was the bit of the Principal Floor corridor that included the Cross-Bench offices. While we try to lock away our admittedly plentiful rations of crumbly shortbread, we have been guilty of providing sustenance for the enemy. Despite this, and the early hour when I tended to run across her, she always greeted me and indeed all our staff and those who met her with a smile and a kind word. She will now spend more time with her children, Ben and Wayne, and her grandchildren, Finley and Fiona. We wish her all the best, and we will all keep fighting the great war on her behalf.

It remains only for me to thank my fellow usual channels. I cannot tell your Lordships how generous they are constantly to the Cross Bench in all sorts of little ways, and I and the Cross Bench are all very grateful to them. I have to say that it is very good fun in the usual channels. I would take issue about the biscuits, because there was a metre-long lot of biscuits with the Chief Whip—a lot of Jaffa cakes at one point—and we are hoping to get more of those in there. But it is in a great spirit that we try to make sure that things work in the House, and I pay tribute to them.

With that said, the only remaining thing is to wish, on behalf of our Benches, everybody, Members and staff, a very happy Christmas.

[The Lord Bishop of Derby]

My Lords, I shall not detain the House long, but on behalf of these Benches I echo the appreciative comments that we have just heard from the Front Benches about all those who have retired, or are about to retire, as colleagues, working alongside us here. It is a real privilege to have the final opportunity on behalf of us all in your Lordships’ House to thank those who work with us, both front of house and behind the scenes, for their outstanding care and service in keeping this House and our work here running smoothly.

As we near the end of this year’s journey through Advent and approach Christmas, I know that all Members will join me in wishing not just each other but all our colleagues here a restorative recess. I pray that they may know the joy of the angels, the eagerness of the shepherds, the perseverance of the wise men, the obedience of Joseph and Mary, and the peace of the Christ child this Christmas. Happy Christmas, and a good New Year when it comes.

Procedure and Privileges Committee

Thursday 18th December 2025 Lords Chamber

Motion to Agree

12:16

Moved by

[The Senior Deputy Speaker]

That the Report from the Select Committee Conduct Committee: Rotation Rule (5th Report, HL Paper 230) be agreed to.

[The Senior Deputy Speaker (Lord Gardiner of Kimble)]

My Lords, the 5th report from the Procedure and Privileges Committee follows an invitation from the Conduct Committee to the Procedure and Privileges Committee to review the application of the rotation rule to Peer members of the Conduct Committee. The report before your Lordships’ House recommends that Peer members of the Conduct Committee should be appointed for up to three years in the first instance, with the option to extend their appointment annually up to a maximum of six years in total. The Committee of Selection should review the membership of the Conduct Committee annually, with the input of the committee’s chair, to ensure a balance of skills and experience on the committee as a whole. The report proposes no formal change to the terms of appointment of external members, who will continue to be appointed for three years in the first instance. An extension thereafter, up to a maximum of a further three years, will be subject to regular review by the chair of the Conduct Committee. In summary, if this report is agreed, the terms of appointment for Peer and external members will, as far as practicable, be aligned. I commend the report to your Lordships.

Motion agreed.

Retirement and Participation Committee

Thursday 18th December 2025 Lords Chamber

Membership Motion

12:18

Moved by

[The Senior Deputy Speaker]

That: (1) A Select Committee be appointed to consider and make recommendations on—

(a) a retirement age, and

(b) a participation requirement for members of the House of Lords;

(2) In relation to these issues the Committee shall consider and report to the House on—

(a) the impact of a retirement age on the House and, in particular, its size and functioning,

(b) the impact of a participation requirement on the House and, in particular, its membership and functioning, and

(c) options for the implementation of a retirement age and participation requirement including without primary legislation and that these options should include transitional measures, where appropriate;

And that, as proposed by the Committee of Selection, the following members be appointed to the Committee:

Anelay of St Johns, B, Blunkett, L, Chandos, V, Hayman, B, Manningham-Buller, B, Mattinson, B, Parminter, B, Sherbourne of Didsbury, L, Smith of Hindhead, L, Strathclyde, L, Suttie, B, Taylor of Bolton, B (Chair)

That the Committee do report by 31 July 2026;

That the Committee have power to send for persons, papers and records;

That the evidence taken by the Committee be published, if the Committee so wishes; and

That the Report of the Committee be printed, regardless of any adjournment of the House.

Motion agreed.

Sentencing Bill

Thursday 18th December 2025 Lords Chamber

Order of Consideration Motion

12:19

Moved by

[Lord Lemos]

That the amendments for the Report stage be marshalled and considered in the following order: Clause 1, Schedule 1, Clauses 2 to 9, Schedule 2, Clause 10, Schedule 3, Clauses 11 to 27, Schedule 4, Clauses 28 to 31, Schedule 5, Clauses 32 to 47, Title.

Motion agreed.

Puberty Suppressants Trial

Thursday 18th December 2025 Lords Chamber

Commons Urgent Question

12:19

The following Answer to an Urgent Question was given in the House of Commons on Wednesday 17 December.

“Let me just start by acknowledging the sensitivities around this issue and the strong beliefs held around this House. For all the division and divided opinion, I believe that there is a determination shared by everyone in this House to do the right thing by a vulnerable group of children and young people. It is for those reasons that I am taking the course of action that I am. Put simply, that is to follow expert clinical advice and take an evidence-led approach.

The Cass review found shocking levels of unprofessionalism, a lack of clinical oversight and puberty blockers prescribed to children without sufficient evidence that doing so was safe or beneficial to those children and young people. What Dr Hilary Cass uncovered was a scandal. That is why, on coming to office, I made the temporary ban brought in by my predecessor, the right honourable Member for Louth and Horncastle, Victoria Atkins, a permanent one. Dr Cass also recommended a thorough study to establish how best to support children and young people who suffer gender incongruence. That is the PATHWAYS study.

The study has four main parts, one of which is the clinical trial to study the effects of puberty-suppressing hormones on young people’s physical, social and emotional wellbeing. The other aspects of the PATHWAYS study will track the physical, social and emotional well-being of all young people attending UK NHS gender services. It will look at young people’s thinking and brain development, following both those who are and are not taking puberty-suppressing hormones, and it will gather evidence directly from young people, parents and staff about their experiences of living with gender incongruence.

The bar for the trial to be approved was extremely high and oversight will be rigorous. Children cannot consent to being on the trial, so places will require parental consent, as well as the assent of young people. It is because protecting and promoting the health and well-being of affected young people is our primary concern that there are also strict eligibility criteria in place to join the PATHWAYS clinical trial. As such, the number of young people who would expect to qualify for the trial will also be low. Participants must undergo thorough mental and physical assessments and will be followed over a number of years with regular well-being checks. Puberty blockers have also been used to delay puberty in children and young people who start puberty much too early. Use in those cases has been extensively tested and has met strict safety requirements for that use.

The study is led by King’s College London and the South London and Maudsley NHS Foundation Trust. It has been carefully checked by independent scientists who advise the National Institute for Health and Care Research and by the Medicines and Healthcare products Regulatory Agency, and received approval from a research ethics committee. I am treading cautiously in this area because the safety of children must come first”.

[Lord Kamall (Con)]

My Lords, I begin by thanking the Government for their sensitive language in handling this delicate issue. I recall the noble Baroness, Lady Cass, telling the House that puberty blockers are currently licensed only for much younger children with precocious puberty or older adults with certain cancers. Trials are therefore needed to determine whether they are safe for adolescents with gender incongruence and to understand the interaction with the different processes of puberty. I understand that children taking part in the trials must have their parents’ consent, but can the Minister clarify two points that are clearly raising concern? First, what is the maximum and minimum age of children taking part in these trials? Secondly, what assurances can the Government definitively give that children taking part in these trials will not experience fertility issues or loss of sexual function or any conditions that are irreversible later in life? I also wish all noble Lords, staff and officials a merry Christmas, happy Hanukkah, happy new year and, as our American cousins say, happy holidays.

[The Parliamentary Under-secretary of State, Department of Health (Baroness Merron) (Lab)]

My Lords, I am grateful to the noble Lord for acknowledging the sensitive language. This is indeed a sensitive issue. For all the division and divided opinion that I know there is, there is also a determination—including across the House, I am sure—that we get this right. The clinical trial is just part of the PATHWAYS study. With regard to the clinical trial, it is extremely unlikely that anyone under the age of 11 will qualify as a potential participant and it runs up to the 16th birthday, so I hope that that is helpful. Can the noble Lord remind me of his second question?

[Lord Kamall (Con)]

What assurance can be given so that any health developments under these trials are not irreversible?

[Baroness Merron (Lab)]

I thank the noble Lord. Before participants enter the trial—and it is an extremely high bar, as it should be; there will be at least 226 participants required, but that is not a target and there will be no drive to get up to that number—certainly any possible impacts such as those the noble Lord describes will be fully discussed and mitigations will be explained and made available, particularly in terms of fertility. I absolutely take the point that the noble Lord raises.

[Baroness Cass (CB)]

My Lords, we are faced with a situation where, for 15 years, clinicians in this country have told children and young people that these medications are safe, fully reversible and indeed life-saving. Last year, they were rightly banned from clinical practice. However, the upshot is that now, of the 75 children a month who are coming to the new services, about 20% are getting these medications and, worse, testosterone and oestrogen from unlicensed and unregulated sources—and those are the ones we know about. In addition, referrals to the new services have dropped from 200 a month to only 30 a month, so we think that a large number of those young people are also being harmed through those mechanisms.

We are concerned about this much broader harm; children are voting with their feet now. Does the Minister agree with me that, for the very tiny number of young people who clinicians believe will ultimately have a long-standing gender incongruence and will therefore be eligible for this trial, it is better that they get their medication under careful clinical supervision rather than on the dark web? Secondly, does she think that this trial will be a way of attracting that broader group of young people back into the NHS who do not need medical treatment but need holistic wraparound care?

[Baroness Merron (Lab)]

Let me first say to the noble Baroness how grateful we are for her continued professional attention and sensitivity in dealing with this. There was a cross-party approach to the Cass review, and I pay tribute to Sir Sajid Javid, the former Health Secretary for seeing the need for this. We have always been supportive of the Cass review. I agree with both points that the noble Baroness has made. The fact is that this is about the need to face up to what the review found: shocking levels of unprofessionalism, a lack of clinical oversight and puberty blockers being prescribed to children without sufficient evidence. That was not safe and not beneficial and it could not go on.

[Baroness Thornton (Lab)]

My Lords, I first join my noble friend the Minister in congratulating the noble Baroness, Lady Cass, and I also congratulate my right honourable friend the Secretary of State, for the transparency with which this has already been dealt. Members will be aware that, across parties and across both Houses, there was a briefing that involved all the scientists who will be carrying out this research. Can my noble friend assure the House that that transparency and information giving will continue?

[Baroness Merron (Lab)]

I can confirm to my noble friend that the transparency will continue and I am grateful for the comments that she made about my right honourable friend the Health Secretary, who I believe has not just been transparent but extremely honest. I very much welcome that.

[Baroness Barker (LD)]

My Lords, the backdrop to this research is an extensive international religious nationalist campaign against women’s rights and LGBT rights. Since this research has been designed according to standard research protocols, has been approved by the NHS ethics committees and will be carried out by professionals who are bound by professional regulation, does the Minister agree with me that those professionals should be enabled to get on with their job free from ideological interference?

[Baroness Merron (Lab)]

I do agree with that point. We are seeking to protect the safety and interests of children and young people through evidence, and it is right and proper that we get on with that. As the noble Baroness has said, this is a trial; it is being led by King’s College London and the South London and Maudsley NHS Foundation Trust. It has been carefully checked by independent scientists who advise the NIHR and by the MHRA and it has also received approval from a research ethics committee. I would say that we are treading cautiously and correctly in this area, because all that matters is the safety of children.

[Baroness Falkner of Margravine (CB)]

My Lords—

[Lord Paddick (Non-Afl)]

My Lords—

[Lord Sandhurst (Con)]

My Lords, I understand the concern about illicit provision on the dark web, which is a very serious matter and difficult to manage. None the less, I must ask what provision is being made to meet potential claims for damages from young people like Keira Bell in the future who sustain permanent damage to sexual function and emotional well-being after being on the trial?

[Baroness Merron (Lab)]

It is probably helpful to say that no one is required to be on the trial. Nobody will be accepted on to the trial unless there is an extremely rigorous and clinically led judgment about whether a young person is suitable. On the point about transparency, all that information is available online and I would urge noble Lords to look at it. The temporary ban was brought in by the previous Health Secretary, Victoria Atkins, and, in my view, it was absolutely right that we made it a permanent one. However, the issues remain, and we must work out how best to support children and young people who suffer gender incongruence.

[Lord Paddick (Non-Afl)]

My Lords—

[Baroness Falkner of Margravine (CB)]

My Lords—

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, it is the turn of the Cross Benches.

[Baroness Falkner of Margravine (CB)]

My Lords, in the case that children cannot consent, which is widely acknowledged, given the age of the children, we know that single-parent consent will be permissible for the PATHWAYS trial. We also know from litigation to date on these vexed matters that parents are going to court to ascertain whether a single parent can consent to this. Will the Government review single-parent consent and insist that both parents must give consent to these potentially irreversible changes, where children’s consent is not possible?

[Baroness Merron (Lab)]

As the noble Baroness rightly says, children, by definition, cannot consent to being on the trial, so places will require parental consent as well as the assent of young people. I can assure your Lordships’ House that, as I have already mentioned, there are strict eligibility criteria to join the PATHWAYS clinical trial. Part of the assessment by the professionals making the decision about engagement involves the role of parents, including whether there has been any undue pressure and a whole range of considerations. I urge the noble Baroness to refer to the details of how young people will be accepted on to this trial. I must emphasise that no person will be guided towards it who should not be. We are seeking young people; there is no requirement.

UK-EU Common Understanding Negotiations

Thursday 18th December 2025 Lords Chamber

Statement

12:31

The following Statement was made in the House of Commons on Wednesday 17 December.

“With permission, Madam Deputy Speaker, I would like to make a Statement on the Government’s strategic partnership with the EU.

The Government were elected with a manifesto commitment to reset relations with our European partners; to tear down unnecessary barriers to trade and cut costs and red tape for British producers and retailers; to increase national security through strong borders and greater co-operation with our closest allies; and to support jobs here in the UK and opportunities abroad.

In May this year, the Government agreed a new strategic partnership with the EU, which the Prime Minister announced at the historic UK-EU summit—the first of its kind. It is a landmark deal that is good for bills, good for our borders and good for jobs. We took that decision, exercising our sovereignty, to strike a deal in the national interest. We had to fix a bad deal passed on to us by the previous Government—the first trade deal in history that made it harder to trade. Just as we have done with the US and India, this Labour Government are striking deals to bring down bills for British people and open new opportunities for British businesses.

Since that summit, I have led negotiations with the European Commission to implement the commitments we made. I am therefore pleased to inform the House that, earlier today, the UK and the European Commission concluded negotiations for the UK’s association to Erasmus+ from 2027. This will open up world-class opportunities for students, teachers, youth workers, sports sector professionals and communities of all ages in our education, training, sport and youth sectors—both for the professionals who work in those sectors and, crucially, for our young people.

For students, this means more chances to study, train, work or volunteer abroad, gaining language skills and experience that will make them attractive to employers; for our teachers, youth workers and those who work in the sports sector, it means greater opportunities for professional development; and for our schools, colleges, universities and providers, it means access to networks and partnerships that will drive quality, encourage research links, and enhance the reputation of the UK’s world-leading education system. This morning, I met students at New City College in Hackney to see the range of benefits there are going to be, including playing basketball.

As part of Erasmus+, participants can travel to any European Union member state, as well as to several countries outside the European Union. It will go further than schemes that have come before, offering a broader scope of activity and a specific focus on unlocking opportunities for all. It is an investment in opportunity for young people from all backgrounds, for our workforce, and for our future. It will open doors for tens of thousands more young people across the UK, renewing our ties with Europe and beyond. This Labour Government have always been clear that we want young people to have access to the best opportunities in life, no matter what their background or where in this country they live. That is what we have consistently delivered, and it is what we are delivering through today’s announcement.

We are pleased that the EU has agreed financial terms that represent a fair balance between the UK’s contribution and the benefits the programme offers. The 30% discount in 2027, compared with the default terms in the trade and co-operation agreement, has paved the way for UK participation in the programme.

We also agreed that there will be a review of the UK’s participation in the programme 10 months after our association, so that we can look at the actual data concerning the demand for funding in the UK. Going forward, any continued participation in Erasmus+ under the next multi-annual financial framework will be informed by that data and our experience of association in 2027. We have always said that we will not sign deals unless they are in the national interest, and in this case I am happy to say that the agreement passed that test.

The Government will now work to maximise take-up across all sectors so that the benefits of Erasmus+ association can be fully realised. We will work closely with institutions and our young people to support this, particularly among disadvantaged groups. A UK national agency will be appointed to administer the programme in due course.

In addition, I am pleased to inform the House that the UK and the European Commission have concluded exploratory talks on the UK’s participation in the EU’s internal electricity market. The details of this will be set out in an exchange of letters between me and Commissioner Maroš Šefčovič, to be published next week. Closer co-operation on electricity will bring real benefits to businesses and consumers across Europe. It will drive down energy costs and protect consumers against volatile fossil fuel markets. It will also drive up investment in the North Sea and strengthen energy security. The UK and the EU will now proceed swiftly with negotiations on a UK-EU electricity agreement.

But that is not all. I welcome the clarification from the European Commission today that, in practice, there should be no carbon border adjustment mechanism costs levied on UK electricity exports—a welcome development that reflects our extensive use of renewables. Negotiations to link our carbon markets are also under way, which will cut costs, make it cheaper for UK companies to move to greener energy and, once agreed, save £7 billion-worth of UK goods exports from EU CBAM charges.

Negotiations on the food and drink agreement are also under way, which will enable food and agriculture businesses to trade more cheaply and easily by slashing the red tape and costly paperwork introduced by the last Government, which result in businesses facing £200 for export health certificates on every single shipment, or small businesses choosing not to trade with the EU altogether. Our new agreement will put this right, boosting our exports, cutting costs for importers, and bringing down prices on supermarket shelves.

The UK and the EU are committed to implementing the commitments of the May 2025 summit in a timely manner. We are working swiftly to conclude negotiations on the food and drink deal and on linking our carbon markets by the time of the next UK-EU summit in 2026. Across all these areas, the UK is clear that there will be no return to the single market, the customs union or freedom of movement. We will agree deals that are in our national interest. The Government are exercising our sovereignty to deliver for the British people.

We are committed to building this new strategic partnership with the European Union. Indeed, last week I spoke with my counterpart in the Commission, Maroš Šefčovič, and we underlined our shared commitment to implementing the common understanding that the Prime Minister and the Commission President agreed at the UK- EU summit in May. Whether it is through boosting opportunities for young people and educators across the country, cutting energy bills or agreeing a food and drink deal that slashes red tape and cuts costs, I will always negotiate in the interests of this country and our people.

I will continue to lead negotiations with the Commission. I look forward to the next annual UK-EU summit, where the Government will continue to build that new strategic partnership. That is what a grown-up, pragmatic relationship looks like. We work together under shared aims for mutually beneficial solutions to our shared problems. That is the approach the Government are taking and that is the approach that is delivering results. I commend this Statement to the House”.

[The Earl of Courtown (Con)]

My Lords, there is little doubt across the House that the opportunity to live, study and work abroad can bring real benefits for young people. It enables them to experience different cultures, encounter new ways of thinking, build confidence and form relationships and friendships that can last a lifetime. Those objectives are, in themselves, entirely laudable. However, good intentions are not enough. If this arrangement is to command confidence, it must be fair, accessible and genuinely mutually beneficial. It is therefore right that we scrutinise carefully both the financial and practical implications of what His Majesty’s Government have agreed.

One of the most immediate questions raised by this announcement is whether it will represent genuine value for money for the British taxpayer. It is concerning that the Government have been unable to define any cap on the number of EU students who may come to the United Kingdom under this arrangement, nor have they ruled out a wider youth mobility scheme that could further increase the inflow of young people from the EU. Under the proposed deal, European students would be able to study in the UK for up to a year while continuing to pay tuition fees to their home institutions.

When this scheme last operated, the imbalance was stark. In 2018, almost 32,000 young people came to the UK through Erasmus, compared with around 17,000 UK students who travelled in the opposite direction. The result was an estimated net cost to the UK taxpayer of more than £200 million per year. The media reported this morning that the total cost to the British taxpayer from this new scheme could be as high as £8.75 billion. At a time when young people in this country are already facing rising living costs, spiralling unemployment and diminished opportunities to buy homes and to save and invest their money—problems largely stemming from this Government’s own policy choices—we must be extremely careful about entering into arrangements that risk British taxpayers subsidising European students to study here.

Whether or not a taxpayer’s own child benefits from this scheme, the cost is borne by everyone. If parents across the country are being asked to help fund opportunities for other people’s children to study abroad, we must be confident and able to demonstrate that this delivers benefits not just for the individual participant but for the country as a whole. What assurances can the Minister give the House that this will not again become an asymmetrical arrangement? Can she guarantee that participation in Erasmus+ from 2027 will not result in a net cost to the British taxpayer of the kind we saw previously? Can she please tell us how value for money for the taxpayer will be assessed and communicated?

Closely linked to this is the question of equitable access. It is easy to predict who is most likely to benefit from schemes of this nature: those who studied languages at school and travelled abroad with their families, and whose educational and social background already equip them to take advantage of international opportunities. Without careful design, Erasmus risks becoming little more than a publicly subsidised gap year for young people who already enjoy significant privilege. Although the Government have said that financial support will be available for disadvantaged students, funding alone is insufficient if those disadvantaged students are unaware of the scheme, lack institutional encouragement or do not see it as something for people like them. Can the Minister set out how the Government will ensure that this scheme is actively promoted and supported in schools, colleges and universities serving disadvantaged communities? What concrete steps will be taken to ensure that those who would benefit most from international mobility are not, once again, the least likely to access it?

I would also welcome the Government’s response on how the new arrangement will sit alongside existing UK mobility programmes. The United Kingdom currently operates the Turing scheme, which was designed to expand opportunities for students to study and work abroad, well beyond the European Union. Against that background, it would be helpful for the House to understand what the future holds for the Turing scheme once association with Erasmus+ begins in 2027. I hope, therefore, that the Minister can tell us how, in choosing to reassociate with Erasmus+, the Government intend to preserve the broader international reach that Turing was specifically designed to support. Will opportunities for global mobility beyond Europe be maintained at their current level, or do the Government envisage a narrowing of focus back towards the EU alone?

As I indicated earlier, this scheme must be able to not only deliver benefits but demonstrate clearly that it represents value for money for the taxpayer. Although the Government have outlined the initial cost of association, experience tells us that such programmes can become significantly more expensive over time, particularly where participation is uneven or demand exceeds expectations. It would therefore be reassuring to hear what safeguards are in place to prevent costs escalating in the years ahead.

The Government have said that rejoining Erasmus will cost £570 million in 2027 for a one-year membership but declined to say what the future costs will be. Can the Minister now tell us what they will be? It is reported that Brussels plans to increase funding for the scheme from 2028 by more than 50%, from around €26 billion to €41 billion. This, plus the extra costs associated with joining EU programmes after Brexit, means the bloc could charge Britain £1.25 billion a year between 2028 and 2034. Can the Minister confirm whether these figures are correct?

Also, if participation once again becomes markedly unbalanced, with substantially more students coming to the UK than travelling abroad, what mechanisms will exist to address that? Will the Government be able to renegotiate the terms of participation, adjust financial contributions or take corrective action to ensure that the UK is not locked into a persistently disadvantageous position? Can the Minister tell us what projected cost this programme will have to universities, which may lose out on international student fees as a result of this policy?

Finally, there will understandably be concern in this House and beyond that this EU reset could amount to a gradual reversal of the settlement reached when the United Kingdom left the European Union. What protections are in place to ensure that the UK is not drawn into open-ended financial commitments, regulatory alignment or governance structures over which it has limited control? Crucially, what clear mechanisms exist for the UK to withdraw or adjust its participation should this arrangement cease to serve our national interest?

There is broad consensus across this House that international mobility can be a powerful force for good, but good will must be matched by responsibility. If this scheme is to succeed, it must deliver value for money, widen opportunity rather than entrench privilege, and sit comfortably within a UK-EU relationship based on co-operation without dependency. I look forward to the Minister’s response on these points and to greater clarity on how the Government intend to ensure that this agreement works not just in theory but in practice for young people across the whole United Kingdom.

[Lord Wallace of Saltaire (LD)]

My Lords, we on these Benches welcome the Statement and the achievement. We regret only that the Government are moving so slowly. I note that this means we differ considerably from the Conservative Front Bench, although I was relieved that the noble Earl’s words were a little less hysterical than the front pages of the Telegraph and the Mail today. If we are going to pursue the reset further, as my party strongly supports, and move towards dynamic alignment across the board—and, therefore, closer association with the customs union, which will have to come next—the Government will need to change their language and spend more time discussing the benefits as against the costs, which my Conservative colleague, the Telegraph and the Mail have stressed so heavily this morning.

I declare an interest. I taught many students from other European Union countries in my last two jobs in universities, one of whom is the President of his country and extremely active on European security; a number of others are now in leading positions in public life in their countries and good friends of the United Kingdom. That is one of the benefits we get from exchanges. On the imbalance we had last time, an active scheme to encourage British students to spend time in other countries would be of enormous benefit to this country. It would lead to people who understand other countries, can do business with them, understand their politics and then enter public service here or elsewhere, to our mutual benefit.

I regret the language of the Statement. It is defensive and therefore wrong. It talks about only “the national interest” and “sovereignty”. I am sure the Minister will agree that the only country in the world that is fully sovereign is North Korea. In other countries, sovereignty has to be compromised by international co-operation. As the leader of Reform in effect makes clear, the alternative to membership of the European Union is not full sovereignty but dependence on the United States, which is not an easy alternative at the present time.

I suggest that the Government should be talking about shared interests, common security, the benefits as against the costs and the fact that our contributions helped save this country money in many ways. When the Conservative Government took us out of the European Union, we had to set up separate agencies and recruit additional public servants. We lost the European Medicines Agency in London, which was a great boon to our pharmaceutical industry, and a number of other things. The benefits absolutely need to be stressed and I encourage the Minister to say to her colleagues, in particular Nick Thomas-Symonds, that the sort of language they are using will not persuade the bulk of the British public that we need to be closer to the European Union.

We now know, on very strong evidence, that we have lost a lot of economic growth since we have left, which means we have also lost tax revenue. On goods and services, we know that we need to go back to closer relations. I encourage the Minister to go further.

[Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)]

My Lords, maybe this was not the Statement to bring some Christmas good will, cheer and unanimity across your Lordships’ House. It is a good thing that my language, I hope, will be both positive for the noble Lord, Lord Wallace, and slightly more circumspect for the noble Earl, Lord Courtown. I thank both noble Lords. We will continue to rehearse these arguments, as we have done for many years since the referendum, as we seek to undertake our reset. A number of important issues have been raised, which I will address in some detail. I will also reflect on Hansard to see which questions I have missed, either intentionally or by accident—never intentionally, as I am being reminded—and will write in due course.

I would like to engage with this in a spirit of good will. This is a positive thing we are doing: £500 million of additional investment in our young people in one year. It is something to be celebrated. I will engage in the promise of positivity at this time of year and I view it as my own Hanukkah miracle. I will touch on some of the issues raised.

On the UK-EU summit, our manifesto promised to reset our relationships with our European partners to improve our diplomatic, economic and security co-operation following Brexit. Earlier this year we hosted the first annual UK-EU summit, where the Prime Minister and the European Commission President welcomed our new strategic partnership and a landmark deal that is good for bills, borders and jobs. That is what we are seeking to deliver—a partnership that enables us to tackle the shared challenges we face, to boost the prosperity, safety and security of both our peoples, and to help strengthen European-wide defences.

I turn to the core of the announcement. We have made good progress on talks with the EU since the summit, working to implement the joint commitments we made in May. I am therefore pleased to inform the House that, yesterday, the UK and the European Commission concluded negotiations for the UK’s association to Erasmus+ from 2027 for one year—with, as I said, £500 million of investment in our young people. Our association to the programme will open up opportunities for learners, educators, youth workers, sports sector professionals and communities of all ages in our education, training, youth and sport sectors, for both the professionals who work in these sectors and, crucially, our young people. Participants can travel to any European Union member state and to several countries outside it, opening doors to tens of thousands of people across the UK, renewing our people ties with Europe and beyond.

At the summit, we also agreed to work towards participation in Erasmus+ on the basis that there will be a fair balance between our financial contribution and the number of UK participants receiving funding. We are pleased that the EU has agreed financial terms—a 30% discount in 2027 compared with the default terms in the trade and co-operation agreement. This is a fair balance between our contribution and the benefits of the programme. It has also been agreed that the UK’s participation in the programme will be reviewed 10 months after our association, which will include data on the demand for funding in the UK. Any continued participation will be informed by our experience of association in 2027. The Government will now work quickly to ensure that there is maximum take-up across all sectors and groups and that the benefits of our association to Erasmus+ can be felt.

The noble Earl, Lord Courtown, raised an important issue about people’s awareness of the scheme. I live in Stoke-on-Trent, and we must make sure that people from up and down the country are able to access these schemes, so that it is not, as historically it could have been considered, a boost for middle-class children, but is accessible to everyone. Many Members of your Lordships’ House have associations with further education facilities and schools up and down the country; there is a responsibility on each of us to make sure that people are aware of this scheme. I urge all noble Lords to reach out to their communities. The funding streams open in October 2026 and we have time to make sure that people can access this. One of the things I was most delighted to see yesterday was a quotation from the Association of School and College Leaders, which was delighted about this scheme.

The Turing scheme has wider international reach since we left Erasmus, though it was not the scheme that we left. I reassure noble Lords that the Turing scheme will be operating as normal next year and that we will continue to learn lessons from it. Any future decisions on Turing will be brought forward to your Lordships’ House in due course. On international fees to the EU, I am not sure that is something that I recognise, but I will reflect on the noble Earl’s exact question and come back to him.

On today’s coverage in the Mail and Telegraph, it will not surprise noble Lords that I anticipated such a question. The reality is that the European Union has not yet determined any costings for the next scheme, so nobody recognises the numbers that were in the papers today because no such scheme has been rolled out with any such budget. We have been clear to commit to 2027. We will make sure that it works and proves to be good value for money for the United Kingdom and is of huge value to our young people. We will continue to negotiate with the European Union on next steps.

The noble Earl raised the youth experience scheme. As I have made clear in other debates in your Lordships’ House, the Government recognise the value of such schemes. One of the things I find exceptionally difficult when we discuss youth mobility schemes is that the previous Government signed a youth mobility scheme with Uruguay. I do not understand why a youth mobility scheme with the European Union is so contrary to our values that we would not want one. If we can have one with 13 other countries, we can have one with the European Union.

On the Labour Party’s red lines in our manifesto, I hate to disappoint the noble Lord but we have been very clear that we are not rejoining the customs union. Our manifesto set out exactly what we were prepared to do in our negotiations. All our negotiations are through the prism of our red lines. We will not be returning to the single market, the customs union or freedom of movement.

On whether the UK is becoming a rule-taker, we have made a choice to align in some areas where it makes sense for our national interest. The EU has accepted that there will need to be a number of areas in which we need to retain our own rules as we make alignment going forward. The details of these are all subject to negotiation. We will be involved in forming the regulations that apply to the UK at every stage, and Members of your Lordships’ House will have appropriate scrutiny arrangements in place.

I will finish on a positive. The expected financial benefits for our economy from having a closer relationship with the European Union are hugely significant. The SPS and carbon-pricing agreements which we are currently negotiating will add nearly £9 billion a year to the UK economy by 2040. The carbon-pricing deal avoids the risk of UK businesses paying tax to the EU on £7 billion-worth of trade. We are seeking to reset our relationship based on what is best in our national interest as a sovereign country. The European Union is our biggest trade partner and the biggest source of economic growth for this country. We continue to work closely with it, in a spirit of good will at this time of year.

12:53

[Baroness Coussins (CB)]

My Lords, can the Minister confirm that rejoining Erasmus+ will include schools for the purposes of trips and exchanges? If so, will His Majesty’s Government back this up by reintroducing group passports, so that we can put an end to the inordinate delays at the border when coach-loads of children have to get out of the bus to be individually checked?

[Baroness Anderson of Stoke-on-Trent (Lab)]

The noble Baroness raises an important point about how important travel is for our young people. We are negotiating bilateral agreements with countries. We have done the first of these for youth travel with France and I believe ongoing conversations are happening with Germany. I will reflect on her comments, but we are seeing positive moves in this direction.

[Lord Reid of Cardowan (Lab)]

Of course we have to give scrutiny to any international agreement, but I am sure that, throughout this House, there is wide agreement that this is good news for the young people of this country—there is no question about that. In that context, will my noble friend the Minister reconfirm, in case of any confusion, that this is not confined only to universities but applies to access for further education, schools, sports, sports trainers, staff and so on? Therefore, it is, in my view, an unalloyed good move for young people. Can she confirm the next steps on this over the coming 12 months? Does she have an understanding of the timeline and the next elements in the process?

[Baroness Anderson of Stoke-on-Trent (Lab)]

I thank my noble friend. He is right that this is for young people in the round. That is why I was delighted that the chief executive of the National Youth Agency welcomed yesterday’s announcement as

“a significant moment for young people across the UK. With Erasmus+ officially back, we are reopening doors to global learning, cultural exchange, and opportunities that shape futures”.

At a time of global instability, it is incredibly important that we have close relationships with our friends and allies and that we understand that the world is more than our borders. This is for as many young people as possible, and we expect and hope to see 100,000 young people participate in this scheme in 2027. On next steps, the funding call opens in November 2026—I must correct myself, as I think I said October 2026 previously—and will be open until February 2027. There are two pots of money, the first of which will be over £400 million that will come directly to the participating organisations, and there is a £1 billion pot that individuals and institutions can bid into. This is very exciting, and I hope noble Lords will share my enthusiasm in their local communities.

[Lord Howell of Guildford (Con)]

My Lords, I will focus on the comments in the Statement on electricity co-operation trading with the European Union. Obviously, there are millions of families in this country who are wondering still how on earth to pay to keep their house warm and feed their children during the Christmas period, and indeed in any period. That is not as it should be. We should be much more concerned than we are about this totally unacceptable situation.

The Statement claims that the new co-operation plan that is being discussed will

“drive down energy costs and protect consumers”

and

“drive up investment in the North Sea and strengthen energy security”.

Can the Minister and her colleagues assure us that that really is going to happen, and that it will drive down the price from what it is now and not from the much higher price it is likely to be? This is a trick of statistics being used by the Government, which I do not like at all, and they should be much more straightforward. Is it going to make cheaper electricity for families and industry than we have now? I very much doubt it. Obviously, we want more investment in the North Sea. At the moment, we are paying the owners of wind farms literally billions of pounds not to produce electricity. The system is wrong and must be changed. I hope it will be, with the co-operation of the European market.

Those are the things on which we want some reassurance because, at present, they are not desirable. It is incredible that we are not producing competitively produced energy, in this country of all countries. We have the North Sea as a huge asset that we are not using properly—indeed, the Government are trying to slow it down. It is time we faced in another direction in this whole area, and I would like to hear more about it.

[Baroness Anderson of Stoke-on-Trent (Lab)]

Given that we have not touched on this point so far, it would be helpful to update your Lordships’ House. The UK and the European Commission have concluded exploratory talks on the UK’s participation in the EU’s internal electricity market. This closer co-operation will drive down energy costs and protect consumers against volatile fossil fuel markets. The UK and the EU will work at pace on these negotiations as we head into next year. While these are ongoing, we cannot comment on the specifics any further.

To reassure the noble Lord on how this is going to impact energy bills, joining the EU’s electricity trading platforms will lower bills by reducing trade friction. More efficient electricity trading allows us to make more efficient use of our shared infrastructure. This deal will also support investment in North Sea electricity infrastructure, allowing us to reduce exposure to volatile wholesale gas costs. This is one component of household bills among many others, but we genuinely believe it will have a direct impact. The noble Lord is right: there is nothing more important to communities, especially where I live, than the cost of living crisis, and we need to do everything we can to support families.

[Lord Grocott (Lab)]

My Lords, on Erasmus, I remind my noble friend that, as I am sure she knows, we are talking about very large sums of money. It was £570 million in the first year alone, and that is with a terrific 30% discount. When large sums of money are involved, I am interested in who the beneficiaries are going to be. I am encouraged by the part of the Statement in which the Commons Minister said,

“there will be a review of the UK’s participation in the programme 10 months after our association”.

My guess is—and it will of course be tested over time—that there will be rather more students coming from Russell group universities than from FE colleges in the Midlands and the north. To a degree, that is how it must be tested, because the evidence is pretty strong that such schemes can easily become a case of “to them that have shall more be given”, and communities such as my noble friend’s former constituency and mine do not get their fair share.

[Baroness Anderson of Stoke-on-Trent (Lab)]

My noble friend is absolutely right that one of the tests of this success will be making sure that my former constituents and his have access to this scheme and genuinely participate. As I said, the Association of Colleges’ chief executive said yesterday that this was “brilliant news” for staff and students of all ages in further education colleges:

“For students, it widens their perspective on the world, opening their eyes to different cultures and different ways of life, and for staff, the opportunity to learn from other countries on how they deliver technical education and skills is invaluable”.


We need to make sure that this is embedded going forward, and one of the tests will be to make sure that working-class kids, too, have access to this scheme.

[Lord Kerr of Kinlochard (CB)]

My Lords, the £570 million is a gross number; the net number would take account of grants to our own people benefiting from the scheme. I hope that the Minister will not be too distracted by the ghosts of Christmas past rattling their chains and coming up with absurd estimates of the cost of this scheme. It is, as the noble Lord, Lord Reid, said, an unalloyed benefit that we are going back to Erasmus.

It is the other bits of the Statement that I would like to press the Minister on. She rightly pointed out that this is of considerable economic benefit, potentially. The Statement and what was said in the other place makes it clear that the negotiations on electricity are intended to move swiftly. If it is possible to achieve more efficient use of the interconnectors, that will be an immense benefit to the United Kingdom and to our continental friends. Obviously, it is crucial that we get the SPS agreement, and it would be good to have a firm link between the emissions trading schemes.

My understanding is that the intention is to do all that before the next summit. But the one thing that did not appear in the Statement was any indication of the date for the next summit. Can the Minister confirm that it will be, at the latest, no later than one year after the first summit—that is, by May?

[Baroness Anderson of Stoke-on-Trent (Lab)]

I was doing so well. What I have been told I can say is that it will be happening in 2026, so there will definitely be a summit next year.

We genuinely are moving at pace, and there is the reality that some of the things we are hoping to bring forward, not least SPS, require a number of contributions from Members of your Lordships’ House to get this over the line. On that basis, we will be discussing these issues in some depth. I expect to be doing so with Members of your Lordships’ House, at this Dispatch Box, next year, which suggests that we are moving—in civil service language—at pace.

[Viscount Hailsham (Con)]

My Lords, as a long-standing opponent of Brexit, I welcome the Statement. I hope it is the first of a number of steps which will improve our relations with the European Union, especially in the trading aspects of that relationship. Without this, the prospects of sustained significant growth are going to be very difficult to achieve.

[Baroness Anderson of Stoke-on-Trent (Lab)]

The noble Viscount is absolutely correct. Our trade with the European Union was worth £813 billion in 2024, and it is our most significant trading partner. It is incredibly important that we have a positive relationship with it, and we have sought to do that. The fact that my right honourable friend the Prime Minister held the first EU-UK summit since Brexit earlier this year suggests that our relationship really did need to be rebuilt. We are rebuilding our relationship based on the three pillars of security, tackling migration, and SPS and ETS. I expect to be in front of your Lordships’ House on many occasions to discuss what I hope will be positive announcements.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I join the noble Lord, Lord Wallace, and others in roundly celebrating this announcement, although we should take a second to reflect on the tragedy of those who missed out in the desert years. Those affected were not only those who might have travelled, but students staying here who did not benefit from having exchange students in their classes and being trained here.

I have two specific questions. David Clarke, professor of languages at Cardiff University, noted that since we were last in the scheme, the bureaucratic hurdles such as visas have become much greater for students travelling. Are the Government working with the European nations to try to minimise those road humps? Secondly, both Scotland and Wales have introduced their own schemes. Are the Government working with the devolved Administrations and the nations to ensure that any interchange is as seamless as possible when Erasmus comes back?

[Baroness Anderson of Stoke-on-Trent (Lab)]

The noble Baroness makes a very important point about visas. I will have to write to her about the detail of any changes we will need to bring forward. I remind and reassure noble Lords that these are temporary arrangements for Erasmus; people will be here for less than 12 months and will be travelling for less than 12 months.

On existing schemes in Scotland and Wales, obviously, there are ongoing conversations, but the Taith scheme in Wales is hugely respected and regarded. In terms of accessing and working with disadvantaged communities and those from working-class backgrounds, we all have a huge amount to learn from their successes. Given the nature of these schemes and that education is devolved, these decisions will be a matter for the Scottish and Welsh Governments, but, obviously, we will have ongoing conversations with them.

[Baroness Royall of Blaisdon (Lab)]

My Lords, I warmly welcome this great initiative, which is a matter for celebration. I am especially pleased that, as my noble friend Lord Reid said, it is open to all kids. As my noble friend the Minister said, we all have a responsibility to ensure that kids in all our areas, including the Forest of Dean, which is a greatly disadvantaged area, know about this so that they can take advantage of it. At a time when we have war on our continent and people are peddling fear of the other, the way in which this can nurture understanding between young people is vital.

There is one thing that worries me slightly. Of course, we have to have robust finances, and to know that we are getting value for money and that all kids are included. Ten months is a very short amount of time. I urge my noble friend the Minister to ensure that, whatever happens in the future, there must not be a cliff edge; we must do whatever we can to ensure that such schemes are a success.

[Baroness Anderson of Stoke-on-Trent (Lab)]

I thank my noble friend for her question and, more importantly, for the work she has done over many years in this area. She raises an important point, but one of the things we need to be aware of is that we are joining the last year of the current scheme, and that the details on the priorities of the next scheme and the countries that will participate have yet to be published. Therefore, there is nothing else that we can join at the moment. I hope that our joining Erasmus+ at this point sends a message to our friends and allies in the European Union and to young people up and down the country that we are investing in their futures, that we are clear in our relationships and partnerships about how important it is that we have cross-country travel, and that we appreciate the potential for cultural exchange.

[The Earl of Clancarty (CB)]

My Lords, I congratulate the Government on getting us back into Erasmus+, something for which many of us have been asking for a long time. I add that it is a complete myth that working-class students did not make use of Erasmus when we were previously a member of Erasmus+.

I have just one question. When the new youth mobility scheme is agreed, will it be properly templated on to Erasmus so that costs, red tape and conditions are kept as low and as simple as possible to further encourage less privileged students whose career plan may want to make use of both schemes? In that sense, as the noble Baroness, Lady Royall, said, a year is surely too short a period to assess the overall interest.

[Baroness Anderson of Stoke-on-Trent (Lab)]

My Lords, we have agreed with the European Union to work towards the establishment of a youth experience scheme with the EU, creating new opportunities for cultural exchange with the UK and the EU. It is in both our interests to conclude the negotiations quickly and to stand up the scheme so that young UK and EU nationals can take up the opportunities as soon as possible. I cannot give those assurances that it will align with the Erasmus+ scheme as we are still negotiating one of those schemes, but I look forward to discussions with the noble Earl as soon as we have the detail of both.

[Baroness Helic (Con)]

My Lords, I welcome the introduction of this scheme. What assessment have the Government made of the extent to which the enhanced EU-UK mobility will strengthen and contribute to better collaboration in defence-related research and development? Will the Government pursue further measures to deepen such mobility, particularly alongside wider defence co-operation?

[Baroness Anderson of Stoke-on-Trent (Lab)]

The noble Baroness is absolutely right to raise our security and defence relationships with the European Union. We see even today why that is so important in the ongoing discussions about Ukraine. On how we ensure this is part of our wider collaboration, it is incredibly important that our young people have a shared understanding of the world with young people from across the European Union, and that they understand the threats we face, which is why there is so much to be gained from us rejoining Erasmus+. I will have to write to the noble Baroness with an update on what the specifics will look like with regard to research, but I will follow up in the new year, if she will forgive me.

[Baroness Wheatcroft (CB)]

My Lords, this is really good news and I welcome it on all counts, in particular the food and drink deal we are moving towards, because so many small businesses have simply stopped exporting to the EU. Can the Minister say how those small firms will now be encouraged to get back to work and back into selling to the EU?

[Baroness Anderson of Stoke-on-Trent (Lab)]

My Lords, a huge amount of effort is going into negotiating the SPS agreement, which will be incredibly important for our trade but also in reducing friction, including between Northern Ireland and GB. There are many positives to this. Those negotiations are ongoing but I look forward to discussing them with Members of your Lordships’ House once they are complete so that we can look at them in detail to make sure that everyone, including SMEs, can access them.

With that, I wish everyone a merry Christmas, chag sameach and happy new year. I look forward to seeing all noble Lords in 2026.

Pension Schemes Bill

Thursday 18th December 2025 Lords Chamber

Second Reading

13:14

Moved by

[Baroness Sherlock]

Northern Ireland and Welsh legislative consent sought. Relevant document: 42nd Report from the Delegated Powers and Regulatory Reform Committee

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, it is a privilege to open the Second Reading of the Pension Schemes Bill. I am grateful to noble Lords for the engagement we have already had, and I look forward to working constructively together as the Bill progresses through this House. I also very much look forward to the maiden speech of the noble Baroness, Lady White of Tufnell Park.

Pensions are really important, and the Bill will transform our pensions landscape for the better. It will play its part in delivering growth, as well as helping to raise living standards in every part of the UK. It will assist the pensioners of the future to feel more confident about the economy in general, as well as their own futures.

Pensions are the promise we make to millions of people that their years of hard work will be rewarded with security and dignity in retirement. UK pension schemes invest hundreds of billions of pounds in our country. The reforms outlined in the Bill will make those pounds work harder for pensioners by making schemes more efficient—more money invested, and less on overheads and administration.

The first Pensions Commission laid the groundwork for a new pensions landscape, with a simpler state pension and automatic enrolment into retirement savings. This transformed private pension saving in the UK. The Bill, along with the work of the pensions investment review, moves our private pensions system forward. Bigger, better pension schemes will drive better returns, as well as tackling inefficiencies in our system.

The new Pensions Commission is looking at the issue of adequacy across the state and private pensions systems, with a clear objective of building a strong, fair and sustainable pension system. I look forward to this debate on the Bill, which is all about making every pound saved work harder for members, unlocking investment for our economy and restoring confidence in the promise of a decent retirement.

I will now outline the main measures in the Bill. First, the Bill addresses the fragmentation of the Local Government Pension Scheme, which is currently spread across 87 funds in England and Wales. This fragmentation limits efficiency and scale. Through these reforms, all assets in the Local Government Pension Scheme, or LGPS, will be managed through FCA-regulated investment pools, ensuring professional oversight and better value for money. Administering authorities will set clear targets for local investment, working with strategic authorities to align with regional growth plans.

Of course, LGPS members’ pensions and benefits are protected, as they are guaranteed in statute and are not affected by the performance of investments. These reforms are about the LGPS being well governed and well invested to deliver efficiency and value for money.

Next, the Bill introduces powers to enable more trustees of well-funded defined benefit, or DB, schemes to share some of the £160 billion of surplus funds to benefit sponsoring employers and members. This will enable employers to drive growth through investment and higher purchasing power, but it will be subject to strict safeguards. The measure will allow trustees, working with employers, to decide how surplus can benefit both members and employers, while maintaining security for future pensions.

The defined contribution, or DC, workplace pensions market prioritises competition on cost rather than on the overall value. The Bill introduces a value-for-money framework to enable a shift in focus away from cost towards a longer-term consideration of value. This new framework looks to standardise how value is assessed, in a transparent, consistent and comparable way. It will require schemes to disclose standardised metrics, undertake a holistic assessment of value, and take improvement actions where needed.

Automatic enrolment has been a huge success, ensuring that millions more people are now saving for their retirement. However, frequent job changes mean that individuals are often enrolled into a new pension scheme by each employer, leaving them with multiple small pots over their working life, often with very small amounts saved. This has created a challenge across the workplace pensions market, with current estimates suggesting that within the system there are more than 13 million pots worth less than £1,000 each. This is hugely expensive for pension schemes to administer, with an estimated cost of £240 million a year, ultimately resulting in poorer value for members.

Through the Bill, we are taking powers to introduce automatic consolidation of these dormant small pension pots through a multiple default consolidator model. Opportunity for member choice will be built in; members can choose a consolidator scheme or choose to opt out entirely if they wish. This will simplify the system, reduce costs and support members so they can better track their retirement savings.

There is strong evidence that larger pension schemes mean better outcomes for members through efficiencies of scale, stronger governance and better investment opportunities at lower cost. The Bill will therefore drive scale by accelerating the consolidation of multi-employer DC schemes.

From 2030, schemes used for auto-enrolment must reach at least £25 billion in assets in a single main scale default arrangement, or £10 billion on a transition pathway with a credible plan to reach £25 billion within five years. This is about harnessing the power of scale: larger schemes can negotiate better deals, access more diverse investments and deliver better outcomes for savers.

On asset allocation, earlier this year, the Mansion House Accord was signed by 17 major pension providers, which, between them, manage about 90% of active savers’ DC pensions. This initiative was led by industry, and the signatories pledged to invest 10% of their main default funds in private assets, such as infrastructure, by 2030. The purpose of this voluntary commitment is, as the signatories put it,

“to facilitate access for savers to the higher potential net returns that can arise from investment in private markets as part of a diversified portfolio, as well as boosting investment in the UK”.

The Bill includes a backstop provision that would permit the Government, with Parliament’s approval, to require DC pension providers of auto-enrolment schemes to invest a fixed percentage of their default funds in specific asset classes. The Government do not anticipate exercising the power, unless they consider that the industry has not delivered the change on its own. There are also strong safeguards around it.

All workplace pension schemes are required to have a default arrangement, where contributions are invested if members do not choose an investment option. Most members go into a default arrangement and remain there throughout their scheme membership. There are currently thousands of different default arrangements in pension schemes, creating fragmentation, inefficiency and poorer outcomes for members.

The Bill introduces new requirements to review those default arrangements, with a power to make regulations as needed, following the review, to require default arrangements to be consolidated into a main scale default arrangement. There is also a power to make regulations for new default arrangements to be subject to regulatory approval. That will ensure that savers benefit from economies of scale and improved governance by reducing the fragmentation in the pensions market.

Many pension schemes, especially legacy ones, are not delivering good outcomes for savers. As contract-based schemes rely on individual contracts between firms and members, firms usually need individual members’ consent to make any changes, even when the change would improve outcomes for members. Obtaining this consent is often difficult and costly, especially when members are disengaged, even when a scheme offers poor value. This leaves members stuck in poor-value schemes.

To address that, the Government are introducing the contractual override power in the Bill. It will allow the providers of FCA-regulated DC workplace pensions to transfer members to a different pension arrangement, make a change which would otherwise require consent, or vary the terms of members’ contracts without the need for individual member consent, but only when the legal and regulatory requirements are met. That includes rigorous consumer safeguards such as the best interests test, which must be met and certified by an independent expert before a contractual override can take place.

At retirement, DC scheme savers face complex financial decisions. They need to evaluate the different options to suit their own individual circumstances, assess risks and uncertainty in financial products, and factor in their own estimation of their life expectancy. We know that savers do not always use the support available: only 16% used a regulated source, such as Pension Wise or a professional financial adviser.

The Bill puts new duties on trustees to develop and provide one or more default pension plans at retirement to help members access their savings without these complex decisions. These plans will provide a straightforward income solution for most members, with opt-out rights for those who prefer alternatives. Trustees must design plans based on member needs, communicate options clearly and publish a pension benefits strategy, which will be overseen by the Pensions Regulator. The Bill also requires the FCA to make rules that deliver default pension plans in relation to pension schemes regulated by the FCA, ensuring consistency and better outcomes for savers.

Superfunds are commercial consolidators that offer a new route for employers to secure the legacy liabilities of closed DB schemes that cannot secure an insurance buyout. Building on the current interim regime, the Bill establishes a permanent legislative framework for superfunds. It introduces an authorisation and supervisory regime with robust governance, funding and continuity arrangements, so that members of those schemes can have the confidence that their pensions are properly protected. Superfunds may invest more productively because of their scale, expertise and buying power, so they are good for members, employers and the wider economy.

Part 4 contains a range of important measures. Following the Virgin Media court case, certain DB pension benefit alterations could be treated as void if schemes cannot produce actuarial confirmation that they met the minimum standards in place at the time. This affects schemes that were contracted out between 1997 and 2016. The court judgment has the potential to cause pension schemes significant cost and uncertainty, even where the schemes did, in fact, meet the minimum standards required. To resolve that, the Bill allows schemes to ask their actuary to confirm that past benefit alterations would not have caused the scheme to fall below the relevant minimum standards.

The Chancellor announced in the Budget that the Government will introduce pre-1997 indexation into the Pension Protection Fund and the Financial Assistance Scheme—the PPF and the FAS—to address the long-standing issue faced by members. As noble Lords will be aware, those are the compensation schemes that provide a safety net for members of DB schemes. Currently, payments in respect of service before 1997 are not uprated with inflation, and affected members have seen the real value of their compensation decrease significantly in recent years.

The Bill will pave the way to introduce increases on PPF and FAS payments for pensions built up before 6 April 1997. These will be CPI-linked and capped at 2.5%, and will apply prospectively for members whose former schemes provided for these increases. That will help those members’ pensions keep pace with the cost of living. This is a step change that will make a meaningful difference to over 250,000 members. Incomes will be boosted by an average of around £400 for PPF members and £300 for FAS members after the first five years. Our changes strike an affordable balance of interests for all parties, including eligible members, levy payers, taxpayers and the PPF’s ability to manage future risk. The Bill makes some other changes to the PPF and the FAS that will benefit the members of these schemes and the levy payers supporting the PPF, including around terminal illness and the levies.

Finally, some noble Lords may have seen that the Delegated Powers and Regulatory Reform Committee published its report on the Bill last night. I emphasise that the Government recognise the importance of getting the right balance when taking delegated powers and using them appropriately. The pensions industry is highly technical and rapidly evolving, and there is a complex interaction between legislative requirements, regulatory oversight and changes in practice or innovation. In pensions legislation, it is common for a mix of requirements and principles to be set out in primary legislation, with finer detail, which is liable to frequent development, to be set out in secondary legislation. That allows for a quicker response to developments in the industry, including to protect scheme members. We think we have the right balance in the Bill, but I thank the committee for its report and will respond in due course.

This Bill will initiate systemic changes to the pensions landscape, with the aim of building a pensions system that is fit for the future—one that is strong, fair and sustainable, and that delivers for savers, employers and the economy. At its core, the Bill is about making sure that people’s hard-earned savings work as hard for them as they have worked to save, while galvanising the untapped benefits that private pensions can offer the economy at large. I look forward to our discussions today. I beg to move.

13:28

[Baroness Stedman-Scott (Con)]

My Lords, I too look forward to the maiden speech of the noble Baroness, Lady White. I have every confidence that she will make a great contribution, including to the work of the House generally. Having had some interface with her at the DWP, I am very confident that will happen.

Although the Bill is not perfect, I hope the Minister will take comfort from the broad cross-party consensus that exists around many of its core measures. Across your Lordships’ House, we share a common ambition: having a pensions system that delivers strong returns for those it serves.

In 2010, we inherited from the previous Labour Government a private pensions system that was not fit for purpose. The shift from defined benefit to defined contribution had left millions behind and, in 2011, just 42% of people were saving into a workplace pension. The cornerstone of reform was auto-enrolment—a Conservative innovation and an undeniable success. Today, around 88% of eligible employees are saving for retirement, with most opt-outs made on the basis of sound financial advice.

Workers deserve dignity in retirement, not merely a safety net. That is why, before the last election, the Government rightly focused on two enduring challenges: value for money and pensions adequacy.

Let me begin by acknowledging what the Bill gets right. We welcome progress on the pensions dashboard, which will help savers access their information more easily and plan for retirement. We also support the Bill’s emphasis on consolidation, including larger pension funds, the consolidation of the Local Government Pension Scheme, and the long-overdue merging of small, stranded pots—all of which have the potential to improve efficiency and value for money, provided that risks are properly managed. Finally, we welcome the humane and necessary measures to improve access to pensions for those facing terminal illness. Taken together, these provisions represent steps in the right direction.

However, while there is much to commend, there are also areas where we believe the Bill falls short, and in ways that matter deeply to the millions depending on it. The most striking omission in the Bill is the absence of any meaningful progress on pension adequacy. The uncomfortable truth is that too many people are simply not saving enough to secure a decent standard of living in retirement: a situation made all the more difficult in the current economic circumstances.

Auto-enrolment was never intended to be the finished article. It was a foundation, not the building itself. Yet the Bill proceeds as though the task were complete. The central question of whether current savings levels are sufficient is not confronted but deferred: pushed into the second stage of the review. This is not reform: it is a holding space, in which difficult but necessary decisions risk being postponed rather than resolved.

Adequacy should have been the organising principle of this legislation. Instead, it has been quietly parked for another day. In its place, the Government have focused on taxing pension contributions, increasing the cost of employment, and layering additional regulation on to the terms and conditions of work. We are regulating, taxing and constraining the very mechanisms through which retirement savings are generated, yet we have failed to address the most basic and consequential question of all: are people saving enough to retire with security and dignity?

A further missed opportunity is the failure to support the self-employed with new and innovative ways to save affordably for their retirement—more than 4 million people who drive our economy, create jobs and take risks, yet too often face retirement with no provision at all. Only around one in five self-employed workers earning over £10,000 a year currently saves into a pension. This is not a marginal problem; it is a structural gap in our pensions system. We need practical and pioneering solutions to support this growing group, and the Bill should have set that direction. We have spoken directly to the self-employed in preparation for this legislation, and in Committee we stand ready to assist the Minister by bringing that engagement and evidence to bear.

Our wider engagement also brought into sharper focus the Bill’s treatment of public sector pensions. This Bill is, in our view, decidedly LGPS-light. We will therefore table amendments to address that omission, ensuring that the scheme operates with greater clarity, flexibility and accountability. At the heart of our concern is the need for a more transparent, simpler and reformed approach to reviewing employer contribution rates for local authorities. This is not about loosening discipline or weakening the scheme. It is about prudent financial management and giving councils the tools they need to govern responsibly. This is what local authorities deserve and it is good financial governance.

The Bill shows no enthusiasm for addressing excessive prudence and the record surpluses within the Local Government Pension Scheme. We are not naive enough to suggest that the LGPS surpluses can be extracted or treated in the same way as those of private defined benefit schemes. But, under the Chancellor’s revised fiscal rules, those surpluses are now treated as assets offsetting public debt. That may be fiscally convenient but it represents a missed opportunity to enhance councils’ resilience. In appropriate circumstances, those surpluses could—and should—be used to support reductions in employer contribution rates. However, too often, overly cautious actuarial methodologies, excessive prudence and a lack of transparency have locked councils into contribution rates that are simply too high.

Proportionality and openness in how assumptions are set and decisions are reached are pivotal. Without transparency, those assumptions cannot be properly challenged through due diligence, and Section 151 officers cannot fully discharge their statutory duties. We must therefore ensure that interim reviews of employer contributions are more accessible, transparent and accountable, through clearer statutory trigger conditions, published policies, improved actuarial transparency and strengthened statutory guidance.

Kensington and Chelsea demonstrated precisely that approach in the aftermath of the Grenfell tragedy. Yet, across the country, councils are still forced into an exhausting and uncertain process to navigate the existing regulatory framework simply to secure interim contribution reductions after a formal valuation. We look forward to engaging constructively with the Government to ensure that councils are properly supported in delivering services while fully meeting their LGPS obligations.

Finally, I turn to what I regard as the most troubling element of the Bill: the proposed reserve power to mandate pension fund investment strategies within master trusts and group personal pension schemes used for automatic enrolment. Mandation is not a neutral tool; it is the quiet nationalisation of pension investment strategy. It is a fundamental shift in who ultimately controls investment decisions. Automatic enrolment has succeeded because it is trusted. Mandation threatens that trust: automatic enrolment is trusted by employers, by industry, and above all by millions of ordinary savers who have neither the time nor the confidence to manage complex financial decisions themselves.

It is therefore deeply concerning that this power is targeted specifically at automatic enrolment default funds. These are the schemes used disproportionately by those with the least means and the least financial confidence: the very people who rely most heavily on the integrity and independence of the system we have built over decades.

This is where the injustice bites. Those with the fewest means and the least financial confidence are the ones Labour’s mandation would trap. The savviest can opt out; the poorest get locked in. That is the injustice of mandation. Those savers need our protection, not a situation in which their pension outcomes become indirectly shaped by ministerial preferences, however well intentioned. Conservatives built automatic enrolment; Labour now stands a chance of threatening it.

We built automatic enrolment on a simple settlement: the state sets the framework, but trustees make the investment decisions. The Bill risks blurring that line. At stake here is trustee independence and fiduciary duty, principles that sit at the very heart of pensions policy. Trustees are bound, both legally and morally, to act in the best financial interests of their beneficiaries. Pension schemes exist to serve savers, not to serve the shifting political priorities of the day.

In this context, I am reminded of the warning offered by the respected pensions expert Tom McPhail, who invoked Chekhov’s famous dramatic device: the gun on the wall. If the gun is hung on the backdrop of the stage in the first act, it will be fired by the third. Once a Government arm themselves with a power, no matter how benignly it is presented, history suggests that it will eventually be used. If the Government do not intend to use the power, why is it in the Bill?

Rather than relying on the logic of “mandation as a backstop”, I urge the Minister and her team to step back and address the underlying reasons why pension funds are not investing more in the UK in the first place. Low domestic investment is not simply a collective action problem, as the Government suggest. It reflects real structural barriers, and the Government should compile the relevant evidence and report back on how those obstacles might be removed.

Will the Minister undertake to do this? There are better and far less constitutionally troubling ways to unlock long-term investment. I offer her just one example. Solvency rules continue to constrain insurers from investing in productive UK assets that offer stable long-term returns. Reforming those outdated rules could, according to Aviva, unlock billions of pounds over the next decade. That is how we should be driving growth, by removing barriers to investment and not by inserting the state into decisions that properly belong to independent trustees acting solely in the interest of savers. It is therefore striking that the Government have chosen to expend so much political capital on a mandation policy that commands little support beyond the DWP and lacks a wider consensus across the industry. Can the Government provide assurances that savers in auto-enrolment pension schemes will not subsequently discover that their pension providers have been instructed to invest in specific entities such as Thames Water?

I close by reaffirming our commitment to work constructively with the Government. Stability and confidence in the pensions market are paramount. It is in that spirit that we approach this Bill. Where improvements can be made, we will table amendments. We will engage in good faith to ensure that the detail is right and that the framework ultimately serves savers, schemes and the wider economy. We broadly support the direction of travel that the Government are pursuing. However, as today’s debate has made clear, there remain important questions around the detail, the intent of forthcoming regulations and what has been omitted from the Bill.

When closing today’s debate, my noble friend Lord Younger of Leckie will expand on these points, set out further concerns and put several direct questions to the Minister. We hope that the Government will reflect carefully on those issues as the Bill progresses. I look forward to working with the Minister in the weeks and months ahead and to continuing this constructive, robust dialogue as we seek to strengthen the legislation.

13:42

[Lord Sharkey (LD)]

My Lords, I join the Minister and the noble Baroness, Lady Stedman-Scott, in saying how much I look forward to the maiden speech of the noble Baroness, Lady White, especially since I too live in Tufnell Park.

It is always a pleasure to follow the Minister. We welcome an important set of proposals for reform. We would support many of these proposals, but several merit serious examination and probing in Committee. As things stand, I should say upfront that we cannot support the mandation proposals in the Bill. I hope that we can constructively modify these proposals during the Bill’s passage through the House.

The Minister will know that stakeholders have expressed significant concerns about risk to member security, trustee independence and long-term saver outcomes that may be contained in the Bill’s proposals. For example, there are worries that easing access to DB surpluses of employers could undermine member benefits. Phoenix has noted that surplus release thresholds will be set in secondary legislation. It believes that a post-release funding level is essential to protect members and limit covenant risks. It opposes lowering the threshold to “low dependency” and believes that surplus should only be released above buyout affordability. Some MPs and the ABI have called for stricter oversight, including retention of the three “gateway tests” to prioritise buyouts over superfunds.

The ACA also recommends that trustees have a formal role in assessing and agreeing any rule changes and in determining any refund of a surplus to an employer. The CEO of TPR, Nausicaa Delfas, whose name I googled—it means “burner of ships”—is on record as saying that:

“Where schemes are fully funded and there are protections in place for members, we support efforts to help trustees and employers consider how to safely release surplus if it can improve member benefits or unlock investment in the wider economy”.


It is not entirely clear how those two outcomes may be traded off, but I would be grateful if the Minister could say more about government thinking on member protection in release and distribution of surplus. I know that my noble friend Lord Thurso, who cannot be here today because he is undergoing a medical procedure in Inverness, will also wish to test the Government’s thinking in this area in Committee.

Then there is the critical question of mandated asset allocation. This Bill, as everyone knows, contains a reserve power to authorise DC master trusts and group personal pensions used for automatic enrolment to invest a minimum proportion of assets in “productive” investments, including UK assets. On the face of it, this cuts directly across trustees’ fiduciary duties and members’ best interest tests. It risks political direction of asset allocation. Does anyone really believe that the Government would be better at allocating funding than the markets? This mandation may well create significant market distorting effects if, for example, the demand for such “productive” assets outpaces their availability.

There is also the risk that such a power may be extended over time to influence allocation on an even larger scale than might be currently envisaged. It is worrying that the Governor of the Bank of England has been reported as saying that he does not favour mandation. The Institute and Faculty of Actuaries has said in a written submission:

“The criteria for Master Trust authorisation were intended to produce a safe and reliable savings environment and we do not believe the concept of qualifying assets belongs there”.


This power to mandate

“introduces a commercial conflict between pension providers and trustees over asset allocation, weakening the fiduciary accountability of the trustees … It is also premature to give the Government a sweeping power it does not expect to make use of (we note the percentage of mandated assets cannot be increased after 2035 but that might encourage a government to ‘use it or lose it’.) We would urge Parliamentarians to consider the implications of a future government—of any configuration—having a power to define qualifying assets as any project that the government of the day can meaningfully define, charging the capital costs to the auto-enrolled pension savings of the nation … Should mandating schemes to invest in accordance with Government direction proceed, it needs to be made clear what the respective responsibilities of Government and trustees are”

as the finances work themselves through.

I would be very grateful if the Minister could set out for us how mandation and fiduciary duty can be reconciled without complicating or diluting the proper exercise of fiduciary duty. Perhaps a definition of “productive” would be a useful start. My noble friend Lady Kramer, who is attending a funeral this afternoon, had intended to speak to this point and wanted to ask for a detail and risk profile of assets that will qualify as “productive”.

Most people contribute through auto-enrolment into default funds. They have few resources and should not be in high-risk investments—and certainly not without their permission. Ministers have promised statutory guidance to help resolve the issue of potential conflict between mandation and fiduciary duty. On Report in the Commons, Torsten Bell said

“I intend to bring forward legislation that will allow the Government to develop statutory guidance for the trust-based private pensions sector”.—[Official Report, Commons, 3/12/25; col. 1043.]

He did not specify what kind of legislation or when. The Minister has told us that this guidance will not amount to direction and will have the usual force, or lack of force, present in the many existing “have regards” that exist in the financial services arena. She has also told us that this draft guidance will not be available before Committee begins. This is surely not ideal.

Can the Minister reassure us that, at the very least, this draft guidance will be available before the end of Committee stage? We need to be able to discuss the details of the guidance before we agree to legislation. That is especially the case if the Government intend to rely on the use of SIs, which would of course deprive Parliament of any effective means of scrutiny at all. May I ask her to take another look at the timing, so that we may be able to take guidance properly into account in our discussions of mandation?

Perhaps the Minister can also explain why the mandation currently has sunset provisions for expiry in 2035 if no regulations are in fact made. Why not use, for example, the Mansion House targets to generate a significantly earlier cut-off?

Then there are questions of value for money and consolidations, which have been discussed already. The ABI, as I am sure the Minister knows, pushes for regulatory mechanisms to force consolidation only when it clearly benefits customers. I heard the Minister endorse that approach. The key word here is “clearly”—what does this mean? What will be the test, and who will be doing the testing?

As important as any of these things is the question of pensions adequacy or inadequacy. It is very disappointing that the Bill does nothing to tackle such things as low contribution rates, self-employed exclusion and early savings barriers. The question of whether people are saving enough is probably easy enough to answer, but what to do about it is entirely absent from the Bill. We will want to discuss this further.

Finally, there is no substantive mention of climate issues in the Bill and no reference to, for example, the Paris Agreement. There is an obvious asymmetry here. The Bill provides for increasing investment in productive assets, which are to be defined. It says nothing about which assets should be avoided or minimised. Industry analysts caution that, if the mandation favours domestic growth sectors without, or which do not have strong, climate screening, schemes could be nudged into assets misaligned with the 1.5 to 2 degrees pathway. That would certainly conflict with the spirit, if not the letter, of the Paris Agreement, and it would damage everybody and every enterprise.

Proposed new Clause 19, brought forward at Third Reading in the Commons by my honourable friend Manuela Perteghella, addresses this issue. This new clause, not voted on, would have required the Government and the FCA to make regulations and rules restricting exposure of some occupational and workplace pension schemes to thermal coal investments, and to regularly review whether the restriction should be extended to other fossil fuels. We will bring forward a similar amendment in Committee.

This is a very important Bill with some obviously welcome proposals but also some deep causes for concern, especially as regards mandation and the failure to address pension inadequacy. We look forward to a constructive discussion with the Government and detailed examination of the Bill.

13:53

[Lord Vaux of Harrowden (CB)]

My Lords, it is about five years since we last saw a Pension Schemes Bill in this House, and it is good to see so many familiar faces, albeit sitting in different places in the Chamber. It is also good to be welcoming some new faces to our small band of pension enthusiasts, and I am particularly looking forward to hearing the maiden speech of my noble friend Lady White of Tufnell Park.

This is a big Bill, and there is a lot in it, much of which is to be welcomed and is not particularly controversial. I am going to restrict my comments to two areas of the Bill, one of which I think we will hear quite a lot about.

First, I understand and agree with the reasons and the desire to consolidate small dormant pension pots, but I have some concerns about the details. We are all aware of the problem of lost pensions, whereby a person has forgotten about a pension, perhaps from a long-ago short period of employment. This is one of the problems that the much-delayed pensions dashboard is designed to solve. Compulsorily moving a small pot from one provider to another risks increasing that problem: it will be much more difficult to track down a pension that you dimly remember if it has been moved, perhaps with any correspondence having been sent to an out-of-date address.

The definition of “dormant” is also slightly concerning: a pension pot will be considered dormant if no contributions have been made into the pot during the last 12 months and the individual has taken no steps to confirm or alter the way the pension pot is invested. I have a couple of pension pots that would be considered dormant under that definition, but that is simply because I am happy with the choices I made in the past; I would not consider them to be dormant. In the opposite direction, £1,000 seems a rather low definition of small, although I see it can be changed by regulation.

I am not clear when the Secretary of State intends to make the relevant regulations, but to avoid making the problem of lost pensions worse, I would suggest that it should not be done until the first pensions dashboard is fully operational and accessible to the public. As I understand it, that will not be until late 2027. Perhaps the Minister could provide a brief update on that. Also, there should be a clear requirement that any such transfer, carried out in a situation where no response has been received from the individual, should be clearly flagged on the dashboard to help people track them down.

The second issue I want to raise is more important. Here, I fear that a trend is beginning to emerge already—and that, most unusually, I am going to find myself in disagreement with the noble Baroness, Lady Altmann. This is the power for the Government to mandate the asset allocation of a master trust or group personal pension scheme. Pension schemes should be managed for the benefit of the beneficiaries. The trustees have a fiduciary duty to that effect. The Government mandating that a proportion—and there is no limit to this in the Bill—should be directed into types of assets and locations chosen by them rides a coach and horses through that principle. Who will be liable if such investments are not suitable or go badly wrong? I do not see any indemnification of trustees here. What makes the Government think that they know better than a professional qualified pension manager as to what is best for scheme members? The track record of government investing is not stellar, to say the least.

Of course, the reason for this is to push more pension funds into UK assets, often described as “productive assets”. Like the noble Lord, Lord Sharkey, I have that in inverted commas here, but even that makes little sense in this respect. Let us look at the sorts of assets that the Bill refers to. The first is private equity. Now, private equity may be a good place for a pension fund to put some of its money. Over time, returns have generally exceeded public markets and bonds, primarily because of the use of leverage, but I would love to understand why the Government think this would be a good thing for the country.

What private equity does is buy existing assets, then leverage them up with high levels of debt, thereby gearing up the possible returns that can be made on normal levels of growth. That reduces the corporation tax payable by the company because debt interest is tax-deductible, and the debt is often located in overseas low-tax jurisdictions. Typically, then, overheads and costs are reduced as far as they can be to make the company appear more profitable for sale after three to five years, and that often has the effect of reducing investment in the company and often leads to job reductions.

So where is the benefit to the country from this? If noble Lords do not believe me, I give them Thames Water, left underinvested and indebted by Macquarie, which took out billions in the process, or Debenhams, where the three private equity owners collected £1.2 billion of dividends financed by debt and property sales that left the company to go bust. Others we could mention would be Southern Cross Healthcare and Silentnight, where, ironically, pensioners also lost out, and we have the current anti-competitive situation with veterinary practices. Of course, this is a generalisation, and there are exceptions, but the idea that PE generates growth is doubtful at best—venture capital, development capital, growth capital, yes; PE, not so much. Why do the Government think it would be a good idea to force pension funds to invest in private equity?

Amazingly, the Bill does not actually set out that allocations must be made into UK assets. The wording is drafted so widely that the only assets globally that cannot be prescribed are assets listed on a recognised exchange; nor does it set any limits to what percentage should be allocated into the assets the Government prescribe. In theory, 100% could be allocated. The only safeguard in the Bill—contrary to the Minister’s comment that there are many safeguards—is that the Secretary of State must review the effects of any such regulation within five years of the regulations coming into force. We should note that this is not an independent review; it is a review by the Secretary of State, the very person who made the regulations. That does not fill me with huge confidence. Anyway, if things have gone wrong after five years, what can be done? Is the Secretary of State to be liable for the losses that scheme members have incurred because of the Government overriding the fiduciary duty?

We are an outlier in terms of our pension funds investing in their own country’s productive assets, especially when compared with countries such as Canada and Australia, so I understand why the Government wish to change that, but the way to achieve that is first to understand why it is not happening now. I would be interested to hear from the Minister why she thinks that is. I suspect it is down to a number of issues, including demographic issues, the attractiveness of our markets versus others, regulation, taxation—Gordon Brown’s dividend stealth tax has a lot to answer for—and, I am sure, others. The better solution, surely, is to identify and deal with the barriers that exist to make UK productive assets a more attractive investment prospect, not to take the frankly lazy and inefficient route of mandating without addressing the underlying reasons. Neither Canada nor Australia mandates. Rather, they promote domestic investment in infrastructure and projects through collaboration, not by forcing specific allocations. We should learn from those examples.

The Minister has been clear that the Government do not expect to use this mandation power. This raises a wider point of principle, one that the Minister and I have debated in other contexts in the past, which is that the Government should not give themselves powers that they do not intend to use. As the noble Baroness, Lady Stedman-Scott, said, there is a tendency to use them regardless at some point, even if it is another Government who use them. This is becoming a bit of a trend, and one that I feel should be strongly resisted. There are two potential solutions to this part of the Bill. Either we need to clarify the whole fiduciary duty principle and improve safeguards, or we should remove the power altogether, and I must say that I favour the latter.

With that, I look forward to working with Members from all around the House, as ever, and the Minister on the Bill. In the meantime, I wish everyone a very happy Christmas.

14:01

[Baroness Altmann (Non-Afl)]

My Lords, it is a pleasure to follow the noble Lord, Lord Vaux, and to take part in this Bill, which is a historic measure proposed by the Government with noble intentions. I need to declare my interests as an adviser to NatWest Cushon and a non-executive director of Capita Pension Solutions. I too look forward to the maiden speech of the noble Baroness, Lady White, who has so much success and experience to offer the House. I thank the Pension Protection Fund, CityUK, Pensions UK, the Institute and Faculty of Actuaries, and the Pensions Action Group for their helpful briefings and information for this speech.

The Bill introduces reforms that aim to improve pension outcomes for members of defined benefit schemes, defined contribution schemes and local government schemes and to increase investment in UK productive assets via the route of consolidation into a few larger asset pools or by ensuring default arrangements for direct pension funds in a way that the Government will mandate. I certainly support the aim of increasing UK investments by UK pension funds and the aim of improving pension outcomes. I warmly welcome many of the Bill’s provisions, but I believe that some of the assumptions underlying these reforms could prove dangerously false and that there is a real risk that there will be a lack of innovation in future as smaller, newer providers drop out or do not even start, while the Government could and should be bolder in encouraging pension schemes to support UK growth than the measures in the Bill provide for.

Using both unlisted and listed investment seems to make far more sense than just requiring a specific exposure to private unlisted assets. I hate to disappoint the noble Lord, Lord Vaux, but I think we are on a similar page when it comes to the Government’s specific proposals. Many of our listed companies are selling at attractive ratings or discounts to their real asset value.

There are many aspects of the Bill that my remarks today could cover, but I will have to try to concentrate on a few and leave the rest for Committee. The aim of increasing UK pension fund support for UK growth is right and long overdue. However, much more could be done with the Bill. According to the Government’s workplace pensions road map, the UK has the second largest pension system in the world, and it is clearly the largest potential source of domestic long-term investment capital. Taxpayers provide £80 billion a year of reliefs to add to individual and employer contributions, but most of that money helps other countries, not ours. If taxpayers were presented with the question, “Would you like £80 billion of your money to build roads and fill potholes in other countries, rather than keeping it here in Britain?”, I am not convinced that they would answer in the positive.

UK pension funds have stopped supporting British companies, large and small. I believe that the future of British business can be successful and I believe in Britain, but it seems like our own pension funds do not. Even the parliamentary pension scheme has about 2.8% of its equity exposure in the UK. The Bill does not address that, as the Government are focusing on DC and local government schemes. One of the proposals that I would like to put to the Government is to see whether there are ways in which, instead of mandating specific areas that the Government want pension funds to invest in—which happen to be, in my view, some of the riskiest areas that they could support—the Government should require, let us say, at least 25% of all new contributions into pension schemes to be put into UK assets, listed or unlisted.

The UK listed markets have become exceptionally undervalued in a global context because our pension funds no longer support our markets. We used to have a reliable source of long-term domestic investment capital. If schemes want taxpayers to put huge sums into their pension funds each year, and if managers and providers wish to continue to receive such sums, is it so unreasonable to ask that they put, as I say, maybe just one-quarter of those contributions into the UK? That could include unlisted assets, listed assets or infrastructure—that would be up to trustees to decide—and if they wanted to put more than 75% overseas, they could go ahead, but should not expect taxpayers to give them money to do so. That seems to me to be not mandation but a proper incentivisation, using the incentive mechanism that we already have of tax relief, which does not have to support Britain at all.

We find ourselves in constrained fiscal circumstances. New Financial recently showed that each bit of the UK pension system has lower allocations to domestic equities as a percentage of assets, as a percentage of their equity allocation and relative to the size of the local market than other countries. What is wrong with Britain? I believe in Britain, and there are reasons to expect that pension schemes—after all, 25% of the pension is tax free—should do far more now to protect and boost our growth. This would not have to wait until 2030, either; it could happen immediately.

If I may, I want to cover the question of relying on consolidation as the answer to driving better returns, and what that might do to the marketplace. Defined contribution workplace schemes and the LGPS are supposed to somehow automatically generate better long-term returns by being bigger. Well, there is a case for that, and some studies would support it, but the figure of £25 billion that must be reached by default funds, and the £10 billion by 2030 that is required, are totally arbitrary. There is no rationale that says that is the right number, yet we are putting it in primary legislation. That is most unwise. What if there is a market crash between now and 2030, for example? What is magic about that number?

Can the Minister say what evidence there is that scale is a reliable future predictor of returns? What consideration have the Government given to the damage to new entrants by favouring these large-scale incumbent funds? The risk of schemes herding and all doing the same thing with such large pools of capital, especially in global passive funds, could distort markets. What consideration has been given to that? What level of confidence is attached to the predictions that the Government have made for improvements in outcomes?

I have heard from new entrants to the market, such as Penfold, which say they are now unable to get new business because they are growing fast but may not reach the £10 billion by 2030—and of course people cannot recommend that employers now invest in them. That company has innovative financial methodologies and is offering a new way of reaching out to pension scheme members, as are Cushon and Smart Pension, which may be further down the line in reaching the target. I have concerns that the Bill will stop new competition and new entrants coming in. An oligopoly is not normally the best way for a market to succeed.

I am particularly puzzled by the explicit exclusion of closed-ended listed companies within the Bill. Part 2 says that none of those investment trusts that have invested in precisely the types of investment that we need, and that the Government want to encourage to boost the UK economy, are excluded from the Bill. I do not understand why the Government would be doing this. I know that they want to encourage long-term asset funds, which are open-ended structures, but there are enormous reasons for and benefits from having closed-ended structures when holding such illiquid assets and long-term growth assets. These are proven companies that have produced very good returns in net asset value yet have shrunk to discounts, due partly to macro factors but also to regulatory overkill, which needs urgently to be reviewed.

Investment in just UK infrastructure and renewables by this investment company sector has exceeded £18 billion. Overall, in the kind of assets that the Government want to encourage—funding solar and wind projects, energy efficiency initiatives, social housing, biotech, property and private equity—these companies have put more than £60 billion to work. But they are now struggling to survive and having to buy back their shares, rather than invest in the kind of growth assets that they could otherwise be selling and managing for pension funds in this country.

I hope that the Minister will help us understand whether the Government are going to reverse this particular exclusion and recognise the benefits of this long-standing, world-leading investment sector. Unquestionably, it can be part of the answer in this scenario. I also urge the Government to clarify what fiduciary duty means. I know that there have been many calls for that to be put into statutory guidance, and I would support this.

Finally, as regards the Pension Protection Fund and the Financial Assistance Scheme, I welcome the flexibility that is being put in to allow the levy to be changed. I welcome the change in the terminal benefits. I welcome the acknowledgment of the injustice of the pre-1997 frozen payments, with the oldest people both in the Pension Protection Fund and particularly in the Financial Assistance Scheme, suffering most. I also welcome the flexibility that will mean that, where a scheme is unsure whether the previous rules would have granted increases on the pre-1997 benefits, it will be assumed that they will. The terminal illness increase, from six to 12 months, is again very welcome. But I would urge the Government to look carefully at how we can recognise the injustice to the pre-1997 members, such as Terry Monk, Alan Marnes, Richard Nicholl and John Benson, who gave years of their lives to achieve better outcomes in the Financial Assistance Scheme, and promote the PPF, which has been such a success. I have also heard from Carillion workers who were in the Civil Service pension scheme and have ended up in the PPF, losing their pre-1997 benefits. This injustice hurts, especially in light of the Government’s generosity to mineworkers and the British Coal Staff Superannuation Scheme, which has been given a 30% to 40% increase to pensions that is effectively publicly funded. I hope that the Government will think again about potentially one-off increases, or some other way of helping the pre-1997 members who lost their benefits.

14:16

[Lord Willetts (Con)]

My Lords, I welcome many features and proposals in this substantial and significant Bill. It does, of course, draw on the work of the previous Government, and indeed continues progress on pensions that has long been conducted on a cross-party basis. I think back to my time as shadow Work and Pensions Secretary 20 years ago, when I worked with the then Pensions Minister James Purnell as he investigated auto-enrolment; I then served in the coalition Cabinet with Sir Steve Webb implementing these proposals. I remember also many years of debating with my noble friend Lady Altmann, and I agree with a lot of what she has just said. I look forward to the maiden contribution from the noble Baroness, Lady White, and I rather suspect that during her time in the No. 10 Policy Unit she may have also been engaged in some of these debates.

The Bill comes before the proposals from the re-established Pensions Commission, and I hope that it will have the flexibility to make it possible to implement ideas that emerge from the Pensions Commission. There is a still a crucial question hanging over the original Pensions Commission work, and it is great to see the noble Baroness, Lady Drake, in her place. She knows that I agonise over whether there was a scenario where defined benefit pension schemes could have been saved 20 years ago. They had become very onerous, and over decades successive Governments had added to the regulations to make the defined benefit promise more and more generous and more and more cast iron. Eventually, they had become so onerous that companies closed them to new members, so what had always been intended as an intergenerational contract was made so generous that it became a once-off special offer for the members of those schemes when they closed. It is possible that a significant reduction in the burdens on employers might have enabled some version of those schemes to survive. That is relevant to today’s debate on measures such as collective DC, which is an attempt to recreate some of those strengths. We went instead to pure DC, and younger employees have not been able to enjoy anything like the pension promise of older members of company schemes.

We did some work on this at the Resolution Foundation back in 2023. I cannot remember what has happened to the chief executive at the time, but perhaps I can quote some figures from our intergenerational audit in 2023. We estimated that millennials born in the early 1980s will reach the age of 60 with, on average, £45,000 less in pension assets than boomers born 20 years earlier. That is the challenge of boosting the pensions savings of the younger generation, which I hope is the cross-party basis for this legislation.

A particularly acute example of how this generational unfairness can work is that some of those defined benefit schemes closed to new members were in deficit. The company plugged the deficit gap by using revenues generated by all of its workers, including the younger workers, which it put into the defined benefit scheme available only to some of the workers. We now have some very interesting examples of what happens when these schemes find themselves now, thank heavens, in surplus. The recent Stagecoach deal is a very interesting example; it has been widely welcomed in the media, and in many ways it is good news. However, the Stagecoach pensions scheme closed to new members in 2017. After that, the younger workers had no opportunity to join it. There will now be a distribution of the surplus. I hope the Minister might comment on the feasibility of some of the uses for that surplus, which are not in the current provisions. We heard from my noble friend Lady Stedman-Scott about the importance of pension adequacy. Would it be acceptable for one use of the surplus to be to pay increased auto-enrolled employer contributions into the pension schemes of employees of Stagecoach who joined post 2017 and were therefore not in the earlier scheme? Some of their work will have generated the revenues that created the surplus. Would helping them through the successful auto-enrolment model not be one way forward? Another use, which is being talked about, is funding a collective DC pension arrangement to help get those schemes going. I very much hope we will move beyond the single CDC we have at the moment with Royal Mail. Pensions UK has an interesting proposal for some tax waivers for extra contributions going into CDC, especially out of pension surpluses. Again, I hope the Minister might be able to give that a welcome.

The closure of DB schemes and the creation of pure DC was the background to some of the big shifts we have been talking about. There has been a massive shift from equities into bonds and away from UK assets into assets held abroad. We are talking about this as if it is just rational capitalism working and trustees exercising their discretion, but I have a lot of sympathy with the points that my noble friend Lady Altmann made, because the British model is a very unusual model. I believe it is largely to be explained, not by some higher economic rationality, but by the strange features of the closure of DB and moving to pure DC. It means that the percentage invested in UK equity fell from 50% 20 years ago to 5% now. That makes us a complete outlier across the OECD for the willingness of our pension funds to invest in UK assets.

This is not what the pension fund members and contributors expect. As we know from recent polling published by the London Stock Exchange, when you do a survey of 1,000 current members of workplace pension schemes and ask them how much of their pension contributions they think are going into British business, their estimate is 41%—nearly 10 times larger than what is actually happening. If you ask them whether they think their pension scheme should invest more in British industry, even if this would involve some sacrifice in their future pensions, 61% say yes.

Most funded pension schemes in other advanced western countries are much more deeply rooted in their own national economy and realise that part of what they are trying to do is create the environment in which their national pensioners thrive in a healthy economy in a generation’s time. It is absolutely right to have this debate now in Britain and, for me, having been involved—and still being involved, in different ways—in the science base and research, it is deeply frustrating that we have one of the world’s great research bases and one of its great financial centres but we have totally failed to link the research base with the commercial investors in the City. That needs to change.

Successive Chancellors have been trying to do this, and of course we have had the Mansion House compact and now have the Mansion House Accord. There is now a fraught debate about mandation, and I realise all the delicacies about it. I personally think that the recent proposal from the London Stock Exchange is a very interesting way forward: not specifying the asset allocation by type of asset but saying that, whatever asset allocation has been decided upon, 25% should go into UK assets—absolutely not with full mandation but expecting this as a provision for UK DC default funds. So I hope the Minister will say that the Government are considering this proposal from the London Stock Exchange, now backed by 250 founders and chief executives of UK companies. I hope she will assure the House that, if that proposal were to go forward, this Bill would provide the necessary legislative framework, which I am assured is not an ambitious set of changes. There are things that can be done to secure a far greater understanding of the value of investing in British industry and other British assets than we have seen over the last few years.

I will briefly raise one other issue involving the other Pensions Commission: the investigation of pension age. I hope the Minister may be able to say something about this, because the clock is ticking. There was a half-hearted partial announcement of the decision that the pension age should go up further under the previous Government, which has not been followed up. My view is that that debate has got totally trapped in a preoccupation with life expectancy and using projected life expectancy as the only metric—what I call RIP minus X—or formula that has to be used. What pension age you set is not simply a mechanical calculation around life expectancy but an important fiscal decision. As in all other decisions, there are other factors, including long-term public expenditure costs and the likely income of pensioners from other sources.

I hope therefore that we will not find that we look back on this debate and ask why we missed another opportunity to prepare the ground and properly consider whether, given the fiscal constraints that any Government face, we should also be considering increases in the pension age.

14:28

[Baroness Warwick of Undercliffe (Lab)]

My Lords, I too look forward to the maiden speech of the noble Baroness, Lady White of Tufnell Park. I was delighted to discover that we are both honorary alumni of the University of Bradford.

An adequate pension must be the goal for everyone to ensure a happy and secure retirement. This Bill aims to achieve higher returns for pension savers. As many millions more people are now in pension schemes through automatic enrolment, it is imperative that we ensure they get good value for the money they are saving from their hard-earned incomes. At the same time, those savings must provide the best possible support in their retirement.

Both the previous and current Governments recognised that, if we are to achieve the growth our country needs, domestic markets must be stimulated to invest in the UK. This inevitably led to a review of the pension system. The pension sector is a major allocator of capital, which has a direct impact on the efficiency of the wholesale financial markets in driving innovation and investment in our economy.

The pension systems in most other advanced economies invest significantly more in their domestic economies than does the UK, as has already been said, where pension savings, as we should remind ourselves, are also supported by tax relief of over £70 billion per annum. The UK has deep savings pools, yet we have seen a reduction in domestic investment in the UK. The UK has one of the largest pension systems in the world. As the parliamentary Under-Secretary of State for Work and Pensions reminded us in another place, it is our largest source of domestic capital, underpinning not just retirement of millions of people but the investment on which the country’s future prosperity depends. It makes so much sense to seek better to harness that capital, to invest in a more diverse range of assets that would benefit the UK economy, but also not to place savers at risk. This Bill is a serious and most welcome attempt to address both issues of concern: domestic capital investment in the UK and improving the outcomes for millions of workers saving for their retirement.

The pension sector’s role as a major allocator of capital will come increasingly from defined contribution schemes. There is momentum behind the need to focus on the DC pension sector’s ability to deliver good value for pension savers. In addressing these twin challenges of improving the outcomes for pension savers and achieving sustainable economic growth, there is general agreement that we need market consolidation, to see fewer pension providers operating at scale, and to deliver higher returns to savers and greater investment in UK productive assets. The Bill introduces the enabling powers to achieve that structural reform and greater consolidation in the market. But that raises major issues in respect of regulation and the governance standards required in both the management and administration of those schemes and the oversight of them by those with the fiduciary duty to protect the scheme members.

The case for consolidation is compelling, but will the Government give further consideration to the governance and regulatory requirements that need to be placed on those fewer scale pension providers managing billions, even trillions of assets over time so that downside risks are controlled and the desired outcome is achieved?

On the specific issue of trustees in these consolidated schemes, in another place, Liam Byrne MP called out the risk that in creating scale through fewer and bigger pension funds, there would still be a failure to deliver desired levels of investment in the UK. He called for greater legal clarity on trustees’ fiduciary duties, their ability to consider systemic factors and their impact on members pension savings when taking investment decisions. The Minister, Torsten Bell, advised that the Government will bring forward legislation to clarify that trustees can take systemic factors into account. Can the Minister advise the House as to the timescale for bringing forward that legislation?

The Bill aims to improve the returns workers receive on their retirement savings. We know that the DWP, the regulator and the FCA are working together to create a disclosure framework for assessing value for money that is to apply across the whole DC market, enabling consistent and comparable assessments of workplace pension schemes. To fully implement that framework, however, will require primary legislation in addition to the provisions in this Bill. When do the Government anticipate fully rolling out a new framework for assessing value for money?

I turn to the issue of accessing pension savings on retirement. In a DC world, UK savers are not well supported at retirement in making the complex decisions they face. They must manage their own longevity, inflation, and investment risk, and many struggle. Which? rightly points out that these decisions may have severe consequences and can mean that an individual outlives their savings. So it is good news that the Bill requires trustees of pension schemes to provide their scheme members with default retirement solutions that are relevant to their needs, and to help them manage the risks they face when they move into retirement. But we have to ensure that those solutions are fit for purpose. Are the Government actively considering additional guidance and regulation on the assessment of the value and benefit for members of the default retirement solutions to be provided by the schemes?

There are now many millions of small pension pots, as workers move from employer to employer, and the numbers are increasing. It is a major inefficiency in the pension system, as the Minister herself pointed out. The welcome advent of the pensions dashboard will help savers to take action to consolidate their pension pots. Characteristically, however, inertia means that many will not. The Bill provides for very small pots to be automatically transferred into qualifying consolidator schemes, which should reduce administration costs and deliver better returns for consumers through lower costs and charges. Can the Minister say what the Government’s current thinking is on the timetable for implementing the necessary regulation to allow this to happen?

There are several other important changes in the Bill which other noble Lords have already raised, but I finish by highlighting one of the changes to the PPF—the Pension Protection Fund—compensation. The decision to introduce legislation to enable prospective annual increases on pre-1997 compensation to PPF and FAS members is welcome. It could benefit more than a quarter of a million PPF and FAS members, but I am concerned that it will leave an unfairness, because no retrospective increases are applied to pre-1997 accrued pensions. The prospective increases will not apply to those members whose schemes did not provide increases to pre-1997 pensions prior to entering the PPF, and there is no recognition in any form of the major past loss of pension value, particularly given the incidence of high inflation and the acute financial impact on those affected. In its foreword, a recent PPF levy policy document concludes:

“The likelihood of the PPF encountering significant funding problems in the future … is low and is expected to continue to reduce over time … if funding problems did arise, these could be resolved over a multi-year period with our investment returns likely to be the most significant contributor”.


I go back to the points made by my noble friend Lady Drake on 23 April, when she raised this issue. Taking into account the considerable confidence in the funding level and investment returns, that £32.2 billion of assets, £19 billion in liabilities and reserves of £13.2 billion are held by the PPF, and the reduction in the levy to zero, the level of fairness set in the striking of the balance between levy payer and PPF/FAS member does not appear right. As my noble friend said:

“Not only has the levy in quantum declined hugely; the levy has also declined as a proportion of the PPF’s funding mix. Roughly one-third of the funding comes from the assets transferred to the PPF from those members’ pension schemes. Similarly, another third comes from the investment returned on assets, and 11% comes from assets recovered by the PPF on behalf of those schemes. Less than a quarter—23%—of the funding comes from the levy, and that is going to fall”.—[Official Report, 23/4/25; col. GC 32.]


Can the Minister take back to the Government consideration of an ad hoc payment to those members of the PPF with pre-1997 service, in recognition of the considerable real loss of pension that they have experienced? Such a payment should be well within the funding levels of the PPF. Payment of the prospective increases to pre-1997 pensions accrued to those whose original scheme may not have made provision for such increases.

14:38

[Baroness Coffey (Con)]

My Lords, there is a lot in this Bill. Some of it is to be welcomed—there are quite a few crackers in it. However, there are also large elements of it that feel—dare I say it at this time of Christmas?—like a little bit of a turkey. It is such a skeleton Bill that it is more appropriate for Halloween than the time in which we find ourselves.

I am not the only person here who believes that. I must say that the report from the DPRRC is one of the most damning that I have seen on a piece of primary legislation coming to your Lordships’ House. Indeed, the committee says that

“we have found it exceedingly difficult to provide meaningful comment on the Bill precisely because it is so skeletal”.

This extent of delegated powers—there are nearly more delegated powers than there are clauses—does not feel like the right place to be. Of course, I know that trying to work with the pension industry and see the scope of what it is trying to achieve means that a bit of flexibility may be needed, but it is important that we do not just, candidly, hand things over to almost a ministerial diktat, which I am afraid that parts of this Bill do.

I was Secretary of State when the previous Pension Schemes Act was passed in Parliament, and my noble friend Lady Stedman-Scott took it through this House; in fact, it started in this House. It built on—and this Bill continues to build on—the idea that where consensus comes together, we can get a very good product. Indeed, that continuity of thought is important, not just for the pensions industry but for the current and future pensioners that we seek to serve.

It has been useful to see the variety of consultations there has been, going back even to 2015, including about local government funds, and the actions taken when consolidation started to happen. There was a consultation in 2022 about other aspects of small pot consolidation. The clause I probably welcome the most is about value for money. It is really important that we make sure that we address these issues. In particular, the power to effectively shut down underperforming funds is good because, regardless of how little or how much people put in, many people are putting into their pensions all the time but do not necessarily realise quite how little will come out at the end of it. We will see more communication with the pensions dashboard, but the value-for-money framework will be a critical part of that.

There has been quite a lot of talk about trustees, and I know that a number of bodies have been trying to see if we can move to having solely professional trustees. That would be a mistake. I appreciate that is not what the Bill is calling for, but one of the challenges is that trustees, driven by a certain type of asset adviser, have been attracted to low-cost and low-risk pension schemes, but too often that has led to low return. So many of the gradual changes we have seen and that will start to come through in response to some of this legislation will be able to address that. That is vital and I will support measures to achieve it.

However, there is an underlying issue here about the mandation clause. From my experience in government, I remember a meeting in Downing Street with a bunch of pension providers, which was mainly driven by insurers. People had been told that they could not raise the issue of Solvency II being a problem. One or two were brave and did so, and were later chastised by Treasury officials. Nevertheless, it was important that they did. I understand the frustration of Government Ministers at the very top of government. People saying “We need investment” is all well and good, but why do they not put some of their money into it? I include the Local Government Pension Scheme in that. Ultimately, our traditional approach is one of state pensions not being particularly generous and trying to incentivise people to put into the private pension market, as well as what has happened historically with the defined benefit industry. That is why we have the system that we do, which has grown to the extent that it has so far—so much so that, as has been recognised, trillions of pounds in assets could be deployed to greater use, but it still must be for the benefit of current, future and, indeed, deferred pensioners.

Further, there is a missed opportunity in this Bill. Having two different regulators for pensions is a wasted opportunity. I know that the two bodies, the FCA and the Pensions Regulator, have been working on joint strategies, but fundamentally we still have significantly different rules on what can or cannot happen with pension funds, depending on how they are regulated. That just does not make sense.

This is the moment to try to change that. Frankly, the FCA has enough to do. Under their different rules, TPR allows a particular investment but the FCA does not, although it may seem to be a very similar product. We should not leave that element of complexity to be solved via delegated powers but take the opportunity to fix it in this Bill. That will need primary legislation and I hope that, although she may not welcome it—and, as I am trying to get it all out of the Treasury and the FCA, they certainly will not welcome it—the Minister will try to get it into one regulator to make a difference for the prosperity of our pensioners.

I am conscious that this is a missed opportunity in how pensions can help our planet. I strongly promoted the concept of planet, prosperity and people. These are mutually beneficial and there is no doubt that investment by the industry can play a part. That is why we put in place world-leading, pioneering regulations making the link to the TCFD and net zero. However, crucially, they did not mandate how investments were to be made or the drawing from a variety of assets but, basically, put a much greater duty of transparency on what was happening in the long term. The same needs to happen with nature and the TNFD. I will explore that in Committee.

In terms of what we want to achieve from this, I think your Lordships will share with the Government the outcome of having a good, robust and fully functioning pensions industry that generates prosperity, but let us not go down this tricky route of mandation. In particular, the DPRRC singles out that Ministers keep saying, “We don’t intend to use it”. In that case, let us not legislate for it. Let us make sure that we keep that blunt instrument away and continue to have a productive pensions industry. Nest, which was originally provided for in legislation prior to 2010 and came into effect within the last decade or so, has been a fantastic source to drive and make sure that we have private asset allocations. Let us celebrate that, work out why it worked so well and, as I have already suggested, make sure that we get rid of the stuff that is massively underperforming when prospective pensioners do not realise it.

It is going to be an interesting time in Grand Committee. I am afraid there will be a lot of amendments—this is not the only Bill I will be tabling amendments to—but I hope the Government will think again on the themes we will get into. If a lot of this is just about getting investment in Britain, the Government will need to answer why they scrapped the British ISA, which was a ready-made model. It is almost because it was not invented here. Fortunately, on the pensions journey, there is normally good cross-party consensus, but I fear that mandation has blown that out of the water. Nevertheless, let us see if we can try to fix it.

14:48

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Coffey, and to hear nature-positive sentiments from the Conservative Benches. We are hearing a wide range of perspectives in that space, and I am glad to hear those. I declare my position as a vice-president of the Local Government Association and the National Association of Local Councils.

I echo the noble Lord, Lord Vaux of Harrowden, in enjoying seeing so many familiar faces on the pensions trail. My first ever Committee was on the Pension Schemes Bill some six years ago. It is also nice to welcome new faces such as the noble Baroness, Lady White of Tufnell Park. I very much look forward to her speech as someone who, when in London, stays just across the border in Kentish Town. I also join the noble Lord, Lord Vaux, in his expressions of concern about any forced investment in private equity. It is an extractivist, exploitative model which benefits a few at the cost of the many and does not have the long-term perspective that we surely need when talking about pensions.

I will start by looking at the context. We are starting from when the Chancellor initiated a pensions review in August 2024, led by the DWP and HMT, aimed at bolstering investment in the UK and dealing with pension adequacy—or rather, the significant levels of pension inadequacy that so many now suffer from.

Picking up the point about pension age raised by the noble Lord, Lord Willetts, although from an opposite perspective, I note that when the state pension age rose from 65 to 66, between December 2018 and October 2020, the percentage of 65 year-olds in income poverty more than doubled from 10% to 24%. A quarter of a million more 60 to 64 year-olds are now in poverty than in 2010, when the state pension age began rising. These figures are from a report by the Standard Life Centre for the Future of Retirement. According to the research, the poverty rate for 60 to 64 year-olds increased from 16% to 22% from 2009 to 2024. There are now 8 million people in their 60s in the UK, up from 6.7 million in 2010, and that is expected to peak at 8.7 million in 2031. Many of those are pre-pensioners now, but they are very soon going to be pensioners. Some are pensioners already, and we have a huge poverty problem there. The noble Lord, Lord Willetts, said that this has to be a fiscal consideration. I am afraid we have to look at it much more broadly and consider the state of public health in the UK, whether many of those people are indeed fit to work, and the huge inequality of health at age 60, 65 or 70 that operates across different communities and social groups.

We also have to acknowledge that 2.8 million pensioners are now living in households below the minimum income standard. I note that the House of Commons Work and Pensions Committee said in July:

“No older person should be unable to have a minimum, dignified, socially acceptable standard of living”.


The Green Party concurs with that. I know the Minister will be interested that women make up 67% of those pensioners in poverty. There has been some improvement in the situation with the new state pension but, as the committee noted in July, there are “blind spots” in policy-making. The reality of women’s lives is still insufficiently recognised. I cannot see anything in this Bill that deals with that, but I would be interested if the Minister could contribute anything on it.

Staying with the context, because it is important that we think about where we are before we get to the detail, according to ONS data we now have 44% of adults aged 16 and over actively contributing to a pension pot. This compares to 34% a decade earlier. Obviously, auto-enrolment is a really important factor, but according to the recent Scottish Widows 2025 Retirement Report, 39% of working-age adults are not on track to achieve what the Pensions and Lifetime Savings Association deems a minimum lifestyle in retirement, and that is a 1% increase since 2024, so we are headed in the wrong direction.

The Minister said this is all about security and dignity in retirement. Before we start talking about private pensions, we have to acknowledge that the financial sector’s private pensions are not going to meet everybody’s needs. There are great risks with the financial sector in this age of shocks, and we have to acknowledge that the state pension must be the anchor of security, certainty and freedom from fear for everybody in our society.

Picking up the point made by the noble Baroness, Lady Coffey, on our Delegated Powers and Regulatory Reform Committee report, there are a couple of extra facts from that report that I think are telling and concerning. At 149 pages, the Bill’s delegated powers memorandum is nearly as long as the Bill itself, which is 161 pages. The number of delegated powers in the Bill—119—nearly exceeds the number of clauses, which is 123.

I have spent quite a bit of time on context because I think it is important, but I turn now to a couple of points that I expect to raise in Committee and possibly later. One of those is the term “fiduciary duty”. Lots of people have been asking me, “What are you doing in the last week before Christmas?” and I have said, “I am going to be talking about fiduciary duty for pension schemes”. I have then got lots of blank looks.

But this is something I have actually long been familiar with as a Green, as we have been struggling over many years to ensure that local pension schemes in particular are able to avoid investing, say, in the merchants of death, big tobacco, because that is bad for pensioners in a broader context, or able to avoid investing in fossil fuels because of their health and environmental impacts, and also because of the financial risks of the carbon bubble. So things like “fiduciary duties” roll off my tongue so easily.

Noble Lords will know that this was debated very strongly in the Commons. They have started the work in some ways but have left us with an unfinished piece of work. In response to the amendment in the Commons supported by 34 MPs, including all four Green MPs, the Pensions Minister has now committed to legislate to bring forward statutory guidance—again—on fiduciary duty. However, as I understand it—I am happy to be corrected by the Minister—the statutory guidance provided by the Government would not apply to the whole range of pension schemes and would not provide the legal clarity that schemes would need to wish to act on these issues. Any statutory guidance of course need not be followed and is at risk from potential future Governments.

Although this sounds technical, it is of course terribly important. I note that Liam Byrne in the other place said that there is currently confusion—and what the Government are proposing does not seem to deal with that confusion. With confusion comes caution. Then, we see trustees understandably following the safe path, rather than the one they can actually see is the right path.

The noble Baroness, Lady Coffey, has covered a lot of what I was going to say about nature, so I will not repeat that. But it is worth looking at this from my perspective of six years in this place. I am delighted to see the noble Baroness, Lady Hayman, in her place, because she has been a leader in finally getting successive Governments to put climate and nature into Bills. To get the climate and nature bit in because the Government initially left it out has become almost the standard part of the role of your Lordships’ House. That is something I am sure we will return to.

I have one final point to make on the Bill. The Financial Conduct Authority has, to be charitable, a chequered regulatory history. The Minister said that the FCA would have this extra responsibility and that extra responsibility, which is deeply concerning. I am interested in the suggestions from the noble Baroness, Lady Coffey, on how we might look at that regulation. I do not have a view on that yet, but I would be interested in the debate.

I note that, a year ago, the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services—I declare I am a Member—published a report on the effectiveness, or not, of the FCA, and blamed it for doing too little, too late, and doing nothing to prevent or punish alleged wrongdoing, with errors being all too common. That is really important, given that we are giving it oversight over some significantly increased powers for trustees, where trustees will not be referring back to members of the scheme.

Finally, I come to the fun bit. Given that this is the last contribution from a Member of the Green group for this session before Christmas, I sincerely thank all the staff—the doorkeepers, clerks, Library, catering, security and cleaning staff—for the many hours they have laboured for us, all too often hours very late in the evening. To offer a wish for all of them and all of us, my hope for 2026 is that we might see more sensible working hours for your Lordships’ House and for all our staff.

14:58

[Baroness Noakes (Con)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Bennett of Manor Castle. But, not for the first time, she will find that I disagree with practically everything she has just said.

I have a few problems with the Bill, which has a number of sensible things in it. I will focus on aspects of the Bill that are being sold as supporting UK business investment and hence the Government’s growth mission.

I have big concerns about pension scheme money being seen as available for investment in ways that the Government choose but which conflict with the views of trustees, who have a duty to act in members’ best interests. I am as patriotic as anybody, but I do not think it is right to allow the Government to require investment in the UK. There have been times when investing in the UK was a terrible idea financially. I can remember the 1970s, when the only reason anyone held assets in the UK was the existence of exchange controls—we could not get money out. I say to my noble friend Lady Altmann that forcing or incentivising pension schemes into listed UK assets does absolutely nothing to enhance UK growth. These are existing assets; they have nothing to do with new investment.

The Government’s proper role is to create the economic environment where businesses want to invest. That requires confidence in the economic future, taxes that are predictable and low, and regulatory burdens that are kept in check. Anti-business and anti-growth Budgets, and changes to employment laws, are the main drags on investment in the UK at the moment, and no amount of playing around with pension fund assets will change that. With the exception of scale-up financing, which is a problem in the UK, there is no evidence that funds are not available to back profitable business investment in the UK. The powers in the Bill need to be judged against that background.

The part of the Bill that concerns me most, in line with many other noble Lords who have spoken, is Chapter 3 of Part 2, which deals with scale and asset allocation. These provisions go much too far. I get the benefits of scale, both in terms of cost efficiency and the ability to diversify into alternative asset classes. However, I do not think that there is any conclusive evidence that £25 billion is a magic threshold. I am concerned that the Bill will have the effect, after first having consolidated the market, of ossifying the pensions landscape. As I have said many times in your Lordships’ House, I am a believer in competition and markets.

Large players love regulations that create barriers to entry, because they insulate them from market disrupters. The Bill says that subscale players—new entrants—have to be regulated. Risk-averse regulators are not the best people to judge growth potential or the power of innovation. The Bill should encourage new entrants into the pensions market, even if that means a prolonged period of operating below scale. We need to look at how the long term for pensions investment can be protected and I will want to explore that in Committee.

The real shocker, of course, is asset allocation. Put simply, I believe that mandating asset allocation is wrong in principle and carries a significant risk of moral hazard. Pension trustees have a clear fiduciary duty to act in the best interests of their members. The Government should have no right to say to trustees that they must invest in particular things, especially if that conflicts with trustees’ views. I do not doubt the sincerity of the Government’s desire to get pension schemes to invest in a wider range of investments to improve returns for their members: that is broadly what scale facilitates. The danger comes with eliding that desire to facilitate higher returns for members with wanting to direct the investment into particular things, which may or may not turn out to deliver those higher returns. Legally requiring certain types of investment will inevitably result in calls for the Government to pick up the tab if the returns from those sorts of investments fall short. The moral hazard implications of these provisions for mandation are huge.

I am also disturbed to read proceedings in another place where some MPs wanted to direct pension schemes assets into their pet projects; they talked about social housing, hospitals and net zero. Such investments may well be socially desirable but there is no confidence that they will yield high returns for members of pension schemes. If the Bill does not rule out that kind of mandation, I am sure that it should. At the end of the day, trustees need to seek the best possible returns for their members, because it is investment performance that drives the retirement income of defined contribution members.

The drafting of the mandation clause is also a horror story; I will not weary the House with a commentary on that today, but I give notice that I shall want to examine it in Committee. I am sure that in Committee we will also want to look at capping the percentage which could be mandated—if indeed we wish to keep mandation at all, which I suspect we will not.

The other area that I wanted to talk about today is Clause 9, which creates a welcome ability to extract surpluses from defined benefit schemes. While only a tiny number of private sector DB schemes are still open to new members, very many employers are still burdened with schemes which have been long closed to new members or indeed to future accrual. Gordon Brown’s tax raid in 1997, followed by the prolonged period of low interest rates, meant that for the last 25 years, employers have had to pay large amounts to support the funding status of their defined benefit pension schemes. Recently, the good news is that some of those have swung back into surplus. It is only right that there should be an opportunity for those employers, who have borne this burden for such a long time, to get some of that surplus back. Doubtless, trustees will want to argue for further benefits for members in return for returning surpluses, but I hope that they will be mindful of the fact that the corporate sector has borne significant costs of keeping the defined benefit pension promises intact over many years, and they deserve a major share of those surpluses.

The Government have portrayed this as supporting business investment in the employing company, which it might do if the business environment is right for those companies to invest, but it may also be entirely rational for those companies to return excess money to their shareholders because that would be the best outcome for those shareholders. There is a provision in Clause 10 which allows conditions to be set on making payments. I shall want to ensure in Committee that this power cannot be used to direct what companies do with liberated pension surpluses once it has been agreed that it is safe for those surpluses to be removed from the pension scheme.

The Bill focuses on pension schemes, but it does not deal with many of the other problems that continue to exist in the pensions world. The Pensions Commission will tackle some but not all of those problems. In particular, around £1.3 billion of unfunded public sector pension obligations will weigh very heavily on future generations—that is currently largely hidden from sight at the moment. Into that category I would also put the continuation of the triple lock. This Bill is not the end of the pensions story.

15:08

[Lord Davies of Brixton (Lab)]

It is always a pleasure to follow the noble Baroness, Lady Noakes; I still worry on those occasions when I find myself agreeing with what she says. No doubt we will have interesting debates in Committee.

It is a real pleasure to take part in this debate, which is a perfect start to the festive season. I declare my interest as recorded in the register as a fellow of the Institute and Faculty of Actuaries, and I look forward to the maiden speech of the noble Baroness, Lady White of Tufnell Park.

I thank all the individuals and organisations that have written to me about the Bill. They have raised too many issues to deal with them all today, but I and others will seek to raise them in Committee.

I welcome this Bill. It is the first leg of the route to better pensions that was set out in the Government’s pensions road map. It seeks to make existing provision work more effectively and to ensure that people derive the maximum benefit from their pension savings. These objectives are to be welcomed. The second leg of this journey will be the outcome of the Pensions Commission. Part 2 will address the adequacy of retirement incomes and the fairness of a system that currently contains persistent inequalities. I welcome my noble friend the Minister repeating that it will look at state as well as private pensions.

It is worth pointing out, particularly given the welcome presence of the noble Lord, Lord Willetts—though he is not in his place—that this Bill marks the effective end of personal pensions and sets out how we can move to a better system of collective provision, leading to improved, fairer and appropriate outcomes for members.

Taking the various proposals in turn, the Bill takes important steps to remove inefficiencies in the current system. They include the consolidation of small dormant pension pots, contractual overrides for FCA-regulated schemes and the resolution of the issues that have arisen from the Virgin Media judgment through the validation of certain amendments. Each of these changes affects individual member’s rights without their active involvement and therefore must be handled with care, supported by appropriate regulation and professional oversight. These measures will require careful scrutiny in Committee.

Next, the Bill requires defined contribution schemes to offer default retirement arrangements for members. I welcome this initiative and consider it to be the most significant part of the Bill—potentially, as it is still unclear how these arrangements will operate in practice. The Bill provides broad regulation-making powers. We have now had the helpful report from the Delegated Powers and Regulatory Reform Committee, but the details, as the committee emphasises, will depend on what is in the regulations. I therefore hope that we will be able to explore these issues in Committee and identify the main parameters that will apply to these default arrangements.

Turning to the value-for-money proposals, I have some reservations about what they can achieve. Greater and clearer disclosure based on defined parameters is undoubtedly desirable. However, value for money is not a simple or uniform concept. It varies significantly from individual to individual, reflecting different circumstances, attitudes to risk and personal needs. The problem is that there is no simple metric that can adequately capture this diversity. While charges are relatively straightforward to identify and compare, investment returns are inherently uncertain and can be assessed only by reference to the past. Beyond these factors, value for money is also shaped by the quality of the scheme administration, the level of service provided to members and the effectiveness of communication and support. Crucially, it also depends on how benefits are adopted and delivered and whether they meet differing members’ needs. Bringing these factors together, deciding how to weight them and reaching meaningful conclusions of value to members is highly complex. Therefore, while everyone is in favour of the concept of value for money—no one favours its opposite—its practical delivery is far more challenging than the Bill appears to acknowledge. The fear is that the process will simply end as a justification for making higher charges and hence lower benefits.

As a number of previous speakers have explained, the Bill contains provisions relating to pension scheme investments, which the Government consider a central element of the Bill. Other noble Lords have addressed, and will address, this in some detail, but I will make a couple of points.

I have no objection in principle to mandation, unlike other speakers. However, it is very important that the Government understand the implications of directing how members’ money is invested. Doing so carries responsibilities; this is where I found myself agreeing with the noble Baroness, Lady Noakes. I do not think that that aspect has been sufficiently recognised by the Government. I am also concerned, as other Members have mentioned, about the provisions that would be inserted into the Pensions Act 2008 by Clause 40 that refer to specific classes of investment that will be the subject of mandation. I do not believe that this belongs in the Bill.

I have a general concern about the Government in effect providing investment guidance—so much can go wrong—but my particular concern is the appearance of private equity in that clause. Private equity has a mixed performance record and presents significant liquidity and transparency challenges for pension provision. Where members have pension rights, illiquidity raises a question about who ultimately carries the risk that is inevitably involved: is it the member, the scheme or other members? I think the point was made by the noble Lord, Lord Vaux of Harrowden.

There are, of course, other issues that require careful consideration, alongside broader concerns, such as climate and systemic risk. I am sure these will be touched on by other Members.

I turn to my two principal concerns about the provisions in the Bill: first, the provisions relating to the release of surplus, and secondly, the provision for pension increases where no statutory guarantee currently exists. On the release of surplus, ministerial Statements have suggested clearly that members are intended to share where surplus is released—I have a series of quotes, but I am running out of time. If that is the case then this objective should be set out clearly in the Bill. This is particularly important as there is a requirement under the existing legislation that the release of surplus should be for members’ benefits, and that is being removed. The Government justify this on the grounds that trustees’ responsibility to members is sufficient. I am afraid my experience in the industry tells me that that is not correct. It needs to be in the Bill if that is the Government’s intention.

Also, where employers are involved in the process of releasing surplus, it is absolutely right that it should involve the independent recognised trade unions that represent the affected employees. This is established practice elsewhere in pensions legislation, where unions must be notified and, in some cases, consulted before decisions are taken. This should clearly apply. If it applies to benefit and changes, it should apply in the case of surplus release.

I turn to my other area of concern: pension increases. It is important to understand the context. Prior to 1997, there was no general statutory requirement for increases in payment, other than those associated with contracting out. However, by the mid-1990s, particularly after the Scott and the Goode reports, it had become standard practice for pensions in payment to be increased annually by at least a minimum amount. In some schemes, this was set out in the rules; in others, it depended on trustee discretion. Which approach was adopted was largely a matter of chance. Either way these increases were funded, members paid for them during their working lifetime as part of their pension contributions, and they had a reasonable expectation that they would receive increases when they retired.

Although scheme finances have fluctuated since then, in general schemes now have sufficient resources to pay increases. It is therefore reasonable to expect them to provide those increases, whether guaranteed or discretionary. This reflects the reasonable expectation members acquired when they accrued benefits in the 1980s and 1990s. This applies in two overlapping contexts. The first is to benefits provided by the Pension Protection Fund and the Financial Assistance Scheme, where the original legislation in both cases excluded any allowance for pre-1997 increases, regardless of rules or practice. The second aspect is members of active schemes: the scheme is continuing, but they no longer receive the discretionary benefits to which they have a reasonable expectation given their service in the 1980s and 1990s.

I welcome the provisions in the Bill relating to the PPF/FAS. They are clearly a response to the current financial state of the PPF. Without the surpluses in the PPF, I doubt that these measures would have come forward, so they are welcome. However, as I have explained, making a distinction between those for whom the rules say they are going to get increases and those for whom the practice was making discretionary increases is invidious. All affected members should receive the same increases. The benefits from these schemes have never been or been intended to be an exact copy of the benefits that were provided by the schemes that were lost. They were always a broad-brush approach to what is fair to provide.

Given the current financial circumstances, it is absolutely fair that all members should benefit from those surpluses. The Bill provides for employers to share in those surpluses by the suspension of the PPF levy. Employers are sharing in the surplus; members should also, whatever the precise details of their entitlement to past increases. Crucially, none of these members is getting any younger and many, sadly but inevitably, will benefit from the Government’s proposals for only a limited period. For 28 years they have suffered a loss and they are now going to benefit from the change in policy but, for many of them, it will be for far too short a period.

Finally, I turn to the circumstances of defined benefit schemes that are continuing to run. Many are in a healthy financial state but are failing to provide discretionary increases for members’ benefits that were accrued before the statutory requirement was introduced in 1997. I believe that it is now reasonable to expect schemes in general to provide these members with discretionary increases, and we need to investigate ways in which we can make sure that that will happen in Committee. I look forward to hearing my noble friend’s response to these and other points that have been made in the debate.

15:24

[Lord Ashcombe (Con)]

My Lords, like other noble Lords, I very much look forward to the maiden speech of the noble Baroness, Lady White of Tufnell Park. I declare an interest as an employee of Marsh, the sister organisation to Mercer, a pension and investment advisory and management company.

I welcome many parts of the Bill. The Government’s ambition to reduce fragmentation, lower costs and secure better outcomes for savers is clear, and I am sure that Members across the House share the desire for a system that functions more effectively. Some measures in the Bill will undoubtedly support that aim.

However, from my discussions with those in the industry, it is clear there are substantial concerns about elements of the Bill. The central purpose of the Bill, as I see it, is to create scale that unlocks access to a broader range of asset classes, including private markets and UK-based investments. Scale is not an end in itself; it is a mechanism to strengthen negotiating power, secure better pricing and deliver improved outcomes for savers. Equally important, it is the potential for operational efficiencies that reduces costs and complexity across the system.

It is crucial, however, that the Bill does not become entangled in prescribing or favouring any particular business model. The pensions market is dynamic and diverse, with multiple viable routes to achieving the Government’s objectives. Flexibility is essential if innovation and competition are to flourish, allowing the best solutions to emerge in a live market environment.

I welcome the amendments made at Third Reading in the other place, which removed from the Bill detailed structures concerning the relationships between product lines and their contribution to the main scale default arrangement. That is a positive step. These issues are complex and better addressed through secondary legislation, where they can be explored with the nuance they require, and which is difficult to capture fully in primary legislation. However, these future regulations will have a profound impact on the efficiency, pace of change and cost across the pension system. It is therefore essential that the Government commit to a full and transparent consultation. I invite the Minister to assure the House that examples included in the Bill will not become exclusionary, and that the regulatory framework will be developed in a way that supports, rather than hinders, the delivery of the policy’s core objectives.

The policy in the evolving legislation must engage constructively with market realities and good industry practice. If that engagement does not occur, the result could be inefficiencies and additional costs that bring no tangible benefit to savers. We must avoid creating a system that is overly rigid or prescriptive and risks stifling innovation, increasing administrative burdens and potentially causing some large funds to lose auto-enrolment eligibility through no fault of their own.

In practice, many pension providers operate multiple product lines, such as group personal pensions and master trusts, while making investment decisions and negotiating prices at an overarching level across these products. That is not fragmentation; it is a sensible and efficient approach that leverages scale and expertise to the benefit of savers. The regulatory framework must recognise and support this reality.

For that reason, I urge the Minister to confirm that the approach to regulation will be principles based. The MSDA and common investment strategy tests must avoid creating unnecessary fails or imposing constraints that do not deliver real value for savers. A principles-based approach would provide the flexibility needed to accommodate different business models and market practices while ensuring that the policy’s objectives were met.

I turn to the Local Government Pension Scheme. I note with concern the significant reserve powers delegated to the responsible authority. While these powers are intended to provide flexibility, there is a risk that political motivations could influence the management of LGPS assets. What protections will be in place to ensure that these reserve powers cannot be used, or threatened, to pursue political objectives regarding LGPS investment decisions?

Alongside the introduction of governance reforms, it is paradoxical that the draft secondary legislation and guidance appear to control and limit external scrutiny and challenge of the enlarged pools. Independent external challenge is a vital component of robust governance, ensuring transparency and accountability.

Another area of concern is the balance between rules-based and principle-based legislation. While clarity is important, again, the current draft secondary legislation appears overly prescriptive and directive.

Almost all noble Lords have hit on the point about mandation. Many in the industry, including Mercer, signed the Mansion House Accord, but the Government should be aware that voluntary support for that accord does not equate to support for mandation, which I know the industry strongly believes poses a conflict with fiduciary duty. I hope that the Minister understands that and will consider it as the Bill moves forward.

In closing, it is vital that secondary legislation governing group personal pensions, the LGPS and the wider Bill remains flexible and not overly prescriptive. Multiple models and approaches can effectively achieve the policy aims. I hope that the Government recognise these market realities and will ensure that regulations support innovation, efficiency and practical implementation while delivering the intended outcomes. Striking this balance is essential to avoid unnecessary burdens and secure the best possible results for savers across all pension schemes.

15:31

[Baroness Penn (Con)]

My Lords, we have had a wide range of expertise in the speakers today, although I suspect that the noble Lord, Lord Davies of Brixton, might be the only one of us who could not think of a better Christmas present than a pensions Bill. I am also conscious that my remarks stand between the House and the much anticipated maiden speech from the noble Baroness, Lady White of Tufnell Park, to which I too am looking forward, so I will try to be brief and focused.

I want to touch on three areas but before that, like many others, I welcome many aspects of this Bill, including on consolidation and value for money. However, there are important areas of detail that the Government need to provide for us to understand how they will better work; in particular, around the requirements on scale and value for money, and what they mean for competition and market dynamism, as the noble Baroness, Lady Altmann, and my noble friend Lady Noakes have spoken to. There is also the risk that, at some point, scale no longer promotes investment in innovation and scale-ups, as those businesses would no longer be able to meet the minimum investment thresholds for very large funds.

The first area I want to focus on, which may be no surprise, is mandation. I am not convinced about the decision to include a mandation power in the Bill, as others have said. I will not repeat those arguments, but if I was convinced of the case for mandation, I would not be convinced of how it is being legislated for in the Bill as it stands. We are told that it has a sunset clause, but that is not the case. The 2035 deadline is only for increasing the maximum allocations set out by regulation and before this sunset moment, as I read it, there is no maximum limit on what proportion of investments can be mandated. I ask the Minister: why not? If the Government want to use the existence of this power to drive delivery against the Mansion House Accord, why not set a maximum level of mandation in line with those commitments made in the accords? There is also absolutely no clarity on what assets may be mandated for investment, only that they are not listed assets. In doing so, the Government have excluded a potentially important class of productive asset, as raised by the noble Baroness, Lady Altmann, and surely to be raised by the noble Baroness, Lady Bowles. I would also like to hear from the Minister whether the Government intend to change course here.

As to what can be included within mandation, the answer appears to be: absolutely anything else. There are examples, of course, as to what the Government want to do but no legal limits whatever, and the prescribed assets can be altered at any time by regulation, in perpetuity. Normally, the argument for such an approach is to maintain flexibility. But given this is a power that the Government themselves say they do not want to use, surely the case for constraining it to the limits of what the Government intend could not be stronger. If a future Government wanted to go further than this, it would also seem reasonable to put forward further primary legislation to do so, because it is important not to think about the use case one might agree with, but the one that one might disagree with.

I can think of credible cases being put forward for mandating for portions of assets significantly above 5% or 10% for investment in net zero or defence, to name two examples. I make no judgment on the values of these: rather, I ask whether, even if noble Lords might support one of those use cases or scenarios, they would support the other.

In explaining the need for the power that the Government do not expect to use, the Pensions Minister has said that its existence will provide clarity to industry. But, for clarity, we need more detail than is included in the Bill: the definition of a qualifying asset and the percentage required. To provide that clarity, you would need to provide draft regulations. Is that the intention of the Government, will we see them during the course of the Bill and can the noble Baroness set out a timeline for us?

If the Government do not wish to use mandation, perhaps I might ask the Minister what feedback she has had from pension providers on the barriers to investing in the UK economy, and what action the Government are taking to address those, both to increase the pipeline of investment opportunities but also, specifically, regulatory barriers that have been raised by providers. Are the Government committed to looking at those also, and over what timeline? I also ask the Minister what happens if valuations change, over time or in response to a specific shock? There is a lot of detail to be looked at with regard to how the mandation powers will work, as well as the principle of them.

The second area I want to touch on is fiduciary duty. This was something that noble Lords discussed in some detail during the passage of the Financial Services and Markets Act, during which I committed to this House that the Government would consider the work of the Financial Markets Law Committee and host their own round tables to consider whether further action was needed. One of those round tables did take place, but I am afraid further ones did not. The Financial Markets Law Committee reported in 2024, however, and made it clear that, in its view, it is proper for pension fund trustees to consider climate change, along with other factors, when discharging their fiduciary duties. As the Pensions Minister conceded in the Commons, however,

“more clarity about the ability of trustees to take into account such factors would help”.—[Official Report, Commons, 3/12/25; col. 1043.]

The Minister committed to bringing forward legislation that will provide statutory guidance in this area. Could the Minister confirm whether that legislation will be in this Bill and, if so, when we can expect to see those amendments, and also the timescale for the statutory guidance to be produced? Given that there will continue to be different interpretations of the underlying law in this area, I ask the Minister why an amendment in primary legislation would not be preferable to address the issue?

Finally, in the same discussions around fiduciary duty during the Financial Services and Markets Bill, the issue of deforestation-linked finance was discussed, including in relation to pension funds. Could the Minister update the House on the Government’s plans to bring forward regulations under Schedule 17 of the Environment Act 2021 to ban the import of forest-risk commodities and conduct a subsequent review to assess whether the financial regulatory framework is adequate for the purpose of eliminating the financing of illegal deforestation, and to consider what changes to the regulatory framework may be appropriate in this context? The EU’s framework on deforestation-linked finance is coming into force this month, so it would be a timely moment for the Government to set out their plan in this area.

Finally, the Bill does nothing to address pension adequacy, as we have heard. My noble friend Lady Stedman-Scott and the noble Lord, Lord Sharkey, have highlighted in particular the issue of self-employed people and pension adequacy. I will be focusing in particular on the women’s pension gap, which remains at over 30%. My understanding is that there has been little progress on narrowing that gap over the years, and what progress has been made is as a result of men’s contributions falling, rather than any improvement in contributions from women, and I do not think that is the right way to be narrowing the gap. We are storing up huge inequalities in retirement unless further action is taken. Can the Minister reassure me and this House on the action that the Government are planning in this area, both potentially through the commission but also alongside and in advance of its work.

15:40

[Baroness White of Tufnell Park (CB) (Maiden Speech)]

I rise to address your Lordships’ House for the first time. I want to start by saying a little bit about myself. I am a child of the Windrush generation. My mother came from Jamaica to London aged 19. In fact, my grandfather sold a field to fund her passage. My father arrived as a 26 year-old and they met and married here in London. I spent most of my childhood in Leyton, east London, and it was something of a dilemma whether to take the name of the place I grew up or the name of the place that I have chosen to live with my husband and two boys, Tufnell Park. Noble Lords will see that I chose the latter.

At a time when the national discourse is so full of division, I hope that the successful integration of the West Indian community into the UK serves as a reminder of those close, common bonds that tie together so many communities, many from the previous British Empire. Thanks to this country, I was able to get a free education at Cambridge and then in London—an education my parents did not get. My mother left school as a 10 year-old and my father as a 15 year-old. It has enabled me to enjoy what is charitably described as a rather eclectic career between the public and the private sectors. I have a rather wide range of interests across public policy, economics and business and I hope your Lordships will be tolerant of those over the coming years.

I am both humbled and privileged to be making my maiden speech as part of the Pension Schemes Bill debate. For me, pensions are both personal as well as professional. They are personal as I creep ever closer to pension age myself, but also because I am scarred by my father’s experience. Probably the single worst financial decision he made was leaving the British Rail defined benefit pension scheme and joining the little-known SERPS many years into his working career.

It is professional because, as the noble Lord, Lord Willetts, mentioned, I have spent quite a lot of my career working on pensions. I was trying to remember the first time, which was the Goode report in the aftermath of the Maxwell pension scandal. The equalisation of the state pension age was when I was at the Treasury. The reform of SERPS was when I was at No. 10, and I am currently advising one of the big Canadian pension schemes.

As we have heard already in the debate, the country desperately needs to increase its productivity and growth. It is the only way, sustainably, to raise living standards in this country across communities—living standards which, extraordinarily, have not budged in real terms since the great financial crisis of 2008. As is well known, we lose too many companies to the US, where growth capital is more plentiful. Again as the noble Lord, Lord Willetts, has already said, this is no accident. It is rooted in past regulation, which was well intentioned and aimed to de-risk defined benefit schemes. But it has had the result, as we have heard, of dramatically reducing the proportion of pension assets going into UK equities, from around 50% to, broadly speaking, 5% today.

Plans put forward by this Government and championed by the former Government to require UK pension funds to invest more of their funds in the domestic economy and within domestic businesses are, in my view, a positive and important step. We have heard already that several UK funds have voluntarily made commitments through the so-called Mansion House Accord, and it is welcome that the Bill provides a legislative backstop to ensure that what is promised is actually delivered. I note the controversy that this particular set of legislative recommendations has raised already in the House, and I look forward to being part of the debate in the future.

In a similar vein, the consolidation of the myriad diffuse local government schemes should improve efficiency—efficiency not just for its own sake but to release more funds to invest in the UK. However, the move falls short of the creation of the sort of mega funds in Australia and Canada that have driven a more wholesale move of public sector pensions into private funds.

I thank your Lordships. Joining the House is one of the privileges of my life, and I look forward, over the coming months, to listening, learning and, over time, contributing in some small way. Like others today, I take a moment to thank the many Members of the House of Lords and its staff. I am spatially dyspraxic, so finding my way around over the last few months has not been without its challenges, and the team has been incredibly kind, patient and generous. I thank them.

15:47

[Lord Wood of Anfield (Lab)]

My Lords, it is a pleasure and an honour to follow the noble Baroness, Lady White, and her excellent maiden speech. I congratulate her on her appointment and her debut outing here in the Chamber and say how much all of us look forward to her future contributions. I am sure her family, not for the first time, is extremely proud of her today.

On that subject, if noble Lords ever worry about the limited breadth of their professional experience, I advise them not to look at the noble Baroness’s CV. In her extraordinary career so far, she has—strap in for a minute—studied at the University of Cambridge and University College London. She worked at Her Majesty’s Treasury twice, at the British embassy in Washington, as a senior official at Downing Street, at the World Bank, at the Department for International Development, at the Ministry of Justice—I have not finished yet—and at the Department for Work and Pensions, before becoming the third chief executive of Ofcom and then the sixth chair of the John Lewis Partnership. She then became the chair of Frontier Economics and a senior managing director at a Canadian pension fund. That is exhausting just to read. I think I am right in saying, however, that her first job after studying was in a church in Birmingham. She has spoken publicly and movingly about the importance of faith to her and her family.

If noble Lords talk to former colleagues of the noble Baroness, Lady White, some of whom are here today, they will find universal agreement that she is someone who faces professional challenges in her career with calmness, humanity to those around her, sound judgment, expertise and a warm inviting intelligence that most of us can only admire. She once told an interviewer:

“You often learn more from things that did not quite go to plan than things that did”.


As a former adviser to Gordon Brown for many years, alongside my noble friend the Minister, I can only endorse those as the wisest of words. We are truly fortunate to have the noble Baroness, Lady White, in our midst, and I am sure everyone agrees that this House’s work will be the richer for her wide-ranging experience, expertise and generosity.

Like the noble Baroness, I strongly welcome aspects of this Bill—most of it, in my case—and the way in which it has been welcomed across the political divide, almost. It will make a positive difference to savers, increasing the value of their savings through pot consolidation and driving greater scale, improving the range of guided retirement products and strengthening the value for money framework—all issues on which other noble Lords have spoken with much greater expertise than I can.

I want to focus my comments on the ambition in this Bill to make UK pension funds a greater driver of investment in UK infrastructure companies and communities, as the noble Baroness, Lady White, said. There is a wide consensus, whatever your view on the measures in the Bill, that we have a big problem in this country with the interface between pension funds as value generators for their clients and their investment contribution to the UK’s real economy.

The statistic has been cited a number of times that, 25 years ago, UK pension funds allocated half their assets to UK equities. That figure is now under 5%. This alarming fall is not for want of scale or size, as many colleagues have mentioned. The UK has, as the noble Baroness, Lady Altmann, remarked, the second largest pool of pension capital in the world. Indeed, UK DC pension assets are set to grow from around £500 billion in 2021 to £1 trillion by 2030. That is a 100% increase in under a decade, with growth predicted to accelerate further after that date. Yet DC pension funds have only 9% of their overall equity allocation in the UK. The global average is 30%. Across all types of domestic pension funds’ equity portfolios, UK equities make up 15% of the total. In Australia, the figure for domestic equities is 52%; in Japan, it is 48%.

We know a lot about why we have become such a worrying outlier in this respect. The £1.5 trillion corporate DB sector has been derisking for some time, as it has approached meeting its liabilities. At the same time, DB schemes have pivoted, for reasons of value generation, from a UK-biased equity approach 30 years ago or so to a global market cap approach in the past 20 years.

One side effect of this move is that the proportion of overseas investors in UK equities has risen to well over 50%, and, because of scarce domestic capital, UK companies have therefore become more reliant on debt for financing expansion. This combination of a growing reliance on debt finance and foreign capital is a matter of concern. As the noble Baroness, Lady Altmann, has written, it is a matter of concern from the point of view of national economic security. There is no simple response to this, but this Bill takes some first important steps to reconfiguring the structure of the industry, the regulatory environment that fund managers face and the incentives that confront them.

One key challenge is to create larger, more powerful and more strategic investment capacity. The last Government made welcome progress on this, and the current Chancellor’s Mansion House Accord, as many colleagues have said, has built further on that. The Bill builds on that accord by gripping the issue of generating scale and simplicity where there is currently too much fragmentation. Like other noble Lords, I welcome the LGPS consolidation, strengthening asset pooling and improving administering authorities’ governance structures. I welcome the requirement for master trusts to reach a minimum size of £25 billion, but I share the concern of the noble Baroness, Lady Altmann, and echo her question to the Minister to assure us that this threshold will not be to the detriment of innovation and new entrants, and to tell us how these two objectives that we all share can be reconciled. The noble Baroness, Lady Penn, also mentioned this.

Lastly, there is the issue of pension mandation, undoubtedly the most contentious issue. It raises issues about the tension between government policy, regulation and fiduciary duties. Again, whatever your view on mandation, our starting point has to be that we have a real problem on our hands here—and the public agrees. The noble Lord, Lord Willetts, mentioned data from a survey on this showing that two-thirds of all UK savers think pension funds should increase investment in UK companies, even if returns are lower. Why do we not listen to them?

The Government in this Bill are taking a reserve power to mandate pension fund investment, but are accompanying it with ministerial protestations that they do not intend to use that power. At the very least, I thank the Government for giving me an excellent case study that I can present for the coming years when I teach my students in the real-world use of game theory. More seriously, I think that I understand the logic of taking the power to do something when you have no intention of using it. The spectre of a big stick locked away in a cupboard, but still on view, is designed to have an incentivising effect on fund managers to reorient their strategies to start to take UK investment much more seriously. Critics might say you cannot have your big stick and eat it, to mix my metaphors—that you cannot have a power and then credibly say that it will never be used, or, to flip it the other way round, that you cannot hope that taking the power will have a chastening effect on the industry while also saying that you will never use it.

My own explanation for what the Government are doing here—I am sure that my friend the Minister will have a better explanation—is that it is a strategy based on sequencing the necessary changes. So, first, the fund industry needs to be defragmented, consolidated and scaled up, which this Bill is primarily about. Secondly, collective reorientation of the UK pension fund industry is incentivised through these reforms but also the accompanying reserve power. Thirdly, alongside the strategic capacity that is being built up, the Government know that they have work to do to make investment in UK equities and non-listed destinations more attractive, which involves lots of measures. By the way, one down payment on these measures that is to be warmly welcomed is the Chancellor’s decision in the Budget to introduce a three-year stamp duty holiday for new listings on the stock exchange. We will see whether this works. For my own part, I am a subscriber to the view of the noble Baroness, Lady Altmann, that 25% of new contributions should be invested in UK public markets.

This Bill is a building block in the attempt to make progress through what we might think of as pressured voluntarism rather than straightforward compulsion, and I welcome that very much. However, we need to be clear that this is a change that, from a UK plc point of view and a public finances and public services point of view, must happen one way or the other.

15:56

[Lord Kirkhope of Harrogate (Con)]

My Lords, before I make my few remarks, I also congratulate the noble Baroness, Lady White, on her most excellent maiden speech. I declare my interest as a trustee and a director of pension funds for a number of years. I acknowledge that this Bill is, in general, a good idea; however, as has been said by many people—I hate to repeat it again—it is a complex multifaceted set of proposals, and the devil is in the details. As I said, I have read this in almost every report so far at this stage of the Bill.

To most working people, their pensions are prospectively there simply to support them when they retire. Good employers, whether in the public or private sector, know that pension provision is often measured carefully when job opportunities are considered. Whether it is a defined benefit plan or a defined contribution plan is quite often a matter of good luck rather than good management and is often determined as a result of historic tradition in the particular industry or business.

In this legislation, the Government have the good general intentions of assisting members in DC schemes, including the enhancement of opportunities to get better returns through increasing the size of schemes and returning surpluses to employers. They also want to encourage schemes to invest in UK asset classes, thus hoping to help the economy, which I am sure is a laudable aim, particularly at present. All well so far, but let me at this early stage of our deliberations just put down one or two markers for later debate.

Increasing DC schemes to £25 billion—an arbitrary figure—has some real downsides. I suspect that this will reduce competition due to consolidation, leaving less choice and barring entry for new schemes, and will increase vulnerability, especially to cyber attack. DC schemes have been the preferred formula now for over 20 years and master trusts for only about 10 years and, of those, only a handful have achieved that magic £25 billion.

Next is the question of surpluses in DB funds. When interest rates were low, many employers put billions into schemes to repair a large number of deficits. They became less competitive than employers who did not have any DB schemes. I therefore hope that, in the Bill’s changes, we might find ways in which some of these surpluses could be returned to be utilised to fund capital expenditure, and I hope the Minister might be able to agree to that.

There are examples of surplus sharing and, in that context, I mention the Aberdeen Group’s adoption of the Stagecoach pension scheme less than two weeks ago—perhaps already mentioned by noble Lords. Members there will get two-thirds of future surpluses and Aberdeen one-third. I have no doubt that this will give great pleasure to bus drivers all over the UK but, like so many other aspects of pensions, there must be safeguards. It is the trustees who must always decide to distribute surpluses and they must act independently of employers, remembering that the basic principle is always to act in the best interest of the members. The intentions in the Bill for the allocation of surpluses in DB schemes seem to extend quite widely and to include enhancement of contributions in DC schemes. This crossover needs some care and further explanation.

Superfunds should be respected as an alternative destination, but advisory costs can be enormous. Also, actuaries must follow their obligations under Technical Actuarial Standard 300 and give advice on alternatives when consideration is taking place to transfer pension scheme obligations to insurers under buyout contracts. Improving the superfund regime is all well and good, but the Government must deal with the barriers around adviser intransigence and those potentially enormous costs. Without that attention, the idea of growing superfunds is a non-starter, as is evidenced by there being only one such fund in the UK at present.

Regarding encouragement to invest in UK assets, I also retain great reservations on mandation powers. As I said at the beginning, in theory it is a good idea that investing to help the UK should be given greater priority, but I remain concerned about the conflict of interest that might arise. This issue was raised by my honourable friend Mark Garnier at Second Reading in the other place. I go back to the strict obligation on trustees to always perform their role in the best interests of beneficiaries. That might suggest a new concentration on UK investment, but not necessarily. We need some more help for trustees for this responsibility. In response, the Minister in the other place suggested an opt-out if there were to be material detriment to members in taking such preferential decisions. I suggest that that would not satisfy the need for trustees to consider a wide list of things in determining those best interests of members.

On the powers for the ombudsman, we need to delve further into the intentions of the Government. Moving the ombudsman to become a form of court or tribunal changes to some extent the nature of its work. The relationship between the regulator, trustees and the ombudsman is currently very clear. We need a better explanation of their future respective roles and powers. My experience is that, although the Pensions Regulator imposes and controls duties and reminds pension trustees of their obligations, it is always, of course, ultimately up to the trustees themselves to decide what they believe is a proper course. Putting the regulator or the ombudsman into an enhanced role will not only diminish the absolute responsibility of trustees; it could also put those bodies into invidious situations of decision-making between themselves. No doubt there are also substantial resource issues to consider.

Lastly, I mention the pensions dashboard to the Minister, which has no doubt been referred to. A progress report would be welcome, as would an assurance that, as was clearly stated by the Minister at Second Reading in the other place, it will be completed and ready by autumn next year.

No doubt we can perfect matters as the Bill proceeds, as is the way with this House. The intentions are fine; the logistics and implementation to meet those intentions may well take quite a lot of work.

16:03

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I declare my interests as a director of the London Stock Exchange and of Valloop Holdings Ltd. I also have experience engaging with local authorities and their pension funds, in relation to both funding proposals and policy. I congratulate the noble Baroness, Lady White of Tufnell Park—she is no longer in her seat—on her excellent maiden speech. I welcome her to this House and look forward to her future contributions.

Like other noble Lords, I welcome much of this Bill, and my reflections are directed at what is missing or where small but significant adjustments could deliver real benefits for scheme members. I shall give some examples. When engaging with local authority fund managers on social impact investing, I found that while they valued local options, they also wanted diversity through investing in similar localised assets but beyond their immediate region. An amendment to reflect that flexibility, perhaps in Clause 2, concerning local and localised investments, may be worth considering.

On scale tests and value for money, should there not be some kind of linkage? Presently, some of the best performers in the DC market have assets under £10 billion. If such schemes deliver outstanding benefit for members, as demonstrated in value for money assessments, should they not be allowed to continue? Other issues in this space include whether the definition of “hybrid” is wide enough and whether the focus on forward looking metrics risks dismissing past performance, which surely still has relevance.

I also hope that some solution can be found for the many schemes in the charity and social housing sector that are disallowed from using retrospective confirmation measures due to an ongoing legal review. Concerns also remain about the PPF’s recent pre 1997 increases in the wind up trigger for DB superfunds, which create issues for funding levels and viability. Additionally, gateway test 1—that if a scheme is funded to buyout level it cannot enter a superfund—seems to prevent schemes augmenting member benefits via a superfund. Is that fair?

I turn to trustees’ fiduciary duty. It is undeniable that the Government have opened a Pandora’s box by taking the power of mandation, even if it is intended as a reserve power. I happen to think it is about time Pandora’s box was opened, emptied and hope allowed to get out, at least on interpretation of fiduciary duty. However, it is essential that this be done in primary legislation. Regulatory guidance or an SI is not enough. We are already seeing banks stung for compensation on car loans when lenders followed flawed guidance from the FCA.

Systemic issues such as the resilience of the UK economy and ESG are not abstract considerations; they directly affect pension scheme members’ long term retirement outcomes. Climate breakdown, financial crises and economic instability all influence the value of investments, the type of investments that need to be made in future and the returns available to members over time. They also determine how far pensions will stretch when drawn. These factors should already be integral to fiduciary considerations, requiring trustees to balance risk mitigation with support for long term stability. Yet trustees remain concerned about how to demonstrate alignment with member outcomes, even though investment results of any kind can never be guaranteed. Clarifying in this Bill that systemic factors are legitimate concerns would help.

At the same time, by naming and favouring certain vehicles, the Bill risks going too far and putting trustees in jeopardy. It could cause herding, market distortions and valuation bubbles and discriminate between comparable structures while failing to provide a safe harbour for trustees regarding financial benefit. The only way to achieve definite financial benefit would be through tax penalties for failing to meet mandated allocations, a possibility noted by the noble Baroness, Lady Altmann.

We have already seen the dangers of herding in both DB and DC schemes, driven by regulatory and advisory consensus. Advice focused on global indices, coupled with regulatory encouragement, led to a retreat from UK equities, an overreliance on gilts and the use of nested leverage through repo borrowing, culminating in the LDI crisis. The only accepted defence that trustees have is that they take advice, but it is from unregulated advisers. While many are excellent, some were noticeably reticent when this House’s Industry and Regulators Committee investigated LDI. We found it striking that such influential advice was not regulated, unlike advice to individuals. This should be addressed, perhaps by making it a designated activity under FSMA.

I turn now to the discrimination against listing. The Government mandate investment into private assets but exclude that investment from being via listed entities, despite their ability to provide superior liquidity. Not all listed entities operate in the same way, and I am going to have to explain that later. It is openly acknowledged that the Mansion House provisions reflected in this Bill are tailored to LTAFs, the new long-term asset funds, which are themselves a variation on the EU’s LTIFs—the long-term investment funds developed during my time as chair of the EU’s ECON Committee. At that time, the UK rejected implementing LTIFs, with the Treasury assuring me that we did not need them because we had listed investment funds, also known as investment companies and trusts, which were better. Yet, under this Bill, they are explicitly excluded, even when investing in the prescribed assets, as the alt sector does.

This exclusion is extraordinary. Before the mistaken, and now nearly corrected, regulatory cost disclosure and cost cap debacle, listed investment funds were favoured by local authority pension funds precisely because they financed local UK infrastructure such as schools, hospitals and renewables, and provided venture capital to growth companies. Those local authority pension funds were major investors at IPO and follow on stages, often for the local infrastructure they were subscribing to. Many retail investors hold listed investment funds in their portfolios for similar reasons.

I have recently been told that somewhere in the Treasury there is a belief that listing and then trading shares is not new money. Interestingly, the noble Baroness, Lady Noakes, whom I very much respect and often find myself in common cause with, also made that point. That is not the proper story if you are looking at a listed investment fund. Listing is what keeps the underlying investment funding in place so that it is not sold out for redemptions, as happens with open ended funds like LTAFs. In fact, the way in which money is raised and then put into investments is a similar procedure to that of an LTAF or any other open-ended fund. The only difference is a clever trick: instead of having to sell off the investments if somebody wants to get liquidity and withdraw their shares, the shares can be traded on the market and there is no damage to the underlying investment. That does not seem to have been recognised in the provisions in the Bill.

It is interesting that even some LTAF providers have contemplated investing in listed investment companies because they want the liquidity, and that will enable them to stay listed in productive assets for longer while still having the safety of being able to trade and get their money if they need more money for paying pensions, so why discriminate against them? The fact is they are complementary investments. They are often going to be smaller and local-sized, as opposed to massive. They can be used in combination with LTAFs and it is very foolish and stupid thing to exclude them. I will certainly be tabling an amendment to try to adjust that.

Overall, it is about time that the Government’s discrimination and denigration of listed investment companies end. I say “denigration” because there is damage done to these companies by this wording in the Bill. How many times has this House talked about having to improve the state of our stock exchange, both for listed companies of the operating variety and for listed funds? What do we do at every turn? The Government and the Treasury do not understand and, here, seem to be undoing a lot of the good work they have tried to do in all the listing reviews.

The Bill contains important reforms, but it must not undermine fiduciary duty, encourage herding or exclude proven vehicles that deliver value. With constructive amendments, we can ensure that it strengthens pensions while saving members’ long term outcomes and delivering for the UK economy.

16:15

[Lord Bourne of Aberystwyth (Con)]

My Lords, it is a great pleasure to follow the noble Baroness. She speaks with great experience and knowledge, and I certainly very much agree with the points she made on fiduciary duties and the need for clarity on them.

I congratulate the noble Baroness, Lady White of Tufnell Park, who is not in her place at present, on a maiden speech of great humour and informed with important principles and pointers to what we should be seeking in this legislation. We will certainly look forward to her future contributions in your Lordships’ House.

I want to make some generalised points about the Bill—echoes, inevitably, of what has been said previously in the debate. But I would also like to focus on four specific areas: first, mandation of investment; secondly, fiduciary duties; thirdly, addressing the wrongs suffered by the pensioners of the former Allied Steel and Wire company; and fourthly, the Delegated Powers and Regulatory Reform Committee report. The Minister, whom I greatly respect, referred to this in opening but dismissed it somewhat breezily—possibly not; maybe I am being unfair. There are some important concerns there that we have to address.

The Bill proposes many sensible reforms. It is a largely good piece of legislation. The creation of megafunds delivering lower-cost, diversified investments and better returns is sound and sensible. The consolidation of the Local Government Pension Scheme is also very sensible. There is much to welcome in this legislation.

My fundamental concern, along with many others who have spoken from around the House—almost universally—is the objection to defined contribution schemes and the Government’s backstop power to mandate investment. This really concerns me. It is potentially in conflict with the fiduciary duties of pension trustees. I would like to hear in the Minister’s response what the Government are proposing for that potential conflict.

Government-dictated investment risks undermining trustees’ fiduciary duty and risks distorting markets. Far more preferable, surely, is the voluntary approach that we have in the Mansion House Accord—built on reforms of July 2023 and based on, later again, the approach of my right honourable friend, the then Chancellor, Sir Jeremy Hunt MP—a voluntary agreement of 17 of the UK’s largest workplace pension schemes, signing up to committing at least 10% of their default funds to private markets by 2030, with a minimum of 5% in UK private assets. That is surely the preferred approach. It may well be the Government’s preferred approach, but I have real concerns about the backstop approach that is also in this legislation. The approach in the Mansion House Accord is expected to unlock up to £50 billion for high-growth UK companies and major infrastructure. That seems to be the sensible way forward, and it is based on the approach of Australia, for example, and other states.

Another area I want to touch on, which has also been touched on by the noble Baroness, Lady Bowles, is the fiduciary duties and the need for clarity here. These duties are in many ways similar to the duties that company directors owe to their companies. The fiduciary duties of company directors are in many ways based on case law, but there is also a statutory framework since the Companies Act 2006, which is very important to underpin the case law that is vital in interpreting the duties. It seems sensible to have a statement of duties on which the case law then elaborates and on which it rests.

There is a need to set the duties of pensions trustees in a broader context. How do they take account, for example, of the impact of climate change, the local community and the views of pension savers? The Government talk of guidance, but in my view there is a very strong case for the introduction of a statutory framework, as we have in company law.

I also want to raise the case of the wrongs suffered by pensioners of the former Allied Steel and Wire company, and indeed others, who have lost out because of the pre-1997 pension compensation not being index-linked. Allied Steel and Wire, a company largely based in Cardiff at the time, went into liquidation in 2002, affecting around 1,000 workers in Cardiff but also in Belfast and Sheerness.

A pensions action group was set up 2003, after the collapse, by those who had lost not just their jobs but their occupational pensions. These workers’ pensions are not protected by the Pensions Act 2004, which helped members of defined benefit schemes that went into liquidation but after 6 April 2005—so obviously it preceded that. In fairness, a government scheme, the Financial Assistance Scheme, was set up and helped to provide some relief for these pensioners—up to 90%—but it was not inflation-proofed. This led to the erosion of the pensions’ value over time. As the pensions built up before April 1997 were not linked to rising prices, that failure for index-linking meant that they have suffered massively and continue to suffer.

I know the incoming Government promised to re-examine the situation, but the Minister will realise that there is still real hurt among these pensioners that this has not been recognised in proper compensation. These pensioners played by the rules; they deserve the pensions they invested for. It seems the Pension Protection Fund has a considerable surplus, which could be used to right this very obvious wrong, and I hope the Government will take this unfinished business on board.

Lastly, the Delegated Powers and Regulatory Reform Committee report, to which my noble friend Lady Coffey and the noble Baroness, Lady Bennett of Manor Castle, referred, outlines some very serious concerns. There are almost as many delegated powers, 119, as there are clauses in the Bill, 123—that is serious. It is a pretty damning report, I have to say. It refers to a licence for the Minister to make subordinate legislation. I feel that is something we will inevitably have to return to as we go through Committee and Report, and I would be very interested in hearing what the Minister has to say on that.

I otherwise welcome the legislation. There is a lot to be welcomed in it—it is good legislation—but I have those reservations.

16:23

[Baroness Hayman (CB)]

My Lords, I declare my interests as a past chair and present director of Peers for the Planet. It is a great pleasure to follow the noble Lord in what he has just said. We have worked together on these issues before, and I feel somehow that on the issue to which I will return, fiduciary duty, we have the very good beginnings of a cross-party amendment with him, me and the noble Baroness, Lady Bowles—and I hope we will recruit from the Labour Benches as well.

The noble Lord, Lord Sharkey, some hours ago—not long hours, interesting hours—mentioned the absence in the Bill of any reference to the Paris Agreement and the Climate Change Act. The noble Baroness, Lady Bennett, mentioned the previous Pension Schemes Bill, in which we both participated six years ago.

That Bill, thanks to a cross-party amendment and great support from the noble Baroness, Lady Stedman-Scott, who was the Minister at the time, included references to the Paris Agreement and the Climate Change Act. I am assured that it was the first piece of pensions legislation in the world that mentioned those things, and it has been followed by many pieces of pensions legislation in many jurisdictions since then. Therefore, I am hopeful that we may make some progress on this.

As the Pensions Regulator has said, pension schemes are

“uniquely placed to understand that short-termism in the face of systemic risk is not the right approach for … pension savers”.

Successive Governments have recognised that the UK’s long-term prosperity will depend on our ability to lead the transition to a greener financial system. However, financial experts, such as the Institute and Faculty of Actuaries and the Pensions Regulator, warn that many schemes continue dramatically to underestimate climate and environmental risks. The Pensions Regulator has stressed that climate change and nature loss are not “abstract concerns” and that

“awareness of and managing systemic risks is … a core part of effective trusteeship”.

The Chancellor recognised the centrality of the issue in her Mansion House speech last year. In letters to the Bank of England and financial regulators, she said:

“The climate and nature crisis is the greatest long-term global challenge that we face”.


She recommended that they

“consider how these risks could impact financial stability over the near and longer-term”.

She also reaffirmed her commitment to make the UK a global leader in sustainable finance.

There are clear benefits to placing the UK at the centre of global financial flows that will drive the economy of the future, creating high-quality jobs and enabling the investment we so urgently need in the face of ongoing economic and cost of living pressures. The pension sector must be central to that endeavour. With the third-largest stock of pension assets in the world, the UK has the capacity to set a global benchmark for responsible investment. The £3 trillion held in UK pensions represents an enormous opportunity to align long-term investment with long-term risks and long-term economic stability.

However, significant exposure to environmental and supply chain risks and fossil fuels leaves savers at risk of holding stranded assets or seeing significant reductions to their pension pots in the years ahead. This is neither in members’ interests nor in our national interests. Therefore, in our discussions on the Bill, I will be very interested to hear how pension schemes investments can align with our climate and nature goals.

As the Bill stands, it remains silent on how the major pension reforms it contains will support the delivery of our nature and net-zero targets, despite the risk to both savers and our economic prosperity that institutions, such as the International Energy Agency and the Climate Change Committee in this country, have highlighted. UKSIF has estimated that approximately £88 billion-worth of UK pensions are directly invested in fossil fuel assets, and that, even if the limited decarbonisation pledges made so far by countries are fulfilled by 2040, £15 billion of UK pensions are at risk of loss due to stranded assets.

The Bill offers a practical, incremental opportunity to put a direction of travel in statute on the need to move away from investment in carbon-intensive assets in a managed and orderly way. It could send a clear signal about the long-term risks we face and help pension schemes to prepare for the transition in a considered way.

One of the measures we could take, and something that I will certainly be focusing on, as I said, as we go through the remaining stages of the Bill, is the clarification of fiduciary duty. For too long, many pension schemes’ trustees have reported confusion about what they should take into account when making investment decisions, particularly when those decisions involve long-term structural risks such as climate change, nature loss and other systemic factors. This can lead to unnecessary and unjustified caution and reinforce a bias towards short-term financial returns, even when the long-term risks are clear.

I think we all absolutely understand and agree that trustees of pensions have a fundamental responsibility to act in their members’ financial interests. However, the clarification of fiduciary duties in legislation, far from detracting from that responsibility, would enable trustees to fulfil it more effectively. So, while I welcome the commitment made on Report in the other place for guidance on this issue to be brought forward, guidance alone falls short of providing the legal certainty that is needed, as the noble Baroness, Lady Bowles, said so clearly.

Guidance can be challenged, ignored, and reversed without primary legislation. The legal ambiguity to which trustees are currently exposed will remain, even if in a slightly lesser degree, if there is only guidance on which to rely. Legislative clarification would dispel that uncertainty and future-proof the system to ensure that pension schemes are better able to recognise and to manage the systemic risks of climate change and nature loss. It would support trustees to act in the long-term interests of all beneficiaries and address issues of intergenerational fairness that are becoming of increasing importance as the longer-term consequence of the climate and nature crisis becomes clearer. It could also lead to better returns and increase new investment in the areas we need to future-proof our economy: clean energy, clean transport, clean infrastructure and, crucially, to unlock the economic opportunity of investing in nature-positive solutions.

I very much look forward to pursuing those issues as the Bill proceeds through your Lordships’ House.

16:32

[Viscount Trenchard (Con)]

My Lords, I too congratulate the noble Baroness, Lady White of Tufnell Park, who is not in her place, on her excellent and well-informed contribution. It is a great pleasure to follow the noble Baroness, Lady Hayman, who just made a most interesting and informative speech.

I thank the Minister for introducing the Bill today. Reforms to the structure of the pension schemes market introduced over the last 14 years have been generally beneficial. In particular, I am sure the Minister will agree that introduction of auto-enrolment into a pension scheme is the principal reason why the number of people saving into such a scheme has increased from 42% of the workforce back in 2011 to 88% today. That is a huge change and one of which the last Government can feel proud. Of course, the 8% of income invested into these schemes is not enough, but it is a start on which we can build.

While current economic conditions necessitate a review of the triple lock, it has been successful in restoring the relative position of pensioners in our society and has lifted 200,000 pensioners out of poverty. As my honourable friend Mark Garnier said at Second Reading in another place,

“the previous Government had turned their attention to two central issues: first, getting the best value for money out of our pension schemes and, secondly, pensions adequacy”.—[Official Report, Commons, 7/7/25; col. 722.]

There are some positive measures in the Bill which I welcome, but I want first to remind the House that it was a Labour Government who did enormous damage to our defined benefit pension system, which was previously a jewel in our financial services crown and the envy of the world.

Shortly after his appointment as Chancellor in 1997, Gordon Brown launched a stealth tax raid on our pensions by abolishing dividend tax credits. The removal of the dividend tax credit has been estimated to have cost occupational pension schemes over £3 billion annually. This led to increased contributions required from employers and employees to maintain pension levels. The consequences of the change were, first, reduced investment in UK companies. Following the abolition, pension funds have been less incentivised to invest in British companies, with their ownership of UK-quoted shares dropping from about 50% in 1997 to just 4% in recent years. This shift is one of the main reasons for the failure of the London Stock Exchange to value new listed companies competitively or to provide the necessary investment to support economic growth.

Secondly, the abolition of the dividend tax credit resulted in the double taxation of corporate earnings, since dividends are paid out of post-tax income whereas loan interest is deductible from corporate tax. This harmful move effectively destroyed many final salary-linked pension schemes by making them too expensive for companies to run. It has been estimated that the tax rate destroyed around £200 billion of the value of the nation’s pensions. Besides the abolition of the dividend tax credit, which was a fatal blow to DB pensions, the continuing restriction of the tax-free allowance for dividends provides an additional disincentive to investment in equities. The dividend allowance was £5,000 per annum in 2016-17 but was reduced to only £500 in 2024-25. Besides that, the income tax rate applied to dividend income has been increased by 2%. A higher rate taxpayer now pays 35.75%.

Take the example of an entrepreneur who has established a successful small business. He does not take a salary but pays himself through dividends when his company can afford it. The company has paid 20% corporation tax, and the 35.75% dividend tax means that the income that the business owner takes out of the business that he has built is now taxed at a rate of 55.75%. Leaving the entrepreneur aside, for years, dividend tax has been a second-tier concern—something that mainly affected company directors and high net-worth investors. That is no longer the case. Dividend tax is now a mainstream issue and hits ordinary people with modest portfolios who have never thought of themselves as investors in the past. If you hold shares outside an ISA, receive dividends from your own company or invest through funds and ETFs, dividend tax now matters.

There have been ongoing discussions about the potential reinstatement of the dividend tax credit to stimulate investment by pension funds into listed equities. That would encourage more domestic investment and help to restore London’s previous status as the best stock market for innovative new technology and other companies to list on. In Australia, as I am sure that the Minister is aware, dividend tax credits have been reintroduced as part of the dividend imputation system. This is designed to prevent double taxation of company profits.

Does the Minister recognise that it is a missed opportunity not to introduce a measure which would be warmly welcomed by the City and would certainly help the London Stock Exchange recover its lost position? Have the Government considered reintroducing dividend tax relief, and if not, why not? Surely this kind of radical measure is exactly what our financial services industry needs. Reintroducing tax credits on dividend payments and cutting stamp duty on UK share purchases are among the 10 recommendations that the Pensions and Lifetime Savings Association has made for using investment and fiscal incentives to encourage pension schemes to allocate more of the nation’s savings to British assets.

I welcome the measures in the Bill which seek to consolidate and build on auto-enrolment and the encouraging progress towards the pensions dashboard, which will greatly assist people’s access to their pension information and help them plan more effectively for their financial future. As the noble Baroness said, larger schemes generally perform better than smaller ones. I believe that the measures enabling the consolidation of small pots and the creation of superfunds are sensible, although regulations must ensure that protection for scheme members is not weakened.

The Association of British Insurers, the Society of Pension Professionals and other industry groups in the main support many of the measures contained in the Bill, including the value for money framework. Will the Minister introduce a requirement that it will be regularly reviewed to ensure that it operates as intended? Referring to the point on the consolidation of small pots, I suggest that the definition of small pots should be revised to £5,000 rather than £1,000, because the latter is too small.

The biggest problem with the Bill, as well explained by my noble friend Lady Stedman-Scott and others, is the proposal to empower the Government to mandate asset allocation within large multi-employer defined contribution schemes. I am not aware that the Government is a well-qualified fund manager with a spectacular track record, and it is absolutely not right to interfere with trustees’ fiduciary duties. It is all the more unacceptable because it applies only to those very large schemes and will therefore affect only pensioners of relatively modest means. This is unfair. This Government are pickpocketing the pensions of poorer people. Fund managers and the trustees who appoint them are under a legal duty to prioritise the financial well-being of savers. Their job is not to obey political whims but to invest prudently, grow pension pots and uphold the trust placed in them by millions of ordinary people. While I hold the noble Lord, Lord Wood of Anfield, in the highest regard, I am afraid I do not agree with his view on this matter. It may be that many pensioners would like to invest in UK assets, even if the returns are low, but they should take action separately to achieve that end.

The fiduciary duty is not a technicality; it is the bedrock of confidence that the entire pension system rests on. Rather than impose new regulations and take powers to do things that they are not qualified to do, I would like to see the Government free up insurers from solvency rules which prevent them owning equity in productive assets. Indeed, following the Mansion House Accord, the pension sector is already moving towards greater investment in productive assets. Seventeen of our largest workplace pension providers have already committed to invest 10% of their main default funds in private assets by 2030. Mandation is not required to achieve this trajectory. To attempt to define and enforce allocation thresholds risks concentrating activity too narrowly, crowding investment into specific asset classes and inadvertently restricting investment in broader activities.

The Government seek to take a power that is unnecessary. Their possible intervention in the market creates operational ambiguity. How schemes and pension providers will prove compliance with requirements lacks clear thresholds and enforcement logic, and creates reputational risk for pension schemes. The clause offering opt-out in cases of material financial detriment is too vague. The best solution to the problem is for the Government to drop this reserve power from the Bill entirely. If the Minister will agree today to do this, it will save us all a lot of time and trouble. I look forward to hearing what the Minister has to say about this.

Concerning local government pension schemes, I welcome the proposal to consolidate the pensions of 86 different authorities, which should contribute to enhanced performance. But, as my noble friend Lady Stedman-Scott explained, surpluses should be used to reduce the burden of contributions going forward, particularly as councils are faced to go through deeply damaging and expensive reorganisation.

Lastly, I am happy that the Bill attempts to find a solution to the problem of defined benefit surpluses. As drafted, it does not provide sufficient safeguards. In this area and others, I look forward to working with noble Lords to improve the Bill in the months ahead. I entirely agree with what my noble friend Lady Noakes had to say on this matter. I look forward especially to hearing the Minister’s winding-up speech.

16:45

[Lord Evans of Guisborough (Con)]

My Lords, I should preface my remarks by declaring an interest in that I am a member of the Local Government Pension Scheme. I am, of course, much too young to be drawing any benefits from that scheme as yet.

It is a great pleasure to follow my noble friend Lord Trenchard, who gave us a good, detailed critique of the Bill and made a number of constructive suggestions. Indeed, it is even more of a pleasure to be following—well, everybody, really. The Minister pointed out the generosity of the Whips this morning; when I looked at the list, I discovered they had been even more generous in giving me basically the last slot of the last debate of the year, at least from the Back Benches—the Front Benches can follow up afterwards. Bearing that in mind, I will keep my remarks mercifully brief and focus on a couple of the contributions that people have made during this extremely informative and interesting debate.

First, I congratulate and thank the noble Baroness, Lady White of Tufnell Park, for her excellent maiden speech. It was interesting and, I think, will be inspiring to people from outside this place who see that clip. I know that she will bring a great deal of expertise to us here, and I look forward to her future contributions.

Secondly, I thank my noble friend Lady Noakes, who raised the spectre of the dead hand of regulation, as it has been referred to at times in the past, and the concern that if we regulate schemes too much, we will discourage new schemes or even make it impossible for them to open up and operate, which will harm competition. We have already seen this in recent years with the situation that pertains to challenger banks in the UK, because a lot of the financial rules that were set up after the market crash made it very difficult for new banks and new financial institutions to gather the capital and put in place the administration they needed to start up. I believe that the Treasury has relaxed some of those rules recently to enable more people to take part in the financial market. I hope that the Government will reflect on that and not repeat mistakes that have been made in the past.

I shall refer briefly to the contribution from my noble friend Lady Altmann, who gave us an informed and passionate plea to encourage pension providers to invest more of the money they have in UK assets. I was quite persuaded by that, but saying to investors, “We’d like you to invest a percentage of your assets and you get to decide, with all your expertise, knowledge and experience, what you invest them in”, is very different from being asked to give the Minister permission to make a much more detailed investment decision on their behalf, with what, in effect, is other people’s money. I think that is what we are being asked to do in the Bill.

I hope we will revisit the whole mandation issue and help to moderate it or even remove it from the Bill altogether. I would go out on a limb and say that I would trust the Minister to make investment decisions on my behalf, but that does not mean that I would trust future Ministers and future Governments to do so. That is not just about the sort of people with the sort of ideas who might occupy those posts in the future; it is also about the sort of challenges that the Government may face and the sort of temptations that this legislation may lay open to them at a time when future years are looking difficult and unpredictable.

I mostly welcome what is in the Bill. There has been a tendency today to focus on the things we do not like about it; that is the job of scrutiny. Back in the 1990s, I worked for a visionary entrepreneur, and he used to say that in the future there will be no such thing as security of employment but there will be security of employability. He was running a training company, so your Lordships can maybe understand why he said that, and we have moved a long way towards embracing the new jobs market since then, but the pensions market needs to catch up. A lot of the measures in the Bill will help us to do that.

16:50

[Lord Palmer of Childs Hill (LD)]

Yes, my Lords, we are getting towards the end. I thank all noble Lords who have who have spoken. My particular thanks and congratulations go to the noble Baroness, Lady White of Tufnell Park, who made a marvellous first speech, which I am sure will be one of many.

There is much to welcome in the Bill; let us start positively. My noble friend Lady Kramer—as noble Lords know, she cannot participate today because she is at a funeral—is seeking the detail and the risk profile of the assets that will qualify under the Mansion House compact. Most people contributing through auto-enrolment into default funds have few resources and should not be in high-risk investments, certainly not without their permission.

My noble friend Lady Bowles, with great expertise, emphasised that fiduciary duty must remain the overriding principle of pension governance. She warned that mandating specific investment vehicles risks undermining trustees’ discretion, encouraging herding and discriminating against proven structures such as listed investment funds. Drawing on lessons from the LDI crisis, she argued that statutory preference cannot guarantee financial benefit and may expose pension members to unnecessary risk.

My noble friend further highlighted the Bill’s unjustified exclusion of listed investment companies and trusts, despite their track record in financing UK infrastructure and growth businesses. She also cautioned that lobbying pressures appear to have shaped the preference for long-term asset funds and urged that legislation should not be dictated by sectoral interests. Her message was clear: fiduciary duty must not be subordinated to lobbying or legislative preference, because it is pension members who will ultimately bear the cost.

My noble friend Lord Sharkey raised many important matters, many of which I will mention, including mandation, DB surpluses and DC master trusts. My noble friend Lord Thurso, who cannot be present—he is up in Inverness—was particularly keen to ensure proper guardrails and governance in relation to DB surplus release, mandation and adherence to the stewardship code, as well as seeking to improve the lot of pre-1997 pensioners who have not benefited from inflation uplifts. He will pursue these matters. Noble Lords can therefore see a lot of amendments lining up.

We will need to consider any action in the Bill to remedy pre-1997 pension erosion. The absence of discretionary increases for pre-1997 pensioners has clearly resulted in an erosion in the real value of their pensions. That is not the only injustice that has impacted on many pensioners. I draw attention to the AEA Technology Pensions Campaign’s work fighting for pensioners who were misinformed by the Government and ended up losing out as a result, as recognised by the Committee of Public Accounts in its June 2023 report on this issue. Although that is not the only example of injustice in our pensions system, it illustrates the challenges many pensioners have faced uniquely. Therefore, we will look to scrutinise these elements of the Bill in detail.

Legislation to formalise the framework around defined benefit superfunds is long overdue and is in the Bill. A main question is how the gateway test for DB funds—in other words, which DB schemes are allowed to enter them—compares with other options such as a buy-out. I hope the Minister can elaborate when she replies on when a new option is created, so that what might be considered the appropriate schemes use it and the wrong schemes do not.

The Bill provides for master trusts to have a default retirement solution so, having built up a pension pot, schemes need to assist in managing it. Can the Minister provide details on how the new advice or guidance will work in practice? The noble Baroness, Lady Stedman-Scott, made that point. Broadly speaking, extraction of surplus funds from DB schemes as if in surplus is mostly paid in by the employer. At present, it is difficult to access the surplus. Can the Minister elaborate on, and perhaps estimate, whether these new powers will be taken up? Will they just be there to be looked at?

Creating defined contribution megafunds sounds okay, but can the Minister elaborate on schemes being too big to fall, and whether new entrants will struggle to enter the market? We need to have the value-for-money framework elaborated on. In Australia, where there are league tables, there is evidence of investment herding, as mentioned in another context, where everyone invests in the same way. That is hardly a dynamic, competitive market, which is what seems to be one of the purposes of the Bill.

We will, I am sure, discuss mandation at length. Mandation is a reserve power to force pension schemes to invest at the whims of the Government, but I state clearly that I oppose this, as it crosses a dangerous line. It is fine saying that the Government do not plan to use the power, but we have to provide for the actions of future Governments: for instance, a Government who do not believe in climate change, a point made by the noble Baronesses, Lady Stedman-Scott and Lady Hayman.

The Bill’s idea of auto-consolidating small pots of less than £1,000 sounds good, but it is a big effort resulting in very little change and not much happening until 2030. Perhaps I have that wrong, but it was a point raised by the noble Lord, Lord Vaux, and I wanted to emphasise it.

The pensions system is evolving. We see what is happening; we are trying to let it evolve in the correct way. There are few easy solutions and, as noble Lords have mentioned, there will be a lot of scope for amendments to the Bill to make it absolutely right. I hope we can work collaboratively, throughout the House, on improving the Bill so that it can be built on and relied upon by pensioners, pension funds and everybody else.

16:58

[Viscount Younger of Leckie (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Palmer, who, like me, has become a regular on the pensions circuit here. As this debate draws to a close, I thank all noble Lords who have contributed with such seriousness and expertise this afternoon. For my part, I will try to touch on the key themes raised but, before I do, I would like to pay my own tribute to the noble Baroness, Lady White of Tufnell Park, because she gave an assured, charming and exceptional speech. She comes with a distinguished career record and I have no doubt that we will be hearing much from her here in future.

The seriousness of this debate was exemplified by my noble friend Lady Stedman-Scott, who set out with great clarity our central concerns raised by this Bill. Those concerns, however, point to a wider issue with the legislation itself. This is a framework Bill, light on detail and heavy on intention, which has left your Lordships debating concepts and hypotheticals rather than the Government’s concrete plans. That is not only unsatisfactory but disappointing. These points were made by my noble friend Lady Coffey. Certainty in legislation comes from detail on the face of the Bill. When that detail is repeatedly altered, deferred and subject to numerous government amendments—by the way, there are over 50—even the limited certainty we believed we had is further diminished. I look forward to the Minister’s response, not just on the preparation of the Bill, or perhaps lack of it, but, as has been raised, on the report from the Delegated Powers and Regulatory Reform Committee.

Nowhere is the lack of certainty more evident than in the proposed value-for-money framework. This was one of the first themes raised, not least by the noble Baroness, Lady Warwick, the noble Lord, Lord Davies of Brixton, and my noble friend Lady Penn. This element of the Bill is thin, almost skeletal, yet it is pivotal—again, my noble friend Lady Coffey spoke about this. In practice, much of what this legislation seeks to achieve will stand or fall on how the value-for-money framework is designed and applied. If it is to drive genuine improvement rather than box-ticking, its methodology must be transparent, robust and genuinely comparable across schemes. Cost alone cannot be allowed to dominate decision-making at the expense of outcomes. A scheme that is cheap but delivers persistently poor returns is not offering value to savers, however attractive its headline fees may appear.

Against that background, I have two specific questions for the Minister. First, do the Government envisage the value-for-money framework operating as a standardised pro forma, with clearly defined and comparable metrics covering costs, net investment performance, and cost-to-return ratios applied consistently across schemes? Secondly, how will the Government ensure meaningful comparability between very different types of schemes? In particular, what steps will be taken where schemes meet fee thresholds but nevertheless deliver consistently weak investment outcomes? My noble friend Lord Trenchard touched on this.

This feeds into a wider concern about the order of priorities in the Bill. Rather than committing to the notion of the reserve power—so-called mandation, which I will touch on later—the Government should have concentrated first on getting value for money right. That should have been the central driver of this legislation. If value for money is properly defined, transparently measured and rigorously applied, it can strengthen outcomes for savers without trampling on the fiduciary duties of trustees. We have heard quite a bit about that this afternoon.

As the Minister for Pensions himself has said, trustees must remain free, and indeed obliged, to act in the best financial interests of their members, but I say that this should be guided by evidence and judgment rather than direction by mandate. We should be confident enough to demonstrate the benefits and drawbacks of widely used default strategies, such as global passive equities, which underpinned many DC schemes’ investment approaches. That case should be made openly and empirically, yet the Government have underplayed the extent to which a robust value-for-money framework could drive improvement without compulsion. If value is genuinely improved and transparently measured, much else should follow.

My noble friend Lady Stedman-Scott has already clearly set out the Opposition’s wider concerns about mandation. I will not repeat them at length, but the subject was raised by my noble friends Lord Ashcombe and Lady Noakes, the noble Lord, Lord Vaux, and a number of noble Lords. However, I wish to raise one further point that reflects a broader theme running through today’s debate: the need to strike the right balance between flexibility and discipline. My noble friend Lord Ashcombe spoke on this.

Beyond the constitutional and fiduciary issues already raised, there is also a practical market risk that should not be overlooked. This matter was raised by the noble Lord, Lord Sharkey, and the noble Baroness, Lady Bowles, about market distorting effects, as the noble Lord put it. Mandation risks inflating asset prices if multiple funds are required to allocate to the same asset classes at the same time. I believe that the noble Baroness, Lady Altmann, raised this matter too. Markets may also interpret Government direction as an implicit signal of future price support, potentially amplifying distortions rather than improving capital allocation.

Against that background, I have two specific questions for the Minister. First, have the Government assessed the risk that mandated investment could lead to asset price inflation or wider market distortion? If so, what conclusions have they reached? Secondly, how do the Government intend to ensure that mandated allocations remain aligned with changing economic conditions, particularly in cases where schemes may reach a mandated threshold only after the relevant asset class is no longer aligned with economic need or the Treasury’s broader objectives?

There are a few further questions on this important subject. The noble Lord, Lord Davies, asked this as well. If, after mandation, or, in the case of mandation, if investments underperform or indeed fail, who takes responsibility, the Government or trustees? My noble friend Lady Penn asked how the qualifying assets will be defined. I think other Peers may also have asked that. The noble Baroness, Lady Bowles, asked some important questions in this sphere, so I am looking forward to the response from the Minister.

I should say also that I noted the constructive advice and ideas from the noble Baroness, Lady Altmann, on how the Government could better encourage pension funds to invest in the UK, short of introducing the reserved power. There were also some suggestions from my noble friend Lord Trenchard.

Next, let me touch on the treatment of surpluses in defined benefit schemes. I agree that surpluses can present opportunities, but they are not windfalls: they exist to absorb future shocks, manage demographic risk and ensure that promises made to members are kept. Flexibility in how surpluses are treated is sensible, but only if it is underpinned by robust safeguards. None of us wishes to see surpluses eroded by ill-judged extraction or quietly diverted into activities that weaken long-term scheme resilience. In that context, the forthcoming guidance from the Pensions Regulator will be pivotal. Can the Minister confirm when that guidance will be published, whether it will be subject to consultation and how Parliament will be able to scrutinise the balance it strikes between prudence, flexibility and long-term security?

Much of today’s debate has also rightly returned to auto-enrolment. The question of paucity of pensions adequacy has been highlighted by the noble Lords, Lord Sharkey and Lord Davies of Brixton, and my noble friend Lady Penn. Introduced by a Conservative Government, auto-enrolment has been one of the quiet successes of the past decade. I would like to remind the House that the operational aspects of this were progressed and tested going back as far as 2012. Participation among eligible employees now stands at around 88%. I would argue that this is a remarkable achievement. But success should not breed complacency, because upwards of 8.5 million people remain undersavers, and the question of adequacy remains unresolved. There is still work to be done, as the noble Baroness, Lady Bennett, said.

Crucially, auto-enrolment is highly sensitive to labour market conditions. Every percentage point increase in unemployment pushes more people out of workplace pension saving altogether. Against that backdrop, the recent “benefits Budget” is concerning. Unemployment is rising and, with it, the number of people falling out of pension saving. I therefore ask the Minister whether the Government have undertaken updated modelling on the impact of higher employment on future pension adequacy, whether those projections differ from earlier assumptions and whether they will be published so that Parliament can properly understand the long-term consequences of the Government’s policy choices.

As many noble Lords have noted, pension engagement remains the missing leg of the stool. Millions are saving, but fewer than half have checked the value of their pension in the past year. This is not simply apathy; it reflects a system that has become increasingly complex and opaque to ordinary savers. The pensions dashboard, which has been mentioned this afternoon, is therefore not a technical adjunct. It is central to enabling informed decision-making, and various questions have been raised about that. Can the Minister confirm when the revised staging timeline will be published, whether clear delivery milestones will be set out and how Parliament will be able to track progress so that savers can have confidence that this long-delayed reform will finally be realised?

Engagement, however, is also constrained by the current regulatory environment. In consultation with industry, we heard compelling evidence that FCA and the TPR regulation makes genuine member education extraordinarily difficult to design. The boundary between advice and marketing has become so blurred that most communications fall into a grey area, leaving schemes with very few compliant touch points for meaningful engagement. If we are serious about improving outcomes, the Government must enable better education and clearer communication. Perhaps the Minister could comment on this and what work is under way to review these constraints and how the Bill supports rather than frustrates the goal of informing saving.

I turn to salary sacrifice, because this decision strikes at the heart of pensions adequacy, individual engagement and, ultimately, trust in the system itself. The recent disappointing Budget has taken a sledgehammer to a mechanism that has for many years made pension saving both affordable for workers and sustainable for employers. For millions of people saving at or near the minimum auto-enrolment rate, salary sacrifice is not a perk but the difference between saving and not saving at all. Removing this relief will mean lower take-home pay, lower pension contributions and, over time, materially smaller pension pots. This is a short-sighted political choice—one that appears designed to plug immediate fiscal pressures while storing up greater dependency on the state in retirement.

The impact on employers is equally concerning. By reimposing employer national insurance on previously sacrificed earnings, the Government are increasing the cost of labour at precisely the wrong moment. For many medium-sized firms, this will translate into tens of thousands of pounds in additional annual costs—money that could otherwise have supported wages, investment or workforce expansion. The decision to charge both employer and employee national insurance on salary-sacrifice contributions above £2,000 introduces a sharp and, I believe, irrational cliff edge. The OBR estimates that 76% of the burden will fall on employees. Once again, private sector workers bear the cost, while public sector employees in defined benefit schemes remain largely insulated.

The figures are stark. An employee earning £45,000 and saving 5% through salary sacrifice will be £58 worse off in the first year and more than £15,000 worse off over the course of a working lifetime. In the light of this, can the Minister confirm whether the Government have undertaken a sector-by-sector distributional analysis of these changes, whether they will publish an assessment of the long-term impact on pension adequacy and future welfare expenditure and whether she accepts that this measure operates in effect as a tax on work and on responsible long-term saving?

Some noble Lords have rightly raised the broader macroeconomic implications of pension reform. UK pension funds and insurers together hold around 30% of the gilt market—this point was made earlier. If mature defined benefit schemes are nudged away from gilts into equities, the consequences for debt management, interest rates and mortgage markets could be profound. It would therefore be reassuring to hear from the Minister whether the Debt Management Office and the Bank of England have been consulted on these potential effects and whether their views will be made available to Parliament.

I realise that time is marching on. I hope the Government will reflect carefully on all the concerns raised across your Lordships’ House today and respond with the assurances that savers and schemes alike are entitled to expect—we owe them nothing less. However, in the spirit of Christmas, and as this is the season of good will—I am feeling more Christmassy now than I did before the Question this afternoon—I say to the Minister that, despite everything I have said, and in a rare outbreak of festive generosity, there are parts of the Bill that we agree with, such as the PPF changes and the terminal illness time extension. As others have said, we will work constructively with the Government in the weeks and months ahead. I look forward to the Minister’s response and wish Peers and staff in the House a very happy Christmas.

17:13

[Baroness Sherlock (Lab)]

My Lords, I am grateful for the incredible range of thoughtful and constructive contributions we have heard during today’s debate. I should declare that I am a member of the parliamentary pension scheme; otherwise, I have a private pension.

I am so grateful to have heard the maiden speech of the noble Baroness, Lady White. I realise we have quite a bit in common: we are children of migrants, I too have spatial dyspraxia—I have never yet found my way around here—and we both engage with a church. I am afraid that there it ends; no one will ever ask me to chair John Lewis, which may be just as well for anybody who likes shopping there. She may have had an eclectic career but, now that she has joined this House, it will get a lot more eclectic still. It is a joy to have her on board and, if there is more of that to come, I look forward to it.

The range of views around of the House reflects the significance of the Bill for savers, employers and the pensions industry. The level of interest underscores how important pensions are to savers and the UK economy, and we need to help people get the best from their savings. There were some fascinating discussions in the debate today. I could have listened to the noble Lord, Lord Willetts, and my noble friend Lord Wood for a lot longer, and I shall not be able to do justice to what they said. But I shall go back and read it very carefully and I hope that we can continue to have some really interesting conversations.

There were a lot of questions, and I will not be able to respond to all of them. I shall do my very best, but I have only 20 minutes and it may be that noble Lords have to listen back to this at half-speed, if I am not careful.

I will start with adequacy, as that is where the noble Baroness, Lady Stedman-Scott, began. I was grateful to the noble Lord, Lord Willetts, for setting out that this has been very much a cross-party journey that we have been on together, and I hope that we can keep it that way. I am sure that the noble Baroness did not mean to presume that auto-enrolment started with the last Conservative Government, when in fact it was legislated by the previous Labour Government—and there was also the Pensions Commission. I am sure that she did not mean to say that. What we have done is provide some remarkable continuity in the journey, and I hope that we can carry on doing that.

I was delighted by the work done by the last Pensions Commission, on which my noble friend Lady Drake served with such distinction—and I know that she will serve with equal distinction on the next Pensions Commission. That is the place where adequacy will be addressed fully. The Government are committed to that—it is a key priority for us—but it is also important that we get the market into the right shape so that, if savers are saving more, they will get the returns on their money.

I turn to the issue of surplus. I listened very carefully to the noble Baroness, Lady Noakes, and my noble friend Lord Davies, and thought, “I can’t make them both happy on this front”. That is generally true, I think, but it is illustrated particularly on the subject of surplus. I shall say two things. First, to the noble Viscount, Lord Younger, I say that we are very careful about what surplus extraction will do. Schemes are currently enjoying high levels of funding, with three in four in surplus on a low-dependency basis. They are also more mature, with the vast majority having a hedge to minimise the risk of future volatility with investment strategies: they are protected against interest rate and inflation movements. The DB funding code and underpinning legislation introduced in 2024 require trustees to maintain a strong funding position.

The decisions to release surplus are of course subject to trustee discretion and underpinned by strict safeguards, including the requirement for a prudent funding threshold, actuarial certification and member notification. Of course, as part of any agreement to release surplus funds, trustees are in a good position to negotiate, and it will be down to trustees to negotiate with their employers about the way in which surplus is released.

My noble friend Lady Warwick rightly pressed me on the questions of scale. As outlined in the impact assessment for the Bill, there is a range of evidence showing that scale can help deliver better governance, with economies of scale, investment expertise and access to a wider range of assets all helping to improve outcomes. We may not be heading for the sunlit uplands of Aussie megafunds, described by the noble Baroness, Lady White, but we are pushing in that direction. In response to her question, we will ensure that the governance and regulatory requirements needed for these much bigger pension schemes will be robust. We will develop those with the industry going forward.

On the question of whether the scale measures are going to be tougher on smaller schemes, the problem is that our evidence shows, across a range of studies, that scale is what makes the difference. We are asked why there is a magic number of about £25 billion. The evidence from a number of studies shows that a greater number of benefits can arise from a scale of £25 billion to £50 billion of assets under management, including investment expertise and sophistication and the balance sheet to provide a more diverse portfolio to savers. We have not seen sufficient evidence that other approaches will enable the same benefits for savers and the economy, so we do believe that scale is the best way to realise benefits across the market for savers. However, there will be a transition pathway to enable those schemes that are not there now to have a route to scale where they have a credible plan to achieve it in five years, and we will consult the industry on what a credible plan may look like as part of the development of regulations.

A number of noble Lords, including the noble Baronesses, Lady Altmann and Lady Noakes, and the noble Lord, Lord Ashcombe, as well as my noble friend Lord Wood, mentioned the position of new entrants. The potential for future market innovation is really important; we are very conscious that scale requirements could, if not done correctly, prevent this future innovation. So the Government have provided for a new-entrant pathway, designed specifically to provide a route for this future innovation. We will monitor future movement in the market to ensure that the pathway is working as intended. In addition to innovation, these schemes will be required to have the strong potential to grow to scale over time.

I dive in briefly to the reserve power and asset allocation. I am clearly not going to satisfy the House today; we will have plenty of time in Committee to discuss this. But I shall make a few points now about it in general and the interaction with fiduciary duty. Questions were raised by the noble Baronesses, Lady Stedman-Scott, Lady Penn and Lady Noakes, the noble Lords, Lord Sharkey and Lord Vaux, my noble friend Lord Davies, the noble Lords, Lord Bourne of Aberystwyth and Lord Evans—and I am going to stop saying these names now.

There is widespread recognition of the benefits that a diverse investment portfolio can bring for savers. That is exactly why the signatories to the Mansion House Accord are committing to invest in private markets. This reserve power will help to ensure this change happens, but we have built in a number of safeguards. Let me just knock one thing on the head. I say to the noble Lord, Lord Ashcombe, that this asset allocation power does not apply to the LGPS. Following an amendment in the House of Commons, the Bill no longer allows a responsible authority, such as the Secretary of State, to direct asset pool companies to make specific investment decisions. I hope that reassures the noble Lord on that point.

On the wider question, the making of regulations under this power will be subject to a raft of safeguards contained in the Bill. To respond to the noble Viscount, Lord Younger, I say that the Government anticipate that we will not have to use this power if all goes well. Were the Government ever to use it, there are a series of safeguards, and we would have to consult and produce a report. We would at that point look at developing how it would be done. Let me briefly touch on the safeguards: first, the power is time limited, and I say to the noble Baroness, Lady Penn, that it will expire if it has not been used. Any percentage headline asset allocation requirements enforced beyond that date will be capped at their current levels. Secondly, and crucially, the Government are required to establish a savers’ interest test in which pension providers will be granted an exemption from the targets where they can show that meeting them would cause material financial detriment to savers. Finally, the regulations will obviously be subject to parliamentary scrutiny but, before that, the Government will need to consult and publish a report on the impact of any new requirements on savers and economic growth both before exercising any power for the first time and within five years of it being exercised.

I am going to have to rush through. I turn to the points raised by the noble Baronesses, Lady Altmann and Lady Bowles, about qualifying assets and investment trusts. I can see that the noble Baroness, Lady Bowles, feels very strongly about this—I listened carefully to the points that she and the noble Baroness, Lady Altmann, made. I say to the noble Baroness, Lady Bowles, in particular that the Government recognise the role that investment trusts play in the UK economy and in supporting the Government’s growth agenda, and we are committed to supporting this important sector. We put that on the record very clearly. However, when it comes to qualifying assets in a reserve power, we have aimed to stick closely to the scope of the Mansion House Accord, which itself is limited to investments made by unlisted funds. That is consistent with our general approach to this part of the Bill, where we deliberately ensure that the powers are suitably targeted and contain guardrails. In other words, they are not intended to be open-ended but should be capable of serving as a backstop to the commitments that pension providers have voluntarily made.

There were a number of points made by my noble friend Lord Davies about consumer protections. I reassure him that consumer protection is a priority for the Government, and ensuring that there are strong consumer safeguards is something we take very seriously. That is why the Bill introduces a number of robust consumer protections, including in the contractual override process, in small pots and in DB surplus. I look forward to discussing these in more detail with him and others in Committee.

My noble friend Lady Warwick raised the question of VFM. I am grateful to the noble Baroness, Lady Coffey, for welcoming that; my noble friend Lord Davies raised it as well. The noble Viscount, Lord Younger, asked about the interaction in different parts of the scheme. The pensions road map, which I am sure he has had the opportunity to read, shows very clearly how the different measures that we are proposing connect and how they are all necessary. They are all key parts of a machine necessary to achieving the Government’s objective of moving the pensions landscape forward. I can tell him that the next step will be a joint consultation by the FCA and the Pensions Regulator, which will be published early next year. This will then inform our draft regulations on value for money, which we intend to consult on during 2026. We expect the VFM framework to be implemented in 2028, with the first set of VFM metrics published in March 2028. The first VFM assessment reports and ratings will then be published in October 2028. On that basis, we would expect to see poor performing schemes starting to exit the market from November 2028.

On the pre-1927 indexation in the Pension Protection Fund and FAS, I listened very carefully to the comments that have been made by my noble friend Lady Warwick, the noble Lord, Lord Bourne of Aberystwyth—I thank him for his thoughtful reflection—and many other colleagues. We are laying the groundwork for the first major step forward in this area, and I think that some credit should be given to the Government for doing that. However, I understand that this will not go as far as many had hoped.

We need to recognise that the PPF maintains a substantial financial reserve. It is not a surplus; it is a financial reserve to protect against future risks. The cost of retrospection and arrears is significant and would greatly reduce that reserve. Any change that reduces the PPF’s reserves will, by definition, reduce the vital security the PPF provides to its current and future members. The PPF has very successfully navigated the past 20 years. It is well regarded as a prudent fiduciary acting in the best interests of pension savers, and we need to ensure that it can continue to do so.

I am going to disappoint my noble friend Lord Davies on the matter of pre-1997 indexation in wider DB schemes. I need to tell him clearly that the Government have no plans to change the rules on pre-1997 indexation for DB schemes. These rules ensure consistency across all schemes, and changing them would increase liabilities and costs. Over three-quarters of schemes pay some pre-1997 indexation because of scheme rules or as a discretionary benefit, but reforms in the Bill, as we have mentioned, will enable more trustees of well-funded DB pension schemes to share surplus with employers and deliver better outcomes for members, which may include discretionary indexation.

I turn to the questions on fiduciary duty, raised by many noble Lords, including the noble Baronesses, Lady Hayman, Lady Bowles and Lady Penn, the noble Lords, Lord Sharkey and Lord Bourne of Aberystwyth, and my noble friend Lady Warwick. It is often said that fiduciary duty is the cornerstone of trust-based pension schemes and that trustees should invest in the best interests of their members. That principle remains fundamental. The Government believe that the current legal framework gives trustees flexibility to adapt and protect savers’ interests. However, at the same time, we acknowledge the calls for more clarity on considering systemic factors, such as climate risk and members’ living standards, when making investment decisions.

My colleague the Minister for Pensions set out in the Commons that we intend to develop guidance for the trust-based private pension sector to provide this clarification. I know that he plans to come forward shortly with more details on what the guidance will look to cover. He has already confirmed how he intends to start engaging with a wide range of stakeholders in producing the guidance, starting with a series of industry round tables early in the new year.

Through guidance, the Government are trying to address a barrier that some trustees say they face when investing in savers’ best interests. Guidance has the potential to support climate and sustainability goals, and our wider goal to improve saver outcomes and unlock pension investment in UK growth. We are still in the early stages of undertaking consultation and exploring options on this, and we will provide further updates in due course.

The noble Lord, Lord Bourne, and the noble Baroness, Lady Penn, asked why we do not just change the primary legislation. It is the Government’s view that introducing statutory changes to refine investment duties could risk creating rigid and complex obligations, which would reduce the ability of trustees to respond to changing investment landscapes and circumstances. On the questions of how and when, we are exploring possible options for taking this forward if and when parliamentary time allows.

The noble Baronesses, Lady Bowles and Lady Coffey, raised the position of trustees, and others also alluded to it. Successful implementation of the Bill’s reforms will rely on highly skilled trustees operating independently, applying good governance and focusing on delivering the best outcomes for savers. That is why we launched a consultation on stronger trusteeship and governance earlier this week. It aims to bring all schemes up to the required standard and explore what changes might be needed to raise the bar for all trustees. The industry has welcomed the consultation and there seems to be a consensus that high-quality trusteeship and governance is vital to ensuring good outcomes for pension scheme members. I encourage anyone with an interest in this area to respond to the consultation.

A number of other points were raised. The noble Baroness, Lady Coffey, talked about the need for a single regulator. I say simply that the Government recognise the importance of clarity and co-ordination in the regulation of workplace pensions. The FCA and the Pensions Regulator work effectively together, including through joint working groups and consultations. They have shared strategies and guidance, and regular joint engagement with stakeholders. The Government keep the regulatory system under review.

The noble Lord, Lord Ashcombe, made some interesting points. The Government are committed to appropriate regulation, and to do that we need to engage regularly with stakeholders and industry to make sure that we get it right. There are some genuine questions, which we will go on to debate in Committee, about getting the balance right between primary legislation, secondary legislation, regulation, supervision, governance and guidance. We need space to be able to engage with industry, because any regulations we produce have to work and the details of the scheme will have to be worked through. That will inevitably mean that there will be times when the House will want more detail than we are able to give. One of the challenges is that it should not be possible both to criticise the Government while they are trying to make their mind up on everything at the same time in some areas and to criticise them for not being open to consultation. We will see how it goes and continue to consult extensively with industry and other stakeholders as we move through this.

A few more points were raised. The noble Lord, Lord Kirkhope of Harrogate, asked about the Pensions Ombudsman. It is important to clarify that the measure on the Pensions Ombudsman neither increases nor widens their powers, nor that of the TPO, beyond what was originally intended. This is reinstating the original intent of the ombudsman’s powers in pension overpayment dispute cases, which were debated in Parliament when the ombudsman was established in 1991. There was a High Court ruling; we are amending the existing legislation because that ruling stated that the TPO is not a competent court in pensions overpayment cases. The aim is to reinstate the original policy intent and reaffirm the government view and that of the pensions industry. I hope that reassures the noble Lord. It restores the original policy intent—that is all. It is not designed to try to widen it. I hope that is an encouragement to him.

On the question of small pots, the noble Lord, Lord Vaux of Harrowden, and the noble Viscount, Lord Trenchard, queried the pot limit. We had to choose somewhere. The initial pot limit of £1,000 will address 13 million stock of small pots, which we think strikes the right balance between achieving meaningful levels of pot consolidation and reducing administration costs for pension providers without distorting the market. However, the Secretary of State will keep the threshold under review to ensure that it remains appropriate as the market continues to develop following the reforms made in the Bill.

A number of noble Lords asked about the position on pensions dashboards. The Government have committed to regular updates to the House—we will be doing another one of those—but let me put some headlines on the record for now. The House will be glad to know that good progress has been made with the pensions dashboards. The first pension provider successfully completed connection to the pensions dashboards ecosystem on 17 April this year, forming a crucial step towards making dashboards a reality. More than 700 of the largest pension providers and schemes are now connected to the dashboards ecosystem; over 60 million records are now integrated into dashboards, representing around three-quarters of the records in scope.

Further, state pension data is now accessible, representing tens of millions of additional records. The pensions dashboards programme is confident that pension providers and schemes in scope will connect by the regulatory deadline of 31 October 2026. When we have assurances that the service is safe, secure and thoroughly user tested, the Secretary of State will provide the industry with six months’ notice ahead of the launch of the Money Helper pensions dashboard.

A number of noble Lords mentioned the gender pensions gap, including the noble Lord, Lord Vaux, and the noble Baroness, Lady Bennett. Auto-enrolment has delivered substantial progress in increasing pension participation among women, which has meant, as the noble Baroness said, that workplace pension participation rates between eligible men and women in the private sector have now equalised. However, it is absolutely right that gaps remain in pension participation and wealth, reflecting wider structural inequalities in the labour market. A gender pay gap leads to a gender pensions gap. Women now approaching retirement still have, on average, half the private pension wealth of men. The Pensions Commission will consider further steps to improve pension outcomes for all, especially women and groups identified as being at greater risk of undersaving for retirement.

That is probably about as far as I can go. I am really grateful to be part of a House with so much interest and knowledge in a subject that not everybody—noble Lords will be shocked to hear—finds as interesting as those of us here today do. However, we do, and I look forward to lots of really interesting discussions in Committee. This Bill marks a decisive step in modernising the pensions system, strengthening security for members, driving better value and enabling innovation across the sector. It combines ambition with safeguards, ensuring schemes can deliver improved outcomes while maintaining confidence and trust. I look forward to working with noble Lords—after they have had a very happy Christmas—and to continuing constructive engagement. I commend the Bill to the House.

[Baroness Penn (Con)]

The Minister has made a valiant attempt to answer all questions. Can she commit to writing to the noble Lords in this debate on the questions she did not reach, and to that letter reaching us before we start Committee?

[Baroness Sherlock (Lab)]

This is the last sitting day before we finish. I will look at what I can put in writing before we get to Committee. I have never been asked so many questions in such a short period—and I have talked to church youth groups. I will see what we can do on that front.

Bill read a second time.

Commitment and Order of Consideration Motion

Moved by

[Baroness Sherlock]

That the bill be committed to a Grand Committee, and that it be an instruction to the Grand Committee that they consider the bill in the following order:

Clauses 1 to 118, the Schedule, Clauses 119 to 123, Title.

Motion agreed.

[Lord in Waiting/Government Whip (Lord Katz) (Lab)]

My Lords, I beg to move that the House do now adjourn and, in doing so, wish everyone in the House, and all those working in the House, chag sameach, a very happy Christmas, a restful break and a happy new year.

House adjourned at 5.34 pm.