Lords Chamber

Thursday 19th March 2026

(began 1 day, 21 hours ago)

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None Portrait Oral questions: Discharging patients is from hospital:consulting unpaid carers Baroness Pitkeathley (Labour)
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First First Oral First Oral Question First Oral Question Baroness Pitkeathley.
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None Portrait Oral questions: Technological assistance for flood detection and prevention The Lord Bishop of Sheffield (Bishops)
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Second Oral Question the Lord
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Lord Katz Portrait Lord Katz (Labour)
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Well, I thank the right reverend Prelate for bringing the actions of Rotherham Council to to our attention. It's absolutely right that the whole of South Yorkshire is subject to some. Some has been subject to some severe flooding, flood floodings and it's. And. And as he said, in places like Rotherham, sometimes basic simple solutions are are the best. I would say that to to address is wider point. We're working closely with local government to ensure lessons from recent flooding and innovations we are seeing across the country can be adapted at scale.

This is the purpose of the government's Flood Resilience Taskforce. It's to improve coordination across the whole system and translate local experience into national practice. Recently, the task force met in Manchester and consider how case studies from local partners in areas like Greater Manchester and also devolved governments such as Northern Ireland. In the case of the meeting the other day on innovation in forecasting, community resilience and emergency response can be replicated more widely. Local partners also directly engaged through regional flood and coastal committees through local resilience forums, which ensures that local knowledge such as in Rotherham and right reverend Prelate quoted such as innovation to reduce flood risk through natural flood management and sustainable drainage systems, informs national decisions on how best to roll out new technologies and share best practice across regions.
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None Portrait Oral questions: Resilience of rail infrastructure against future storms and floods Lord Berkeley (Labour)
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Is it.
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Earl of Kinnoull Portrait The Earl of Kinnoull (Crossbench)
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My Lords, the Network Rail, of course, being a state entity, it doesn't buy third party insurance anywhere. But the insurance industry does have an amazing amount of modellers and information about the natural perils in the United Kingdom, and particularly the sweet water peril and the saltwater peril that we're discussing here. And I wonder whether the noble Lord, the Minister, could tell us whether the insurance industry is being tapped for its expertise in trying to

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manage and predict these perils. The noble Lord asked a very

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The noble Lord asked a very pertinent question, and I will write to him. I believe that that's true, but I can't say for certain. What I can say is that following the Carmont disaster, where people the Carmont disaster, where people were killed as a result of an earthworks failure, the noble Lord earthworks failure, the noble Lord mayor wrote a very powerful report about earthworks maintenance for Network Rail. Dame Julia Slingo did similarly with the weather. In my tenure at Network Rail, network rail started by buying the cheapest weather forecast it could, and Julia has pointed out that actually.

You can now forecast the weather in two kilometre squares throughout throughout the country. And that's what they now do. And that helps prevention. But I will take what the noble Lord says very seriously, and indeed, I will write to him to make sure that the knowledge in the insurance industry is used.
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None Portrait Oral questions: Refugee movements following Israeli military action against Hezbollah in Lebanon The Lord Bishop of Chelmsford (Bishops)
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Fourth Oral Question, the Lord Bishop of Chelmsford. question. Standing in my name on the Order Paper. the Order Paper.
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None Portrait Business of the House
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My Lords, with the leave of the House, I beg to move the motion Paper.

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En bloc question is that the two motions in the name of Baroness Blake of Leeds be agreed to En bloc Blake of Leeds be agreed to En bloc as many as of that opinion will say content and to the contrary, not content and to the contrary, not content. The contents have it. Tertiary Education and Research Tertiary Education and Research Wales Act 2022 Consequential Amendments Order 2026. Lord Katz.

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Amendments Order 2026. Lord Katz. My Lords, I beg to move the motion standing in my name on the Order Paper. The question is that this motion

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The question is that this motion be agreed to. As many as of that opinion will say content and the contrary, not content. The contents have it. Renewables Obligation Amendment Order 2026 and one of the

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motion Lord Whitehead. My Lords of the House. I beg

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My Lords of the House. I beg leave to move the motions in my name on the Order Paper. En bloc.

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The question is two motions in the name of Lord Whitehead the agreed to En bloc.

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agreed to En bloc. Order, order, order.

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Order, order, order. My Lords. As many as of that opinion will say content.

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Content. And to the contrary, not content. The contents have it. Data Use and The contents have it. Data Use and Access Act 2025. (Consequential

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Amendments and Transitional Provision) Regulations 2026. Lord Lilley. My Lords, I beg to move the

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My Lords, I beg to move the motion standing my name on the Order Paper.

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Order Paper. This motion be agreed to. As many as of that opinion will say content. Content to the contrary, not content. The contents have it. And now we move to report of the

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And now we move to report of the Pension Schemes Bill Baroness Sherlock. My Lords, I'd like to move this
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Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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Yes. >> My Lords. >> I will not detain the House too long on this amendment. It is a small amendment, but I believe it is a very important one for members of pension schemes in auto enrolment and particularly women. The proposals in the Bill are to move small pots under £1,000, which are considered dormant. In other words, have had no contributions paid in and no contact from the member with the provider for 12 months.

And those can be moved to a consolidated scheme without member consent. Now, my my argument is simple 12 months is simply not long enough to consider that a scheme that hasn't had contributions paid into it is dormant, and that that member has no interest in the scheme. Imagine a woman, for example, who stops work for a period to care for loved ones or elderly parents, partners and or children. They may be stopping contributions for quite a while longer than a year, but their pension could be moved if the provider hasn't been able to contact them, and their money would be put into a consolidator scheme approved by the regulator over which they have no control.

So amendment 49 would extend the period before which somebody's pot can just be taken away, if you like, from one year to three years. And amendment 50 would extend it to two years. And this gives time for the government correct aim of improving data accuracy to actually take place. We know that most pension schemes have huge errors in their data, and don't always know how to even contact a member. It will also allow time for providers and trustees to trace members and for the pensions dashboard to and members to be able to find the pots themselves.

I understand that pension providers don't want to have these small pots, and that they may make a loss on them, but they should not be able to just get rid of them with such unseemly haste, in my view. And I hope that the government may accept the spirit in which this is meant, which is to protect members while also obviously still allowing the pots to be moved once it is beyond doubt that they are indeed dormant, I beg to move.
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Lord Fuller Portrait Lord Fuller (Conservative)
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Amendment proposed clause 22, >> Amendment proposed clause 22, page 24. Line 19 leave out 12 and insert 36.

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Once again, we have another policy designed by civil servants sipping lattes in that rather agreeable ground floor coffee shop at one Horse Guards Road, safe in the knowledge that their regular monthly salary, their generous taxpayer funded pensions and their ability to work from home a couple of days a week provides that comfortable lens through which they work and view the world outside. But outside, in the real world, we have whole armies of people who don't do the 9 to 5.

They live by their wits. They self-employed, they undertake seasonal work, term time, employment, employment. The man or woman for whom the Labour Party was established and whose salt money away for their retirement when they can. Many of these work hard and ask their accountant to do their books at the end of the year. It might take some time. Neither the worker nor the accountant worked as strict 12 month timescales. It might take three months to finalise the numbers in one year, nine months the next.

That's the untidy way in which the real world works. So to legislate to confiscate someone's pension after 12 months, as it was fly tipped by the side of the road to be swept into the dumpster of some poor performing default scheme, amounts to theft and an abuse of trust that undermines confidence in the pension system itself. I totally endorse amendment 49 in the name of my noble friend Baroness Altmann for another reason as well. Throughout the entirety of the canon of pensions legislation, we have a three year carryback that people can make up their pension liability, pension deficit over three years, and this is entirely consistent with that.

And consistency. Simplicity and understandability are the watchwords with which we should proceed.
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Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (Liberal Democrat)
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My Lords. >> Confrontational way than the noble Lord Fuller. I, from these benches confirm that we will be benches confirm that we will be supporting amendment 49, I. I do not believe the government should not support it should should fail to support this. It's in the name of Baroness Nye noble Baroness Altmann. It increases the time before a pot is considered dormant. In order to provide greater flexibility for savers like mothers, those on sabbatical. Mature students who may not add to their pots for 1 to 3 years.

We have no hesitation on these on these benches to support the noble Baroness Altmann motion, but not in quite such a confrontational terms

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as the Lord Fuller. My Lords, if I could continue

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My Lords, if I could continue the spirit of good grace, I wish our deputy Chief Whip a very happy birthday today. My Lords, I want to birthday today. My Lords, I want to speak briefly in support of an amendment 49 in the name of the noble Lady Baroness Altmann, and noble Lady Baroness Altmann, and which I have been pleased to sign. Fundamentally, this amendment is about ensuring that we do not move about ensuring that we do not move too quickly to classify pension pots as dormant and in doing so, risk making decisions on behalf of savers before they have had a fair opportunity to act for themselves by extending the period before a pot is treated as dormant.

This amendment would delay when pots become eligible for automatic consolidation. That is important because it reduces the risk of pots being moved prematurely, perhaps at a point when an individual is between jobs, taking a short break on maternity leave, or simply has not yet re-engaged with their savings, it also gives savers more time to re-engage with their
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Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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of jobs, they've moved on and they've left small pots, small values scattered around in different places on which they are different places on which they are paying charges, often quite significant charges. And the value of that of that pot is diminishing. The policy, of course, was consulted on not by civil servants sitting in Horse Guards Parade, but by the previous government in 2023. The proposal this is the proposal that was consulted on by the previous government. I happen to previous government.

I happen to think they got this right, my Lords, and so too, so too did the range of opinion that was consulted. I'll say more about that in a moment, but the intention behind the policy is to capture the rights dormant small pots and have them transferred to a consolidated, which will be clearly classified by the regulator as being one that's been classed as having value for money and only to such a pot. The intention is to capture the right small pots that are genuinely dormant, while avoiding transferring pots belonging to members who remain actively involved with their pension saving.

Now, of course, no eligibility test will operate perfectly in every circumstance, but we believe the current 12 month period provides the right balance between effective consolidation and member protection. Let me explain why. But first off, the noble Lady Baroness Altmann would want to extend it to 24 or 36 months, and that would significantly extend the period during which a pot remains dormant. This isn't about industry. It's about risking detriment both to individual members who would continue to face charges for longer and to the wider scheme membership, who in practice subsidise these small deferred pots.

Either of those extensions would delay the consolidation of genuinely dormant small pots, leaving inefficiency excuse me, inefficiencies in the

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system for longer, resulting in go on. It's going to be a long day. To the noble Lady for giving way,

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To the noble Lady for giving way, but can I can I just say that if a pot has been forgotten about for many years, this problem won't many years, this problem won't exist even with my amendment, because it will have been dormant for over three years if it was left for over three years if it was left behind from a long time ago. I'm concerned about the people who are working at the moment, who may take

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working at the moment, who may take some time off and to give them a better chance. Just a little bit of patience. I'm just coming to that. So if you could just bear with me for a moment. However, either of her decision proposals to extend the period of dormancy would delay the consolidation of genuinely dormant, still small pots, leaving inefficiencies in the system for longer, resulting in higher costs for schemes and for members through higher charges. Where someone holds several small pension pots across multiple schemes, they will find themselves subject to multiple sets of charges over a number of years.

The longer the dormant dormancy period, the longer members will face those charges. It's well recognised that many schemes apply a flat fee, flat fee charge structure, and particularly those most affected by the proliferation of small pots, and that can compound the issue. So, for example, a saver with three separate small pots held across three schemes, each applying its own annual flat fee charge, could see those charges accumulate over an extended dormancy period. If the period were lengthened to 36 months, they could face four more annual charges.

Given the relative low value of many small pots, such cumulative charges do represent a significant risk of detriment to the member. But on the point about people taking a career break with the intention of returning to work, in the majority of cases, such members will be adequately protected by the 12 month dormancy window. The noble Lady Baroness Stedman-Scott mentioned maternity leave. This was looked at carefully during the consultation. Where someone's on paid maternity leave, employers should carry on paying pension contributions by Lord Hermer.

Contributions are being made, the pots are not are not dormant and so any period of dormancy would not stop, would not start until there were no contributions paid, so those pots would not be subject to dormancy criteria and not be consolidated. And even taking an unpaid break. The loss that lasts longer than 12 months would find the system included various safeguards. Firstly, every member will get a transfer notice before consolidation takes place, giving them a clear opportunity to opt out if they judge.

Consolidation is not in their best interests and as we develop the delivery design, we'll look to explore different forms of communication to understand how they can best support members engagement with the process. Secondly, under clause 115, the government is taking a power to require employers to provide updated information to schemes periodically. We will consult on how that should operate. But if subsequent evidence shows that career breaks present a genuine issue, we could simply require employers to notify schemes where a break is planned or underway.

Where appropriate. This would allow such pots to be made exempt from consolidation under regulations made under clause 25. However, when Lord Jay, the current evidence does not indicate this is expected to be a widespread problem. As I said earlier, the 12 month time frame formed part of the proposal consulted on with stakeholders across the pension industry and consumer representative bodies in 2023, and represents a supported middle ground long enough to ensure pots are genuinely dormant, not so long as to delay consolidation, necessarily, it is essential that the policy maintains the right balance between operational efficiency and member protection.

However, just to be clear, the bill currently requires the regulations to set a minimum of 12 months for a pot to be classified as dormant. That means if evidence suggests extending the period is necessary, that period could be set at a higher level, or it could be extended subsequently through secondary legislation. My Lords, we all want to avoid negatively impacting individuals who take periods of unpaid leave. But if we think about it, applying a blanket extension to the dormancy criteria can't be the right way to provide that protection.

A more appropriate approach is to design the policy framework with the necessary safeguards built in from the outset. And that's what we've done. Introducing simply, alternatively, a universal increase to the dormancy period would exacerbate the risk of detriment for everybody involved. Finally, I turn briefly to government amendment G 51. This is a minor and technical change. It replaces the word specified with the word prescribed in clause 23 to ensure consistent terminology throughout the bill. The amendment provides clarity and improves clarity and brings the clause into alignment with the drafting used elsewhere in the measure.

In light of what I have said, my Lords, I hope the noble Lady can withdraw her amendments and the House will

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support the Government. Amendment 51. My Lords, I thank the noble Lady, the Minister, for her reply and the Minister, for her reply and what she describes sounds very good in theory. My amendment is designed in theory. My amendment is designed to address the issue that that theory doesn't work in practice in the kind of pension world that we the kind of pension world that we have right now, there will be improvements, but they're not in place yet. There is no compensation place yet.

There is no compensation for a member whose pot is moved away to a worse scheme. There may have higher fees or they may have lower fees. They may get better performance, they may get worse performance. It should be incumbent upon all of us to make sure there is as much protection as possible. And if somebody has not paid in for years, then the three year limit will be fine because they will have exceeded it. Therefore, I do wish to test the opinion of the House on amendment 49 holds.



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The question is that. Order? The question is that amendment

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The question is that amendment 49 be agreed to. As many as of that opinion will say content. Content

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opinion will say content. Content and to the contrary, not content. Not content. The question will be decided by a division. I will advise the House a division. I will advise the House when voting is open. Thank you. when voting is open. Thank you.
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Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted (Liberal Democrat)
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40 and the new. >> 40 and the new. >> Clause 28. See issues thoroughly in committee and I'm grateful to all noble Lords who contributed and all noble Lords who contributed and to those who have spoken to me since these amendments in this group remove the reserve power that would allow government to mandate asset allocations for workplace pension savers. We will vote on amendment 52, which is a consequential amendment, but it carries with it the business amendment, which is or the thing that it's really about, amendment 78 that deletes clause 28 C, and also amendment 96, which will then delete the now redundant savers interest test and all associated references.

Now, my objection here is one of principle why should government override trustees? We all know UK pension funds have invested too little in UK assets and private markets, but we also know why regulatory interventions. The charge cap and pressure into low cost indices and gilts have made it difficult to invest in anything that requires governance or research. The track record of intervention is not good, yet this clause proposes more intervention. It is described as a backup to the Mansion House Accord to be used if industry does not deliver, but if industry does not deliver, it will not be out of obstinacy.

It will be because the opportunities are not there at the right price or at the right risk. Mandation does not solve that. It simply overrides fiduciary and professional judgement. Even the threat of Mandation is intended to do the same. If regulated for this clause would reverse the burden of proof and raise the evidential bar for trustees. Trustees who already must act in members best interests would additionally have to show the regulator that the mandated allocation would cause material detriment, would cause material detriment in order to be exempted from allocation.

That's a very high bar flying under the guise of a savers interest test, we would be placing trustees under a new adjudicator of fiduciary duty, one that has no fiduciary responsibility itself, and a government with an inherent conflict of interest. And if I may say, no technical or regulatory qualification spending workers pensions instead of raising taxes is not fiscal discipline. It's concealment. And the power itself is extraordinarily broad. No time limit, no percentage, no end date and a rather dodgy exemplary asset list available to any future fancy.

Nothing prevents a government choosing its preferred assets, including those that no one else will touch, and compelling 22 million savers to invest in them. That is not the route to pension security, my Lord. For all these reasons, the only responsible course is to remove this power, and I do intend to test the opinion of

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the House. I beg to move. Amendment. Proposed clause 40, page 38, line 12 leave out and condition two. I.

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I fully support everything that the noble Lady Baroness Bowles has said, and I am very sad to be in said, and I am very sad to be in the position of needing to do so because I support the government's because I support the government's aim of helping pension schemes put more money into UK investments and
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Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (Crossbench)
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When you're trying to solve a problem, it's best to try to understand the root causes of the understand the root causes of the problem and then resolve those causes. Diagnose and treat the disease, not the symptoms. And disease, not the symptoms. And that's why I've repeatedly asked the noble Lady, the Minister, why she believes UK pension funds have she believes UK pension funds have been so reluctant to invest in so-called UK productive assets. Now, I know the noble Lady gets frustrated with me asking this question regularly, but she has never actually answered it.

She always responds, as she did again on the 11th of March, by explaining what the symptom is that UK pension funds invest a much lower proportion in UK productive assets than international comparators. She's right, and as noble Lady Baroness Altmann has just pointed out, I don't think any of us disagree with that. But she does not answer the fundamental question why are UK assets apparently so unattractive to UK pension funds? What are the barriers to investment that we need to remove? The noble Lady? The Minister has often told us that the Mandation power is just a backstop to the voluntary Mansion House agreement, and it probably won't be used.

But my Lords, that is precisely the problem. It doesn't need to be used. It's very. Existence is in effect mandation, as the times pointed out so clearly on Saturday, a voluntary agreement ceases to be voluntary if it is underwritten by a promise of compulsion. So even if the power is not used, it still creates a fiduciary duty problem. The trustees are still effectively being forced to act in a way that they might not believe to be in the best interests of members, but they won't even have the defence of.

We were only following orders. If it turns out badly, and the Minister has never given an adequate response to the question of who should bear the risk if the government mandated assets result in poor performance on the 11th of March. The noble Lady, the Minister said, and I quote, this power does not direct schemes into specific assets or projects. What it does is set a broad framework aligned with the industry's own voluntary commitments. Under the Mansion House Accord, trustees retain full discretion over individual investment selection and the balance between asset clauses.

But, my Lords, that is not what the bill says. What it actually does is give the government power to require that an undefined and unlimited percentage is invested in qualifying assets, and qualifying assets are defined as, and I quote, an asset of a prescribed description and I, I stress an asset, not just a class of assets. There is no limit in the bill on what those assets can be, except that they can't be listed on a recognised exchange. So, contrary to what the noble Lady has told us, specific assets or projects can be prescribed and nor does the bill require them to be in the UK.

They can be anywhere in the world, and the first regulations to define the asset allocation are subject to the affirmative procedure. But after that, my Lords, any future government can prescribe any asset anywhere in the world on any percentage under the negative procedure. Now, as the noble Baroness Lady Bowles has pointed out, a scheme can apply for an exemption, but it is an incredibly high hurdle. A scheme must prove that the asset allocation requirement would cause, and I quote, material financial detriment to members.

That is extraordinary, not just not in members interests, but material financial detriment. So, my Lords, contrary to the noble Lady, the Minister's assurances, this unlimited mandate power can be used to direct trustees to invest in classes of assets or indeed specific assets, it fundamentally undermines the fiduciary duty of pension trustees. This dangerous power must be removed from the bill and the government should instead focus, as I said at the beginning, focus its efforts on identifying

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and removing the underlying barriers to UK investment. Yeah. My Lords, I.

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My Lords, I. Rise in this mini. Debate to speak. In full support of this amendment. I am extremely concerned amendment. I am extremely concerned about the principle of government directing any form of investment. I don't think any government has a

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don't think any government has a strong record in terms of making. Investments, and to compel pension funds to make such investments would be incredibly
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Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Conservative)
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investments would be incredibly dangerous. As Lord Vaux of Harrowden has just so wisely said, we're setting ourselves a very, very dangerous precedent here that we will all, as people who want to retire at some point, live to regret. My second point is the technical point, which I think Lord Faulks also touched on, but is worth exploring slightly further, which is the description of what a directed investment is. What is a UK investment? The sort of thing we would be told we have to invest in.

Is it a company where their headquarters is domiciled in London that employs a certain number of people? It does a certain thing in the UK specifically related to certain asset classes. The reality is you're going to have enormous problems if you try and force money into certain parts of the economy, you'll get crowding out excess price. An example could be we're going to force these pension funds to invest in infrastructure. And so you'll have a crowding out of other investments into infrastructure projects that will be mispriced, will create problems when it comes to trying to generate returns.

We should be very careful about that. Prescription over investment is one of the worst things a government can possibly do, and I think we should acknowledge that in this House and as has been mentioned, why are we talking about forcing people to buy things that other people don't wish to buy, when we should be trying to create an economy that people want to invest in? And I would call upon the noble Lords Minister to put that as the priority, rather than trying to force people to do things they don't wish to do, and will cause enormous problems in the long term.
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Lord Wolfson of Aspley Guise Portrait Lord Wolfson of Aspley Guise (Conservative)
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My Lords, I begin by declaring an interest as Chief Executive of an interest as Chief Executive of Next PLC, a company that has over 20,000 colleagues in enrolled in an 20,000 colleagues in enrolled in an auto enrolment pension. I want to convey to the government just how worried people are at the idea that the government is planning to mandate how their pensions, their life savings should be invested, to be told that a percentage as yet to be determined, should be invested in certain classes of assets at yes, at yet to be defined by Ministers who can give no indication as to what they actually want to do with these powers is deeply worrying.

Good investments don't need to be mandatory. In fact, there is the inherent suspicion that investments which are compelled are unlikely to be very good investments. In fact, it's worse than that, my Lords, because if the demand for certain asset classes is artificially increased, then the returns are likely to fall further. Why pay a healthy return to an investor who has no choice but to invest in your class of asset? Now, it might be argued that whilst mandated investments are not so good for pensioners, they will be good for the nation as a whole.

This is a very dangerous precedent, my Lords, and it's not credible. It's not credible because government are not well placed to allocate capital in this way. They are subject to political pressures. The competing priorities of their backbenches, the media, the polls. Now, I join other noble Lords in saying that the government is not wrong to worry that British pension funds show an alarming tendency to avoid investing in UK businesses. But there are better answers than this reform. The regulatory regime make the UK a more attractive place to invest in, but compulsion is the worst possible solution, and it is that compulsion that goes to the heart of my concerns and many others about this power, because the greatest risk of this power is that government abuses it.

That in the thick of some political storm, under pressure to boost the economy, under pressure to serve some interest group, it mandates large scale, misguided investment in some part of the economy. As a last roll of the dice. Now, I should stress, my Lords, that I completely accept that this government would not abuse this power. But can the noble Lord, the Minister, be so sure that all future governments, perhaps led by their political opponents, will not abuse it? Other noble Lords have rightly spoken about the breadth of these skeleton powers.

They're not quite Henry the Eighth Powers, but to me, my Lords, they look very much like Robert Maxwell Powers, the powers to control and direct the investment of other people's hard earned savings for purposes other than their benefit. Back then we said never again. Never again will we put the savings of so many people in the hands of so few powerful people. Never again will we risk people's life savings being invested for anything other than their benefit.

My Lords, this power takes us back in the wrong direction. It should not stand. I

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support Baroness Bowles amendment. Yes. My Lords, those people have done

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My Lords, those people have done the right thing and saved our retirement. Have made a bargain with the state in exchange for little help on the way in. The little help on the way in. The state will be relied on a little bit less on the way out. That's the deal and the responsibility of finding people to look after your finding people to look after your money lies with the individual and the trustee or investment managers they appoint. On that simple truth,
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Lord Fuller Portrait Lord Fuller (Conservative)
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they appoint. On that simple truth, London has developed global leadership in asset and investment management, and the entire city ecosystem has created a tax gusher that pays for defence schools and hospitals. We should not place it or its reputation under threat. Now, we've heard a lot from the Dispatch Box over the last 12 months or so about the sort of investments that government thinks we should invest in, and we need to learn some lessons from history, green schemes, forgetting that when they tried this under political direction in Sweden, it created the $5.8 billion northvolt disaster and all the public sector pensioners lost their shirts.

The Minister from the Dispatch Box lionised the large Canadian public sector schemes as the model that should be followed. Last year, their investment returns went down by 5%. At the same time as our own LGPS went up by nine. Ministers want schemes to backfill UK infrastructure, perhaps steel. Steel, which we now learn has cost us over £1 billion in little over a year, money that will be never seen again. Carbon storage, passive funds which by arithmetic lead you into bubbles or into high risk private assets.

We're at 5:00 this morning, the Financial Times published an excoriating demolition of the claims that private equity funds do, as well as the Chancellor claims, especially as the J curve gets stretched out beyond ten years. I could go on, I won't. The point is that whilst Ministers want to pick winners, they've been selling lemons. The pound shop pundits are trying to force feed the most risky parts of the market. The bits. The other professionals turn their noses up or consider they're not right for the man in the street, down the throats of those for whom taking excessive risk is not necessarily the right thing.

The government's job is to create the environment for the best and most attractive investment ideas to come forward, not to beat pensioners with a stick and strong arm them

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poorer long after Rachel Reeves and Torsten Bell have become a footnote in history. It's our duty to stop this, and we must. Yeah.

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Yeah. My Lords, I declare my interest as an employee of Marsh, whose sister company, Mercer, is a sister company, Mercer, is a pension consultancy, master trust provider and a signature to the Mansion House Accord. I speak in strong support of this group, beginning with amendment 52, which
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Lord Ashcombe Portrait Lord Ashcombe (Conservative)
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would remove the power to mandate asset allocation while preserving the requirement on scale. This is a

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targeted, proportionate change that keeps the legitimate objective of ensuring sufficient scale. In the.

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In the. Market without stripping trustees of the fundamental responsibility to make investment responsibility to make investment decisions. I've never supported, and it has become abundantly clear in recent weeks that the bulk of in recent weeks that the bulk of industry does not support the government's proposed power to government's proposed power to mandate asset allocation. I have listened carefully to Ministers in both houses over the past weeks who say these clauses are simply reserved power intended to ensure that the Mansion House Accord operates.

Even accepting that characterisation, the House should not lose sight of two important points. First, the schemes that signed up to the Mansion House Accord did so in good faith and with trustee agreement. Second, those signatories did so on the basis of explicit caveats caveats that recognise trustees fiduciary duties, the necessity of a reliable pipeline of assets, and the imperative that the market shift from a narrow focus on a broad cost to a broader assessment of value across the whole investment chain, including my clients.

It is therefore deeply disappointing to see the government invoke the Mansion House Accord agreement as though it represents blanket industry support for intervention in private finance and trustee decision making. It does not conflating a voluntary conditional industry commitment with a license to centralise investment allocation decisions, risks doing grave damage to good governance and to member outcomes. For these reasons, I urge noble Lords to support these amendments. Remove the dangerous part and mandate asset allocation. Keep the focus on scale.

Let trustees, acting with their fiduciary and statutory duties, continue to determine the investment strategies that best serve their members. The amendments

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before us achieve that balance. My Lords, I signed amendment 52 in the name of the noble Baroness in the name of the noble Baroness Bowles of Berkhamsted because let's be candid about this. This is not the government's money. And there the government's money. And there seems to become an attitude that because the government uses tax relief and other ways to encourage people to invest in private people to invest in private pensions, all of a sudden now, just because it's not being invested in projects the government wants,
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Baroness Coffey Portrait Baroness Coffey (Conservative)
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projects the government wants, instead of government taxpayers money being put into those projects, that somehow they are going to tell people what to do with their cash. Now, even on things like auto enrolment, which are have been a force for good, it's not mandatory. People can opt out because there's always been a recognition. It's somebody's salary. It's their choice on what they do with it in their take home pay. So this goes completely against that because some, I won't use unparliamentary language, but some, some way of just almost being blind to the fact that it's not the government's money.

Now, my particular concern is that there never was a human rights impact assessment. I have written to the Attorney General to understand this, because I think this could well be covered, in effect as an asset, a personal property under article one, protocol one. And yet the government seems to be quite happy to say this meets the human rights test. We've never seen any backup to that. So I would be grateful if the Minister would publish any assessment that they've done before we get to Third Reading.

But to be straightforward about this, this is the wrong approach. The voluntary accord is the right approach, and that's why I'll be supporting this if it is tested.

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Right. My Lords, we. Know that a much higher

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Know that a much higher percentage. Of pension fund assets can happily be invested in UK can happily be invested in UK assets. It was the case when I was managing pension funds. The reason it isn't now is entirely what it isn't now is entirely what politicians have done to the system, and we should seek to undo it. Not and we should seek to undo it. Not in not fudge that as the noble Lord Lord Vaux of Harrowden says, my particular recommendation to the government is that rather than giving the government power, they should give pensioners and investors in pension schemes power.

Let them. There are structures in the Bill which allow pensioners to express their opinions on what
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Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Conservative)
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OK. >> My Lords. >> Of all the groups and of all the amendments we have tabled and discussed on this bill, for me, discussed on this bill, for me, this is the most important mandate is, rightly and understandably, the is, rightly and understandably, the most contentious part of this bill. I'm grateful to all noble Lords who have helped to raise awareness of this issue, which, as I am sure the noble Lady the Minister is aware, has garnered a lot of attention and criticism outside of this place.

The Abi have written to the Minister and the Other place, Torsten Bell to warn him of their serious concerns about the mandate power, saying that it is not necessary for the government to mandate investment. They have asked the government to withdraw this part of the Bill. Pensions UK have been unambiguous on this point. They too have called on the government to remove this power from the bill, warning that it would harm free and open market competition aimed at driving better saver outcomes.

They have said Mandation would put these outcomes at risk. More recently. Paul Johnson, formerly of the IFS, wrote strongly against Mandation in an article in The Times. Just the headline and strapline will give the Minister all the information that the noble Baroness needs, telling pension funds where to invest will not end. Will the government's desire to boost UK assets is understandable, but overriding the fiduciary duty of trustees crosses a line my Lord, industry are clear, the experts are clear, and much of this House are

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clear that the government should not be directing Private sector investment. It is

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Private sector investment. It is obvious that this power overrides the fiduciary duty of trustees. the fiduciary duty of trustees. This is a radical step, and it establishes the principle that it is appropriate and desirable for is appropriate and desirable for governments to tell schemes how to invest, to meet their own political. invest, to meet their own political. The government are right to want investment in UK assets. Indeed, I am sure no one in this chamber would not welcome more money in UK assets.

But if the picture is not where we want it to be, then the question for the government is why? Why is the UK not attracting that capital? What barriers exist and what reforms are needed? Instead of doing that work, the government have reached for a shortcut, a reserve power, which is really a threat to compel investment. My Lords, this is reckless. It sets a dangerous precedent. And the government's central defence that they do not intend to use the power raises two unavoidable questions.

Firstly, if they never intend to use the power, then why are they legislating for it? Secondly, and how can the noble Baroness Lea Minister assure us that the power will not be used when they themselves will not be in office for ever? This power is going into law, and it will mean I'm afraid it will. I am afraid, outlast the Minister, and indeed all of us. The noble Baroness, the noble Baroness, cannot speak for future administrations or indeed political parties like reform.

God help us, who have signalled a great willingness to direct investment. The government is handing future Ministers this power, not merely their own. My Lords, I won't detain the House any further than to say that this power must be removed. It is a massive overstep from the government, and despite all the assurances of the Minister, no one is yet convinced that this can remain industry. Reject it. Experts have expressed serious concerns about it, and the Minister must remove it.

Mine. I am sure the noble Baroness has listened to all noble Lords contributions, and as my noble friend Lord Wolfson said, we must remove this Robert Maxwell power. We will. On these benches, and I'm sure others support the noble Lady wholeheartedly if she

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matter. Hey! My Lords, as we've heard, the

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My Lords, as we've heard, the combined effect of these amendments will be to remove from the bill the government's reserve power to require certain pension schemes to require certain pension schemes to hold a prescribed percentage of their assets in qualifying assets. As Lady Balls indicated, we explored this territory in some explored this territory in some depth at committee and noble Lords made a number of detailed and considered arguments. It's been considered arguments. It's been good to have an opportunity to talk to a number of colleagues since then and to discuss their concerns.

The government has reflected, but the government continues to regard the asset allocation reserve power as a necessary part of the reform package that this bill introduces, and I will set out why. Let me make the headline case is that there is strong evidence that savers interest lie in greater investment diversification than we see today in the DC market. And I think that probably is at least broad agreement on that. DC pension providers themselves have recognised this. A small allocation to private markets as part of a diversified portfolio offers the potential for better risk adjusted returns over the long term.

But despite that recognition, many providers are not yet acting on it. Lord Dannatt is not because diversification is against savers interests, it is insignificant part because of competitive dynamics. The pressure to keep costs as low as possible in order to win and keep new business from employers, and the difficulty of any single provider moving ahead of the market. Now that this isn't just the government's view. I mean, this is what the industry has said

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repeatedly. Let me quote from the. Minister for giving way. But in most industries which are not most industries which are not recognised, that moving ahead of the rest of the of your competitors is an advantage, not a disadvantage.

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It's certainly not a reason to not move in the right direction. Exactly. Yeah. I think it depends how the market structured. The decision makers here are employers, and I think a number of noble Lords have accepted in committee that, in fact, accepted in committee that, in fact, this was if we look at what happened under the Mansion House Compact, the predecessor of the accord brokered under the previous government. I mean, the words were too much focus on cost remains the key barrier.

In other words, we have a market in the UK for the employment sector, where the focus has been for too long on cost, not value. The noble Lord shakes his head. But we have had this from around the house and indeed in committee. Many people who don't agree with this power accepted the underlying diagnosis of that, and that's the basis on which the government is proceeding. Similarly, the government wants the industry to invest in the full range of assets. And one of the reasons I suspect, that the Mansion House Accord are moving together is to make sure that it's clear that the market is going in that direction, and that's what we think is the problem, is that there is a risk of a failure of collective action.

The accord is the commitment. The power gives providers assurance that the whole market will move in order so that they will not then face be in a position where somebody faces a competitive advantage by reverting back to focusing on cost and not on value. Because the Mansion House Accord represents a welcome and

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voluntary commitment by. Oh, sorry. Sorry. As I understand the noble Ladies argument, it's that the focus on argument, it's that the focus on cost is the problem. But this bill solves that with the value for money framework. So why do we also

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money framework. So why do we also need the power. Comes as a package. The. A lot of attention is focussed on this of attention is focussed on this particular reserve power. But in fact, it's the combination of all of the elements of the bill that we've discussed in some detail at committee over recent weeks. The question of the investment in scale, the need for, for for VfM, the value for money framework, the need for the option to consolidate small parts that are involved.

All of these things come together to create the conditions in which this will work. This reserve power is to make sure that addresses a particular question. The risk of collective failure. I fully accept the noble Lord doesn't agree with it, but I want to at least try to have the opportunity to make the argument as to why the government is proposing this in the way that it is. So, my Lords, the Mansion House Accord represents a voluntary commitment by 17 of the UK's largest DC pension providers to invest 10% of their default funds in private markets, at least half of that in the UK by 2030.

And we continue to be encouraged by progress. But the risk of a collective action failure in this market has long been recognised. As I said, individual providers face strong commercial incentives to keep costs low and to defer action until others move. First, the reserve power exists as a backstop to ensure that if voluntary progress stalls stalls, the government has the means to act. Its presence in the bill sends a clear signal. The commitment to change is underpinned by more than good intentions, and it helps to give each provider confidence that the rest of the market will move to.

Now, at earlier stages, we have discussed a range of issues, chiefly around safeguards and a number of others, which I thought we would come up in later groups, but obviously that will depend what happens next. First of all, Lords, the power is time limited. The noble Baroness Stedman-Scott thinks this power will outlive all of us, but I personally, I hope it doesn't, because if it hasn't been used by the end of 2035, it falls away. So I hope very much it won't outlive both the noble Baroness Stedman-Scott and me.

Although obviously we are in the Lord's hands. Should we be called home at. What can we do? But if it hasn't been used by that date, my Lords, then any percentage. So it hasn't been used by 2035 it falls away. And if it has been used, any percentage requirements in place cannot be increased beyond that date. Secondly, my Lords, the bill establishes a savings interest test. Pension providers will be able to apply for an exemption from the targets where they can show that meeting them would cause material financial detriment to their members.

Thirdly, the government must consult and publish a report on the expected impacts both on savers and on growth, before exercising the power for the first time, and a post-implementation review must follow within five years. Finally, the regulations implementing any requirements will be subject to the affirmative procedure, so Parliament would have its say in response to some of the specific questions. My Lords, there was a question about how to define UK assets. I think yes, this will be done in regulations where the power ever to be used consideration would have to be given to the characteristics of different asset classes.

The Mansion House Accord is accompanied by some high level guidance on how a UK investment should be identified within each of the different asset classes, but that asset class by asset class approach to establishing the location. That's also the one the FCA has taken when as it consults on the upcoming VfM. So value for money disclosure requirements, which will require firms to provide UK overseas asset allocation split. If the government ever came to exercise these assets, these powers, then then it would expect similarly to take an asset class by asset class approach.

My Lords, about a future government has been, had been raised and how this might be used. The number Baroness Suttie coffee upgrade in aid. The European Convention on Human Rights, and I commend her for her for that. Firstly, I think just the question on on on property rights, of course, this applies to default schemes and people can choose to opt out. But I think that also the point she raises is a relevant one is where a subsequent government, obviously AB1. But if there ever were a government of a different persuasion then were they cease to use it in a way beyond what's here, then I think they would run into problems.

And the purpose of the power this government's made quite clear in this House and Committee and in the other House that it's about assuring, assuring good outcomes for savers and the economy, recognise the diversity, diversification, benefits and the potential for higher returns. But it's not an instrument for channelling investment into pet projects or specific companies. It is about the noble Lord Faulks quoted me in ways and I commend. Marvellous. Thank you. What he said. I think I said what I would say at this point, but that that is that is the government that is the government's view.

And I've spoken about the various safeguards. But, my Lords, even if a future government wanted to use these powers to do something much, much broader or something much more specific, then of course, they would have to abide by established principles of public law, including the requirement for Ministers to act rationally, ensuring procedural fairness and compatibility with our rights when making secondary legislation. My Lords, the government is under no illusions, I should say, about the significance of this power. I mean, if it's a substantial intervention and if we ever found the need to proceed, do we need to use it? We would have to proceed with great care.

I do understand the strength of feeling on this. These powers, alongside the scale provisions, the value for money framework and the consolidation measures are a package. Together, they are designed to deliver a step change in outcomes for millions of pension savers. If we remove the reserve power, we remove the mechanism that gives the rest of this framework its teeth when it comes to investment diversification. But for a long time, successive governments have recognised the need to channel pension capital into productive assets.

Auto enrolment has brought millions more people into saving. We now have a responsibility to ensure those savings are put to work properly, delivering better long term returns. But the question before us is whether the bill should contain the backstop at all. In the government's view, the answer is yes. Without it, the voluntary commitments made by the industry would rest on good faith alone. The experience of previous attempts to shift investment patterns in this market suggests that that, on its own may be may not be enough.

So, my Lords, for those reasons, I respectfully ask the Baroness not to press her amendment.

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My Lords, I thank all those who have spoken, and the overwhelming have spoken, and the overwhelming view is still that this power goes too far. A lot of the issues that too far. A lot of the issues that the Minister comments about are around cost, but as I said, the around cost, but as I said, the whole focus on cost has been brought around by regulation and brought around by regulation and changing over to value for money, hopefully adjust that.

I have my
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Baroness Noakes Portrait Baroness Noakes (Conservative)
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Lord Sewell I rise to move amendment 55 in my name and that of my noble friends, Lady Stedman-scott and Lady Neville Rolfe, and the name of the noble Baroness Goudie Ortmann. And I shall also speak to amendment 60 and 94 in this group. This group of amendments concern the so-called scale requirement in clause 40. In practice, the government's proposals concentrate only on size, with a vision of the DC pensions provision landscape, comprising 20 or so schemes with assets of over £25 billion.

I have no quarrel with the proposition that the current pensions landscape is too fragmented, and this may well have contributed to investment returns for some pension savers, which have not been good enough. It is, however, a massive and unwarranted logical leap to move from that proposition to the proposals in this Bill, which mean that virtually all schemes below £25 billion of assets will cease to exist in a few years time. The plain fact is that investment returns do not correlate with the size of assets under management.

When the government produced their report on pension fund investment in the UK economy in November 24th, 2024, it was disarmingly honest, it said. The evidence linking pension provider scale and investment returns is mixed. It said across the AUM spectrum, there are examples of small, medium and large sized schemes with both high and low returns. It also said that studies suggested broadly a wide range of benefits around 25 to £50 billion. In particular the ability to invest in certain asset classes.

But it did not claim as it should, not that that amounted to a guarantee of superior returns. Despite this in committee, the noble Baroness, the Minister, said that the government, I quote, are absolutely committed to the belief that scale matters, and she seemed to rest this on the this, this absolute commitment on the ability of larger schemes to invest in asset classes which produce better returns, the government must know that there is no magic formula for achieving superior returns, and all asset classes can produce both good and bad performance, and I believe the current experience in private equity and private debt is proving just just that position.

I believe that in trying to legislate smaller pension schemes out of existence, the government have lost sight of the one essential truth, which is that what matters is the size of savers own pension pots, not the size of the investment vehicle. My amendments 55 and 60, seek to turn the bill's focus to returns to savers. For savers, they apply to master trusts and group personal pension plans respectively, and they allow these schemes to be excluded from the scale requirements if they achieve above average returns, so the consolidation is not forced on smaller schemes which are doing well for their pension savers.

Amendment 94 concerns the new entrant pathway and allows for the potential for achieving above average returns to be considered as an alternative to the potential for achieving the size requirement. At one final point on scale, this bill entrenches the competitive position of large pension providers. It is significant that many of them have lined up to condemn the mandation provisions, which we have just removed, but have remained silent on the on the scale requirements. Of course they have. It's like Christmas come so early, several times over.

The ability to. Not a large number of high performing competitors out of the market without lifting a finger. My Lords, we should not let that happen. My noble friends on the front bench table a moment 77, which is a much more sophisticated approach to the issue of scale than my amendments in this group, because it includes a wider, wider range of factors than investment returns and is a more complete route to expressing what is really meant by scale. I've added my name to that amendment, and if my noble friends wish to move their amendment, I will withdraw mine.

At the end of this

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debate, I beg to move. Amendment proposed clause 40,

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Amendment proposed clause 40, page 38, line 34. At end, insert the words as printed on the

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Marshalled List. Obsession with size. But

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Obsession with size. But everyone knows it's not about size, it's what you do with it. And that point was made forcefully in the Financial Times this morning when Financial Times this morning when discussing the fact that the larger funds aren't necessarily better performers, with the subheadline
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Lord Fuller Portrait Lord Fuller (Conservative)
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seeking size for its own sake can distract fund managers from focusing on clients and shareholders. There is so much I can say, but I'm going to restrict myself to one substantive point. myself to one substantive point. When schemes get large, their normal market investment size gets bigger, too. They don't have the bigger, too. They don't have the time, capacity or need to go away from the big global stocks, most of from the big global stocks, most of which are by their nature, overseas.

It limits the constellation of investment ideas, so they chase the same MSCI stocks, creating a value destroying bubble and systemic risks by all chasing the same thing. It becomes all about speculation. But that's not what capital markets are necessarily for. Capital markets exist to provide capital so that smaller companies can become big ones. And right now in the UK, there are lots of smaller companies with bright ideas and great prospects that could become bigger if only they were relevant to the funds.

A few million here, perhaps a few tens of millions there, but they are all but invisible to the super funds, for whom anything less than half a bar is a rounding error. And the problem is for the UK that whilst Ministers are worshipping the false icons of scale, they will actually make actually make it harder for the stock market to invest in small British businesses at home. If the schemes are forced to bulk up, they simply won't have the time to look for or after the small fry.

So British companies who are crying out for long term patient capital will go hungry. And that directly contradicts the Mansion House objectives once again. The government has been suckered into a position by the big boys, understandably keen to cut out the competition, and is visiting harm on the UK economy, and especially the small British firms we all want to see do well. As the Financial Times says today, a substantial body of evidence in academic research suggests that mergers in financial services frequently lead to prolonged periods of underperformance, revenue synergies fail to materialise and cost synergies tend to be overstated.



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Quite. In favour of amendment 55. In the name of the noble Baroness the name of the noble Baroness Noakes, there is a questionable theory of change in the bill that a bigger pension schemes are bigger pension schemes are necessarily better, suggesting the minimum scale of 25 billion. And whilst scale certainly creates advantages, Australian experience suggests that funds can be run at suggests that funds can be run at less than this size and still provide value and good outcomes for members.

However, concentrating the
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Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (Liberal Democrat)
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My Lords, I think everybody in >> My Lords, I think everybody in your Lordships House wants good investment. Whichever side of the investment. Whichever side of the House we're on. And this is. And you if you're investing, I'm. Sometimes with apologies. Faith is not enough. You've got you've got to do what happens in the market. And it's the choices that are made. And these amendments, my Lords, will allow pension schemes to demonstrate that strong investment, performance or innovation in member services and administration to exempt from the scale requirements set out in the bill and were not, would and would introduce greater flexibility and how scale is assessed, including recognising assets held across multiple arrangements.

They reflect concerns the bill places disproportionate emphasis on size rather than outcomes, risks disadvantaging smaller or new entrants, as other noble Lords have said, and may reduce competition and innovation in in the pensions market without clear evidence that larger schemes consistently deliver better returns for members on these benches, amendment 77 would allow exemptions to scour requirements if the regulator deem there was no evidence of improved outcomes for a member. In the case of a proposed merger to meet the scale requirements, as this would make sure members interests are protected.

So on these benches, we we support in particular amendments. 77 and if it comes to a vote, we would be supporting that.
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Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Conservative)
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My Lords, I want to thank all noble Lords who have amendments down in this group, which broadly seeks to refine the government's seeks to refine the government's scale requirement, as set out in the Bill, to reflect the fundamental principle that size is not everything. And we've heard a lot about that just in this very short debate. For the sake of brevity, I shall limit my remarks, though, to my own amendment 77. The scale requirement, as currently framed, is too blunt an instrument.

It risks prioritising size of equality, process over performance and structure over outcomes. In other words, innovative and high performing funds merely because they are small. And these remarks have been echoed by the noble Baroness, Lady Altmann. The central question we must always ask in pensions policy is this does this improve outcomes for savers? And this was the essence of my noble friend Lord Fuller's remarks. If the answer is no, then we should think very carefully before proceeding. When this power comes into force, it will bring into scope schemes which are already delivering strong outcomes.

Schemes that are well run, well governed and performing effectively for their members. In such cases, forced consolidation is not just unnecessary, it may be actively harmful. It risks disrupting successful investment strategies, increasing costs and ultimately, my Lords, undermining the very outcomes that we are seeking to improve. This amendment, therefore introduces a vital safeguard. It gives the regulator the discretion to recognise where a consolidation would not benefit members, and to treat such schemes as meeting the scale requirement. It ensures that the policy is applied intelligently, does not run roughshod over schemes that are already doing what the government wants and crucially, it also reinforces fiduciaries.

Duty trustees and managers must act in the best interests of their members, not in pursuit of arbitrary, arbitrary thresholds set by the government. So this amendment ensures that they are not compelled to take actions which run counter to that duty. So my Lords scale should be a means to an end, not an end in itself. Where scale improves outcomes, it should be encouraged, but where it does not. Where schemes are already delivering for their members. We should not force change for its own sake.

So this amendment simply ensures that savers remain at the centre of the policy and therefore, when this amendment is called, I will seek to test the opinion of the House.
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Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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Hear, hear. >> Well done Jane. >> My Lords, clause 40 delivers the government's commitment to ensure that DC workplace pension savers benefit from the advantages that flow from scale and consolidation. The framework the bill establishes for scale is integral to securing for scale is integral to securing better member outcomes, improved access to productive investment, and stronger in-house capability. Evidence shows scale can bring the ability to invest in diversified assets, as well as lower member fees and investment costs. There is also evidence that scale can enable greater investment and governance capability in running a scheme.

As DC schemes become more complex, these things will drive improved member outcomes and support the delivery of an income in retirement. We had a debate on various issues at committee. One of the questions was about scale and competition in the marketplace. I can reassure the House that the government has considered this, and our analysis suggests that once the scale measures have taken effect, there will be 15 to 20 master trusts and GPP Megafunds operating. There's a number of amendments in this group, and I will try to say something briefly about each.

Firstly, we look at those amendments which seek to add further exemptions to scale. The government's policy in this area is to allow day one exemptions that are based in a scheme's permanent design characteristics. In other words, it should be as clear as soon as the regulations are in place. If a scheme meets an exemption, rather than it being subject to regular assessment. That's important because that's about providing certainty and stability for members and employers. Amendments 55 and 60 from the noble Lady Baroness Noakes would create an exemption to allow master trusts and GPPs to be excluded from the scale requirements where they deliver investment performance, which exceeds that achieved by the average of all master trusts or GPPs that meet the scale conditions.

Now, while I hear the noble Lady's arguments, I am concerned that this would undermine the government's objective a market of fewer, larger, better run schemes where economies of scale deliver sustained benefits for members. Recent investment performance may not be reflective of a good long term investment strategy within the UK. The highest performing multi-employer schemes have often been driven by exposure to overseas and effectively, US equities that may have been effective for the past 5 to 10 years. But markets have been more volatile recently and it may not be the right strategy for the future.

Our modelling shows that diversification can help increase long term performance, where assets are spread across a wider range of assets. Another concern is the temporal nature of an exemption based on performance. Past investment is obviously not a guarantee, and there may be occasions under this proposal where a scheme that has previously met the proposed exemption and is not at scale, subsequently does not deliver investment performance, which exceeds the average of those at scale, with the result that they no longer qualify for such an exemption.

Well, that's just not stable for members or employers and does not act in members interests. Amendment 67 from the noble Viscount Viscount Younger, and I believe the intention of this amendment is to provide an innovation exemption to scale for small schemes. The bill is drafted already, enables new and innovative providers to apply for the new entrant pathway and for existing market participants to utilise the transition pathway, which provides a longer period to build to scale. But it is important to recognise that scale will change the landscape.

Schemes that have scale will have the tools to deliver on value and performance in a way that small schemes will not be able to in that future landscape. I should probably also note for the record that the amendment as tabled only applies to master trusts and not to GPPs. In addition, it does not set out what the criteria for an innovation exemption would be and appears to include it as an extra criterion for scale rather than an alternative to it. Amendment 56 the noble Lady Baroness Altmann would allow a master trust with an innovative approach to member communication or administration to be exempt from the scale measures, but innovation in those areas is very welcome and it may aid member engagement and service quality, but those are not appropriate proxies for the benefits scale can bring.

They will not drive more diverse, diversified investments, greater returns, lower fees, nor necessarily improved governance. Again, I should note the amendment as tabled would only apply to master trusts and not GPPs. In a similar vein to amendments 55 and 60 amendment 94 from the noble Lady, Baroness Noakes seeks to enable a scheme to qualify for the new entrant pathway if it can deliver strong investment performance as an alternative to the ability to grow to scale over time. The government's view is that a strategy to grow to scale will be fundamental for a new entrant in the market.

We fully realise this will be over a period of time, but my Lords, we cannot agree that investment performance can work as an alternative and it is difficult to envisage how a new entrant would demonstrate this. When they apply for approval, they will have no assets or performance record to demonstrate. They will be able to deliver above the average achieved by a scheme at scale. That would give the regulators a very difficult task in seeking to make an assessment based on long term assumptions.

And again, I'm also concerned about the stability of this approach. What happens if and when the scheme doesn't exceed its investment performance in its investment performance? I do not believe that will offer the stability to members or employers that they need, and they would want to join a new scheme. Finally, on exemptions, let me turn to amendment 77 and 107 from the noble Viscount Viscount Younger. These set out a power to create an exemption, presumably to be granted on application for a regulator to treat a scheme as meeting scale.

If there is no reasonable evidence that the scheme consolidating would improve member outcomes. While I understand the intent of these amendments, I have the same concerns as I've set out already, which is that the approach is simply unstable. The amendment also doesn't consider what a future, rather than current landscape could look like and what it could deliver. Where schemes at scale will have the means to deliver member outcomes in a way that smaller schemes won't, because scale enables greater expertise, efficiencies and buying power.

The benefits of scale are wide ranging. It is not as simple as isolating and trading off known pros and cons of individual consolidation decisions. The scale measures will reshape the whole market for the good of members, and the benefits that come from that from the broad restructuring will be delivered long into the future. But this amendment asks regulators to make quite an extraordinary judgement. The criteria set out in the amendment are loosely and broadly termed and would be, we have to assume, highly contested by schemes working out exactly what the standard is that the regulator is supposed to apply could ultimately be a matter for the courts, adding years to the process and ultimately leading to increased costs for members while still not delivering the benefits of scale.

And a scheme that may be approved as having an exemption would presumably have to be subject to regular review. And if they lose the benefit of the exemption, again, it exposes members to risk and cost for employers in seeking alternative provision. In turn, that may mean that schemes with an exemption like this may struggle to attract business. If there are concerns, they may not remain in the market over the long term compared to compared to a scheme at scale. Taken together, it is a recipe for greater uncertainty and instability, and this would serve no one well, least of all members.

This compares with the government's vision for a stable market of schemes with scale, as well as space for disrupters, with the tools and capability to deliver for members and the economy. Amendment 69 and 75 for the noble Lady, Baroness Altmann would remove the scale threshold of £25 billion from the face of the bill and instead grant the Secretary of State the power to set it in regulations. I will not dwell on this, since she didn't. But, my Lords, we did discuss this at some length in committee and the evidence for the threshold set out in our published Impact assessment.

The figures has been consulted upon and discussed. It's a fundamental central pillar of the policy, and it is right. We give certainty about this now at the earliest point, and it's by that metric which industry are preparing for scale now. Amendment 71 and 76 from Baroness Altmann seek to ensure that a master trust or GPP can manage assets without being mandated to follow a common investment strategy. Lord Dannatt would drive away from delivery of the benefits of scale as a common investment strategy is important to the operation of the main scale default arrangement.

In fact, it's the mechanism by which benefits of scale are actually realised. It provides consistent governance over a unified pool, lower fees and access to a broader range of assets. My Lords, the same arguments apply to amendment 64 and 65, which enable Baroness Cass tabled along with Altman, along with a number of consequential amendments. Both of those amendments would require a regulator to approve a master trust as meeting scale requirement. If it's got £25 billion in a scale default arrangement or across a number of default arrangements in addition to amendment 64.

The intent appears to be allow members to be invested in default arrangements that suit their circumstances. I understand the aim, but the vast majority of members do not engage with their pension, and these measures are needed to ensure the schemes are working for them to give them better outcomes. But these amendments, again, would drive away from the benefits of scale. My Lords, the bill requires, I should stress that the bill requires a main scale default arrangement at the heart of a scheme, but it doesn't prohibit or cap the other default arrangements if they meet a member need and therefore the amendment would not be needed in any case.

In response to the right reverend Prelate, the Bishop of Hereford about about faith based ethical funds. My Lords, the government has considered these carefully for schemes that are solely set up for the purpose of a religious consideration. They will be exempted and not meet scale. Where a scheme wishes to have a default arrangement for a religious or ethical need that is accommodated and not prohibited by scale. Let me turn now to government amendments. G 93, G 95 and G171, which are minor amendments to correct the current drafting of the schedule and clause 40 government amendment G171 makes a minor technical correction to the schedule at paragraph 12 three to ensure the Pensions Regulator can issue codes of practice in relation to the scale, measure and approval at scale are onto a pathway.

In particular, government's government amendments G 93 and G 95 make amendments to clause 4012 and specifically to the new section 28 E and 28 F of the Pensions Act 2008. Those are the sections that deal with the two pathways the amendments correct and inconsistency in clause 40 of A regulation making powers for applications and approvals for these pathways. And as to these pathways and a scheme at scale. My Lords, this has been a useful debate, but I hope my explanations are enough to persuade noble Lords, especially the nobility.

Baroness Noakes I live in hope to withdraw her amendments and support the government amendment.
13:53
Baroness Noakes Portrait Baroness Noakes (Conservative)
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Thank you. Disappoint the noble Baroness, the Minister. I think Baroness, the Minister. I think there is just a fundamental disagreement. The government thinks that size is the most important that size is the most important thing, and most of the rest of us think that the judgement on which schemes should be allowed to survive the initial cull consolidation will require should be much more nuanced and should be based on what is good for savers, and if schemes are delivering for savers and capacity to deliver savers, then they ought to be allowed to stay within the population of pension schemes that go on.

The government also seemed to not trust their own value for money tests, which would should deliver over time if schemes that are allowed through at the moment, over time disappointed, then the value for money test would deal with that. We think taking scale out with the value for money test long term produces exactly what the Minister requires, which should be good returns for pension savers. My Lords, I said that I would not move my amendment because I know that my noble friend on the frontbench will be will be moving his amendment 77.

On that basis, I beg leave to

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withdraw. OK. Amendment be withdrawn. The amendment is by leave withdrawn. amendment is by leave withdrawn. Amendment 56 Baroness Altmann not Amendment 56 Baroness Altmann not moved. Amendment 57 consequential from the previous vote. Move formally, the question is that formally, the question is that amendment 57 be agreed to. As many as of that opinion will say content Of the contrary, not content. The contents have it. I beg your Lordships pardon. I should have included amendments 58 and 59 move formally.

The question is that amendment 58 and 59 be agreed to en bloc as many as are that opinion was content Of the contrary, not content. The contents have it. amendment 60 Baroness Noakes not moved. Amendment 61 and 62 and 63 consequential move. Formally, the question is that amendment 61, 62 and 63 be agreed to en bloc as many as are that opinion will say content the contrary, not content. The contents have it. amendment 64 Baroness Altmann not moved 65.

Not moved 66. Not moved 67. Baroness Gohir not moved. I'm sorry, I didn't catch that. Not move. Thank you. 68 Baroness Altmann not moved. 69 and 70 not moved and 71 I beg your pardon? Not moved. And 72 and 73 not moved. And 74 and 75 and 76

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not moved. Amendment 77. Lord John. Yes, and I have spoken to this amendment and as warned in my
13:56
13:56
None Portrait Division
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>> The question is that amendment 77 be agreed to. As many as are of that opinion will say content. >> Content. >> The not not content.

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Not content. The question will be decided by division. I will advise the House division. I will advise the House when voting is open. Voting is now

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For.

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The The question The question is The question is that The question is that amendment

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The question is that amendment 77 be agreed to as many as that of, say, content content content.

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say, content content content. Not content. The contents will go to the right by the throne, the not right by the throne, the not

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Yes Yes yes. Yes.

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My My Lords. My Lords. The My Lords. The question My Lords. The question is My Lords. The question is that

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What What did What did you. Lord Lord Suri?

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My My Lords, My Lords, there My Lords, there have

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My Lords, there have voted contents 191 not contents 118. So My My Lords amendment 78 moved formally. Move formally. I must advise the House that if amendment 78 is agreed to, I cannot call amendment 79 to 92 by reason of pre-emption. So the question is that amendment 78 be agreed to as many as that content Of the contrary, not content. the contents have it as advertised. I cannot call amendment 79 to 92.

And so we come now to amendment 93. Baroness Sherlock move formally, move formally. The question is that amendment 93 be agreed to as many as that that opinion will say content contrary, not content. The contents have it. Amendment 94 Baroness Noakes not moved. Amendment 95 moved formally. The question is that amendment 95 be agreed to. As many as that opinion will say content the contrary, not content. The contents have it. Amendment 96 move formally. I must advise the House that if amendment 96 is agreed to, I cannot call amendments 97 and 98 by reason of pre-emption.

So the question is that amendment 96 be agreed to. As many as that opinion will say content the contrary, not content. The contents have it as advertised. I cannot call amendments 97 to 98. And so we come to amendment 99. Move formally. In fact, can we move 99 to 101? Move formally? En bloc Baroness Nye 101 En bloc yes, yes. The question is that amendments 99 to 101 be moved formally. En bloc as many as that. We say content the contrary, not content.

The contents have it. We come to amendment 102 and I must advise move formally. I must advise the House that if amendment 102 is agreed to, I cannot call 103 and 104 by reason of pre-emption. The question is that amendment 102 be agreed to as many as that. We say content, the contrary, not content. The contents have it. I cannot call amendments 103 and 104. So we come to amendment 105 Baroness Noakes.
14:09
Baroness Noakes Portrait Baroness Noakes (Conservative)
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Been withdrawn. >> Five has been withdrawn. Thank you. So we come now to the group beginning 105 A Baroness Noakes. My Lords, I rise to move. Amendment. I beg your pardon.

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I'm very grateful to Baroness Noakes indeed. And she graciously allowed me to intervene very briefly earlier today during briefly earlier today during Question Time, there were two questions which involved insurance, and I forgot to mention my register of interest records for insurance, and I'd like to update the House's record for that. Thank you.

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Baroness Noakes. My Lords.

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My Lords. I'm sorry I forgot that earlier agreed to. That intervention. My Lords, I rise to move amendment 105 A and will also speak to amendments 114 and 115 in this group. And I thank my neighbour friends. They just Edmund Scott and Lady Neville-rolfe for adding their names. In the last group we concentrated on size not being everything when determining which pension schemes will be allowed to live on after the consolidation enforced by the scale requirements. My Noble Friend's Amendment 77, which the House has just accepted, has modified the size test.

But even with that important change, the scale requirements will represent a major market intervention by the government and and it is the DC schemes market that I'm addressing with these amendments. My amendments focus on the role of competition and innovation. The one thing that we really need in the long term is a market which will continue to evolve and work for the interests of pension savers. And the one thing that we don't need is a mature market consisting of a limited number of large players, untroubled by the potential for market disruption.

Now, mature, mature markets can still be competitive and there would be incentives to innovation within a mature market. But that innovation tends to be focusing on incremental, often process based improvement. And the plain fact is that factors such as incumbent inertia and investment in legacy systems act as counterweights. Disruptive innovation is typically associated with new entrants who spot underserved markets, structural rigidities, and the opportunities to harness technological breakthroughs. And they do not all succeed, but they often end up reshaping mature markets such as this happening at the moment with fintechs.

The rules that this bill sets out for pension schemes need to ensure that the benefits of competition and innovation, which ultimately deliver better returns for pension savers, are kept alive and well in the new pension scheme universe that this bill will deliver. My amendments 105 A and 105 focus on the regulation making powers surrounding the new scale requirements in clause 40 and the new entrant and consolidation powers in clauses 42 and 44. They both require those making the regulations to have regard to the encouragement of innovation in the design and operation of pension schemes, and the benefits of competition among providers of pension schemes.

Now, these regulation making powers are operated in part by the Secretary of State and in part by the FCA and the Pensions Regulator. The important thing is that when deciding on the regulations, the person making the regulations has to keep competition and innovation in mind as relevant factors for shaping the way in which the detailed rules are framed and which will affect how the market develops over time. And this is especially important in relation to Pensions Regulator, whose statutory responsibilities are very narrowly drawn and do not extend to the pensions provision market.

As such. And my other amendment in this Group 114 adds competition and innovation to the matters to be addressed by the review of Non-scale default arrangements as required by clause 43. I give notice to the House that I'm currently minded to test the opinion of the House on the two amendments affecting the regulation

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making powers, namely 1105A and 115. And I beg to move. Amendment proposed.

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Amendment proposed. Clause 40. Page 54, line 16. After regulations, insert the words as regulations, insert the words as regulations, insert the words as printed on the Marshalled List. My
14:14
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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Lords, I rise to support amendment 105A and the new clause in the name of my noble friend Lady Noakes, to which I have added my name. It is essential, in my view, to require the regulations to be pro-innovation and pro-competition, rather than over exclusionary. The 25,000,000,000 billion £25 billion minimum provided for in the government's reforms seems set to deter innovation. Lady Noakes has explained the case very well, and the reach of our proposal, so I won't speak at length, but I was a trustee of the pension of the pension fund at Tesco, which at the time was worth less than £25 billion, and we were innovative.

We invested in private equity, including US private equity, when others didn't, and we had part of our portfolio in housing. So just sort of innovation. The Chancellor is seeking to encourage. However, today that would not be seen as innovation. I'm sure my successors are looking at today's innovation, innovative, innovative investments, fintech, quantum space, rare earths, new types of weapons and other types of disruptive, disruptive innovation. I've also been very struck by the arrival of the in the pension market of online only operators.

They started small, made good returns, and a growing part of the market. The trouble is that unless our amendment is accepted, we will not see this kind of innovation in future. The 15 to 20 master trusts will rest on their laurels. Without the risk of too much competition from smaller schemes. Indeed, we heard earlier that the government is hoping to keep costs up, apparently in the interests of the health of the big schemes. This, my Lords, will be very bad for returns to savers and for our UK pension industry.

And if the government does not keep innovation and competition in mind when they're making the regulations under this act, I think we will have a less successful pension sector. So I encourage the House to continue the good work and to vote for my noble friend, Lady Baroness Barran Baroness Noakes amendment, as they have done for other sensible amendments today.
14:17
Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (Liberal Democrat)
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My my Lords, this group of amendments is very narrow in amendments is very narrow in drafting, but we believe important in principle. Amendments 105 A114115 require the Secretary of State and the reviews and regulations under these clauses to have regard to innovation and competition in the design and operation of pension schemes and in the treatment of non default arrangements on these benches. We strongly agree with the proposition that pension legislation should not inadvertently, and that's the problem inadvertently frees the market in favour of the largest existing players.

Whenever the bill pushes schemes towards fewer, larger infrastructures. Parliament, we believe, must ask what happens to specialist providers, digital entrants, more tailored propositions and competitive pressure. Generally, a market that is tidy and tidy is not always right. Tidy for Ministers, but closed to challengers is not necessarily a market that serves savers well. This concern has made repeatedly during the Committee stage of the Bill the critique of the bill scale provisions has not simply been that small is beautiful.

It has been the innovation. Innovation can come from schemes that do not yet meet an arbitrary threshold, and that competition itself is one of the mechanisms by which member outcomes improve. I have already spoken in this vein in earlier parts of this bill, warning against an overemphasis on size that may crush new entrants and reduce competitive discipline in the market. There is nothing my Lords, radical about asking Ministers to have regard to innovation and competition. It is a modest discipline, not a veto.

It does not prevent consolidation. Where consolidation is justified, it simply ensures that regulations and reviews must notice what might be lost, as well as what might be gained. In our view, it is an entirely reasonable request. A well-functioning pensions market should be safe, well regulated and member focussed. But it is important. But it should also remain open to new ideas and new providers. These amendments do something to help that balance in view, and that's why on these benches we support them.
14:19
Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Conservative)
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My Lords, I want to thank my noble friend Baroness Noakes for noble friend Baroness Noakes for her amendments in this group, and I'm very grateful for the helpful remarks made by my noble friend, remarks made by my noble friend, Lady Neville-rolfe and also the noble Lord, Lord Palmer. These noble Lord, Lord Palmer. These amendments recognise an important point, my Lords, that a rigid, one size fits all approach risks crowding out innovation, flexibility and ultimately better outcomes for savers. Schemes are not identical, nor are their members, and it is entirely right that providers should be able to design different default arrangements to meet different needs.

So amendment 105 A is especially important in this regard. It would require regulations concerning the operation of the scale provisions in clause 40 to have regard to innovation and competition. The government have said time and time again that they are pursuing a growth mission and that growth will underpin their ability to fund day to day spending. Yet it's very different, my Lords. What we have seen instead is ever greater reliance on taxation to plug the gap, something which is not only economically damaging but ultimately unsustainable for the country.

And the noble Lord, Lord Palmer, put it well. But if the government are serious about growth fostering innovation and competition like pensions, recognising and ensuring that innovation is not stifled is a practical and constructive way to support that mission. So this amendment does exactly that. It ensures that in shaping the regulatory framework, the government actively considers the importance of a competitive, innovative market and one that delivers for savers and contributes to the wider economic growth. So for those reasons, the government should accept this amendment.

And should the noble Baroness, Lady Noakes, wish to test the opinion of the House, we would be glad to support her here.
14:21
Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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I'm grateful to the Lady Baroness Noakes for introducing her amendments. The government thinks it's essential that pension schemes it's essential that pension schemes remain competitive post scale, and we expect that schemes with scale as well as market disruptors will continue to innovate and to drive competition. Indeed, we actively encourage competition through the provision of the new entrant pathway to allow new innovative schemes to enter the market. The scale measures place a requirement for a main scale default arrangement at the centre of the scheme to deliver scale and the benefits that can bring.

Amendments 114 and 115 relate to measures on consolidation and addressing fragmentation within schemes that are in the market, but there is currently significant fragmentation within the market, with high numbers of default arrangements that don't ultimately serve member outcomes. While I recognise that much of the fragmentation is a product of history in contract based schemes, we have seen the number of default arrangements is increasing across the market and in a number of master trusts. We do not want to see the same issues arising over time as existing GPPs, where members are in too many default arrangements that don't offer value.

But let me be clear. The measures in chapter four do not cap or limit the number of default arrangements, nor do the impact on the ability of a new entrant to enter the market and stifle. Excuse me, excuse me. Sorry. Apologies. I'm so sorry. Yeah. No. I'm fine. I've got my throat. I'm so sorry. Nor to the impact on the ability of a new entrant to the market. Because what we want to see is default arrangements being created where this meets and continues to meet genuine member or employer need in tandem with the scale measures.

That is why we are introducing measures to prevent new default arrangements from being operated without regulatory approval, and carrying out a review into current arrangements to establish where they should be consolidated, or the reasons for them to continue. Amendment 114 seeks to require the review of default arrangements to consider the extent to which arrangements contribute to innovation and competition. I agree with the spirit of this amendment, but I do not think it's necessary. The review must already consider the circumstances where it is appropriate for Non-scale default arrangements to continue operating, and it is right that competition and innovation will be part of that work.

The review will consider how competition and innovation have driven the operation of Non-scale default arrangements, and what they're expected to deliver for members. Amendment 115 seeks to require that regulations under clauses 42 and 44 will have regard to competition and innovation. Again, I agree with the intention behind the amendment, but I think it's unnecessary. Let me explain why it's reasonable to expect that the regulations which set out the criteria in which regulators can approve new default arrangements, will include innovation and competition.

Indeed, we would expect these arrangements to be meeting a specific need or offering something different to the market. It's also reasonable that these will be considerations in setting out where Non-scale default arrangements will have to be consolidated. However, as the bill sets out, those regulations already have to take into account the conclusions of the review and that will consider Competition and Innovation Amendment 105 A seeks to require regulations across the scale, measures to have regard to innovation and competition. I reiterate the government's support for an innovative market, and we expect providers to continue to innovate.

This amendment is not needed to achieve this. But while well intentioned, the duty that the amendment will introduce my Lords ignores the policy objectives of the scale measures and the benefits are expected to bring. To be clear, the benefits of scale include lower charges, diversified investments and improved governance. We are already creating space in the market for innovation through the new entrant pathway, and as previously outlined, we still expect the market to be competitive. More than this though, we need to remember something crucial about the nature of the DC market.

A competitive market is vital, but we also have to recognise that the ultimate beneficiaries, the members, do not select their scheme. That's done by the employer. Employers are the decision makers on pension provision. They're the buyers in this market and they will try to do the best for their workforce. But ultimately, of course, their focus will be on current rather than past employees. Therefore, we need to drive schemes to deliver for all members, not those who are just those who are actively contributing and too narrow.

A focus on competition and innovation will not

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do this. The needs of members should be paramount. For the noble Lady. Proceeds.

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For the noble Lady. Proceeds. Could you just tell us do competition and innovation feature

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competition and innovation feature at all? On the face of the bill? No. Lord McCrea of course, there is an innovation pathway and therefore clearly there has to. Innovation clearly there has to. Innovation has to be in that. The innovation pathway is the innovation pathway. So it clearly is in that. And I've So it clearly is in that. And I've set out on the record my expectation of what will be considered in the review and the fact that the regulations will have to take account of what the reviews happen.

So I hope that satisfies her. But the needs of members should be paramount. It's right the government is acting to protect them and to drive schemes to have the capability and capacity to deliver better outcomes. So, my Lords, I hope the noble Lady can see we share the same overall objectives and the bill, as drafted accommodates the intent of her amendments and she feels able to withdraw them.
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15:02
Lord Keen of Elie Portrait Lord Keen of Elie (Conservative)
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weaken the level of protection afforded to members? Is there any scenario in which this more flexible, percentage based approach could permit lower funding levels than would otherwise have been required? Thirdly, how does the Secretary of State intend to determine the appropriate percentage? Will there be a minimum floor, or is this entirely to be left to future regulations? And finally, given the importance of this safeguard, can the Minister explain why it is not being set out in the face of the Bill, and what level of parliamentary scrutiny will apply to the regulations that are determined? So, my Lords, flexibility can be valuable, but when it comes to member protection, it must be accompanied, we believe, by clarity and by robust safeguards.

So I do look forward to the Minister's response.

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I'm very grateful to the noble Lady Baroness Altmann for for her support, and I know that she support, and I know that she recognises the problem that this is designed to solve and why the government has done this. In response to the noble Viscount response to the noble Viscount Viscount Younger. I obviously completely fail, but I thought my speech explained the problem which was designed to solve. So let me was designed to solve. So let me let me try that again. These are these are circumstances where it's these are circumstances where it's unusual, normally.

Maybe, just maybe, I'll say it again slowly. That might help. Which is a comment on my speed, not on his comprehension. If I may say so, under the Superfund supervision framework that the bill is establishing, there's only there's only an interim arrangement at the moment. The bill is establishing a permanent supervisory framework for super funds, a breach of the technical Professional Technical provisions threshold can result in the scheme's buffer being released to the. The trustees. So there are two different things.

Whereas on the other hand, if you breach the protected liabilities threshold, that can result in the Superfund being wound up. If those end up being breached in not in the traditional order, it could end up with a Superfund being obliged to wind up when in fact it. Possibly it could meet meet its liabilities other than because of this issue. So that's the problem. I've tried to explain that more simply, and I apologise. I didn't do so more clearly at the start. That's the problem.

We discussed it in committee. Baroness Bowles had an amendment and we had a conversation about this in committee. So that's the problem we're trying to solve.
15:04
Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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I did say at the time we could basically it can't be necessarily a member's interest to force a Superfund to wind up where it's Superfund to wind up where it's when it's technical provisions are lower than it's protected liabilities. If it could otherwise meet its liabilities. So I did say meet its liabilities. So I did say that there was an option in to use to use a clause in the bill, basically to, to deem that a threshold hadn't been breached. But actually, if it's going to potentially be a more common problem, then it makes more sense problem, then it makes more sense to find a way of dealing with that in the way that we have.

So the the threshold will be set and the way we've gone about it is about providing flexibility to make sure schemes aren't unnecessarily wound up. We currently do not expect to set the threshold below PPF levels of benefits. I suspect that's what the noble Viscount Eccles was shooting at, so that isn't what we intend. The focus is on ensuring the best possible member outcomes and protecting the PPF. But until the evidence gathering is complete, it wouldn't be appropriate for me to speculate precisely on where that will be set.

But I can simply say that to him that that that that is the that is the case in terms of how it will be provided. These will be regulations, and therefore the regulations and regulations will be subject to the affirmative procedure. So when that comes back here, there will be an every opportunity for the House to to discuss them. So I hope that satisfies his questions. But, Lourdes, if there's nothing else, then I'd beg to move.

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Amendment 116. The question is that this amendment be agreed to. that this amendment be agreed to. As many as of that opinion will say content of the contrary, not content. the contents of it. content. the contents of it. Amendments 117, 118 and 119. Move Amendments 117, 118 and 119. Move formally. En bloc. The question is that amendments 117 to 119 en bloc that amendments 117 to 119 en bloc be agreed to. As many as are of that opinion will say content of

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the contrary, not content. the contents have it. My Lords, I beg to move that further consideration of report. Be

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now adjourned. The question is that further consideration on report be now consideration on report be now adjourned. As many as are of that opinion will say content the contrary, not content. The contents contrary, not content. The contents have it. Questions on a statement made in the House of Commons on made in the House of Commons on Tuesday, the 17th of March, and on
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Earl of Courtown Portrait The Earl of Courtown (Conservative)
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stand ready to support operations there, as well as all the officials, diplomatic and consular staff who diplomatic and consular staff who are working under great strain. I also thank our Gulf Cooperation Council allies for all that they Council allies for all that they have done to support British nationals in the region. Can the nationals in the region. Can the noble Lord, the Minister, provide the House with an update on the support that is being provided to British nationals in the region? And my Lords, in the case of Craig and Lindsay Foreman, this has been raised on a number of occasions in your Lordships' House.

The impact of the ongoing Middle East conflict is clearly extremely worrying for them and their family. Can the noble Lord, the Minister, please provide a further update on the work Ministers and officials are doing to support them and redouble our efforts to secure their release? Turning to the itself, my Lords, Iran has attacked our military bases. They currently hold British nationals captive. They have indiscriminately attacked states across the Middle East, and they are blocking the Straits of Hormuz. In that context, we cannot be silenced.

My Lords, Iran's actions have implications all over the world, and they will in particular affect every British household through higher energy prices. Earlier this week, it was reported in the Times that the Prime Minister was weighing up the legality of whether Britain can join the US military operation to reopen the Strait of Hormuz. On the issue of international law, can the noble Lord the Minister, confirm whether it is the view of His Majesty's Government that Iran has violated the UN convention on the law of the sea, which includes the right to transit and while we are on this subject, can the.

Can the noble Lord, the Minister, say whether Iran's indiscriminate strikes across the Gulf region are lawful. And finally, if international law serves to protect rogue states, does she accept that international law will have failed? My Lords in Iran is seeking to hijack the global economy. And my noble friend the Earl of Effingham asked the Energy Minister earlier today about the steps to protect British households from rapidly rising energy costs as a result of Iran's actions. Can the noble Lord the Minister, update the House on the work Ministers are doing with our international counterparts to ensure the smooth transit of vessels through the Persian Gulf? My Lords, reopening the Strait of Hormuz must be the priority, but we must develop and secure our domestic supply of fuel.

Can the noble Lord, the Minister, say whether His Majesty's Government will approve the jackdaw gas field development? Finally, my Lords, we mustn't forget the appalling conduct of the Iranian regime. They have murdered their own citizens in droves simply for calling out for democracy. They have refused to cease their pursuit of nuclear weapons, and they have been responsible for unacceptable, illegal, state sponsored activity on our own shores. My Lords, I look forward to the noble Lord. The minister's response.
15:10
Lord Purvis of Tweed Portrait Lord Purvis of Tweed (Liberal Democrat)
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My Lords, I join with the noble Earl in commending the commitment Earl in commending the commitment to our country, of our servicemen and women. And it is of deep regret and women. And it is of deep regret that they are in a position where they are having to risk their lives on an unlawful and unwarranted conflict. It was on the 2nd of March in this House that the Leader of the Opposition said that when President Trump called, the UK should have answered and the UK should have been fully involved in all of the offensive actions in this unlawful conflict unleashed by President Trump, with Prime Minister Netanyahu, whose government.

If we had heeded this, the UK would currently be bombing civilian areas in Tehran. It would be targeting energy installations. And because of the impact then on the Strait of Hormuz, we would be seeing the consequences now of the UK as a result of that, it was a major strategic error on the behalf of the Conservative and Reform opposition in seeking to tie us directly with President Trump's decisions, especially in the context of two more than two weeks into this war, we still don't know what the justification was, and we see no clarity on any end game or a lack of strategy as to what will be next.

The opposition asked us to be fully part of the measures for regime change two weeks ago. They are now silent on this issue and it is, I think, appropriate for them to state what the position is. However, this is the government's statement and the Minister will answer for the government and I will have a number of questions in a moment. One of the consequences of today, however, is we are seeing the concerns on energy prices in the United Kingdom.

This was a wholly predictable outcome, and also the fact that we did hear earlier in questions the fact that we are now seeking to have greater UK domestic production to try and mitigate this as a fundamental misunderstanding of how the global energy market works and how the United Kingdom is part of it. There is nothing that is a direct correlation between greater North Sea production and greater domestic consumption. And even if there was, North Sea product is traded on the global market and therefore the impact on the global energy on the global oil and gas market has a direct consequence on the United Kingdom, we export almost as much oil that we produce from the North Sea.

Because of the complexities of the UK energy market. So given all of this, what actions will the government take to seek to try and prevent some of the extremes? If the trajectory of the energy prices go up, and what package of support can there be, particularly for the most vulnerable, who need the energy, who need the fuel, and those living within rural areas? What is the latest with regards to our government? Speaking with other like minded countries who are seeking to mitigate, mitigate against what could potentially be even worse consequences? Can the Minister state whether or not there have been any British Ministers who visited the region since the start of this conflict, and if so, who have they met and what are our priorities for that? For those diplomatic dialogue turning to of great concern in Lebanon, the noble Lord, on behalf of the government, spoke very clearly at this afternoon at the Dispatch Box, and I agreed with everything he said with regards to the government's position on the concerns for Lebanon.

It is extremely worrying to hear senior political figures within Israel talk about cleansing part of Lebanon and creating buffer areas. What is becoming apparent is the tactics that have been used in Gaza may well become the tactics used in Lebanon, and that is a consequence. The consequences of that, given the. The UK support for sovereign territorial integrity for Lebanon should be significant. So what consequences would there be of the Netanyahu administration if indeed there are territorial incursions into Lebanese territory? And what is the UK government doing to ensure that there are protection of civilians? This should not be discretionary in conflict protections of civilians as mandated under United Nations in international humanitarian law.

And we are seeing far too many civilian areas being targeted. And what is now becoming apparent is potential of collective punishment for certain parts of the Lebanese population that we've seen elsewhere. The area where I perhaps if I had asked a question to the noble Lord Lemos earlier, it might have been just to follow through what he did say accurately, that the UK has been a very major supporter through official development assistance for Lebanon over many years, £850 million.

I recall him saying. The next sentence, however, is that what our current level of capacity is an 88% cut in what the UK is providing to Lebanon on a humanitarian crisis, which is now almost on a par of what it was in 2014, and the £30 million humanitarian support has been uplifted with a further amount is less than a quarter of what the UK provided in 2014. So the UK is simply, in many respects, not at the table when it comes to humanitarian support.

There is also the very considerable concern that there is likely to be an on going cycle of violence, trauma of civilians and this includes the Israeli population who are having to withstand unjustified attacks from Iran. But we are also seeing continuing violence within the Palestine Territory of West Bank. What is the latest from the Minister with regards to our representations to the Netanyahu administration on the West Bank? And have we warned them that there would be repercussions if there is moves for attempts for full annexation? Former Prime Minister Olmert has warned of this, and we should be equally warning of the consequences of it.

Now, finally, I wish to ask the Minister, who will probably not be surprised to hear me make an appeal to the government on the associated issue of Sudan. So many of the consequences of what's happening within the Middle East and with Iran has consequences for the world's worst humanitarian crisis in Sudan. And what are the latest actions from the UK as the penholder to seek an end to that war and for there to be sustainable civilian government for that country? And before I sit down, I just want to close by saying that whatever our differences and perhaps on this conflict compared to previous previous ones, there are differences across this House.

These benches are resolute that we believe that the Jewish population in this country should not be held to account for an external foreign government, and there should be no excuse for anti-Semitism on our streets in the United Kingdom. And some of the incidents that we're seeing recently are deeply troubling. And likewise, the growth in Islamophobia, especially against young Muslim children in this country, is utterly unacceptable. I wonder if the Minister would seek to convene cross-party talks, because there is likely to be even worse incidences, and we need to be united across this House to ensure that both of those are completely unacceptable and they are stopped.

Amen. Well.
15:19
Lord Collins of Highbury Portrait Lord Collins of Highbury, Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office) (Labour)
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I think both know the Lords for >> I think both know the Lords for their questions and contributions. And can I join both noble Lords in And can I join both noble Lords in sort of actually acknowledging the service of our our people in in the region, covering a whole range of services, not just military people, but diplomatic staff and consular staff doing a really amazing job. And can I just start with the last point the noble Lord Lord Purvis made, which is in relation to our community cohesion, and we address that issue on Monday.

And I think it's really important that we do actually speak with one voice about saying how anti-Semitism and the rise of anti-Semitism is absolutely unacceptable, and that applies also to Islamophobia. We've heard some, you know, comments from, sadly, members of the opposition on that issue recently about people praying in public. And I think that was totally unacceptable. But I do think that we do need to come together to ensure that community cohesion, because there is no way anyone can be responsible for something like what's going on at the moment.

Can I also just share? I mean, I think whatever our opinions and you know, the noble Earl. Mentioned this in terms of our response. And I do agree with the noble Lord Purvis. I think the opposition and certainly those leaders of reform have gone from taking a very strong you know, we must take action. And now they're reconsidering the position. And I do think the Prime Minister has been absolutely correct on this. And as he said on the 16th of March, leadership is about standing firm for the British interest, no matter the pressure.

And I believe time will show that we have the right approach right on the economy and the cost of living, right on defence and energy and right on this wall in the best interests of the British people. Can I just say, in relation to the Straits of Hormuz, we continue to work closely with our allies on the range of options to support commercial shipping through the Strait, as the threat picture develops, and as the Prime Minister said today alongside partners, we are ready to contribute to appropriate efforts to ensure the safe passage through the Strait.

We know the impact that it's having on the global economy, the global energy markets and more importantly, our communities here, people you know, and I, you know, I would just repeat to the noble Lord Lord Purvis, Prime Minister announced yesterday, we are providing £53 million to support those households who are most exposed. But as the you know, I mean, it's not just working with allies in terms of the the Strait of Hormuz, but the Energy Secretary has spoken to BP, shell and natural gas in the last few days.

And their primary concern is the safety of vessels passing through the strait. As you'd expect, their duty of care towards their employees in the face of ongoing threats from Iran. But more broadly, the DfT constantly monitor UK shipping and we are working very closely with allies, as I say, but also providing advice and guidance where necessary. But as part of their work, the Chancellor and the Economic Secretary to the treasurer have both spoken with Lloyd's of London over the last week to ensure there is appropriate insurance cover available for operators in the light of ongoing conflict, including policies to cover businesses for losses and disruption caused by the war and civil war and revolution.

Can I civil war and revolution. Can I just also stress that, you know, we absolutely are focussed on our consular work. And Mr. noble Earl has said, you know, we've had over 101,000 British nationals have returned to the UK since the start of the conflict. And those that and this includes those who returned on the six UK government charter flights from Muscat in Dubai. And we will continue to work with airlines to increase commercial capacity and the volume for British nationals.

And certainly commercial options have increased. And on Sunday we saw 35 flights carrying over 8000 nationals arriving back and there is an estimate of a further 300,000 still remaining in the region. And obviously what consular support we can give you give. He also I mean, can I reassure the noble Lord? We are taking every effort to support the couple who've been detained well, arrested and detained. We are doing everything to our consular support there. And obviously that includes.

Consular people working. Can I just say in relation to the Lord Purvis question, but it relates to noble Lord. Obviously, our diplomatic relationships with Iran enable us to ensure that we can make those clear representations. And certainly, you know, one of the things that my. I'm aware of that the my, my right hon. Friend, the Minister for Mena, Minister Faulkner, has called the ambassador here in to make those representations strongly, as well as trying to provide consular support.

And, of course, the noble Lord Lord Purvis said, what what ministerial engagement have we had? And certainly Minister Faulkner has been constantly engaged with both commissioners and embassy here, but also many, many phone calls. And of course, the Foreign Secretary visited Saudi Arabia on the 12th of March to demonstrate support for regional allies, and particularly the Gulf Council. And we're absolutely with them. And she saw the defensive support that the UK is providing in response to the immediate Iranian strikes, and discussed how the UK and Gulf states are working together to address the threats to energy, civilian infrastructure.

And our priority is to make sure that we can keep the economy moving, because that is what helps us back at home. And certainly our Saudi partners are playing a critical role in protecting civilians and critical infrastructure, including over 25,000 British nationals who call Saudi Arabia their home. And, of course, the Foreign Secretary has also spoken with leaders across the wider region, including G7 partners, about that. Can I just turn to the humanitarian situation in, particularly Lebanon, as the noble Lord Purvis mentioned? And it is potentially, as we discussed earlier on with the oral question, to which my noble friend responded to Lord Lemos.

It is a critical situation, and not only did we sort of initially announce 5 million, we've added another 10 million to make £15 million to a humanitarian assistance to both Lebanon and to neighbouring areas. And I think as we've heard, the situation is incredibly dire with infrastructure and bombing, and we have certainly made our position very, very clear to both. I mean, we've we've condemned the escalation and we've been very clear. And the Foreign Secretary has been very clear to all sides that further escalation of this conflict is in no one's interest.

Hezbollah must cease its attacks on Israel. And we've been clear with the Israelis that they must not expand this war further into Lebanon, and that they must do everything to protect civilians and to comply with international humanitarian law. And I do appreciate the noble Lord Doyle Purvis mentioned Sudan because it's often I mean, we've got the current situation where this conflict taking our eyes. We've heard from President Zelensky this week who was in Parliament, who made it absolutely clear that, you know, Putin must not benefit from this conflict.

And we have been very clear about that. But also we must understand that the conflict many of the the the sides within Sudan have had support from the players who are now involved in this conflict. And what we've got to do ensure that we don't forget Sudan and that we absolutely keep it high and that we absolutely keep it high up the agenda, I think I've got no doubt that we'll cover more points, but I just I just want to conclude that, you know, we are absolutely engaged in supporting our allies.

We're absolutely determined to do what we can in terms of defensive measures to protect our interests. And we will continue. As the Defence Secretary visited Cyprus earlier this week to ensure that we take all possible actions to do that.
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Lord Collins of Highbury Portrait Lord Collins of Highbury, Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office) (Labour)
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Well, I think both the Foreign >> Well, I think both the Foreign Secretary and the Prime Minister's been made, been very clear that the been made, been very clear that the solution relies, you know, the the most important outcome is a negotiated settlement, an agreement that will resolve the end, achieve the end of this war. But the Straits of Hormuz do present us with a problem. But it's incredibly you know, the situation. Why we are in detailed negotiations with all our allies is because, as the noble Lord accepts, what we are facing now is much more different from what we faced ten, 20 years ago.

Technology has changed the, you know, as the Foreign Secretary said, in the other place, you know, we don't just have air drones, we have sea drones. There are different things. So it's not just about, you know, guns along the bank. And we have to actually understand that. So but it is important that and we are actively working with our allies to see how we can address this, because I think it was either the noble Lord Purvis or the noble Earl. And by the way, I should have mentioned happy birthday to him.

It's, you know, dealing with this statement at the end of the week is not a, you know, not a birthday occupation. But I do I do think it's absolutely important that we do see that. Actually, I think the noble Earl referred to international law and the law of the sea. Absolutely. You know, the law of navigation and trade is absolutely the number one priority for the UK in terms of its ability to trade and be economically viable. So we are going to continue to work with our allies.

But the noble Lord is right about at the end. We need a negotiated settlement.
15:35
Baroness Uddin Portrait Baroness Uddin (Non-affiliated)
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My Lord, my Lord, may I thank the noble, the Minister for repeating the statement and associate with him the very constructive way in which he and thoughtful way in which he has responded. May I also associate myself with all the other other comments made by noble, particularly with Lord Purvis of Tweed, because of the issues that he's raised on Sudan? My Lord, may I ask the noble Minister that he. Would he accept that there is no hierarchy of wrongs, whether it's the attack by us and Israel on an unprovoked war on Iran and its population, or Iran itself conducting blatant disregard of human concern in all and and pouring wars on its neighbours.

So may I condemn utterly both those actions? Does Minister accept that there was a peaceful solution? According to the Oman Minister in place, and that that would have been possible if international laws had not been broken? My two questions are can noble Lord, the Minister, assure this House that in our measured action and I congratulate our government in the way that it has so far conducted itself, that no support is provided in killing of innocent civilians in Iran.

And my other question is, Minister, will be aware that the Al-Aqsa mosque has been closed to Palestinian Muslims for prayers at this very auspicious time, and tomorrow is Eve. Has the Minister had any opportunities to make some representation to say that this should be open to Israeli government? And lastly, may I wish all those who are going to celebrate the month end of month of Ramadan and Eid Mubarak to everyone.
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Lord Collins of Highbury Portrait Lord Collins of Highbury, Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office) (Labour)
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Well, can I just say, I mean, I >> Well, can I just say, I mean, I think I've indicated what the sort of nature of the regime in Iran and of nature of the regime in Iran and it's way that it has undermined and attacked not only people within their own country, but what they've been doing across the globe. And that is why, I think since the UK has now has over 550 sanctions against Iranians in linked individuals and entities, including not forget, the IRGC, which was has been sanctioned in its entirety.

Over 220 designations have been imposed since this government came into office. So it's our long standing position. As the noble Lady knows, under successors successive administrations, not to comment on the detail of security and intelligence matters, including whether or not a specific organisation is being considered for prescription. But we do recognise, as the noble Lady, quietly point out, the threat posed by the IRGC and we will not hesitate to take the most effective measures against the Iranian regime.

The separate list of proscribed terrorist organisations is kept under review, and certainly the threats to the UK are kept under review. But I would remind the noble Lady that we have made a commitment. Jonathan Hall QC, as the independent reviewer of terrorism legislation, has examined how the UK's legal framework should address hostile activity by state actors and entities, and we are committed to taking his recommendations forward.

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Lords. My Lords, my Lords, can I.

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Lords. My Lords, my Lords, can I. I thank the Minister for. His statement. And applaud the Prime Minister and the government for the way and the government for the way they've responded to the crisis in the Middle East all the way through, both in relation to the British both in relation to the British people abroad and the entire international situation. I speak as
15:42
Lord Barber of Chittlehampton Portrait Lord Barber of Chittlehampton (Labour)
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international situation. I speak as the foreign FCDO envoy on Palestinian governance. I've been there regularly over the last couple of years. I'm trying, in a small way to assist the Palestinian Authority build an effective Palestinian state with the rule of law for the future. This is fundamental work. If we want a two state solution in the future. Lord Purvis raised the West Bank in his remarks, and I'm. I'm grateful to him for that. The West Bank is currently suffering quite significantly from a tightening economic stranglehold, where the tax revenues are collected by the Israeli current Israeli government and not transferred regularly to the Palestinian Authority.

So most public sector workers are on a small proportion of their salary, 25 or 30%. In addition to that, there are a thousand checkpoints across the West Bank, and in some cases there is settler aggressive violence. It's making the growth of the economy. No, never mind the governments of the West Bank ever more difficult. But there are some very, very powerful, effective, thoughtful, constructive Ministers in the Palestinian Authority. And I'm delighted that the British government is doing its best to help them.

My question to the Minister is, does the Minister agree that this is a time with all the other distractions in the Middle East to continue that work to strengthen the Palestinian Authority and, if possible, to make their work even stronger and more effective. Well done.
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Lord Mohammed of Tinsley Portrait Lord Mohammed of Tinsley (Liberal Democrat)
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All the words of my noble Lord Lord Purvis, in particular around Lord Purvis, in particular around conflicts abroad should not result in hate on our streets, and I fully. in hate on our streets, and I fully. His call for a cross-party kind of meeting of senior members of your Lordships' House to look at how we can work together to ensure that both anti-Semitism and Islamophobia is not allowed to spread. Given what's happening in the Middle East. Could I also wholeheartedly back your comments around what's happening in the West Bank? And clearly those incidents are heartbreaking to see individuals being attacked.

Often it's not just a young, but also the elderly have just been brutalised, beaten up for no reason other than the fact that they they live there and anyone. I think your Lordships' House should be very clear that anyone that's involved in those. The United Kingdom government will take strong action, including sanctioning further individuals. Can I just pick up on a point that's not not me mentioned so far, and that's the whole phase in Yemen, because at the moment they've stayed out of this conflict.

But what assessment has His Majesty's Government made about if the Houthis were to enter this conflict, and what impact that would have, particularly on trade? But also at the moment, we've had a huge attention on fuel and the fact that the energy prices are also affecting both domestic and as I mentioned earlier in the earlier debate, energy intensive industries such as steel in in the likes of South Wales, South Yorkshire and Scunthorpe.
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