Pension Schemes Bill

Baroness Bowles of Berkhamsted Excerpts

Committee stage
Monday 12th January 2026 Grand Committee

[Lord Wigley (PC)]

My Lords, I apologise that I, too, missed Second Reading, for reasons outside my control. When you are in a party with two or three Members, it is very difficult to spread yourself in all directions. I have an interest in this area going back to when I was a trustee of the National Assembly’s pension scheme some years ago and, before that, I had involvement as financial controller of the Hoover Company and with Mars Ltd, which is one of the foremost companies in these islands.

I want to flag up one point as we look at the generalities in this comprehensive umbrella amendment—the position of employees such as those of Allied Steel and Wire in Cardiff in 2002, who found themselves on their backs without adequate safeguards for the pensions that they had. Over the almost quarter of a century since, those still surviving did not get justice out of the system. Whatever balance we have to strike in terms of risk—which is inevitably part of the equation—benefits, security and the longer term against the shorter term, we must also have some safety nets for those who fall through, through no fault of their own, as did the employees of Allied Steel and Wire.

I commend the Government for the steps they have taken for the coal miners, who have been in a difficult position, but if the coal miners were justified so are the workers at Allied Steel and Wire. I draw to the Government’s attention that the First Minister of Wales, the noble Baroness, Lady Morgan, spoke about this last month and called on them to take action to recompense those who have lost out so badly.

[Baroness Bowles of Berkhamsted (LD)]

I no longer have any financial interests to declare, having retired from the board of the London Stock Exchange at the end of 2025 after a long tenure, although that indicates that I have some history in that regard. I also have a history of policy engagement with local authority pension funds, the Local Authority Pension Fund Forum and IPO test marketing with various local authority pension funds. That is for background, so that people can understand some of where I have obtained my information.

I added my name to this amendment because I thought it was a good idea to have a list of purposes. We have before us a very long list of regulatory empowerments and, in some places, to do with value for money, I put a little list on the front of them. Somewhere or other, whether in this proposed list at the front, listed throughout or as a mixture of both, it would help us with structure and understanding. We ought to make our Acts of Parliament as readable as possible for the non-specialist. It is also quite important in that regard. It may not be a perfect list; you could ask for “more” instead of “greater” or take the “-er” off the end of words and make it look like it is not criticising. I do not want to go into that, but I did not take it as a criticism. I thought it was a list of what we are trying to do to make things better and, on that basis, I support it.

I would be very pleased if we could all work together to build a list that we were all happy with and that reflected a true convergence of minds. During the passage of the previous Pension Schemes Act, there was an awful lot of working together to try to find the right wording. The Minister was on this side then, and we went through it together with many of the other people in this Room. We should be getting something good up front that tells everybody what it is about, not using it as a way to tie the Government’s hands. I do not look at it like that; I look at it as something that is explanatory. But if it helps in the interpretation, so be it.

If we cannot produce a list like that, I have reservations about whether one should go forward and jump straight into a list. If you do not want it here, you have to put one in every clause, so maybe it is better to try to do a shorter one here. Those are the reasons why I support the amendment. I support the principle of it, and I am more than happy to work at trying to make it something that everybody could sign up to.

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I appreciate that I have spoken for some time on this group, but in a Bill as technical as this, it is important to set out the rationale behind the questions that I am asking. I thank the Ministers in advance for their responses. I beg to move.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I share some of the concerns that have been expressed. I added my name to Amendment 6, and I could have added it to Amendment 5 as well. Before I go further, as it is an early part of discussing this Bill, I should say that I am a great supporter of the notion that there should be investment in productive assets that support the UK economy. Although I am not that heavy on mandation, if anything I lean in that direction quite a lot. It is obviously done through advisers, and maybe that is one reason for being concerned about advisers—perhaps they have pushed it too much the other way in times past. Noble Lords can take it as background that I am very supportive.

I am concerned about too much forcing of particular kinds of investment, and restricting the routes to those investments or the resistance of the opportunity if the trustees think that it is not the right thing to do. That is why I have some support for Amendments 5 and 6, because I think they may go too far. One of the good things about Clause 2(3) and (4) is that they are optional. However, it still hints at a lot of things that could be done.

I am concerned about any kind of dictation on which advisers can be used, because they have been very powerful. If there is any control over which advisers are used, that is another way of controlling the fund. Given the obligations of trustees to consult advisers, and the liabilities attached to that, they have to remain independent. That is the direction that I am coming from; therefore, I do not want the Bill to give powers that could go too far. That is why I added my name to Amendment 6, and why I have some sort of regard for the content of Amendment 5 around the investment opportunities.

[Lord Davies of Brixton (Lab)]

This group is about asset pools in the Local Government Pension Scheme. I had not intended to intervene on this group, but I want to comment on the remarks made by the noble Viscount, Lord Younger, in introducing this group of amendments on the Local Government Pension Scheme. I am relatively agnostic about asset pools. I am not sure that I am totally convinced by the Government’s line that big is necessarily beautiful, but I am open to that debate.

In introducing this group, the noble Viscount set it in the context of a large group of amendments introduced on much wider issues around the Local Government Pension Scheme than were originally expected—it was really just about investment in the Local Government Pension Scheme—and at a very late stage. It makes no difference to me personally, but fundamental questioning of the structure, running and management of the Local Government Pension Scheme was introduced at such short notice; we found about it only on Thursday or Friday. I can live with that, but I think that it was a little unfair to the people working in and running the scheme suddenly to produce this level of uncertainty. That was unwise. When you want to discuss these things, you start talking to the people involved first, but it is my understanding that it came out of the blue and everyone was totally surprised. Obviously, the issue was always there for discussion, so the fact that it has come up is not a surprise, but doing things at this moment and in this way was unfortunate and is causing problems for those trying to provide the pensions.

I believe that the fundamental premise introduced by the noble Viscount is wrong. The Local Government Pension Scheme is a notable success. Rather than setting up inquiries to discover what went wrong, we should be inquiring about what it got right, because it provides good pensions for a large number of people providing essential services. The average pension in the Local Government Pension Scheme is £5,000; that is because the scheme provides pensions mainly for people on low pay. It provides good pensions for people—often, for women with part-time jobs. It does so in a way whereby, in the forthcoming valuations—as I will expand on and discuss at greater length when we get on to the eighth group of amendments, because that is where the substantive discussion will take place—it faces a better record than private sector occupational pension schemes. We should be looking at its success and not, as the noble Viscount argued, the difficulties and failures.

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[Lord Katz (Lab)]

I am sorry; I probably misunderstood the direction of the noble Baroness’s questions. I had better write to her to set that out. I think it is fair to say that—this might help a little—in contrast to external advisers, because asset pools are solely owned by old GPS administering authorities, they exist to provide services of their interests and they do not stand to gain financially, even from partner funds taking their advice or providing poor-quality advice. I am not entirely sure that that gets at her question, but the point is that we do not feel that there will be that impact from limiting sources of advice. I will write to her to provide more detail on that point.

[Baroness Bowles of Berkhamsted (LD)]

I got a bit lost in the explanation, because the Minister also mentioned internal advisers. In replying, will he lay out where he thinks the advice is and what that power is doing? If it is providing a sort of override, as the noble Baroness, Lady Noakes, suggested, to a particular type of adviser, as I was trying to suggest it might, then that is unacceptable. Perhaps if the Minister just lays out exactly what is there, that might clarify it. I hope that he will tell us that he will not override anything.

[Lord Katz (Lab)]

That is very helpful. When I write to the noble Baroness, I will certainly make sure that we address the point around independent advisers. I appreciate the noble Baroness, Lady Bowles, asking for that kind of clarification, so my written remarks will address that point.

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I ask my noble friend the Minister: are the Government confident that, without specific references to social housing in the Bill, pension schemes will have the confidence that this investment sits appropriately with their fiduciary responsibilities? Do the Government consider that they have the necessary statutory remit to put policy and regulatory enablers in place to allow investment at scale in affordable and social housing by the LGPS and others? Will they ensure that the opportunity offered by the Bill to ensure that this happens is not lost?

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I will speak to my Amendment 12 in this group. I hate to disappoint the noble Lord, Lord Davies, but he will have to wait a while before we get to Amendment 10.

As I mentioned earlier, a few years ago I had engagement with local authority pension funds concerning investment opportunities that could be tailored to their own areas. I discovered that they did not want it only in their own areas. They wanted to look at wider areas that included nearby local authorities, in some instances, as well as those further away where the economic responses to recession had fared better. There were some that wished that they had not just invested in some shopping centres in their own area but also in some in London and the south-east that had not lost so much money. That is not what I was trying to involve them in at the time, but these were the examples that came to me.

Those that were in more rural areas wanted some action from the cities. They viewed local investment through a broader lens of meaning things that help localities generally. They wanted to invest in local-sized infrastructure, but not necessarily only in their own areas—especially where some of these things could serve their areas from the outside. There is an example of waste management in Milton Keynes that goes beyond its area. Another example is that of a local waste management facility that recycles all the waste from kitchens. Normally, because there is quite a lot of toxic stuff in it, that waste will go to landfill, but this facility deals with all the nasties and converts it into energy. That facility is not just of interest to the local authority area in which it sits but to other ones too.

There is no suggestion that I wish to compel this in any way; I just want to draw attention to the fact that my personal experience brought this, which I was quite surprised about at the time. There was a focus on saying, “Do good in your own area”, but there was also a desire for the diversity to do good in other areas as well. Maybe you need it under a separate heading, but I just thought I would table this amendment to draw attention to this point and to make sure that, when it comes to regulations, maybe it is in the mind of the Minister and others that there should be some wriggle room around what is defined as local.

[Baroness Altmann (Non-Afl)]

My Lords, I added my name to the amendment tabled by the noble Lord, Lord Davies, and I endorse his remarks. There is a clear need for social housing and I would be grateful if the Minister could explain to the Committee the impact of asset pooling and whether it perhaps interferes with funds from local authority pension schemes being invested in social housing.

There is a clear need across the country for improvements in the housing stock. Local areas can know what the need for build-to-rent might be or the need for social housing that is disability friendly or friendly for an ageing population. These areas are not necessarily the focus of some of the private sector housebuilders. Using this resource to improve the lives of local residents—perhaps it would improve the futures of pension scheme members themselves—as well as areas around the country, would be important and I would be grateful to hear the Minister’s views.

I also support Amendment 12, which was so well introduced by the noble Baroness, Lady Bowles. It is essential that the resources in both local and national pension schemes are invested to benefit local and national growth. The diversification benefits of investing in areas much wider than just the local area are clear in terms of using pension fund assets to boost long-term growth, which is an aim the Government rightly have.

I know the Government want to use pension fund assets to benefit Britain, and it seems that local authority pension schemes offer an ideal opportunity for that. If these asset pools can invest more broadly than just the local area, and local authority pension schemes are encouraged to have a diversification spread across the country, I hope that would be a significant improvement and a tangible benefit from the funding that goes into these schemes and from the strong position they have built.

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Moved by

[Baroness Bowles of Berkhamsted]

10: Clause 2, page 4, line 24, at end insert—
“(4A) An investment strategy under subsection (3)(b) may not specify preferences between comparable or competing investment vehicles.”

[Baroness Bowles of Berkhamsted (LD)]

My Lords, Amendment 10 says simply:

“An investment strategy under subsection (3)(b) may not specify preferences between comparable or competing investment vehicles”.


This concerns the same part of the Bill that we were discussing in the previous group. In other words, if the Government are taking powers over what assets pension schemes may hold, even if that is a reserve power, those powers must not discriminate between comparable routes to access those assets.

It is a defensive amendment. Why do I need to table such a basic safeguard? It is because, later in the Bill, in new Section 28C of FSMA, the Government do discriminate for DC default funds. It excludes listed investment companies even when they can hold exactly the same underlying assets as the favoured long-term asset fund, the LTAF wrapper. That is how creeping cartels begin. Who is to say such direction will not next be targeted at a local authority pension fund, many of which have historically favoured listed investment companies as ideal for local infrastructure investment?

The Minister’s letter, which arrived on Friday, explains how the Government are now creeping the cartel onwards. The letter puts this front and centre. The Minister confirms that the exclusion of listed investment companies is deliberate and that the purpose of these powers is to

“support the Mansion House Accord”.

We have already been alerted to the competition law risks around the Mansion House Accord. An article by competition lawyer Matthew Hall in the Times last May warned that the accord risked co-ordinated investment intentions that could raise competition law concerns, and that government encouragement does not create a legal exemption. Those comments came before we learned about exclusions. Government legislation—which would mean regulations, not just the framework of this Bill—could override competition law, but only with a clear public interest justification and far more scrutiny than cosy discussions behind closed doors.

Let us look at the public record. In public, the accord—from the ABI, the City of London and the Pensions and Lifetime Savings Association—refers simply to

“allocating at least 10% to private markets … and within that, at least 5% … to UK private markets”.

At the bottom, it defines UK private markets as being

“where the underlying assets are based in the UK”.

Thus, it is not looking at the wrapper they sit in; it does not exclude listed investment companies; and it does not require the use of LTAFs. It explicitly acknowledges looking through to the underlying assets.

In the Bill, that has been transposed to an exemplary asset list and a definition that deliberately excludes listed securities, and for that to cover listed investment companies, despite the fact that they are slightly different as they have exemptions for growth markets. Rhetoric has followed that anything listed is excluded. If the accord does not say it and no consultation or public document has said it, but according to the Minister it is being done in the name of the accord, something has happened in private—what and with whom?

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[Lord Katz (Lab)]

My Lords, I am grateful to the noble Baronesses, Lady Bowles of Berkhamsted and Lady Altmann, for this amendment. I agree with them that funds in the LGPS should not be specifying preferences between similar investment vehicles in their investment strategies. I fear that the rest of my response may well disappoint the noble Baroness, Lady Bowles, and—though perhaps not to such a great extent—the noble Baroness, Lady Altmann. I say in passing to the Committee that it is always good to hear consensus breaking out, even if it rather gets to the horseshoe theory of politics when it is my noble friend Lord Davies and the noble Lord, Lord Fuller. But let us try to end today’s Committee session on a positive note.

I will now go into the detail. Under our reforms, decisions on implementation of strategies, including selection of appropriate vehicles and managers, will be made by the LGPS pools, which will have the capacity and expertise to deliver the benefits of scale that we have discussed. It is the Government’s view that the draft regulations are already clear in that respect. This will be supported by guidance, setting out that investment manager selection is solely the responsibility of the pool. LGPS pools will make the decision on whether to invest through external managers and which managers to use, and there is nothing whatever to prevent them using investment trusts should they consider it beneficial.

This is where the space for disappointment potentially arises. I am aware of the concerns expressed in relation to the treatment of listed investment funds, notably investment companies and trusts, under the reserve asset allocation powers, which are relevant to DC pension schemes. That was set out very powerfully by the noble Baroness, Lady Bowles. The Committee will have the chance to debate these concerns when we reach Clause 40 and discuss Chapter 3, which deals with asset allocation for DC schemes.

To get to the heart of it, the noble Baroness, Lady Altmann, asked about the impact on the LGPS. To give reassurance, we are not excluding closed-ended investment funds from the LGPS. I can be absolutely clear that that is the case. We are not excluding them, and neither will local authorities be directed to exclude them. I hope that provides clarity as we discuss the LGPS elements of the Bill.

Having said that, we have had comments around investment and asset types, particularly from my noble friend Lord Davies, as well as others, on this group of amendments. We will take what has been said and consider it in time for the debate on this issue when we get to it in greater detail. In anticipation of that day—which we are all looking forward to, particularly at two minutes to Committee rising—I ask the noble Baroness, Lady Bowles, to withdraw her amendment.

[Baroness Bowles of Berkhamsted (LD)]

I will be as brief as I can. I thank all those who have spoken in the debate, particularly for the support that I have received. The noble Lord, Lord Davies, is to some extent correct in that this is a proxy for what comes later, but I wanted to give the Committee that reflection time over competition law issues, because it is not necessary: exactly the same will happen without defaming listed investment companies and doing them down. The channels of how the investments are going to go will be the same. But the Minister has still not answered the question. Who asked for the exclusion? It is not in the accord. We have been told that it is in the accord but, as I have explained, the wording gives the opposite direction.

We have been told by Ministers that it is the pension funds, or anybody except the Government. It is somebody’s fault that it is there. I regret that I think it is deliberate rather than accidental but never mind that as long as it goes because it is not necessary to defend what the Government want to defend. That would be fine by me. It is relevant to local government funds because they invest so much that way. Therefore, it was a genuine concern that a reserved power could begin to replicate the reserved power in new Section 28C. It was not a totally bogus proxy, if I could put it that way. I have elaborated the point; as I have said I can do much more yet. With that, I beg leave to withdraw my amendment.

Amendment 10 withdrawn.