Pension Schemes Bill

Baroness Griffin of Princethorpe Excerpts

Monday 23rd February 2026 Grand Committee

Frankly, however, it feels bizarre that we have before us today and are discussing a pensions Bill, and have a Government that say they want to bring forward statutory guidance, for which they accept they need a legislative base, yet there is no sign of an amendment to underpin the Government’s own proposed solution. That is something we will have to return to, and solve in one way or another, on Report. I hope that, in her response, the Minister with both reconsider her opposition to this amendment and address in detail the problems raised by the Government’s own approach.

[Baroness Griffin of Princethorpe (Lab)]

First, I welcome the Bill wholeheartedly. In this group of amendments, we have cross-party political working, which I am very proud of. Every child in the world deserves to breathe clean air.

I speak first to Amendment 212,

“fossil fuels and climate change risk”.

This new clause would require government and the FCA to make rules and regulations on climate risk grounds, restricting exposure of some occupational and workplace personal schemes to thermal coal investments, and to review whether the restrictions should be extended to other fossil fuel investments. I will not repeat what my friend, the noble Lord, Lord Sharkey, has said, but as noble Lords will recognise, this amendment does something that we have heard rather a lot about recently—taking powers to direct the investment of pension schemes—but in a narrowly defined way, with parliamentary and industry scrutiny, and with safeguards to prevent the power being misused.

In reality, the Government and Parliament, as noble Lords have said, have been directing pension scheme investments for decades. When the Brown Government established the automatic enrolment scheme, Nest, they set a policy of 0.3% annual charge, which forced even a very large scheme such as Nest to choose investments which fitted within that tightly constrained charging envelope. When the coalition introduced a charge cap on all schemes used for automatic enrolment, the 0.75% ceiling drove the smallest schemes to exit, moved smaller schemes into overwhelmingly passive investments and limited asset and private market allocations for all but the largest schemes. Theresa May’s Government legislated for trustees to publicly report their investment policies in relation to environmental, social and governance considerations—quite rightly so.

Each of these policies has been explained on the basis that they are in consumers’ and the wider public’s interest, as in Amendment 212 of the noble Lord, Lord Sharkey, to which I proudly added my name. The amendment is in the consumer’s interest, because the immediate power of direction in this amendment would be limited to thermal coal. Pension schemes do not routinely publish sector-level investment data, but early analysis suggests that schemes still invest somewhere around £30 billion in companies with thermal coal interests. While noble Lords have been talking about the long-term investment profile of social housing or infrastructure and its appropriateness for pension funds, this coal, as the noble Lord, Lord Sharkey, so clearly said, is an ultimate short-term investment. Even the International Energy Agency’s most pessimistic scenario shows that coal demand is peaking. These investments will fail in due course but, in the meantime, they do harm to the returns of other investments in their portfolios, as well as everybody else’s portfolios, by contributing to local air pollution and global climate change.

That is why ending these investments is in the wider public interest. The £30 billion UK pension fund investment in thermal coal supports the equivalent of about 10 gigawatts of thermal coal-fired power overseas. This, with some basic arithmetic, means that UK pension schemes’ thermal coal investment emits more greenhouse gases than the whole of the UK power network.

In this way, UK pension schemes have been undermining the progress made by successive UK Governments in phasing out coal, by contributing to fund the expansion of coal overseas. I do not intend that to be a criticism of the funds. Governments have not nudged them away from coal specifically, but they have been willing to nudge and direct in other areas, including in this Bill, and they should be willing to do so here in respect of thermal coal. I kindly request that my noble friend the Minister agrees to accept this gentle nudge.

I was pleased to add my name in support of Amendment 218A in the name of the noble Baroness, Lady Hayman. As she said, in response to a similar amendment on Report in the House of Commons, the Pensions Minister indicated that

“guidance will encapsulate those wider factors set out in his new clause … including what we mean by systemic risks and standards of living. There is good support in the industry for providing that clarity”.—[Official Report, Commons, 3/12/25; col. 1043.]

It is really positive that the Government have accepted the principle that bringing further clarity to fiduciary duties is needed to tackle confusion and uncertainty among trustees around how they should best carry out their responsibilities to deliver for members.

I am delighted that my union, UNISON—the largest in the UK with a membership of over 1.3 million—has written in support of this amendment. The amendment recognises that there are wide-ranging benefits in giving legal backing to pension managers who wish to act in their members’ best interests by considering long-term systemic considerations such as sustainability. Moving in the direction of refining investor duties to allow these types of systemic-level risks to be properly quantified and acted on will help future-proof the pension system in the long-term interest of savers. For those of us not yet at pensionable age in the UK, that is quite attractive.

However, issuing guidance is unlikely to provide the level of assurance required by trustees. That is because, as my noble friend knows, pension funds need only have regard to guidance, which does not represent a stable enough foundation for interpreting duties; nor does it insulate pension funds should they find themselves defending decisions in the courts. Without clear timeframes, trustees will be left unsure as to whether guidance could be changed in the future and how they should prepare for it. Leaving these matters solely to guidance risks perpetuating the current status quo, where trustees feel they do not have permission to act in response to system-level risks for savers. Accepting this amendment would, I hope, bridge the gap between the Government’s commitment to date and their objective of removing obstacles for pension managers. I hope that my noble friend will accept it.

[Baroness Coffey (Con)]

My Lords, I have tabled Amendment 218E, which is about recognising biodiversity risk. In the previous Pension Schemes Act, we introduced additions to the 1995 Act to allow regulations to come forward regarding climate change. The significant difference between that and Amendment 212 is that it in no way mandated an approach to investment but recognised the risk that would be there. We have brought together a well-established architecture, with the TCFD, the Task Force on Climate-related Financial Disclosures, and now the TNFD, the Taskforce on Nature-related Financial Disclosures. I pay tribute to David Craig for the immense work that he has done throughout all this. I think I am right in saying that well over 700 investors around the world, with approximately £22 trillion-worth of assets, are committed to start using the TNFD once we have the proper hierarchy agreed. Being positive about it is not unique to this country; we are seeing that around the world.

One of the reasons why I decided to table this amendment now is because, while I appreciate that it has taken time to get to where we are, I do not know when next there will be a pension schemes Bill. Let us hope that there will not be one for a while, because we know that the industry needs stability.

These are serious risks, as was highlighted in the Chamber today when the noble Baroness, Lady Hayman of Ullock, answered my noble friend’s question about the TNFD and the UK’s nature security assessment. It is not just about environmental risk—it has been made very clear by the Government that we need to think about that in the long term—it is also about a balance between food security and geopolitical security. I accept that not all of those are issues that we should use our pension assets and schemes around the world to try to manage. That is not their role, but it is their role to think about the return on investment and what instability might do to pensioners’ projected payments in the future.