Pension Schemes Bill

Baroness Stedman-Scott Excerpts

Report stage
Monday 23rd March 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

My Lords, briefly, I support Amendment 120, in the name of the noble Lord, Lord Palmer. It is important to look at the issues he rightly raised that relate to the market. Indeed, Amendment 165 is particularly important, given that the injustices, some of which we will come on to in later groups, seem to have few redress routes. For a good pensions system, it is incumbent on us to have a better system to identify and remedy occupational pension injustices.

I will briefly speak to my Amendment 160, which would require a review to ensure that data in pension schemes must be accurate. Currently, there is no legal requirement to ensure that the amounts of money being paid into pension schemes for auto-enrolment workers or anyone else—I am particularly concerned about auto-enrolment—are correct. The Pensions Regulator has to make sure that pension contributions are being paid, but there is no requirement to make sure that this money is the correct amount.

I suggest amending the Pensions Act 2008 so that the section on “quality requirements” includes something that confirms regular checking of pension contributions; the regulations in Section 33 on “deduction of contributions”

“must require employers to obtain confirmation from the trustees or managers … that the amounts … paid into a scheme … are regularly checked … recorded and corrected as quickly as possible”;

and Section 60 on “requirement to keep records” would require schemes to provide confirmation that regular data accuracy checks and contribution verification, including for tax relief and national insurance relief, are correctly reported.

I have so often seen pension scheme records riddled with errors. It is surprising that there are no requirements in the legislation to make sure that the amounts of money going in are correct. I am interested to hear the Minister’s comments on the Government’s thinking as to whether they would consider this.

[Baroness Stedman-Scott (Con)]

My Lords, I will speak broadly in support of these amendments. They reflect a thoughtful and welcome focus from across the House on some of the most important structural issues in our pension system. In particular, I welcome the attention given by noble Lords to the effects of consolidation on competition and market entry, and to the importance of robust data accuracy checks. A market that consolidates without sufficient scrutiny risks reducing innovation and choice, while poor data integrity undermines trust at its very foundation. These are therefore welcome points of focus, and I thank the noble Lord, Lord Palmer, and the noble Baroness, Lady Altmann, for raising them.

However, I will speak primarily to Amendment 169 in my name and that of my noble friend. This amendment would require a review of pension communications and financial promotion rules, examining whether the current framework unduly restricts providers from communicating clearly with members, particularly in relation to risks, guidance and comparative information. This is, I believe, a profoundly important issue. The reality is this: pensions are complex, technical and often opaque. For many people, they are also distant—something to be thought about later rather than now—but that distance is illusory. The decisions made or not made today will shape financial security decades into the future. Knowledge in this area is power, yet too often, individuals lack both the information and the confidence to engage meaningfully with their pensions. Communications can be overly cautious, overly technical or constrained in ways that make it difficult for providers to present information in a way that is clear, comparative and genuinely useful.

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[Baroness Stedman-Scott (Con)]

My Lords, we have significant concerns about the direction of travel shown by the Government with their amendments in this group. These amendments risk opening the door to mandation by the backdoor, and that is something we cannot support.

The Government’s Amendment 156 would require the Secretary of State to issue guidance explaining key aspects of pension law, including fundamental concepts such as “financially material considerations” and, crucially, what constitutes the “best interests of members”. If the Government are given the power to define what is in the members’ best interest, what is to prevent that definition shifting over time to reflect political priorities? What is to stop a future Secretary of State asserting that particular forms of investment—perhaps in UK assets of their choosing—are, by definition, in members’ best interests? If that becomes the case, have we not simply created mandation in another form?

Throughout the passage of the Bill, we have been clear that decisions about investment must remain with trustees acting in the interest of their members, and not be directed implicitly or explicitly from the centre. These amendments risk undermining that principle by centralising significant interpretive power in the hands of the Government. When the Government issue guidance to schools, the health service or other areas in their purview, the effect can be to clarify and support operations in a practical sense. The sort of guidance the Government propose to issue on this point goes precisely the wrong way and can serve only to limit the options open for trustees to act in their members’ best interest.

For these reasons, we believe that these amendments represent a step in the wrong direction. They risk politicising what should remain independent fiduciary judgments. Accordingly, I put the House on notice that we will oppose these government amendments when they are called.

[Baroness Sherlock (Lab)]

My Lords, I will start where we just finished. I can only assume that the noble Baroness, Lady Stedman-Scott, did not listen to the words of the noble and learned Lord, Lord Thomas; I hope she would take it from him if not from me. He made it clear that this guidance does not change the law; it simply seeks to explain how the law can be applied. As he pointed out, were any Government—this Government or a subsequent one—to try to make the guidance represent something that the law is not, the courts would very quickly set it aside. Frankly, I find the objections risible. They do not stack up at all.

To be really clear, the amendments require the Secretary of State to issue guidance that explains existing law. The guidance would not instruct trustees how to invest. It would not give Ministers any power to set investment policies or require trustees to invest in any assets. Trustees must consider the guidance, but they can depart from it if they have rational grounds for doing so. Trustees retain full discretion and independent judgment. The amendment does not change trustees’ duties or prescribe investment outcomes. It simply clarifies how the existing duties operate.

The aim of the guidance is to clarify, not control. Trustees and industry stakeholders have asked for clearer, practical explanations of legal concepts, and that is what the guidance will provide. There will be a technical working group, as the noble and learned Lord pointed out. I certainly have no intention of expecting the kind of people in that group to bow to the wishes of this or any other Government, and we will not be disappointed in that respect.

To be really clear: guidance cannot override the law. Trustees must still make investment decisions based solely on what they judge to be in members’ best financial interests. They can depart from the guidance if they explain their reasoning and set it out. Nothing in the guidance allows Ministers to mandate their investment choices.

I regret that I cannot agree to my noble friend Lord Hendy’s request to expand the guidance in the way he described. I clarify that the amendment does not apply to the Local Government Pension Scheme, as I think I made clear in previous stages.

I was disappointed that no one from the Lib Dem Front Bench got up to explain the decision they have taken. I was as surprised as the noble Baroness, Lady Hayman, to find that they did not propose to support what we had all thought was a proper consensus. I pay tribute to the noble Baroness, Lady Hayman, as I think she has done a really good job in putting forward the case of trying to make sure that trustees who want to take appropriate account of long-term factors, such as climate risk, are enabled to do that.

That is what this Government have brought forward. If the House votes it down then so be it, but it would be a major mistake.

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[Baroness Altmann (Non-Afl)]

My Lords, I have added my name to this amendment, and I thank the noble Viscount, Lord Thurso, for the excellent explanation he has given. I agree completely with what the noble Lord, Lord Davies, said. This is clearly an injustice that has gone under the radar for far too long. Indeed, I have spent the last 20 years of my life trying to help people in this kind of position, where their pensions have been taken away from them, reduced or in some way impacted by problems that were not of their own making.

This is probably the worst example I have seen of instances where people were misled into moving their money into something that was totally different from what they were led to believe. For example, the members asked the Government Actuary’s Department, which reassured them before they moved their money that the scheme they were moving it into was pretty much the same as the one they left, without any mention of the risk that they could lose the whole thing. Indeed, in 1996 there was no Pension Protection Fund, and they could have lost the whole of their accrued benefit that was transferred over.

They asked:

“Did the GAD document state anywhere that the AEAT pension fund was at greater risk than the UKAEA pension fund?”—


the private fund that they transferred to. In the written reply, the Government Actuary’s Department said it did not. In the private sector, how many people have paid a fortune for mis-selling for much less lack of risk warning than that? In Parliament, Ministers at the time gave assurances, such as that from Richard Page MP in debate on the Atomic Energy Authority Bill, which did the privatisation. He said:

“I have made it absolutely clear that the Government have no intention whatever of selling employees short. Their terms and conditions and pension rights will be fully protected”.—[Official Report, Commons, 2/5/1995: col. 210.]


That is just not what has happened.

I do not think it was an intentional outcome, but it is a real outcome to the members who are trying to survive on so much less than they should have. The Pensions Ombudsman could not investigate this because the scheme was privatised in 1996 and failed in 2012. The statute of limitations expires after 15 years, but the company did not fail until 16 years later. The Parliamentary Ombudsman office could not investigate because it is involved with public sector pensions, but the ombudsman felt so strongly that this was an injustice that they helped to draft a Private Member’s Bill for the noble Lord, Lord Vaizey—he is not in his place and I had hoped he might make it; I think he is coming later—to try in that way to achieve proper justice for the AEAT members. We are talking about fewer than 1,000 people in the closed section who transferred their entire public sector pension accrual over into this new private scheme with a new company. The amendment tabled by the noble Lord, Lord Palmer, in the first group concerned a lacuna in protection. If this is not a huge lacuna in protection, I am not quite sure what is.

I remind noble Lords that in 2024 the Government allocated £1.5 billion to enhance by 32% the pensions of 112,000 former mineworkers. I am not criticising the Government for doing that. They also, in the last Budget in 2025, allocated £2.3 billion of taxpayers’ money to enhance coal staff pensions, even though that money would have come back to the public purse in 2029. That was given to those mineworkers. Again, I am not criticising the Government for that. However, I cannot help wondering whether the shortfall for 2029 that would arise as a result of this may have driven in some regard the £2,000 national insurance salary sacrifice cap, which will, perhaps coincidentally, kick in in 2029.

What I am saying is that, if this country can afford to enhance those pensions at taxpayers’ expense, how much more worthy and important is it for us as a country to honour the accrued rights of workers who in good faith transferred their pensions on the advice, as we have heard from the noble Viscount, Lord Thurso, of the Government Actuary’s Department? They believed they were doing the right thing and have ended up losing so much as a result.

I hope that the Minister and the Government might think carefully about the speeches that we have heard this evening and give serious consideration to addressing this injustice.

[Baroness Stedman-Scott (Con)]

My Lords, this is a thoughtful amendment from the noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, and I am grateful to them for bringing it before the House. Where there is a credible concern that individuals have suffered material pension losses, it is right that those concerns are properly examined. This amendment seeks to ensure that the facts are established, the extent of any losses is understood, the causes are examined, and any lessons for policy, protection or redress are fully considered. That seems to us a measured and sensible approach. If the losses suffered by former employees of AEA Technology are indeed material, it makes sense that this issue should be looked into carefully, independently and transparently.

We will therefore listen closely to the Minister’s response, particularly on whether the Government believe that the existing framework is sufficient to address these concerns, or whether there is merit in undertaking the kind of review proposed in the amendment.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Viscount, Lord Thurso, for moving his Amendment 161, and for the conversations that we have had on this and other things. I have a lot of respect for him and the way that he approaches issues, and it has been a pleasure to talk. As we heard, the noble Viscount’s Amendment 161 would require the Secretary of State to establish an independent review into the pension losses incurred by former employees when AEAT went into administration and its pension scheme went into the Pension Protection Fund. It also seeks to explore mechanisms for redress or compensation.

The Government’s position was set out by me in Committee and subsequently by the Minister for Pensions during an Adjournment Debate in the other place at the end of February. I regret that I am not in a position to accept the noble Viscount’s amendment. I put on record my sympathy for all those who accrued public sector pensions and transferred their benefits into private sector schemes, only to end up, through no fault of their own, experiencing losses and not getting the full value that they were expecting from their pensions as a result.

In this specific case, AEAT has a very long history. It is not straightforward to turn the clock back 30 years and revisit decisions that were made then or look at the conditions that obtained at the time. Since 2013, through revised Fair Deal guidance, employees who are compulsorily transferred from the public sector into the private sector are offered continued access to a public service pension scheme, so the situation that AEAT members found themselves in could not happen now.

The fact is that these issues have spanned many years and Governments of all colours. AEAT was privatised in 1996 under a Conservative Government; the pension scheme entered the PPF in 2012 under the coalition Government; and, following the pension scheme’s entry into the PPF, AEAT members raised complaints to a number of bodies under successive Governments. There have been opportunities over the years for different Governments, and their Ministers, to provide redress or to address the issue, but, due to the impracticality of trying to go back all that time, none have done so.

One of the bodies that the noble Viscount mentioned as having looked into the matter is the Public Accounts Committee. The first recommendation from the committee’s inquiry was that the Government should consider introducing pre-1997 indexation within the PPF. This Government are taking action on that. We have brought forward legislation to introduce annual increases on compensation from the PPF and FAS that relate to pensions built up before 6 April 1997, where schemes provided for this. I am grateful to the noble Viscount for acknowledging that. Sometimes, when one gives something, it is simply banked, and then everything else is asked on top of it, so I really appreciate his grace in having acknowledged that. I also point out that if previous Governments had made that change sooner, it would have made much more of a difference to AEAT members, who would have found their pensions building up over that time. But we are introducing it now through this Bill, and AEAT members with pre-1997 accruals will benefit.

I recognise that I cannot offer everything that noble Lords want on this and other cases that have been brought to me and the Minister for Pensions. We are offering the concrete changes that we can, and that is all that I can offer. For that reason, I hope that the noble Viscount will withdraw his amendment.

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Moved by

[Baroness Stedman-Scott]

169: After Clause 117, insert the following new Clause—
“Review of pension communications and financial promotion rules(1) The Secretary of State must, within 12 months of the day on which this Act is passed, conduct a review of all legislation, regulation and guidance governing marketing, financial promotion and member communications in relation to occupational and personal pension schemes. (2) The review must consider whether existing rules unduly restrict pension providers from—(a) communicating risks, warnings, and comparative information to scheme members;(b) providing guidance and targeted support on decumulation options, fund choice, consolidation, and value for money;(c) supporting informed member decision-making and actions without constituting regulated financial advice, through either guidance or targeted support.(3) The Secretary of State must lay a report of the review before both Houses of Parliament.”

[Baroness Stedman-Scott (Con)]

I beg to move.

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[Baroness Hayman (CB)]

My Lords, I have added my name to this amendment. Given the quality of the speeches that have explained exactly what it would do and its very limited but important purpose—simply to allow the Government to have a proper handle on the data and a proper understanding of the exposure that pension schemes have to thermal coal investment—I think it would be a valuable step forward, one that I hope will get support from all around the House. In Committee, the Minister rightly acknowledged the high financial and climate risks associated with thermal coal investment and indicated that it was the Government’s expectation that industry will do more to reduce levels of coal investment, but we need to understand exactly what those levels are and to monitor them. For that reason, I support the amendment.

[Baroness Stedman-Scott (Con)]

My Lords, I am grateful to the noble Lord, Lord Sharkey, and the noble Baronesses, Lady Hayman, Lady Griffin and Lady Bennett, for this amendment, and I fully recognise the principle that underpins it. However, we have some reservations about the approach taken here. In particular, we are concerned that it would impose an additional compliance burden on schemes, including the Local Government Pension Scheme. The LGPS should be focused on delivering the best possible outcomes for its members, and where there is surplus within the system, that should be directed towards supporting members’ interests, rather than being absorbed by additional reporting requirements.

More broadly, while this amendment is framed around thermal coal, it raises a wider question: introducing a requirement for annual reporting on specific categories of investment risks setting a precedent which could, over time, expand into a much broader set of ESG-related reporting obligations that, in our view, risk creating a cumulative regulatory burden which may not ultimately serve members as well as it intends. So, while we understand and respect the intent behind this amendment, we are not persuaded that this is the right way to proceed.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Lord, Lord Sharkey, for moving his Amendment 170. It is good to have the opportunity to discuss again the climate-related risks with which pension schemes—indeed, all investors—are grappling. While I recognise the intent behind the amendment, the Government believe that the existing framework for responsible investment already enables trustees to identify, assess and manage climate-related financial risks. Introducing further reporting duties at this stage risks additional burdens without clear benefit.

Trustees of occupational trust-based schemes are already required to take account of financial and material considerations, including environmental, social and governance factors. Their statement of investment principles must set out their policy on these matters. Larger schemes are also required to publish annual climate-related financial disclosures, including on total greenhouse gas emissions from their portfolios and carbon footprint metrics. These provide trustees with important information to support investment decision-making. Equivalent disclosure requirements apply to FCA-regulated providers, and the LGPS has its own requirements on explaining how ESG factors influence investment decisions. There is evidence that this framework is delivering real progress.

The noble Lord, Lord Sharkey, cited data from the Finance Innovation Lab showing that more than £10.5 billion of UK pension savings remains invested in companies involved in the extraction or burning of thermal coal overseas. I am sure he is aware that that figure is based on just three pension providers and is not necessarily reflective of what members are invested in. Recent corporate adviser data indicates that around 65% of UK occupational schemes now have a net-zero target, including 18 of the 19 major DC master trusts. DC schemes have reduced the carbon footprint of their investment by nearly 20% in the last year. Many schemes are also taking decisive action on thermal coal. For example, USS, Railpen, and Border to Coast exclude companies with significant revenue from thermal coal, while Nest supplies a 10% revenue cap. While this progress is welcome, the Government agree that further data on exposure to thermal coal and other fossil fuels will be helpful. We expect trustees to continue to strengthen their disclosures, particularly around the actions they are taking to reduce such exposures within the existing responsible investment framework.

Complementing these expectations for stronger disclosures, the Pensions Regulator is deepening its supervisory approach by requesting increasingly granular investment data from schemes. The Government are taking significant steps to enhance sustainability reporting more broadly. DBT has published final UK sustainability reporting standards closely aligned to the International Sustainability Standards Board framework. These are available for voluntary adoption and the Government will consult later this year on potential mandatory use. DWP is also reviewing the Task Force on Climate-related Financial Disclosures reporting obligations through a comprehensive evidence-gathering exercise, with conclusions to be published this year.

Pension schemes are already helped by the UK’s Transition Plan Taskforce, established by the previous Government, having published a gold standard framework to help companies produce credible, consistent and decision-useful climate transition plans aligned with net-zero goals. The task force has also released sector-specific guidance, including for metals and mining, to support pension schemes and the companies in which they invest. Future reforms are designed to modernise the sustainability disclosure regime and equip trustees with clearer, more decision-useful information. This will support better-informed decisions on investment, divestment and exclusions, including, where necessary, in relation to thermal coal.

Finally, at this point, I was going to say that the Government are legislating to bring forward statutory guidance on trustee investment duties as a further opportunity to include clear examples of good practice to help schemes strengthen their management of climate-related risks, including those highlighted by this amendment. But—oh, no—we will not be doing it, because the noble Lord and his party voted against it, so it will not be happening.

The existing disclosure framework is already driving greater transparency around schemes’ climate-related risks, and further reforms are strengthening this approach, so the Government do not believe that this amendment is necessary. However, we recognise that improved data on thermal coal and other fossil fuel investments would be helpful. This is an area we will continue to monitor and keep under active review within the existing reporting regime. I therefore hope that the noble Lord will withdraw his amendment.