Pension Schemes Bill

Wednesday 22nd April 2026 Commons Chamber

Consideration of Lords message

Clause 40

Certain schemes providing money purchase benefits: scale and asset allocation

14:13

[The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)]

I beg to move,

That this House insists on its disagreement with the Lords in their amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, insists on its amendments 88A and 88C to the words restored to the Bill by that disagreement, does not insist on its amendment 88B to the words so restored to the Bill, but proposes amendments (a) to (j) to the words so restored to the Bill.

[Madam Deputy Speaker (Judith Cummins)]

With this it will be convenient to consider the following Government motions:

That this House disagrees with Lords amendments 37B and 37C but proposes amendments (a) and (b) in lieu.

That this House disagrees with Lords amendment 35B but proposes amendments (a) and (b) in lieu.

That this House insists on its disagreement with Lords amendments 77 and 85 but proposes amendments (a) to (c) in lieu.

[Torsten Bell]

I thank Members and peers for the continued scrutiny of the Bill before us. Our task today is to focus on the limited outstanding areas of disagreement, although that should not detract from the consensus behind this Bill—behind the case for a better pension landscape that sees bigger, better pension schemes focused on delivering stronger returns for savers. On the issues that remain before us, I hope that Members and peers will see that we have listened to the points they have raised and brought forward amendments that directly address what we have heard, while of course holding to the core principles of delivering against the Labour manifesto, which was clear on our policy intent around scale and productive investment.

First, I turn to the reserve power on asset allocation. Last week I set out the Government’s case for such a power at some length, and I will spare the House a full repetition today—[Interruption.] I know, I know, but there is so much more to discuss. We will not have time to discuss the hair of the hon. Member for Wyre Forest (Mark Garnier) if I offer a full statement.

In brief, since hon. Members have asked, there is a well-evidenced collective action problem in the defined-contribution pensions market. Providers want to diversify their asset allocations in their members’ long-term interests and in the interests of better pensions for savers, but they are clear publicly—and even more emphatically in private—that market dynamics, which focus on minimising cost rather than maximising long-term value for savers, are the single biggest barrier to doing so. That is not a theoretical risk; it is exactly why so little progress was made against the Mansion House compact under the last Government. The reserve power exists for the sole purpose of solving this problem.

Last week, we brought forward changes to make that absolutely explicit by writing the industry-set Mansion House accord targets into primary legislation through the 10% and 5% caps, and requiring any regulations to operate neutrally across asset classes. These were designed to make it clear in the Bill that the power can be used only in line with what the industry itself has committed to. The cap prohibits any move beyond the accord targets and the neutrality requirement rules out the possibility that any Government could direct investments into a particular asset or asset class.

As is plain, however, we have not yet reached agreement across the two Houses. Rather than simply restating our position today, the Government are bringing forward a further package of changes.

First, we are bringing forward the current sunset date for the reserve power from 2035 to 2032. The Mansion House accord commits the industry to reaching its targets by 2030, and bringing forward the sunset clause aligns the power more closely with that timeline. If the power has not been exercised by the end of 2032, it falls away entirely. Secondly, because the power has only one purpose, we are providing that it may be exercised only once.

Thirdly—I want the House to understand the significance of this—we are providing for not just the power but any effects of it to fully fall away at the end of 2035. That goes beyond the sunset clause I have just described and means that even if the power has been used, the entire framework and any requirements on schemes will fall away at the end of 2035. This timeline reflects the fact that once the cultural shift has occurred and the impacts of the Mansion House accord are embedded, the collective action problem falls away. At that point, other elements of the Bill—greater scale and the impacts of the value for money framework—will help to sustain the change.

I want to return to a point made by the hon. Member for Faversham and Mid Kent (Helen Whately) in our previous debate. She observed correctly that the Bill referred to assets held in default funds as a whole, whereas the Mansion House accord applies only to main default funds. As the policy is intended to reflect the accord, the legislation would ideally use the same language, so we have tabled amendments to ensure that that is the case throughout the relevant provisions and have retabled the percentage cap with the same wording. I am grateful to the hon. Lady for pressing that point last week.

Let me be clear that the House today is being asked to consider a reserve power that is highly constrained and narrowly focused on solving a very specific problem. It is capped at the accord targets and provides for absolute neutrality among private asset classes. The Government cannot direct investments. The power explicitly applies only to main default funds, more explicitly matching the language used in the accord. The power’s timeline also matches tightly that of the accord. It can be used only once and lapses entirely in 2035 if not used; even if used, which is unlikely, the entire regime is repealed at the end of 2035. On top of all that, it remains subject to the savers’ interest test, the affirmative procedure and the statutory reporting requirements, both before and after any regulations are made.

[Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)]

I congratulate my hon. Friend on stewarding the Bill with such expertise, and I very much hope that the cultural change that he is hoping for sticks and that we do not just get an unwinding of the repatriation of UK investment. A necessary corollary of what he is proposing is a fiduciary duty and a fiduciary code that give pension fund trustees real clarity in investing in a wide range of investments that are good for the long-term health of the savings they are stewarding. It was unfortunate that the other place rejected the Government’s amendment that would have allowed a new statutory code to be implemented. Will the Minister confirm that the technical working group that he has set up to revise that code will proceed, and will he commit to bringing forward further amendments to future legislation to give effect to the ambition that he set out in response to my new clause 17?

[Torsten Bell]

I share my right hon. Friend’s frustration about developments in the Lords on those matters, not least because some of those who voted against amendments that would have introduced statutory guidance, as he says, have spent years calling for exactly that—but that is a matter for them. The Government will proceed on work to draft that guidance. The technical working group is well under way and is doing good work to provide clarity to the industry. We will come forward with proposals to put the guidance on a statutory footing in the months and years ahead.

As I was saying, the timeline tightly matches that of the accord. I hope that everybody can see that the framework is a long way from the characterisation of this power that we have occasionally heard. I understand that some Members of this House and the other place would prefer it if the power did not exist at all. I respect that view, but I do not share it. The evidence for the collective action problem is clear—we have lived it—and I have listened but heard no alternative proposal to address it. The consequences of not addressing it fall on pension savers—the people who rely on their defined-contribution savings for a comfortable retirement. That is not a risk that the Government are prepared to take.

The elected House has now considered this question twice. On both occasions, it has overwhelmingly endorsed the case for the reserve power to deliver our manifesto commitments in this area. The Government have listened to the concerns raised in the other place, and have responded not with warm words but with real concessions, through changes to primary legislation that directly address the arguments made. I hope that MPs and peers will now accept that the Government have moved significantly and provided the assurance they have been seeking.

Lords amendment 35B would require the Secretary of State, when making regulations across the scale measures and those for default arrangements, to have regard to

“the benefits of competition among providers of pension schemes”.

The Government of course support the importance of competition as the market moves towards scale, and have done so in the Bill’s provisions. The market is already highly competitive, and the new entrant pathway is designed to ensure that it remains so. The same goal is reflected in a scheme’s ability to open new default arrangements.

However, we have heard the arguments that have been made during debates, and I recognise the desire in the other place to see that commitment in the Bill. This is why I have tabled amendment (b) in lieu of Lords amendment 35B. It sets out that the Secretary of State, in setting regulations in respect of both the scale measures and those relating to default arrangements, must have regard to the importance of competition and innovation. The amendment in lieu delivers on the proposals from the other place, but with an appropriately holistic approach to the issues to which a Secretary of State will need to have regard in the years ahead. That reflects that our ultimate focus is, of course, on delivering the best outcomes for members, of which competition in the market is one important driver. Under the Government’s amendment, regulations must have regard not just to scale, but to competition and innovation, alongside effective governance. The explanatory notes will make that clear.

On Lords amendment 37B, the case for scale has been made, and both Houses have broadly agreed with the benefits that it brings. Indeed, all main parties are on the record as recognising the key role of scale in delivering better outcomes for savers. We all made those arguments, recognising that moves towards scale would always mean some schemes exiting the market because we collectively prioritise the need to deliver for those who work hard to save for retirement, and we must ensure that they are saving into schemes that can deliver better outcomes.

Scale drives lower costs, better governance, investment expertise and a balance sheet that can provide a more diverse portfolio for savers, improving overall outcomes for them in the longer term. That focus on scale was explicitly laid out in our manifesto, and the evidence for the approach we are taking was detailed in the pensions investment review. The Lords amendment pays too little regard to that evidence and that manifesto. It would also be unworkable in practice, as it would enmesh regulators in years of legal proceedings while leaving providers and savers in limbo.

However, I have listened to the argument made in this House and the other place that the innovation some smaller schemes offer members should not be dismissed. I absolutely agree, which is a key reason our approach to ensuring that scale is achieved has been so pragmatic.

[Chris Vince (Harlow) (Lab/Co-op)]

I do not claim to be a huge expert on pensions, which may be why, rather than focusing on the point last week, I made comments about the hair of the shadow Minister, the hon. Member for Wyre Forest (Mark Garnier). I will not do so again—but it is fantastic hair.

Pensioners in my constituency are passionate about ensuring that they get the best return on their savings—that is hugely important—and that their pensions are secure, as the Paymaster General said in his statement. What reassurance can the Minister give them that the provisions he has set out today and last week will give them the best returns and security?

[Torsten Bell]

As always, my hon. Friend asks an important question. As I have said, the entire focus of the Bill is on ensuring that we drive up returns for savers. I am sure that he has already read all 200-odd pages of the extensive impact assessment, which sets out clearly that we would expect an average earner who saves over their lifetime, in line with auto-enrolment levels, to see higher returns of around £29,000 to their pension pot when they head towards retirement. That is not an inconsequential amount when we want to ensure that future generations can trust the system to deliver them a comfortable retirement in the years ahead.

As I was saying, the Lords amendments in this area are unworkable, but we must recognise the importance of innovation. That is why we have taken our pragmatic approach. The evidence suggests that the benefits of scale are achieved once a threshold ranging from £25 billion to £50 billion of assets is reached. The scale requirements in the Bill not only target the bottom end of that range—£25 billion—but provide a long timeline for schemes to reach it, especially given that this is a fast-growing market. Smaller schemes require only £10 billion of assets in 2030 to qualify for the transition pathway.

To provide further reassurance, I have tabled amendment (a) in lieu of Lords amendment 37B to require the Secretary of State to publish a report about the effects of pension schemes consolidation and the extent to which innovative product designs are adopted or maintained following consolidation activity, as well as any barriers that may exist to preserving those features. The timing of the report, which is required to be published within 12 months, will ensure that the Government are then able to take necessary action in advance of the scale measures being commenced in 2030.

On Lords amendments 77 and 85, the Government agree with the points made during the Bill’s passage regarding the importance of transparency around, and clear accounting for, public service pensions. I discussed those issues yesterday with Baroness Neville-Rolfe, who tabled the amendments. I completely agree with her that it is crucial that the future cost of payments from unfunded pension schemes is understood and taken into account in Government decision making. That applies to the Treasury in aggregate, as well as to individual organisations making decisions about the nature and level of staffing. We will continue to ensure that accounting and budgetary processes support this.

The Government invite the House to accept our amendment (a) in lieu, which recognises the important principle that Parliament, policymakers and the public should be able to see clearly the long-term cost of unfunded public service pension schemes. The amendment requires the Government Actuary to produce within 12 months a document setting out its analysis of the long-term impacts of public sector pensions, covering both expenditure on benefits and income from member contributions. The document must be provided to the Treasury and the Office for Budget Responsibility, and the former is required to make it available to Parliament. That approach is focused on the evidence base, using the Government Actuary to produce impartial numbers to aid understanding and debates on this issue.

I hope that Members will have heard our serious engagement with the issues raised by peers and by Opposition parties in this House. We are committed to delivering the policy intent in the Bill, given its crucial role in driving better outcomes for savers and the important place given to these pension reforms in our 2024 manifesto. We have tabled significant amendments to address the specific issues raised, aiming to further reinforce the consensus on the Bill that has been evident since its Second Reading in this House. On that basis, I hope that Members will be happy to support our amendments.

[Madam Deputy Speaker (Judith Cummins)]

I call the shadow Secretary of State.

[Helen Whately (Faversham and Mid Kent) (Con)]

What a difference a week makes. When the hon. Gentleman rose to conclude our debate last Wednesday, he delivered from the Dispatch Box what I can only describe as a tirade. Serious and considered concerns—not just from me and my hon. Friends, but from noble Lords and many respected people across the industry—were met with accusations. We were told that those concerns were “nonsense on stilts”. He said that I had been “infected” by my party. If by that he meant that I have strong opinions—that I believe in a smaller state because Governments do not have all the answers and often need to get out of the way—then I must break the news to him that I have held those views for many years. I came to Parliament after a career in business. I knew my views then, and I still know them now.

Last week I thought that the Minister could and should do better, and I am glad that since then he has. His tone has shifted, and I am grateful for the discussions he has had with me and my team. His engagement has been constructive, and we have indeed made progress.

Turning to the amendments tabled since our last debate, I first welcome the Government’s commitment on the local government pension scheme. A faster and wider review of the triennial valuation by the Government Actuary’s Department is sensible and significant. If the review is to be meaningful, it must focus on what actually drives employer contribution rates, and we welcome that the Government have now recognised that.

Secondly, the Government have committed, in their amendment in lieu of Baroness Neville-Rolfe’s amendment 77, to examine the costs and sustainability of public sector pensions. That too is welcome. That review should consider questions of intergenerational fairness, long-term sustainability and how best to protect the benefits already promised to people, particularly at a time when demands on the state are rising and taxpayers are being asked to contribute more than ever.

14:30

Now to the question of scale, the Bill assumes that if schemes offer a strong proposition and good member outcomes, there is nothing to stop them growing. We disagree; it is not that simple. For instance, it is exceptionally difficult to win new business in today’s market without already being an incumbent or large insurer. Market structure, capital requirements and regulatory constraints all act as significant barriers to growth.

While pursuing the objective of scale, the Government must avoid entrenching advantage at the expense of performance. That would not serve the interests of members. It is on that basis that we tabled our amendments in the other place. The intention behind the amendments—indeed, the intention of the other place—was to preserve the Government’s policy objective and connect it to the underlying aim, which is not scale in its own right but improving outcomes for members. Scale is a means to that end, but it is not the only means.

Size alone does not equal success. Take football clubs as an example: a larger club may have greater resources, a bigger stadium, more expensive players and larger crowds, but none of that guarantees results on the pitch. I am told that one need look no further than Tottenham Hotspur to see that. We welcome the Government’s amendment to ensure that when regulations are developed, member outcomes will be placed front and centre, and returns, not just scale, will count. What the Government have brought forward today is not perfect, but it is a significant step in the right direction.

The review amendment is also welcome. It introduces a post-legislative reporting requirement on scale, which will allow this House to hold the Government to account for the real-world impact of these reforms.

Unfortunately, that is where our agreement ends, and I suspect the Minister knows that, so let us turn directly to the elephant in the room: mandation. The Minister has advanced a number of arguments in its defence, and I will address them in turn. First, he said that this is a natural extension of the Mansion House agreement. It is not. A voluntary agreement between willing participants is one thing; a legal requirement imposed across an entire sector is another.

Secondly, the Minister has said that this is merely a reserve power—and one that the Government have no intention of using. But a reserve power does not sit harmlessly on the shelf. It shapes behaviour, and I think, in truth, the Minister accepts that. He has said as much to me before—that the power will achieve its ends without even needing to be turned on, so to speak, because the moment that a voluntary agreement is backed by the threat of law, it ceases to be voluntary in any meaningful sense.

That leads us to the Minister’s central claim that mandation is necessary to solve a collective action problem—that while the sector recognises the case for higher return investments, no individual scheme is willing to move first. Now, that is a serious argument, but mandation is the wrong conclusion. He says that industry agrees with him on mandation, but that is not the case. The industry agrees with the diagnosis—the problem I have just set out—not his solution. A collective action problem is not in itself a justification for state compulsion. It is a signal that incentives are misaligned, and when incentives are misaligned, the answer is not to override the system but to fix it, to make it rational to be the first mover or an early adopter.

The truth is that parts of the solution to this problem are in the Bill. The pensions dashboard will give savers visibility and, with it, agency. The value for money framework will help employers choose schemes that they can justify to their employees on the basis of returns, not just fees. Those are ways to tackle the problem through informed choice, competitive pressure and a market that works, not through direction from the centre by the dead hand of the state.

Today we have also heard the Minister reach for one last defence—and strangely late in the day. He claimed that mandation was in the Labour party manifesto. It was not. There is no mention of mandation, no reference to a reserve power, no suggestion of asset-allocation powers of this kind. The Labour manifesto did talk about adopting reforms to workplace pensions to deliver better outcomes, but let us be clear: mandation does not do that. It undermines fiduciary duty, puts trustees in an impossible position—forced to choose between their legal duty to members and direction from Ministers—and could lead to lower returns.

The Minister may be planning to say in his wrap-up that the Government already intervene and that there are all manner of regulations shaping trustee behaviour, and of course there are, but there is a fundamental difference: regulation protects the process; mandation dictates the outcomes. That is the line that this Bill crosses. This cannot be justified, still less legitimised, by a manifesto commitment that was, in fact, never made.

I do appreciate the Minister’s attempt to offer an olive branch on mandation—several olive branches, in fact. Last week an amendment was tabled to constrain his originally unlimited and undefined mandation power that would have meant he could direct up to 100% of default pension fund savings to be invested in assets of his choice. It was extraordinary. He recognised that and amended the power to limit it to up to 10% requirement for investment in private markets and up to 5% in the UK. He also took some steps to limit the Government’s ability to cherry-pick specific sectors or geographies.

This week we have seen a flurry of concessions. There have been revisions to the sunset clause. First, the date when the mandation power lapses, if it has not been used, is being brought forward from 2035 to 2032. Secondly, the entire regime will be repealed at the end of 2035. So, as drafted, the mandation threat will not hang over the sector indefinitely, but the fact is that once this power is on the statute book, amending it—for instance, to extend those dates—is a whole lot easier than if the Government had never even crossed this Rubicon.

The Minister has also introduced an amendment to limit the Government to only exercising the mandation power once, giving them just one opportunity to set the asset-allocation requirement. I recognise that that gives more certainty to industry, as there is less risk of moving goal posts. He has also updated from last week the amendment to constrain the scope of mandation to main default funds, rather than all defaults. That was a problem that I set out last Wednesday. I believe it was inadvertent, and as he acknowledged in his remarks earlier, he has amended it, so I appreciate that.

Like last week’s amendments, the amendments before us today make the mandation power in the Bill less bad. They constrain it in terms of timing and scope, but they do not solve the problem, because the problem is not the percentage, the threshold or the duration of the power but the principle. If something is wrong in principle, it does not become right in smaller doses.

Mandation will not guarantee better returns, contrary to what the Minister continues to claim. It may force trustees to take decisions that are not in savers’ best interests—decisions driven not by judgment or duty but by direction. When fiduciary judgment is replaced with political instruction in this way, it does not strengthen outcomes but puts them at risk.

The Minister and I agree that we want to see more investment by pension funds in the UK, and we want to see better returns for savers. The industry backs that aim too; that is why it did the Mansion House Accord. But to be clear, when he says that he has industry backing for this, there is a distinction to be made between the industry saying that it agrees that there is a problem and is willing to work to solve it and the solution that the Minister is seeking to impose. He put the fear into the industry that this Bill may fall and made all manner of threats to pressure it to come into line. But I say to him this: I will not be cowed by him, and I have been told to my face that the pensions industry does not back mandation.

I say to the Minister yet again that pension pots belong to the people who have worked, earned and saved. It is their money, not the Government’s. Ministers in Whitehall should not have the power to dictate what people’s pension savings are invested in. As Ronald Reagan once put it, the nine most terrifying words in the English language are:

“I’m from the Government, and I’m here to help.”

This is an extraordinary hill for the Minister to choose to die on. Mandation was never put to voters, it never had the backing of industry, and it should not be forced through Parliament now. I urge the Minister to think again.

[Madam Deputy Speaker (Judith Cummins)]

I will now announce the result of today’s deferred Division on the draft Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026. The Ayes were 380 and the Noes were seven, so the Ayes have it.

[The Division list is published at the end of today’s debates.]

[Liam Byrne]

I rise to say a couple of things in support of the Minister, who not only has done a heroic job in laying out the intellectual architecture for the legislation before he got to the House, but is so expertly steering it through the House. I wish him all the very best this afternoon in finishing the job.

I want to make three points. First, the measures that the Minister has set out are essential if we are to pursue the long-term interests of pension savers in this country. It is in their fundamental interests that they live and retire in an economy that is growing faster in the years to come. The only way in which we can collectively achieve that is by raising the investment rate in this country. For a long time, our investment rate was the lowest in the G7; it is improving and is now the second-lowest in the G7. It is for exactly that purpose that hon. Members on both sides of the House made the argument that we need to repatriate investment saving.

The fact is, we have got to resolve the paradox that, on the one hand, we have £3 trillion-worth of pension savings and, on the other hand, while we have some of the world’s best life science, best universities and best entrepreneurs, we do not have the investment institutions and systems that connect long-term savings to that brilliant tradition of entrepreneurial genius. Unless we fix that long-standing paradox, this country will not grow faster. That is not a Labour analysis; it is an analysis that was first advanced by the former Conservative Chancellor, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt).

If we manage to get that right, the investment rate in the country will go up and the economy will grow faster in the years to come. Therefore, there is not a cost to the savings of Britain’s pension savers—it will actually be to their advantage.

[Helen Whately]

As I think the right hon. Gentleman will have heard in my speech, there is widespread agreement that we want to see more investment by pension funds in the UK; the debate is about whether mandation is the way to achieve that. Actually the Minister’s main argument for the mandation powers is not about investment in the UK; it is about solving a collective action first-mover problem in trying to improve returns and the risk that that will put up costs to pension funds and for savers. That is what he’s really arguing, rather than the point made by the right hon. Gentleman about investment in the UK.

[Liam Byrne]

I am grateful for that intervention, because the hon. Lady made my second point for me. It is just not good enough to will the ends and not the means. The reality is that, after all the heroic work of the former Conservative Chancellor, built on ably by the current Chancellor of the Exchequer to advance the Mansion House accord and the Sterling 20, the repatriation of long-term savings into our country is going at a snail’s pace. If we want to deliver it by a timetable on which we are both agreed, we will need to give a little bit of encouragement to the industry. That is exactly what the Minister’s proposed provision would do.

[Mark Garnier (Wyre Forest) (Con)]

The right hon. Member raises many really important points, much of which we agree with. That is why, I think on Report, the Opposition tabled an amendment to try to understand what the problem was. It specifically asked, “Why are these pension funds not investing in the UK? Is it legislative, is it regulatory or is it cultural?” The Government voted against that. They voted against exactly the work we need to do to understand what the problem is. Could he possibly explain why?

[Liam Byrne]

I can advance only my own analysis of what will be needed. Indeed, it is part of a wider Business and Trade Committee inquiry, which will produce a report in a couple of weeks, on how we transform the investment environment. The reality is that there is a shared ambition on both sides of the House to ensure that we fix this long-standing paradox. My judgment is that the measures the Minister is proposing are essential if we are to deliver on that by the early 2030s. It is just not good enough to try to persuade Britain’s pension funds through sheer mind powers alone to repatriate the investment they are proposing. By taking the Minister’s approach, we stand a better chance.

14:45

My last point, as I mentioned in my intervention, is that I was heartened to hear the Minister’s commitment at the Dispatch Box that we will proceed with reform of that clarification of fiduciary duties. Too many pension fund trustees today lack the legal certainty that they can make strategic, long-term investments that are in the best interests of their pension savers and will create a higher return on investment in this country by investing in things such as net zero infrastructure and other virtuous investments that are good for the long-term growth of the economy. It is disappointing that Lib Dem peers and others voted against the provision in the other place and prevented the Government from bringing in the necessary amendments. However, I am reassured by the Minister’s commitment that he will seek a further legislative opportunity at the earliest point in the next Session. With that, I add my support to the Minister’s ambitions.

[Madam Deputy Speaker]

I call the Liberal Democrat spokesperson.

[Steve Darling (Torbay) (LD)]

The Liberal Democrats broadly support the proposals before us in the Bill as a whole. I know from conversations with residents in Torbay that there are some challenges within the pensions market, and the Bill as a whole addresses an awful lot of them. However, I suggest that the Minister has been studying his Greek history, assumed the position of Odysseus and developed a Trojan horse, which he has sneaked into the Bill. The Trojan horse is, of course, mandation.

While the Minister may have cut off a couple of the Trojan horse’s legs, it remains a Trojan horse before us. Clearly, as Liberal Democrats, we welcome that as a step in the right direction, but the Government should be shaping the market appropriately through policy so that there is a pipeline of opportunities for investments—that goes across to the Mansion House accord—so that the market has those opportunities and can invest in them appropriately.

There is an element that we need to touch on. Since 2008, there has been risk aversion in the market, which stifles profits; we need to be alive to that. Risk is a good thing when investing, but investments should be sensible and with appropriate spreads. The Bill does elements of that, but I fear that some of the monitoring could stifle risk and therefore stifle returns.

The Liberal Democrats are keen to ensure opportunities. The Government should be ensuring that there are baskets of opportunities to invest in things that matter to our communities, whether regenerating our town centres or social rented housing. We know that people such as Legal & General lead the market in those investments; we need to think about how we can enhance those opportunities. We must also ensure that we are investing in net zero, which is close to the heart of several parties. Again, the Government should be shaping the market in that way rather than dictating. While the Minister alludes to this as a one-shot opportunity, other colleagues are fearful that mandation is the thin end of the wedge.

Finally, I would like to reflect on the changes that the Minister has proposed. We welcome the changes allowing greater innovation and greater development of the market, which are significant steps in the right direction. However, as Liberal Democrats we are not prepared to see the dead hand of Government directing here. We continue to oppose mandation in whatever form it may take.

[Torsten Bell]

I thank the Members from across the House who have contributed to the debate today. Let me respond directly to a few of their comments. I welcome much of the shadow Secretary of State’s remarks. I am glad that she welcomed many of the Government’s amendments, including those on public sector pensions and around innovation and competition—I appreciate that. I hope, when those issues are debated in the Lords in the near future, that there will be similar consensus across that House.

The shadow Secretary of State raised the question of scale. Again, I am glad that she has welcomed the review that will happen within 12 months of the Bill’s commencement. On scale, I am a bit more confident than she is on the role of small schemes to grow, because we can see significant growth right across the market, including among small schemes, partly because the market itself is growing so fast in the current climate. However, I offer no comment on her pessimism about Tottenham Hotspur; that is for others to speak on.

To be fair, as the shadow Secretary of State set out, the main area of disagreement that remains is around the reserve power. She raised the question of the accord and whether it applied to the whole industry. She is correct; it does not apply to the whole industry, but it does cover 90% of defined contribution assets held within the industry. We are therefore talking about not just a majority but the overwhelming majority of the industry.

The hon. Lady mentioned the Labour manifesto, which set out two focuses on pensions. One was around the question of scale, on which we have just touched and which I think is a matter of cross-party consensus; the second, which, again, I think is a matter of cross-party consensus, is on the importance of delivering change in terms of investment in productive assets in private assets. That is exactly the focus of both the Mansion House accord and the reserve power.

The hon. Lady said the power was about directing specific outcomes. As I have been setting out, it absolutely does not do that. It will not allow any direction of savers into particular assets or particular asset classes, and it offers no ability for Government to take control of pension savers’ pensions. Indeed, I think it is actually dangerous to have members of the public hearing remarks like that when that is categorically not the case.

The shadow Secretary of State is right to say, though, and this maybe gets to the crux of where we are, that the money belongs to savers. That is what this is about and that is what we all agree about; we want to see higher returns to savers. The industry is telling us that diversifying their range of assets is in their savers’ interest and it is admitting that it has not done so to date. [Interruption.] No, that is what the industry is saying. Savers are not saying that, because savers do not have that choice and they are intermediated by providers, some of which have trustees and some of which do not. That is the underlying point: they need to see that change happen, that it has not happened and that we have seen it not happen. Implicitly, what that is saying is that members are losing out from the status quo, and what I am not hearing from the Conservatives is a serious engagement with that reality that has let down savers. [Interruption.] I will come to the point about the previous amendment tabled by the hon. Member for Wyre Forest (Mark Garnier) shortly.

I now come to my right hon. Friend the Member for Birmingham Hodge Hill and Solihull North (Liam Byrne), not least because he admirably set out the big challenge facing Britain, which is to turn this country back into a country that invests in its own future once again. That means higher investment. It is not acceptable that Britain saw both the second-lowest public investment in the G7 and by far the lowest business investment in the G7 under the last Government—and not for some years but for almost every single year. That is the challenge that I think we all want to see addressed. Part of the issue being raised about whether this is about UK assets or private finance is overdone, because what we see around the world is a higher home bias among private asset investments than among public asset investments, for all the obvious reasons about the comparative advantage of different investors in those situations.

My right hon. Friend also rightly says—I think this is, again, part of a cross-party consensus—that moving to that high-investment world is overwhelmingly not about pensions, but much wider changes and about making sure that actual investment happens so firms can actually get things built. That is why this Government have come in and provided the go-ahead for solar farms, wind farms, national grid investments and nuclear power stations that have been held up for too long. That is what a higher-investment country looks like and that is what we need to be getting on with, and I have a nugget of good news to bring my right hon. Friend on that. If hon. Members go and look at the investment levels in the national accounts—I know everybody in this room spends their time doing that—they will see that, since the election, Britain has seen the fastest investment growth of any country in the G7. That is what we are starting to deliver against what we set out as our core objective, which is turning Britain back into a higher-investment country.

The hon. Member for Wyre Forest mentioned his previous amendment, which asked for the reasons why schemes say the change would be in savers’ interest but have not done it. The problem is that we have had a lot of reviews. The Association of British Insurers has written some and published them, explaining why the previous Government’s attempt with the Mansion House compact did not work. We have the answer; I am afraid the hon. Gentleman just does not want to engage with what he is being told.

[Mark Garnier]

Both sides of this House are going with the grain of what is intended on this. There is a fundamental problem—we all agree on that—but let us get the issues out of the way that are blocking it. We cannot force people into a minefield if the mines are still there; we have to clear the mines and allow them do it. This is the most fundamental point. The Government should not be telling pension fund managers how and where to invest their money. If there is a problem that they are going to encounter, we should get those problems out of the way and managers will go into those assets.

[Torsten Bell]

I am afraid the hon. Member has just revealed his lack of focus on what is going on. Pension schemes from around the world are investing in British private assets; it is UK pension schemes that are not. The hon. Member implied that there were minefields when investing in Britain. It is that kind of talking down Britain that is the problem. We are making sure that there is a robust pipeline of investments, which is absolutely right.

[Alison Griffiths (Bognor Regis and Littlehampton) (Con)]

I think all of us on the Opposition Benches would be keen to understand why, if the Minister is so confident that pension funds will invest, he does not make it a choice rather than a mandate.

[Torsten Bell]

I fear the hon. Lady has not sat through enough of these sessions. Earlier, those on her own Front Bench engaged exactly with some of the arguments that I have made, explaining exactly the points she has raised. I will just say that she should go and have a look at what Australian pension schemes are doing investing in UK infrastructure and go and look at what is happening when US investors are investing in UK venture capital. Why is that happening? It is not because of differential tax breaks—there are very strong tax incentives. No, it is because of a history of not having the collective action problem that we have set out, and the fact that those on the Conservative Front Bench do not wish to engage with that is holding us back.

[Helen Whately]

On the ABI report that he referred to—he has referred to it before—yes, the ABI has agreed with the diagnosis of the problem, as I set out, as a collective action problem. However, it does not agree with mandation as the remedy. The Minister needs to be clear about that.

[Torsten Bell]

The truth is that there is a range of opinion among ABI members about that. However, there is agreement across the industry about the need to deliver change.

I turn to some of the comments made by the hon. Member for Torbay (Steve Darling) who, again, kindly did not refer to the Lib Dem manifesto, which called not just for reserve power, but for the direction of pension scheme assets into certain asset classes. I gently say that it is a shame to not see him engage with the substance, rather than taking the easy option of offering high-level, throwaway comments about a thing that he had in his own manifesto. On the plus side, however, he is right to say that the investment pipeline is important. The issue there is that that is different in different sectors. Within the infrastructure sector, it is obviously about having a country that is delivering actual infrastructure. Within venture capital, it is about making sure that there is easier intermediation for pension schemes into a market of which they have less experience. We are doing exactly that and that is what the Sterling 20 process is doing. I see very good engagement between pension schemes right across the board on that and every chief executive I speak to is engaging with exactly those questions that the hon. Member for Torbay raises.

The Bill has received detailed scrutiny over the past year, and it is a better Bill for it. We have brought forward amendments that, subject to delivering the core pension reform programme of the elected Government, respond to the detailed points raised by peers in the other place. With those improvements, this is a Bill that industry worker representatives and charities wish to see passed into law. The TUC said:

“It’s vital the Bill is passed so workers can start to benefit.”

Age UK has said the measures in the Bill will help both the pensioners of today and the pensioners of tomorrow. It is important that these can be implemented as soon as possible. Aviva welcomed today’s amendments and said:

“We hope this is enough to build the consensus needed for the Bill to be passed”.

The ABI has said that it and its members are

“clear that we want the Bill to pass”.

They are right, and I commend the Government’s position to the House.

Question put.

15:00

Division 502

Question accordingly agreed to.

Ayes: 272

Noes: 149

Resolved,

That the House insists on its disagreement with Lords amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, insists on its amendments 88A and 88C to the words restored to the Bill, does not insist on its amendment 88B to the words restored to the Bill, but proposes Government amendments (a) to (j) to the words so restored to the Bill.

More than one hour having elapsed since the commencement of proceedings on the Lords message, the proceedings were interrupted (Programme Order, 15 April).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83G).

Resolved,

That this House disagrees with Lords amendments 37B and 37C but proposes amendments (a) and (b) in lieu.—(Torsten Bell.)

After Clause 57

Sections 40, 42 and 44: regulations and competition among providers of pension schemes

Resolved,

That this House disagrees with Lords amendment 35B but proposes amendments (a) and (b) in lieu.—(Torsten Bell.)

Clause 122

Commencement

Resolved,

That this House insists on its disagreement with Lords amendments 77 and 85 but proposes amendments (a) to (c) in lieu.—(Torsten Bell.)

[Helen Whately]

On a point of order, Madam Deputy Speaker. The last Division we voted on was on a motion proposed by the Government that grouped a series of amendments with which we agreed, alongside amendments on mandation, with which we had strong disagreements. What steps can be taken to bring about a separate Division on the mandation clauses, with which we disagree?

[Madam Deputy Speaker (Judith Cummins)]

I thank the hon. Member for her point of order. The content of the motions is a matter for the Government. I can reassure her that they would not have appeared on the Order Paper unless they were in order. Those on the Government Front Bench have heard what she has said. If she would like any further advice on procedure, I recommend that she contact the Public Bill Office.

[Matt Western (Warwick and Leamington) (Lab)]

On a point of order, Madam Deputy Speaker. I thank you for granting my point of order and apologise for not giving you due notice of it. Given the events of recent days and some of the debates that have been called, when can we get an update from the Intelligence and Security Committee on the work it is undertaking and on its findings regarding the Mandelson papers?

[Madam Deputy Speaker]

I thank the hon. Member for his point of order. That is not a matter for the Chair; it is a matter for the Committee.