Monday 16th March 2026
(1 day, 12 hours ago)
Lords ChamberPension Schemes Bill 2024-26 View all Pension Schemes Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 169-I(Corrected) Marshalled list for Report - (12 Mar 2026)
19:42 - Division on Amendment 14 - Ayes: 48 / Noes: 142 - Amendment 14 disagreed.
Viscount Thurso
“(2AA) Without prejudice to the generality of subsection (2A), regulations made under that subsection must include provision that takes into account the particular circumstances of occupational pension schemes established before the coming into force of the Pensions Act 1995 which, prior to that Act, possessed or were understood to possess a power to pay surplus to an employer.”Member's explanatory statement
This amendment would allow schemes where people are affected by pre-1997 arrangements to offer discretionary indexation where funding allows, with appropriate regulatory oversight.
Baroness Sherlock
Member's explanatory statement
This amendment corrects a mistake in a cross-reference to the Pensions Act 1995.
Viscount Thurso
“Report on fiduciary duty and discretionary indexation of pre-1997 benefits(1) The Secretary of State must, within 12 months of day on which this Act is passed, publish a report on whether the fiduciary duties of trustees of occupational pension schemes should be amended to permit discretionary indexation of pre-1997 accrued rights, where scheme funding allows.(2) The report must consider—(a) the impact of current fiduciary obligations on trustees’ ability to award discretionary increases to pre-1997 pension benefits;(b) the potential benefits of permitting such discretionary indexation for affected pensioners;(c) the funding conditions and thresholds under which discretionary indexation could be considered sustainable;(d) the appropriate level of regulatory oversight and guidance required to ensure that discretionary increases are granted in a fair, transparent, and financially responsible manner;(e) international approaches to indexation of legacy pension benefits;(f) the legal and actuarial implications of amending fiduciary duties in this context.(3) In preparing the report, the Secretary of State must consult—(a) the Pensions Regulator,(b) the Financial Conduct Authority,(c) representatives of pension scheme trustees, members, and sponsoring employers, and(d) such other experts or bodies as the Secretary of State considers appropriate.(4) The Secretary of State must lay a copy of the report before both Houses of Parliament.”Member's explanatory statement
This new clause requires the Secretary of State to report on whether the fiduciary duties of trustees of occupational pension schemes should be amended to permit discretionary indexation of pre-1997 accrued rights, where scheme funding allows.
Viscount Thurso (LD)
My Lords, as the Minister indicated earlier, we left much of the meat for this debate around pre-1997 indexation to this group, not anticipating the events that happened outside, which I know we all regret. Knowing who was involved, who was a friend, I very much hope that the outcome is the best it may be.
This amendment, which is similar to one we moved in Committee, basically looks at the situation of those people who, for one reason or another, have not had their pensions uprated for inflation. Basically, it sets out that:
“The Secretary of State must, within 12 months of day on which this Act is passed, publish a report”.
When I discussed this with the Minister, I think we agreed that having a review is not necessarily the best way forward, but the problem is finding a way to bring this to the attention of government in a manner that might result in some sort of outcome for those affected. The problem we were discussing around surpluses was very much around how a surplus is made, who can have it, and so on. I would just like to go back to the argument I was making in relation to the fact that defined benefit schemes to me are a contract between the employee and the employer.
I know that in Committee, on a different group much later on, one of the noble Lords present commented that, in his view, a DB scheme is just a giant Ponzi scheme. I thought that comment was a bit uncalled for and indicated that he neither fully understands the evil impact of a Ponzi scheme nor the benefit of a properly constructed DB scheme. In a DB scheme where there are sufficient contributions from the employee and the employer and well-run trustees follow a good investment strategy, the great likelihood is that, at the end of the day, a good solid pension will be paid.
What we are discussing here is really whether trustees who are in a position to do so can in fact share the benefits of a surplus. In some circumstances, that is written into the contract between the employee and the employer, as in the case of the PCPF, which is the one I know—it is absolute and we have to pay it; it is uprated by CPI, and that is in our investment objectives and we invest in order to achieve that. There were a number of schemes where the scheme rules did not actually mandate that to happen, but if you read the literature produced for many of these schemes at the time, it made clear that the anticipation was that that would happen. The amendment seeks to highlight the fact that a great many people could reasonably have expected to receive a pension that broadly kept pace with the cost of living but which today is substantially less than it might have been.
As I woke up this morning, listening to the “Today” programme and the ministerial rounds that were going on, I could not help but note that what was on the grid for today was how much the Government are concerned by the cost of living, so it is apt that this amendment is being discussed today. I completely accept that this amendment may not move the dial hugely and that it may be somewhat imperfect, but I think we owe it to those who are now in some considerable hardship to make at least some effort to try and get them back to where they might have been.
Finally, in looking at all the different economic inputs that go into growth, one of the most important is the ability for the consumer to spend. One of the things I learnt when I was still in business was the power of grey purchasing power, as it was known in marketing terms in those days. The pensioners who were earning their pension in the 1960s, 1970s and 1980s and who retired in the 1990s had that strong purchasing power and spent a great deal of money on activities that supported the economy. Therefore, I think there is merit—moral merit, if you like—in looking after these people, and there is also sound economic merit in looking after these people. Having rehearsed all the detailed arguments before, I leave it there. I beg to move.
Viscount Younger of Leckie (Con)
My Lords, we again understand the intention behind this amendment from the noble Viscount, Lord Thurso, supported by the noble Lord, Lord Palmer. We also recognise the strength of feeling that exists on the question of pre-1997 indexation; I listened carefully just now to that strength of feeling behind the noble Viscount’s remarks. It is an issue that has been raised in this House and, separately, we have had discussions ourselves with representatives of a number of the campaigns that have taken a close interest in this matter. We have heard the arguments that they have put forward and understand clearly where this amendment is coming from and why it has been tabled.
However, we feel that there is an important principle at stake here. The noble Viscount said that his amendment was not perfect, but I will continue. The foundation of the occupational pensions system is fiduciary duty. Trustees and scheme managers are entrusted with the stewardship of pension funds on the basis that they must act in the best interests of scheme members and beneficiaries. That is the basic and fundamental point on which the entire system operates. It is also the basis on which people engage with the system in the first place: members can have confidence that those responsible for managing their pension savings are legally bound to act in their interests.
Once we begin to qualify or redefine what those best interests are, however well-intentioned the objective may be, we risk undermining that principle. If Parliament starts directing or reshaping how that duty should be interpreted in particular circumstances, we may end up tying the hands of the very people who are trusted to make those judgments. Trustees could find themselves placed in a position where they are, effectively, required to act in a way that they themselves do not believe is in the best interests of members, based on their professional judgment and their understanding of the scheme’s funding position.
I believe that would represent a concerning precedent. The strength of the current framework lies precisely in the fact that those decisions are taken by trustees exercising their fiduciary responsibilities, not by central direction or legislative qualification of what those responsibilities ought to mean in practice. We will, of course, hear more about the point that I am making on Thursday.
For these reasons, although we recognise the concerns that have given rise to this amendment and the sincerity with which they are held, we are cautious about moving in a direction that could weaken the clarity and independence of fiduciary duty within our pensions system. We regret that we are therefore not in a position to support this provision becoming a feature of the pensions landscape. I am sorry to disappoint the noble Viscount to that extent.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I am grateful to the noble Viscount, Lord Thurso, for introducing his Amendment 22. Many members of defined benefit, or DB, schemes have seen inflation erode the value of their pensions, as he said. That is especially true where any uplift on older benefits depends on decisions made at the level of the scheme. I want him to know that I hear those concerns loud and clear. I have heard them expressed by affected pensioners, as many Members will, and I understand the strength of feeling among them.
As the House will know, schemes take different approaches to indexation: some schemes have to provide increases under their rules; some do not require them at all; and a significant number allow discretionary increases, but usually only where both trustees and the sponsoring employer agree. This amendment focuses on the role of trustees in relation to pre-1997 discretionary indexation. The fact is that, in many schemes, such indexation can be awarded only where the sponsoring employer provides consent, which reflects the scheme rules. It means that trustees may be unable to award uplifts where employers are unwilling to agree, even in well-funded schemes.
I recognise why many schemes give employers a central role. Employers ultimately stand behind the scheme and may have legitimate concerns about future affordability and their long-term liabilities. But the result is that when employers are unwilling to support discretionary increases, even when the scheme is in a strong funding position, trustees are, effectively, prevented from acting. I understand that that limitation creates concern, especially in schemes that appear well-funded and may be running surpluses but are not providing discretionary uplifts on older benefits.
However, although I understand the challenge, we cannot accept Amendment 22 because—the noble Viscount identified this himself—it would require a statutory review of trustees’ fiduciary duty in a complex area. Fiduciary duties underpin trustees’ responsibilities to protect all members and ensure the long-term solvency of their scheme. Changes that go beyond trustees freely acting in line with their fiduciary duties on this issue and removing trustee discretion, or removing the employer from any decisions, could have significant consequences for scheme funding, employer sustainability and member security. In any action they take, the Government have to consider all schemes, not only those that are well funded or have historically paid discretionary increases. Mandating a statutory review thus risks creating uncertainty for all trustees and employers, while we are undertaking wider work on surplus and helping schemes make endgame choices.
The key point, as I know the noble Viscount, Lord Thurso, recognises, is that the difficulty in the hard cases is not typically that trustees lack the willingness or the legal ability to act. They are often acutely aware of the pressures their members are experiencing. However, I agree it would be helpful to develop a clearer understanding of the factors that prevent some well-funded schemes awarding discretionary increases, particularly where employer consent is not forthcoming. I am aware that the Pensions Regulator has been considering how it might build its evidence base in this area, and any insights from that work would be helpful in informing future thinking.
The Government recognise the importance of this issue. As I indicated in earlier debates, the wider package on surplus, including giving trustees the ability to agree surplus payments to employers, is intended to support more balanced negotiations so that both members and employers can benefit. I hope that has given at least an explanation to the noble Viscount, Lord Thurso, as to the position that the Government are in but, for all those reasons, although I recognise the concerns he has raised, I hope he can withdraw his amendment.
Viscount Thurso (LD)
My Lords, I am grateful for the comments of the noble Viscount, Lord Younger, and only sorry that I was not persuasive enough to get him to join my side. I am also grateful to the Minister, because the tea and sympathy has actually gone further than I might have expected. What she said in her response is very encouraging. It indicates that the Government are very much in listening mode on this. If we can find a way to encourage some of those schemes, particularly the BP scheme which I mentioned in Committee, to share those surpluses, and if the Government have a mind to perhaps put a bit of a wind behind that then that would be very good. In the light of that, I beg leave to withdraw my amendment.
Baroness Altmann
“(14) Value for money regulations must include criteria relating to member service quality, including—(a) accuracy of recorded contributions;(b) reliability of valuation data;(c) efficiency of administration;(d) jargon-light communications in plain English;(e) availability of education or guidance for all members;(f) specific support for vulnerable members.”Member’s explanatory statement
This amendment seeks to ensure that value for money assessments consider the quality of member services and communications, as well as data and administrative accuracy.
Baroness Altmann (Non-Afl)
My Lords, I will speak to various of my amendments in this group. We have moved on now to value for money. Of course, I fully support the Government’s aim of moving from talking about cost as the only arbiter of whether a scheme is good, and low cost being the measure of good, to looking at a much wider area of benefits for members in terms of value for money.
The particular amendments that I tabled, which I also tabled in Committee, focus on language in particular. I am grateful to the noble Baroness, Lady Bowles, for her support for Amendments 24 and 25. These amendments are trying to outline more clearly what criteria a scheme that is good value for money should be able to fulfil, so that it is much clearer what “value for money” means beyond whether it is low cost, and indeed beyond the aims of just saying whether a scheme has been performing well.
Ultimately, when we are discussing the value of a pension scheme with members, one thing that has in the past not typically factored into the thinking of the industry is the idea that the scheme might encourage members to understand pensions and give them a better idea of what the pension fund does and the benefits it can bring to them. So often in the past, there has been a reliance on member inertia, where they do not have to do anything and the pension is done for them.
The aim of the various requirements I suggest in Amendment 24 is to make the accuracy of contributions important. At the moment, schemes are generally riddled with data errors. I know that the Pensions Regulator has been looking at this recently, but part of the assessment of a good scheme should be whether its administration is capable and competent in managing scheme assets and recording the contributions correctly. I therefore suggest assessment criteria that includes reliability of the valuation data and efficiency of administration. Those are other areas that I hope will form part of the value-for-money judgments, and I hope that a requirement that regulations must include them will be included in the Bill.
I have also included what I call
“jargon-light communications in plain English”.
So often when you get a pension statement, or when anyone talks about pensions, it is in jargon that makes no sense to ordinary human beings. It is pension speak, which everyone in the pensions industry automatically understands, but, unfortunately, when the member gets their information about pensions it is usually something that they ignore, throw away or put in a file for later, rather than looking at what it means.
That leads on to my next point, which is the
“availability of education or guidance for all members”.
Members of the scheme would then have a provider that tries to help them understand what is happening to their pension fund.
Along with that, of course, would be specific “support for vulnerable members”. To some extent, vulnerable members are better taken care of, but I argue that, when we are looking at value for money—I stress that the Government are right to suggest that we need to look at value for money—there are important areas that should be in the regulations. I am trying to highlight them here.
The remainder of the amendments look at the language that will be used to assess value for money, apart from Amendment 32,which I will come back to. The other amendments deal with the Government’s assessment of whether a scheme is good value—which in the Bill is called “fully delivering”, though I am not sure that that is the kind of language that an ordinary person would relate to when thinking a scheme is good value. I am suggesting that rather than “fully delivering”, why not use “good value”? By the same token, when a scheme is judged to be “not delivering”, could we not say that it is “poor value”? That is what the ordinary person would immediately relate to when they look at what a value-for-money assessment says.
I appreciate that the Government and the consultations around this have looked at different red, amber and green ratings—RAG ratings—such as light green, dark green and so on, but I am trying to signal that there are ways in which we could talk about pensions that would resonate much better with the ordinary person. I hope that the Government might consider that.
The pensions industry, of course, loves its jargon and is very wedded to it, but I am not sure that it helps encourage people to want to put more money in pensions, for example—an aim which I believe the Government want. It would be more achievable if pension providers spoke to ordinary people in language that they understand—and their members are ordinary people, such as workers and so on.
Viscount Thurso (LD)
My Lords, I rise briefly to offer support from these Benches, particularly for Amendments 24 and 25 and more broadly across all the amendments that the noble Baroness indicated.
In particular, I was taken by Amendment 24 and the idea that value for money regulations should include, among other things, the
“accuracy of recorded contributions … reliability of valuation data”
and the “efficiency of administration”. As any poor civil servant who is currently trying to get hold of a pension administered by Capita is finding out, these things are not a given. Making sure that the small number of quite large firms in the marketplace actually deliver with the necessary competence is a really important part of whether pensioners get value for money. As I say, I broadly welcome and support the amendment.
Lord Lucas (Con)
My Lords, it is a long time since I was managing big pension funds in the 1980s. In those days, we were in the happy position of considering it a bit underweight if you had less than half your money in British stocks; now, it is 5%. It is extraordinary for politicians to have done that to the economy—and it is because of us that it has dropped. The way we have framed our regulations and organised how pension funds are assessed has, over time, resulted in that extraordinary diminution. This has left us with a stock market that is cash negative and a City that is immensely weaker than it would be. We will address this later, but the solutions to that problem perhaps lie in this part of the Bill.
If we communicate better with pensioners and say to them, “Do you really trust the country you live in, are part of and benefit from so little that you want only 5% of your pension in it?”, I think we would get a positive response to the idea that perhaps that figure should be higher. Through the mechanisms in this part of the Bill, we could ask pension fund managers to respond to that, and I hope that we would be able then to get away from the bits in the Bill about compulsion and direction that are causing difficulty to my noble friends, whose concerns I share. I think we would get a good response if we informed members of pension funds, as my noble friend said, so that they could take good decisions, and then empowered them to say that they want to back their own, with a good chunk of their money going to improve, invest in and support this country and take it forward. This bit of the Bill would be a good place to do that.
I hope the Minister can confirm that, in the governance aspects of this, it will be expected that pension fund managers should vote their shares. It is extraordinary that we have moved to a position where the owners of companies just do not vote—they do not use that power to decide what their opinion is on what companies have been doing; they merely buy and sell. That is a huge diminution in the mechanism by which companies are held to account. We need people to vote and to take an interest. Having a direction on pension funds that they should participate and be a real part of the corporate governance process would be a useful thing to come out of this Bill.
Lord Davies of Brixton (Lab)
I have three points. First, I profoundly disagree with the noble Lord, Lord Lucas. To pin the blame just on politicians lets everyone else off scot-free. It is more like Murder on the Orient Express—everyone had a hand. My particular favourite is the accountants, who had a big hand; the way they defined accounting for pension costs was pernicious. Let us not blame just the politicians.
Secondly, one cannot not be in favour of value for money. Obviously, we are all in favour of people getting value for money from their pension schemes. However, I think the Government underestimate the difficulty of providing something useful. As the noble Baroness, Lady Altmann, pointed out, there are more than two or three factors to be taken into account. It is particularly difficult when one starts including prospective factors—how are these to be judged? It is very difficult, and it is not just the factors. The pension holders’ circumstances vary so widely. How can there be a simple, straightforward way of assessing whether someone has had value for money when their needs are so different from those of other people who are saving for their pension?
Thirdly, I apologise for not being present in the Chamber to support the amendment in the name of the noble Viscount, Lord Thurso, in the previous group. I realise I am cheating here, but I was elsewhere. I had not realised that one of the groups had disappeared; otherwise, I would have been here and supported his amendment.
Baroness Stedman-Scott (Con)
My Lords, I begin by thanking the noble Baroness, Lady Altmann, for her opening remarks, which set the scene effectively on an important part of the Bill. She has done so at the close of what has been a long first day on Report—longer than we would have thought. She has once again brought clarity to a set of issues that are central to the operation of the reforms before us.
The amendments in this group are, in large part, concerned with ensuring that the value-for-money framework works well—both in how it is constructed in legislation and how it is communicated to and understood by those who will ultimately be operating under it. If this framework is to achieve its objective of improving outcomes for savers, it must be both robust in its design and clear in its application.
Amendment 24, in the names of the noble Baronesses, Lady Altmann and Lady Bowles, is both welcome and important. Throughout our discussions today and, indeed, in Committee, we have spoken a great deal about fiduciary duty: the principle that those responsible for managing pension schemes must act in the best interests of their members. Amendment 24 would help ensure that this vital principle is properly reflected within the value-for-money framework. It would require the regulations underpinning the framework to include explicit criteria relating to the quality of service provided to members. It would include matters such as the accuracy of recorded contributions; the reliability of scheme data; the efficiency of administration; the clarity of communication; the provision of guidance and education for members; and the support available to vulnerable members. Thus it recognises that value for money in pensions is a question not simply of investment performance and cost but of how effectively schemes serve the people whose savings they are entrusted to manage.
Amendment 25 has a complementary effect of strengthening transparency. It would require the value-for-money framework to provide separate assessment and reporting for each asset type in which a scheme invests. Rather than relying on a single aggregated measure of performance, schemes would need to report performance by asset class; for example, equities, bonds or infrastructure. This would allow for a clearer and more granular understanding of how investment strategies are performing, and therefore enhance transparency and accountability.
We also welcome the amendments in the name of the noble Baroness, Lady Altmann, which seek to ensure that the language used within the value-for-money framework is both intelligible and meaningful. The framework can succeed only if it is understood by those who are subject to it and by those whose savings it is designed to protect. Replacing more technical or opaque terminology with clearer expressions, such as “good value” and “poor value”, may seem a small change, but it is a practical one that helps ensure that the framework communicates effectively with members and the wider public.
Amendment 32 addresses another important issue: the practical realities facing pension schemes as they adapt to a rapidly changing regulatory landscape. This amendment would ensure that schemes are given time to improve before facing additional regulatory obligations. We have heard considerable concern throughout our debates about the sequencing of reforms in the Bill. Funds are being asked to do a great deal at once and to respond to a system that is evolving significantly under these provisions. Allowing a longer period before additional reporting requirements are triggered therefore seems both sensible and pragmatic. If schemes are to improve performance, they must first be given the time and space to adjust.
Finally, I turn to Amendment 44 in my name and that of my noble friend Lord Younger, which would require the Secretary of State to establish the value-for-money framework within 12 months of the Act being passed. This again speaks to the issue of sequencing: those who operate the system need clarity about the framework within which they are expected to operate. Providing that framework in a timely manner gives funds the greatest possible opportunity to understand its requirements and prepare for implementation. That, in turn, makes compliance more achievable and the reforms themselves more effective.
I thank the Minister for the technical amendments in this group. These drafting corrections help to ensure that the framework is expressed clearly and consistently in legislation, and we welcome that work. Taken together, the amendments before us seek to ensure that the value-for-money framework is clear, transparent and workable. If we are to ask pension schemes to operate within a new regulatory structure, it is only right that we ensure that structure is robust in its design and comprehensible in its operation. These amendments help us to move in that direction.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords who have spoken this evening. I am grateful to the noble Baroness, Lady Altmann, for her support on the principle of the shift to value for money. Before I move on to the detail of her amendments and others, I say to the noble Lord, Lord Lucas, that I am not going to get in between him and my noble friend Lord Davies in fighting it out on who got us here. Of particular relevance to this debate is that we would probably all agree on the need to move from cost to value—and that is only one of the things that has been going wrong. If we have pension funds competing for business with employers on cost rather than value, we are never going to move to the kind of scale that we want to see, which is a consolidated pensions market with large and better-performing pension schemes, improving the opportunity to invest in a wider range of assets and, I hope, taking us in a direction that would make the noble Lord happy.
I start with Amendment 24. I recognise the consistent commitment of the noble Baroness, Lady Altmann, to improving outcomes for members, particularly through better service quality and clear communications for vulnerable members. The Government entirely share these aims. Where we differ is that we think that the Bill already provides the necessary powers to deliver them. Let me explain why.
Service quality is a core part of the VFM framework. The Bill ensures that these metrics remain central to assessments, while allowing detailed definitions to be set in regulations so they can evolve with member expectations and industry practice. Clause 12 makes it clear that trustees may be required to disclose data on service quality. However, defining a comparable quality of service is complicated, as I am sure the noble Baroness will appreciate. We have consulted with industry on appropriate metrics and how these should be measured to ensure that they represent the nuances involved in determining quality, without inadvertently disadvantaging those arrangements—for example, with a less engaged member demographic.
Defining this through regulations provides us with the scope to develop comparable data in this area in an adaptable, consultative and proportionate way, while still acknowledging the technical nuance required here. For these reasons, while fully supportive of its intent, we cannot accept the amendment as the Bill already provides the powers needed to achieve its aims.
I turn to another matter for the noble Baroness, Lady Altmann, I fear. Her Amendment 32 would limit the Government’s ability to specify the consequences for intermediate ratings unless received for at least three consecutive years. I listened carefully to what the noble Baroness said, but the Government cannot support the amendment. Reducing reporting for such schemes risks missing early warning signals that changes are needed to protect savers. We believe that thorough, regular reporting ensures the long-term health and security of pension schemes for all members.
As the noble Baroness said, Clause 16 gives the Secretary of State discretion to set different consequences for different grades of intermediate rating. As proposed in recent consultations, amber-rated arrangements would face consequences, while light-green arrangements would not. A three-year threshold would mean potential problems going unchecked for too long. Instead, we propose giving schemes up to two VFM cycles to make improvements. We believe that is the right approach, and essential to protecting members.
Turning to Amendment 44 from the noble Baroness, Lady Stedman-Scott, while I appreciate the desire for a statutory timetable, we cannot accept this amendment, as a fixed 12-month deadline risks pre-empting the essential consultation and undermining the co-ordinated regulatory process which is already under way. Our published road map aims for the first data disclosures and assessments in 2028, based on 2027 data. Providing clear powers in the Bill, with the technical detail and timelines set out transparently in secondary legislation, remains the most proportionate approach here. A government amendment, to which I will come later, deals further with this. Industry’s responses to the latest VFM consultation will inform draft regulations and guidance.
Moving on to the group of amendments from the noble Baroness, Lady Altmann, on simplifying language in VFM assessments with a view to making them more intuitive for members to understand, this is another area where we completely agree with the aim but disagree with the proposals. Let me explain. “Fully delivering”, as set out in the Bill, is a more objective term, which is aligned with the structure of the framework. The language in the Bill has to allow regulators to make clear, consistent and, crucially, legally robust determinations, and “fully delivering” gives them the scope they need to apply the framework as intended. By contrast, the term “good value” risks weakening regulatory clarity by introducing a term that is broader, more subjective and less tightly aligned with the evidence-based metrics underpinning VFM assessments. Given what will flow from these assessments, clarity is crucial.
The same argument applies to amendments looking to change the terminology of “not delivering” to “poor value”. Crucially, these statutory terms will not be used in public-facing communications. Instead, members and employers will see the simple and intuitive RAGG ratings—red, amber, light green and dark green. Simplicity and accessibility will be appropriately delivered, without sacrificing the robustness required in the legislation. That is why we cannot accept the amendments.
I turn to the amendments tabled by the Government. As drafted, Clause 122, “Commencement”, provides that the value-for-money measures come into force on the day on which the Bill is passed. Our amendments allow the VFM provisions to be commenced via regulations. This provides the Government with greater flexibility to introduce elements of the VFM framework in stages, following detailed design work and informed by consultation. That brings the VFM clauses in line with other parts of the Bill which are commenced by regulations. The FCA and TPR have recently concluded their consultation on the VFM framework, and we are using the valuable insights and feedback from industry to shape final proposals in order to ensure that the regime is fit for purpose across both the trust-based and contract-based sides of the market.
We recognise that introducing the VFM framework is a significant undertaking for industry that requires adjusting to the administrative and data obligations to which it will be subject. I want to be clear that it is and remains the Government’s strong intention that the first VFM data disclosures and assessment reports will be required in 2028. However, this amendment provides us with the option, if necessary, to stagger the introduction of parts of the framework to allow more time for industry and regulators to adjust to its introduction.
In Committee, we debated amendments from the noble Baroness, Lady Altmann, on reporting requirements for intermediate schemes. The consultation paper from the FCA and TPR sets out our proposed approach, which is to require improvement plans for amber-rated but not light-green-rated arrangements, and action plans for red-rated arrangements. Templates will help keep requirements proportionate. Taking the flexibility to smooth the introduction of different elements of the framework, should that emerge as a pragmatic way forward, enables us to continue working closely with industry to fully understand the potential implications of the VFM measures. I hope that this provides the House with reassurance that we recognise the potential burden for industry. This has informed our approach—to reach a balance between ensuring that members receive the value they deserve, and that industry is in a position to comply with these new requirements.
Lastly, I clarify that government Amendments 36, 37, 38, 39 and 26 to Clauses 18 and 12 are of a minor and technical nature and correct consistency mistakes. In light of all that I have said, I hope that noble Lords will feel able not to press their amendments and to support those in my name.
Baroness Altmann (Non-Afl)
My Lords, I thank the Minister for her remarks. I also thank all noble Lords who have spoken in support of my amendments, in particular Amendment 24, which I had hoped the Government might be a little more favourable towards than they seem to have been. I understand that the Minister says that the Government have consulted industry and that has fed into the production of the Bill. I hope that the Government will also consult consumer groups and members because it is they who really need to understand the value-for-money framework. It is those groups that I was addressing with my proposals because from the point of view of industry it looks rather different, perhaps, from how it does from that of the ordinary workers who are having their money put into the pension.
I understand that the Government do not wish to accept Amendment 24 but it will, I hope, still help provide a framework for some further discussions as we develop the value-for-money framework. I beg leave to withdraw the amendment.
Baroness Sherlock
Member’s explanatory statement
This amendment corrects a consistency mistake.