Pension Schemes Bill

Lord Davies of Brixton Excerpts

Report stage
Monday 23rd March 2026 Lords Chamber

This amendment is therefore about more than communications; it is about trust, transparency and, ultimately, outcomes. I will therefore be listening carefully to the Minister’s response to the issues that I and other noble Lords have raised in this group. I provide notice that I will seek to test the opinion of the House on Amendment 169 when it is called.

[Lord Davies of Brixton (Lab)]

Is the noble Lord, Lord Palmer of Childs Hill, going to contribute to this debate?

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

He has spoken already.

[Lord Davies of Brixton (Lab)]

Okay. This demonstrates the clear fact that I am still suffering from my cold, which is so bad that it kept me from attending the second day of Report.

There is an important issue that needs to be highlighted, and that is addressed in Amendment 165. I want to say a word on behalf of the members of a number of different schemes—NatWest is one, but there are others—who feel aggrieved because they were not properly informed of their rights under their scheme. Their major complaint is that when they reach state pension age, they suffer a diminution in their benefits. These rules were introduced in all good faith, and I participated in such negotiations myself, but it is the failure of the employer to ensure adequate information for members that has led to the complaint.

Do I have a different grouping from everyone else? I am speaking to Amendment 165, which is in the first group—is that correct?

[Lord in Waiting/Government Whip (Lord Katz) (Lab)]

Yes.

[Lord Davies of Brixton (Lab)]

Okay; good. As I say, I am still suffering from my cold, and I hope the House will indulge me. But I think it is important to make the point on those members’ behalf.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords who spoke. I think the noble Lord, Lord Palmer, decided not to dwell on a number of his amendments because there is more to come, I suspect, in later groups. I had a nice long speech written in response to all these, but I may spare the House parts of that and concentrate on the issues raised during the debate.

Briefly, on consolidation, I think in general we all agree on the importance of understanding and monitoring the impact of the reforms presaged in this Bill. The Government have already taken steps to do this. A comprehensive, green-rated impact assessment was produced and an updated version was published as the Bill entered this House, with details of our monitoring and evaluation plans, including critical success factors and collaboration across regulators and departments. We have published a pensions road map, setting out clearly when each measure will come in. So the kind of review envisaged in the first amendment would not be helpful.

Amendment 160 from the noble Baroness, Lady Altmann, would give new powers to the Secretary of State to require employers and pension providers to undertake regular data accuracy checks in relation to contributions paid into workplace pension schemes. I completely agree about the importance of ensuring that members get the contributions they are due. However, I do not agree that the additional requirements proposed are necessary or proportionate, given the robustness of the current regulatory framework. Compliance with automatic enrolment duties remains high. The Pensions Regulator—TPR—runs a proportionate and effective compliance regime, underpinned by detailed guidance.

As I explained in Committee, employers, together with the trustees or managers of pension schemes, are already required to keep certain records. That includes details of both employer contributions and deductions from members’ earnings for each relevant pay reference period. Employers have to keep payment schedules and contribution records for six years and opt-out information for at least four. TPR has issued codes of practice setting out clearly how trustees of DC schemes and managers of personal pension schemes should monitor the payment of contributions. These also cover the provision of information to scheme members, enabling them to check that their contributions are made correctly, and they establish clear expectations around the reporting of material payment failures.

There is already a requirement for scheme providers to have sufficient monitoring processes in place, which includes a risk-based approach to monitor employers, who should have appropriate internal controls to ensure correct and timely payment of contributions. If a trustee—

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Government Amendment 144 relates to FAS. It restores the original policy intention by removing from Clause 110 references to Schedules 3 and 5 to the FAS regulations. We have understood that the changes made to the schedules would have the unintended consequence that some members would have received higher payments than those to which they are entitled. This amendment corrects that. FAS members will receive the higher of the pension that their original scheme could have notionally offered to secure with the remaining assets or the standard FAS assistance. I beg to move.

[Lord Davies of Brixton (Lab)]

I hope the House will bear with me. I once bragged that if I were ever on “Mastermind”, GMPs would be my specialist subject, so I feel compelled to ask a question. Of course, through the Pensions Act 2012 the coalition Government made significant changes to the impact that GMPs had on people who retired after 2016. In effect, they were abolished and forgotten about. That issue was corrected in public service schemes but not in private schemes. Perhaps my noble friend the Minister could write to me and assure me that there is no difference in the effect of these amendments between people who retired before and after 2016.

[Baroness Altmann (Non-Afl)]

My Lords, I shall speak to my Amendment 155, and I am grateful for the support of the noble Viscount, Lord Thurso. This amendment and the noble Viscount’s own Amendment 162, to which I have added my name, deal with the same point, which is something we talked about in Committee. They aim to secure provisions that were made in the Pensions Act 2004 which would allow schemes to be extracted from the Pension Protection Fund if there were a new opportunity; for example, for the pension scheme members to be treated to better pensions than those available in the Pension Protection Fund itself.

That provision, in Section 169(2)(d) of the Act, has never been commenced. That provision means that if an employer had two or three workers in a pension scheme, had a company which fell on hard times and became insolvent—at which point the members’ pensions went into the PPF—then had a particularly fortunate experience and found himself or herself in a position where they could try to remedy the shortfalls of the members’ pensions and wanted to be able to take the scheme back out of the PPF, then that would be possible. Currently, that would be against the law because the provision has not been commenced, even though it is in the Pension Act 2004.

These amendments seek to ensure that this is at least a possibility, especially now that employers may start to be more attracted to running pension schemes, given the different financial situation that surrounds pension schemes now that we no longer have quantitative easing, with schemes finding themselves more often in surplus. Therefore, I hope that the Minister might accept that this is a possibility. These amendments would not commit the Government—or anyone—to spending any money; they would merely bring into force a provision that was already provided for in 2004.

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In this, my last full Parliament, I look around this House to seek similar support for the steelworkers who lost the full benefits of the pension for which they had worked so hard. Are there parliamentarians today who are willing to make the same stand as did Michael Foot in 1979 in support of a relatively small group of workers and to give them the justice for which they have long struggled? I urge this House to vote for the amendment in the name of the noble Baroness, Lady Altmann.

[Lord Davies of Brixton (Lab)]

I thank the noble Baroness, Lady Altmann, for these amendments. We have discussed this issue a number of times during the passage of the Bill, and other noble Lords who have spoken so far have all spoken strongly in support of necessary action.

The facts are established. These people were poorly treated and it is the Government’s policy that they should be better treated. That is established: there is no debate about that. I have heard no one suggesting that it does not really matter that these people do not get any money. We have agreed to give them some extra money by revaluing these pensions from next year onwards. However, because of the structure of who has lost out—the age profile when the losses occurred—these people stand to make very little gain from that proposal, so the Government’s proposal to help these people just does not hack it. Something more needs to be done.

I have argued at previous stages that the shortfall over the number of years since their compensation started should be made good and the pension that has increased in future should start from that higher level. Clearly, that was not going to receive the support of the Government, so the noble Baroness has proposed an alternative: that the money that is in the Pension Protection Fund should be used as a lump sum to compensate those who have lost out. Clearly, when you are in your 70s and 80s, a lump sum is of much greater advantage than future increases. That is the point of these amendments. Therefore, this is a compromise; it is not what those affected have actually called for. As has been said, these people are towards the end of their life and they need help now.

We know what it is going to cost. When the scheme was set up by my noble friend Lord Hain, there was some debate about the benefits. I was advising the TUC at the time. We might have argued against the restrictions, but it was accepted that, to get the show on the road, we would accept these benefits. But we now know what it is going to cost and that the money is there. It is all in the Pension Protection Fund. If it does not go to these people who have lost out, eventually it will end up in the Government’s coffers. The Government will not be entitled to it, but where else is it going to go? We need to act now to help these people, not leave it to a future Government. So I am strongly in support of the proposal.

My noble friend the Minister might make one additional point. There are two groups of pensioners here. There are those who are receiving benefits from the Pension Protection Fund and there is another group receiving benefits from the Financial Assistance Scheme. It is important to understand that the only reason they are in the Financial Assistance Scheme is that the Government failed to accept their responsibilities early enough. They are only in the FAS because the Government failed to comply with their legal requirement to introduce this sort of compensation arrangement on redundancy. Therefore, there is no argument that the FAS people should be treated any differently from the people in the PPF. They are entitled to money to make good the deficiency and to allow them to enjoy some sort of benefit for what remains of their lives.

[Viscount Younger of Leckie (Con)]

My Lords, I will speak briefly. We welcome the intent behind these amendments. We have spoken with campaigners and representatives of affected members and understand the concerns that sit behind them. Those concerns are real and deserve to be taken seriously. I have listened very carefully to the remarks from the noble Baroness, Lady Altmann, and the noble Lords, Lord Hain, Lord Wigley and Lord Davies, with the case studies that they have cited relating to the losses suffered by individuals, and also the emotional consequences.

However, we have reservations about the proposed approach. As drafted, these amendments would, in certain circumstances, compel the payment of lump sums. That does not sit comfortably with the core principle that we have adopted throughout the passage of this Bill: that we should not seek to direct or constrain pension funds in a way that limits their ability to act in the best interests of their members. If the PPF determines that using surplus to provide such payment is appropriate, proportionate and in members’ best interests, of course we would support that. However, that judgment is properly one for the fund itself, not something that should be prescribed. It is for the Government to offer a response to the questions and the points raised by other speakers, and I look forward to the remarks from the Minister.

While we have sympathy with the objective of these amendments, we do not believe that mandating this approach is the right way to achieve it. Therefore, I am afraid that we are unable to support them.

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[Lord Palmer of Childs Hill (LD)]

My Lords, this group brings together a number of proposed new clauses on the wider health and fairness of the pensions system: public service pension availability; intergenerational fairness; the impact of the Act on retirement incomes; barriers to UK investment; and member engagement and rights. In addition, my amendment proposes a new clause to address the fairness of police pension survivor benefits forfeiture rules. Taken together, the amendments reflect a wider concern that major structural reform should be accompanied by a proper review, transparency and evidence.

On these Benches, we believe that there is obvious merit in asking the Government to come back to Parliament on these questions, whether the issue is long-term sustainability, actual retirement outcomes or the obstacles that may prevent productive investment. They are not hostile to reform; they are part of legislating responsibly in an area as consequential and complex as pensions. On these Benches, we are minded to support Amendment 157, moved by the noble Baroness, Lady Neville-Rolfe.

Through the amendment in my name, I am pleased to have raised the issue of police pension survivor benefits in this Chamber. I raised the matter in Committee, and I feel strongly about it. I appreciate the Government’s response to our earlier discussion, so I will not pursue the amendment further today.

[Lord Davies of Brixton (Lab)]

I welcome the comments from the noble Lord, Lord Palmer of Childs Hill, on police pensions. It is a clear injustice that my noble friend the Minister will understand. The truth is that the only objection is the classic “read-across”—the implications it has for other groups—but I do not see that as a good reason to continue with an injustice. I am therefore happy to express my support for Amendment 164.

I do not support Amendment 157, calling for a review of public service pensions. In truth, the House deserves a proper, full debate on the issue and not as a by-product of this Bill. If other Members want to take the necessary steps to have a proper debate on the issue, I would welcome that. I am confident in that because I know that when such a review takes place, it will come up with the same conclusion as the last review.

It should be of no surprise to anyone that an unfunded pension scheme is not funded—it is inherent; it is in the name. Why do we fund private sector pensions? We do so to provide members with a guarantee. There is no ideological issue involved here. For members to feel safe about receiving their pensions, they want to see the employer putting aside the members’ money into a fund that will be there to provide the pensions when they get to retirement—that is why we have a fund. If the pension is being provided by the Government, we can rely on the Government. We have always relied on the Government, and so a fund is not necessary. Calculating what the fund would be, if it were funded, is an interesting exercise—I would do it myself for a reasonable fee—but it does not tell you anything about the management of that unfunded pension scheme arrangement.

The noble Baroness, Lady Neville-Rolfe, mentioned interest rates. Interest rates make no difference whatever to the cost of an unfunded scheme, because it is not funded. They do make a difference to the figure that you calculate at the current time, but that is purely a ghost figure—that is not the cost of the scheme. The cost of the scheme is what arises when you pay the benefits, which is not affected in any way by interest rates.

I look forward to the noble Viscount, Lord Younger, introducing his amendment on member engagement. If I had seen it before this weekend, I would have been minded to add my name to it—I like the amendment. I do not know whether my noble friend the Minister will accept it, but I agree that it is time for a review of how members are engaged in their pension scheme. The system we have now dates back almost 30 years; it is post Maxwell. The Pensions Act 1995, introduced by the noble Lord, Lord Hague—as he is now—established the structure, and the operation of pension schemes has moved on so much since then.

An interesting wrinkle in the legislation comes in the light of the Goode report. Professor Goode was asked to provide advice on member involvement in the wake of the Maxwell scandal. He recommended that there should be member-nominated trustees. This was adopted by the then Conservative Government. The interesting fact is that the Goode commission recommended that there should be a majority of member-nominated trustee in defined contribution schemes, which, of course, is the majority form of provision at the moment. If we were to adopt its approach, as part of the noble Viscount’s review, we would want much greater involvement in looking after the money and taking investment decisions, which I regard as a very good thing.

There have been big changes since 1995. There has been massive growth in single corporate trustees, which precludes the possibility of member-nominated trustees—again, another good reason to support the noble Viscount’s amendment. Of course, how you have member involvement in schemes that are closed is a much more difficult issue than when they are open with active members.

There are good reason for having a review of how members are engaged in occupational pension provision. I have not discussed this with my noble friend the Minister but my guess is that she will reject the amendment, which is a bit of a pity but I will of course, as almost always, support the Whip.

[Baroness Altmann (Non-Afl)]

My Lords, I support Amendment 164 in the name of the noble Lord, Lord Palmer. I agree that there seems to be something of an injustice in relation to survivor pensions for the police. For policemen who pass away, pensions for their spouse are suspended if the spouse remarries or even moves in with a partner. Do the same provisions apply in the Armed Forces, NHS and Civil Service pension schemes, or does the deceased member’s partner not lose their pension in those schemes if they remarry or cohabit, unlike for the police?

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I seriously ask the Government to look at this. I am not going to press Amendment 161 to a vote, because I have got the message from all around the House that we are not into reviews. However, on Amendment 162, which is consequential to this and is the remedy in part for the wrong, I will want to test the opinion of the House. I hope the Minister can at least say something not too discouraging in respect of Amendment 161. With that, I beg to move.

[Lord Davies of Brixton (Lab)]

I support the amendment from the noble Viscount, Lord Thurso. I think that anyone who looks at the detail, as he has done, will be convinced that somewhere in this series of events there has been a serious injustice. There is no question of that. These people have suffered financially through no fault of their own.

Getting to the bottom of it is difficult. Whatever “a review” means, I think it is appropriate that there should be some form of investigation. The problem they face is that the existing methods of investigation—in particular, the Pensions Ombudsman—just do not work in this case, so a bespoke review is required.

I have to emphasise that nothing I say should be taken as a criticism of professional colleagues and certainly should not be taken as constituting professional advice. But the injustice is clear. Other cases have been quoted by those who have suffered an injustice where the Government have taken action to support members of other, not directly analogous, but similar schemes, and this only increases their sense of injustice.

I urge my noble friend the Minister to indicate in her reply that the Government’s mind is not totally closed on this issue, because there is undoubtedly unfairness involved.

[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.

Pension Schemes Bill

Lord Davies of Brixton Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

[Lord Lucas (Con)]

My Lords, it is a long time since I was managing big pension funds in the 1980s. In those days, we were in the happy position of considering it a bit underweight if you had less than half your money in British stocks; now, it is 5%. It is extraordinary for politicians to have done that to the economy—and it is because of us that it has dropped. The way we have framed our regulations and organised how pension funds are assessed has, over time, resulted in that extraordinary diminution. This has left us with a stock market that is cash negative and a City that is immensely weaker than it would be. We will address this later, but the solutions to that problem perhaps lie in this part of the Bill.

If we communicate better with pensioners and say to them, “Do you really trust the country you live in, are part of and benefit from so little that you want only 5% of your pension in it?”, I think we would get a positive response to the idea that perhaps that figure should be higher. Through the mechanisms in this part of the Bill, we could ask pension fund managers to respond to that, and I hope that we would be able then to get away from the bits in the Bill about compulsion and direction that are causing difficulty to my noble friends, whose concerns I share. I think we would get a good response if we informed members of pension funds, as my noble friend said, so that they could take good decisions, and then empowered them to say that they want to back their own, with a good chunk of their money going to improve, invest in and support this country and take it forward. This bit of the Bill would be a good place to do that.

I hope the Minister can confirm that, in the governance aspects of this, it will be expected that pension fund managers should vote their shares. It is extraordinary that we have moved to a position where the owners of companies just do not vote—they do not use that power to decide what their opinion is on what companies have been doing; they merely buy and sell. That is a huge diminution in the mechanism by which companies are held to account. We need people to vote and to take an interest. Having a direction on pension funds that they should participate and be a real part of the corporate governance process would be a useful thing to come out of this Bill.

[Lord Davies of Brixton (Lab)]

I have three points. First, I profoundly disagree with the noble Lord, Lord Lucas. To pin the blame just on politicians lets everyone else off scot-free. It is more like Murder on the Orient Express—everyone had a hand. My particular favourite is the accountants, who had a big hand; the way they defined accounting for pension costs was pernicious. Let us not blame just the politicians.

Secondly, one cannot not be in favour of value for money. Obviously, we are all in favour of people getting value for money from their pension schemes. However, I think the Government underestimate the difficulty of providing something useful. As the noble Baroness, Lady Altmann, pointed out, there are more than two or three factors to be taken into account. It is particularly difficult when one starts including prospective factors—how are these to be judged? It is very difficult, and it is not just the factors. The pension holders’ circumstances vary so widely. How can there be a simple, straightforward way of assessing whether someone has had value for money when their needs are so different from those of other people who are saving for their pension?

Thirdly, I apologise for not being present in the Chamber to support the amendment in the name of the noble Viscount, Lord Thurso, in the previous group. I realise I am cheating here, but I was elsewhere. I had not realised that one of the groups had disappeared; otherwise, I would have been here and supported his amendment.

[Baroness Stedman-Scott (Con)]

My Lords, I begin by thanking the noble Baroness, Lady Altmann, for her opening remarks, which set the scene effectively on an important part of the Bill. She has done so at the close of what has been a long first day on Report—longer than we would have thought. She has once again brought clarity to a set of issues that are central to the operation of the reforms before us.

The amendments in this group are, in large part, concerned with ensuring that the value-for-money framework works well—both in how it is constructed in legislation and how it is communicated to and understood by those who will ultimately be operating under it. If this framework is to achieve its objective of improving outcomes for savers, it must be both robust in its design and clear in its application.

Amendment 24, in the names of the noble Baronesses, Lady Altmann and Lady Bowles, is both welcome and important. Throughout our discussions today and, indeed, in Committee, we have spoken a great deal about fiduciary duty: the principle that those responsible for managing pension schemes must act in the best interests of their members. Amendment 24 would help ensure that this vital principle is properly reflected within the value-for-money framework. It would require the regulations underpinning the framework to include explicit criteria relating to the quality of service provided to members. It would include matters such as the accuracy of recorded contributions; the reliability of scheme data; the efficiency of administration; the clarity of communication; the provision of guidance and education for members; and the support available to vulnerable members. Thus it recognises that value for money in pensions is a question not simply of investment performance and cost but of how effectively schemes serve the people whose savings they are entrusted to manage.

Amendment 25 has a complementary effect of strengthening transparency. It would require the value-for-money framework to provide separate assessment and reporting for each asset type in which a scheme invests. Rather than relying on a single aggregated measure of performance, schemes would need to report performance by asset class; for example, equities, bonds or infrastructure. This would allow for a clearer and more granular understanding of how investment strategies are performing, and therefore enhance transparency and accountability.

We also welcome the amendments in the name of the noble Baroness, Lady Altmann, which seek to ensure that the language used within the value-for-money framework is both intelligible and meaningful. The framework can succeed only if it is understood by those who are subject to it and by those whose savings it is designed to protect. Replacing more technical or opaque terminology with clearer expressions, such as “good value” and “poor value”, may seem a small change, but it is a practical one that helps ensure that the framework communicates effectively with members and the wider public.

Amendment 32 addresses another important issue: the practical realities facing pension schemes as they adapt to a rapidly changing regulatory landscape. This amendment would ensure that schemes are given time to improve before facing additional regulatory obligations. We have heard considerable concern throughout our debates about the sequencing of reforms in the Bill. Funds are being asked to do a great deal at once and to respond to a system that is evolving significantly under these provisions. Allowing a longer period before additional reporting requirements are triggered therefore seems both sensible and pragmatic. If schemes are to improve performance, they must first be given the time and space to adjust.

Finally, I turn to Amendment 44 in my name and that of my noble friend Lord Younger, which would require the Secretary of State to establish the value-for-money framework within 12 months of the Act being passed. This again speaks to the issue of sequencing: those who operate the system need clarity about the framework within which they are expected to operate. Providing that framework in a timely manner gives funds the greatest possible opportunity to understand its requirements and prepare for implementation. That, in turn, makes compliance more achievable and the reforms themselves more effective.

I thank the Minister for the technical amendments in this group. These drafting corrections help to ensure that the framework is expressed clearly and consistently in legislation, and we welcome that work. Taken together, the amendments before us seek to ensure that the value-for-money framework is clear, transparent and workable. If we are to ask pension schemes to operate within a new regulatory structure, it is only right that we ensure that structure is robust in its design and comprehensible in its operation. These amendments help us to move in that direction.

Pension Schemes Bill

Lord Davies of Brixton Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

[Lord Fuller (Con)]

My Lords, I support Amendment 9 in the names of my noble friends on the Front Bench and place on record that there are some very good behaviours among the Local Government Pension Scheme administering authorities that already follow the path laid out in the amendment, which would then be placed on a statutory basis.

I would not want people to think that none of that best practice happens, or that the numbers are just plucked out of the air—that is not the way it is at all. The purpose is that all schemes reach expectations and assess their liabilities in aggregate, not just for each of the councils—most people without this House would think the LGPS is a scheme for councils—but all the other admitted bodies as well. As I said in the previous group, when I first joined the Norfolk scheme about 20 years ago, there were about 70 admitted bodies; there are now 500, so it is extraordinarily complicated. Nationally, on a whole-of-LGPS basis, there are 6,160 scheduled bodies, 3,639 admitted bodies, 478 designated bodies—I do not know what they are, but I think they might be with the Environment Agency—and 15,049 employers with active members.

The key thing, in support of my noble friend Lady Stedman-Scott, is that when we look at all these contribution rates, it is not just taking the scheme in aggregate; we have to drill down to all the particular liabilities for each employer in the scheme. I am now drifting into the complication we often hear so much about, which is used to obfuscate the scheme. What I really like about this amendment is that it stops people who know about the Local Government Pension Scheme from hiding behind that complexity and obfuscation. It will require members to publish in plain language how the numbers are arrived at and what this amendment seeks to achieve.

Again, to repeat some of my history, when I first joined the Norfolk scheme, which is a good example, it was 79% funded. We shovelled in cash like it was going out of fashion. Now, 20 years later, it is 130% funded. In the last three years it has gone up 25%. These big swings militate against stability and sustainability. Over the years there has been a pessimism bias, which has meant that council tax, councils and admitted bodies have put much more money into the scheme. Partly, there was groupthink from the regulators, which forced us down this path.

However, I want to provide reassurance. When you look at the assumptions that I have been involved in, over five triennial revaluations now, there is a fan of opportunities and scenarios that the actuaries run on the membership of the scheme, sponsoring employers, even the life expectancy of members calibrated by postcode. There are about a thousand different scenarios in the scheme that I have seen. Of course, one of those scenarios is a wipeout. We should not confuse a scenario with a likelihood. With the benefit of hindsight, I think what has happened is that the extreme cases have been taken and split down the middle, whereas if there was more clustering around the middle then we would not have had to put in so much. That is why the amendment looks in a much more focused way at the funding strategy statement. That way, we can take the true costs into account.

On seeing the noble Lord, Lord Davies, again, who is an actuary, I am reminded of an old actuaries’ joke I told in Grand Committee. I am going to repeat it, because it was a small audience then: “We’re all living longer and it’s getting worse”. Some of the assumptions have possibly overcooked life expectancy and undercooked the effects of Covid, and so forth. There is a balance to be struck between overoptimism on one hand and excessive prudence on the other. It is a complicated scheme, but the amendment works out a method by which we can communicate that texture in language that the man in the street can understand, so that taxpayers can be reassured that they are not being overtaxed and members can be reassured that, over the life of the tail liabilities of the whole scheme, they will be paid in full at the right moment. As I said on the previous group, the LGPS is the closest thing we have to a sovereign wealth fund and it is important that we do not take an excessive pessimism bias, as the story of the last 20 years has shown.

[Lord Davies of Brixton (Lab)]

I do not mean to be unkind to the tablers of this amendment, but it is nonsense, in my view. As the noble Lord, Lord Fuller, explained, I can confirm that I am a fellow of the Institute and Faculty of Actuaries. To be honest, this amendment would mean more work for actuaries, on the face of it. Who will do these independent assessments? It is presumably people who know what the technical nature of a pension scheme is—to that extent, maybe I am not against the amendment. It suggests that it should be benchmarked against two things that are irrelevant. The Local Government Pension Scheme is not insured. It is not invested totally in gilt-edged securities. You could calculate those figures, but what do they tell you? Absolutely nothing.

The fundamental problem with this proposal is that it is the administering authority that decides on the contribution rate, not the actuary. It is not the actuary who decides how much prudence should be in the figures. The actuary provides advice and the administering authority decides. If, for whatever reason, the administering authorities feel that they do not have enough control over the situation then that is a matter for them to sort out. It does not require legislation to say that administering authorities should do their job—it is already their job, and they should get on and do it.

Finally, even if an appropriate level of prudence was applied when deciding the contribution rate, that money—which, for the sake of prudence, is paid into the fund—is not lost and has not disappeared. It is still available and will be available for the purposes of the scheme; it will be taken into account the next time there is a valuation. Valuations roll on one after the other. If perchance, because of incorrect advice, a bit too much money is put in initially then it will be there at the next valuation and will be taken into account. Presumably the administering authority, as long as it is doing its job, will adjust the contribution rate appropriately. What we have in the amendment is additional unnecessary bureaucracy and, as far as I can see, the only people who will gain will be the professional advisers.

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[Viscount Thurso (LD)]

My Lords, I shall speak to my Amendments 14, 16, 17 and 18, in my name and that of my noble friend Lord Palmer. It is always a pleasure to follow the noble Baroness, and I thank her for her support, which I am happy to reciprocate. As it is the first time that I have spoken on Report, I reiterate my interest as a trustee of the Parliamentary Contributory Pension Fund. I do not think that this Bill affects that fund, but for clarity I declare it. I also thank the Minister for the engagement that she has had with me and other colleagues—but particularly with me—on this subject. I came away feeling that I had had tea and sympathy, although possibly not with the greatest expectation for the future. But I thank her for engaging with me.

We debated this matter at some considerable length in Committee, and I shall not go over it. The key issue in this set of amendments is about permitting, when there is a surplus, that surplus to be fairly used, in part to give some inflationary uplift, if that would be the appropriate thing, to members of a scheme. There is nothing in any of the amendments that mandates that course of action; these are designed to permit it and also perhaps to draw attention to some of the historic injustices, as they might be called.

I cannot hear the word “surplus” in relation to pension funds without immediately putting quotation marks around it, as I said in Committee. I was grateful to the noble Lord, Lord Davies, for his suggestion that we really ought to talk about “assets” rather than a “surplus”, which is a best guess by some intelligent professionals. The starting point is a known—the actual market value of the fund on a given day—to which are added a series of known unknowns, in the form of what the guesstimated inflation rate might be, what the likely actuarial longevity of the members might be, and a variety of other things, to arrive at a best guesstimate of what the value of the assets might be at a time in future and what the liabilities might be. If you take one from the other, you come up with a surplus or a deficit. Like many who have spoken, I am extremely cautious about the notion of surplus, and I know from the funds that I have been involved in that, if you are at the top of the cycle, as I suspect we are getting close to now, a larger surplus is much needed to cushion you against the volatility of the shocks to come, whereas if you are at the bottom of the cycle, you are probably very near parallel and possibly slightly in deficit—and you have to have regard to that.

There is a general principle, which I shall speak to more on my next amendment later on tonight, that there is a contract between the employer and the employee that is, in the case of a direct benefit pension, that they are remunerated and, as part of their remuneration, there is a future remuneration, which is the pension. In the case of those schemes that have in their rules full indexation and there is a large surplus, the principle is that that surplus should, by whichever means are chosen, be returned to the employer. The schemes that I am concerned about are schemes which are in surplus and which, in their documentation, made clear that it was the intention at the time to uprate for inflation—but, for whatever reason, usually prudence, the designers of the scheme did not mandate that but allowed a degree of flexibility so that the employer or the scheme could choose not to uprate in whatever circumstances. In that circumstance, when a surplus arises and when indexation arises that had been indicated, if not absolutely promised, part of that surplus belongs to the pensioners, and it is only fair and just that they should have it. This set of amendments is designed to make that possible.

[Lord Davies of Brixton (Lab)]

I have worked in the pension sphere for far longer than I care to remember, and so-called surpluses have been a big issue throughout. They have come and gone. Sometimes they have been negative surpluses—deficits—but they are still central to the health or otherwise of a pension scheme. They have been totally embedded in my working life, so I hope the House will forgive me if I choose to make a longer contribution on this issue.

I support all the amendments in this group. The noble Baroness, Lady Altmann, suggested that I might not like her amendments, and maybe they are a bit unnecessary in principle, but in practice, the idea that trustees should consider all these issues when they make a decision about releasing surplus to the employer is a good one, so I support Amendments 13 and 15. I also support the amendments in the name of the noble Viscount, Lord Thurso. I particularly welcome his Amendment 17, which effectively points out that the existing legislation on the release of surpluses says explicitly that the trustees should do so only when it is in the interests of members. This legislation removes that guarantee.

We debated this issue in Committee and we have heard the Government’s argument, which, essentially, is, “We can leave it to the trustees to look after it”. My experience is that that is not a safe basis to rely upon. Some trustees are fine and they do a great job; others do not consider their role to be to help the members. They see their role as very restricted, so not having something in the Bill about members is a massive disadvantage.

In introducing this legislation, Ministers said extensively that members are going to benefit from the release of surpluses. Any bystander not deeply engaged in the issue, listening to what Ministers have said, would come to the conclusion that members are going to benefit. Indeed, I quoted about half a dozen ways in which different Ministers have given that impression, but for the purposes of this debate, I shall just quote the Minister for Pensions, my honourable friend Torsten Bell. He argued consistently and rightly that the release of assets is not just for employers but for members as well. The Government’s road map for pensions, to which he put his name, states under the heading, “Surplus Flexibilities”:

“We will allow well-funded … pension schemes to safely release some of the £160 billion surplus funds to be reinvested across the UK economy and to improve outcomes for members”.


The Government’s case is that this change in the legislation is required to benefit members, yet there is nothing at all in the Bill about benefit for members. This has been highlighted in the amendment from the noble Viscount, Lord Thurso. It is a big gap in the Bill, and it needs to be rectified.

My Amendment 19 goes together with Amendment 16 from the noble Viscount, Lord Thurso. His amendment adds the word “consulted”, saying that members should not only be notified of the trustees’ intention to release surplus to the employer, they should be consulted about that decision. Consultation is obviously a good thing. The structure for trustees to consult scheme members is not, to my mind, strong enough to provide a helpful way forward. The better way forward is the one suggested in my amendment. There is already provision in legislation for employers to consult members about changes in occupational pension schemes. There is a list of changes to or actions in relation to pension schemes, whereby the employer—if they are involved—has to consult with the independent recognised trade unions. I am very much a trade unionist here. The point of trade unions is to provide a viable means of consultation, and it applies here.

Universal Credit (Removal of Two Child Limit) Bill

Lord Davies of Brixton Excerpts

2nd reading & Committee negatived & 3rd reading
Thursday 12th March 2026 Lords Chamber

[Lord Davies of Brixton (Lab)]

I welcome strongly the Government’s decision to abolish the two-child limit. Scrapping it remains the single most effective step that we are taking to reduce child poverty in this country.

As we have heard, abolishing the policy will lift about 450,000 children out of poverty by 2030. When combined with the other measures in the Government’s child poverty strategy, this could lift more than half a million children out of poverty by the end of the decade. This is something that we should be celebrating and shouting from the rooftops. It is an incredible achievement and one of which the Government can be proud.

This is not an abstract statistic. It represents hundreds of thousands of individual children who will grow up with better security, better health and improved opportunities. One noble Lord has asked how the Government can justify the expense and mentioned the £3 billion figure. Quoting the £3 billion figure ignores the costs of child poverty—the poorer health outcomes, the lower educational attainment, the greater pressure on public services and the lost economic potential. Put together, that is an estimated £39 billion. The £3 billion saves the country as a whole £39 billion. How can we not wish to pursue that policy? It is not reckless spending. It is highly targeted and cost-effective, with serious and substantial long-term benefits.

Others have argued that taxpayers should not be expected to support larger families. Many of the comments of the noble Baroness, Lady Stedman-Scott, were about large families. The reality is that, now, only a limited proportion of families have four or more children. Of those families, the great majority are working hard to provide for them. Those who are unable to get jobs are still not to be dismissed as the feckless poor—that is the narrative which is always produced to try to prevent decent human services. The two-child limit has no measurable impact on family planning or the fertility rate.

Every child is to be celebrated and cherished, regardless of their birth order. They deserve enough food, a safe home and a fair start in life. When children are supported to thrive, they do better in school, remain healthier and contribute more fully as adults. That benefits not only those families but all of us—society as a whole. It is important—I think the point needs to be made to the noble Baroness, Lady Stedman-Scott—to note that this is not only about families out of work. As other speakers have explained, the majority of those who are caught by the current policy and will benefit in future are families who are in work.

Unfortunately, I am going to join my noble friend Lady Lister of Burtersett and raise the issue of the benefit cap. I do not think this policy will achieve all its objectives unless and until we remove the benefit cap. It was introduced by the coalition Government and it continues to place immense pressure on many families. I should have started by paying testimony to and welcoming the excellent maiden speeches that we have heard today, but it is worth mentioning that the noble Baroness, Lady Teather, can claim credit for opposing the introduction of the benefit cap when she was in government. I am sorry she is not here, but I acknowledge her important contribution to this debate.

To conclude, if we are serious about tackling structural poverty, we cannot remove one barrier, that of the two-child cap, while leaving another firmly in place. Lifting the benefit cap would complement the abolition of the two-child limit and ensure that the gains we make today are not undermined by other restrictions that fail to reflect the rise in the cost of living.

Pension Schemes: Ministerial Powers

Lord Davies of Brixton Excerpts

Wednesday 11th March 2026 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, the Government have not set out a timeline for using the power precisely because we have made it clear that we do not wish to use it, and do not expect to use it. The timeline for Mansion House is clear: the power expires if it is not used, and if any requirements are in place, they are capped at that level and cannot be raised thereafter. This will happen only if it becomes clear that the Mansion House Accord is not able to be delivered on. At that point the Government would consult, they would produce draft regulations, and the process would then happen. As I have made clear, since the only aim is to backstop the Mansion House Accord, the evidence should come from what companies are doing in that accord.

[Lord Davies of Brixton (Lab)]

My Lords, like my noble friend I am looking forward to discussing these issues at length on Report of the Pension Schemes Bill. Does the Minister agree with me that the real trick is not so much directing the investment as finding the suitable opportunities in which to invest? Her honourable friend the Pensions Minister has talked extensively about the failure of investment in reservoirs over the last 20 or 30 years. There is a failure there that has to be addressed.

[Baroness Sherlock (Lab)]

My noble friend is quite right; we have had many opportunities. It has been a joy to discuss the Pension Schemes Bill over many weeks, and that joy is set to extend for some weeks to come. My noble friend raises an important point: if the Government want to make sure that people are investing in good projects, they need to make sure that there are good projects to invest in. We also need to make sure that there are vehicles for doing that. The Government have done a great deal already, with the British Business Bank, looking at what has happened with Sterling 20 and at making sure that we work with industry to create the opportunities. But there is clearly money to be made here: if international pension funds are coming to our country and buying up chunks of our infrastructure and our private equity, we should be making sure that these are open to our own pension funds to make money on them. Nobody is making them do it; they are doing it because it is the right thing to do. We need to make sure, therefore, that we enable and encourage it, and the industry has taken the first steps itself. We are simply making sure that the backstop is there to make clear that this is the direction of travel.

Pension Schemes Bill

Lord Davies of Brixton Excerpts

Committee stage
Monday 23rd February 2026 Grand Committee

[Lord Kirkhope of Harrogate (Con)]

My Lords, I will intervene briefly in support of my noble friend’s amendment—not on the specifics but because, having read again the 42nd report of the Delegated Powers and Regulatory Reform Committee, which refers directly to this legislation, it has become ever more obvious that this skeleton, which has taken up an enormous amount of time and is in itself highly complex, leaves an enormous number of question marks. It leaves an enormous number of doubts and concerns, most of which the Government are placing at their own disposal through secondary legislation, which is at this point equally uncertain.

Therefore, it seems absolutely essential that, when there are proposals such as those we have just heard from my noble friend—to review the commencement of the legislation, or to have reviews on a five-yearly basis, or indeed in any other ways, of some of the more complex areas—the Government should concede that that is appropriate in a Bill of this kind. I do not think I have ever read in my time here such a clear statement as that made by the Delegated Powers and Regulatory Reform Committee about the nature of legislation. It would be serious enough if it were dealing with a Bill with very few clauses and of little import, but this is of such a substantial nature. The report we have read condemning the nature of the Bill for not having the flesh around those skeletal bones is notable and important. The Government should therefore be much more amenable to the sort of sensible proposals being made in the amendments of my noble friend.

I do not wish to speak further on this, but it seems terribly important that—whether it is dealt with now or at a later stage—there be an understanding that the Bill is entirely dependent upon future secondary legislation. Standing alone is, I am afraid, an unacceptable set of provisions.

[Lord Davies of Brixton (Lab)]

There can be no objection in principle to having a review; all public policies should be open to review. The objections are practical, such as whether it would be a waste of time for the people who would have to undertake the review, who might have better things to do. Undertaking reviews can lead to planning blights; measures that need to be carried forward are held back because of some form of review being undertaken that is not central to the measures currently in the Bill.

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[Lord Davies of Brixton (Lab)]

This is about impartial pensions advice. Had I heard the noble Lord’s speech, I would have said that I did not accept his arguments. What I want is a pensions system that works without people needing advice. Proper pensions advice is extremely expensive, and on the idea that everyone will get at least twice during their working life full and adequate pensions advice—no, we do not want to encourage that. I would encourage a pensions system that works properly.

Then we have the Police Pension Scheme. I have talked to those campaigning on the issue on a number of occasions and I totally agree that it is entirely unfair that the spouses of some members of the scheme, when those members retire and die, will receive a pension—until they are accused of cohabiting or decide to get married. That happens only in the public sector; virtually no private sector schemes do that sort of thing, and the only ones that do are those that have carried over those rules from the public sector. To be honest, that is nasty. People naturally resent losing the money, and then become open to tittle-tattle and intrusive investigations; that is just wrong. Clearly, there is a cost involved, because there is a carryover to other public service schemes—but it is just wrong; it is treating people badly for no good reason other than history.

I hope that the Government will be able to make a positive response on Amendment 215. I do not have a lot of hope, but I am eternally hopeful. I apologise for jumping in ahead of the noble Lord, Lord Palmer.

[Lord Palmer of Childs Hill (LD)]

My Lords, I say to the noble Lord, Lord Davies, that no apology is needed.

This is a wide-ranging set of review and process amendments. The noble Viscount, Lord Younger, explained what I think he described as his “modest” amendments—indeed, they are. The noble Lord, Lord Kirkhope, said that this was all set up for secondary legislation; we ought to take that point into account.

These amendments are linked by a common theme: whether the Government are willing to build a stronger evidence base for future pensions policy and to improve the basic safeguards for savers. Several of these amendments ask Ministers to review pension adequacy, contribution rules, labour market impacts and public understanding, while others seek an independent look at specific injustices or practical improvements to data accuracy.

These amendments are probing, but they raise real policy gaps. Taken together, they test whether Ministers are prepared to move beyond structural reform and address the practical foundations of trust in pensions, adequate incomes, fair treatment, accessible information and correct records. I hope that, in replying, the Minister will explain which of these issues the Government accept in principle and whether they believe that the existing powers, regulators and reviews are already sufficient. I expect that to happen. The Bill changes structures and powers, but savers also need fairness, clarity and accurate data. When Ministers resist new duties, they should set out a clear alternative route and timetable. I hope that the Minister will do so.

The noble Lord, Lord Davies of Brixton, made important points. We will disagree, but I shall pursue the amendments in my name. Amendment 214 in my name would establish a universal entitlement to free and impartial pension advice at key stages of life. It would ensure that everyone, not just the financially literate or well advised, can make informed decisions about retirement. Such advice would, I hope, be offered around the age of 40—a critical moment for mid-life planning and pension consolidation—and again within six years of expected retirement to support decisions on drawdown, annuities and retirement income options, which are a mystery to many people at that or any stage of life.

The advice would include essentials such as pension types—DB or DC schemes—investment strategies, charges and fees, consolidating multiple pension pots and retirement income choices, and would be practical, comprehensive and relevant. The advice would have to be qualified, independent and impartial. Trustees, managers and providers would have a role in facilitating access. Data sharing would be permitted, but with strong data protection safeguards.

This amendment in my name would also offer flexibility, in that responsibility could be placed with established bodies such as the Pensions Regulator, the Financial Conduct Authority and the Money and Pensions Service. It would be funded from prescribed sources to ensure sustainability. The regulations will be subject to the affirmative procedure, ensuring proper parliamentary scrutiny. Amendment 214 is designed to ensure that people have confidence in and clarity on their pensions, which, I assure noble Lords, many people do not have; to avoid poor decisions that undermine pension security, which many people make; and to make sure that everyone, not just those who can pay for private advice, gets the help they need.

The purpose of my Amendment 215 is to require the Secretary of State to commission an independent review into provisions in police pension schemes that result in the forfeiture, reduction or suspension of survivor pensions. It focuses on cases where survivor pensions are affected by remarriage—as mentioned by the noble Lord, Lord Davies—civil partnership or cohabitation.

Why is this review needed? These provisions can have significant financial, social and emotional impacts on survivors and their families. This would ensure fairness and consistency with other public sector pension schemes—the Armed Forces, the NHS and the Civil Service—and would address potential inequities or outdated rules that disproportionately affect survivors. This review would ensure an independent—that is the point—and transparent process, as well as stakeholder consultation, reporting and accountability. The review panel must publish its findings and recommendations within 12 months. The report must be laid before both Houses of Parliament, ensuring transparency and parliamentary oversight.

This amendment is designed to act to assess the fairness and impact of current survivor pension rules in police schemes and to identify practical reforms that protect survivors’ rights while maintaining scheme integrity, to ensure that the system is consistent, equitable and transparent. I look forward to hearing whether the Minister addresses my points about these amendments.

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[Viscount Thurso (LD)]

My Lords, I rise to support my noble friend, particularly in respect of Amendment 218, to which I have added my name. I do so because I have something of an interest: for most of its existence and until quite recently, the superannuation fund of the United Kingdom Atomic Energy Authority was based in Thurso. A number of my former constituents were beneficiaries of that fund and a small number of them ended up becoming beneficiaries of the AEAT plc fund, when that came into existence. It has always struck me that something remarkably close to mis-selling went on at the beginning and that we really have a moral duty to try to correct it.

I, too, looked at the comments that the Minister made in her speech on 5 February. As my noble friend pointed out, she said that the case around AEAT pensions had “been fully considered”. What sprang to my mind when I read those words was the scene in “Independence Day”, when the President is telling everybody that there is no such thing as Area 51 and Defense Secretary Nimziki says that that is not, strictly speaking, true.

Looking at the Minister’s comments that came afterwards that there were three ombudsmen involved, as my noble friend said, the ombudsmen were all asked and all declined, because of vires, to give an answer. Looking at the parliamentary scrutiny, that was two Westminster Hall debates, one by Sir Geoffrey Clifton-Brown and one by Sir Oliver Letwin, I think. As anybody who has done a Westminster Hall debate knows, that is not proper parliamentary scrutiny. Of much more importance were the NAO and PAC reports, which came to the conclusion that there was a case to answer. Indeed, the last Pensions Minister in the previous Government, Paul Maynard, accepted that something should be done and suggested that something would be done, but the election has intervened.

The core issue is that the Government Actuary’s Department, in its publications, gave the distinct impression that the quality of the pension for those who transferred would have an equivalent security to the quality of the pension that had the Crown guarantee with UKAEA. That is clearly not the case, which is the core issue around all this.

As an aside, and in parenthesis, there have been occasions when a Crown guarantee has in these circumstances been transferred across. I was in fact responsible for one when I was chairing VisitScotland and we took the Scottish staff out of the BTA scheme and obtained a Crown guarantee to let that happen, so it is perfectly possible.

This amendment gives an elegant redress that the Government can use to look at, as my noble friend says, a very small number of remaining pensioners suffering under this. I commend it to the Government. In summary, this seems to me to be something that, were it in the private sector and sold by a bank on the high street, would be called PPI, frankly. That is the level of it, in my humble judgment. Therefore, first, there is a duty to do something about a clear mis-selling. Secondly, it has not been properly scrutinised up until the NAO and PAC reports. Consequent on those reports, a previous Government Minister indicated that they would look at doing something about it. For all those reasons, we should now take this opportunity to right a manifest wrong.

[Lord Davies of Brixton (Lab)]

These two amendments are grouped together. There are clear common themes between them, the most obvious one being dissatisfied scheme members: dissatisfied pensioners concerned that they have ended up worse off than they might reasonably have expected. I thank the noble Lord, Lord Palmer of Childs Hill, for his excellent description of both problems, and in broad terms I support the spirit behind these amendments. Of course, both of them call for a review, but in truth we do not really need a review; we know that wrong was done here and we are really asking for the Government to accept some responsibility for providing an element of redress.

Amendment 216 is actually about a thing called integration in pension schemes. This was a technique used widely in the 1970s, 1980s and 1990s, where the occupational pension had a target taking account of the state pension, integrating the state pension into the benefit model. Where the retirement age of the scheme was, for example, 60—we had schemes with a retirement age of 60 in those days—it was integrated by paying more money between 60 and 65. We are talking about a man here. That was when the state pension would come into payment. At that point, the scheme pension would be reduced to allow for the fact that they are now getting this pension from the state.

That is an issue of scheme design, and my view is that the rules of the scheme should be set through collective bargaining. The problem is that that sort of arrangement is much more obvious to someone like me with a lot of experience. I sometimes would claim that my superpower is understanding scheme rules. It is absolutely clear to me, but I can well understand that an ordinary member of the scheme would not immediately have that understanding. Of course, it is quite possible that they see their pension being cut when they get to state pension age. In some schemes, it is actually cut before they get to state pension age now, because the rules still refer to a reduction at 65 and the state pension is not payable until 66, so there are big problems.

Of course, it is possible to look at it the other way around: the member is actually getting a bigger pension after state pension age, and that is to their advantage. This goes to the central point, which is a lack of understanding among scheme members. Were they misled into giving more credit to the scheme? Clearly, for the particular campaigning groups we have heard from—under Amendment 216, there are a number of different groups—their case rests on the argument that the way the rules worked was not adequately explained to them, and they need compensation for how they were misled.

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The report was right: to give these benefits beyond the privileged few would indeed break the bank. However, as we have seen, giving such schemes just to that privileged 20% in the public sector breaks the bank anyway. A full review of and debate on this topic is surely essential and urgent.

[Lord Davies of Brixton (Lab)]

I am glad that we are having this debate now, but only as a taster for a proper debate at a proper time—I am quite surprised that the clerks accepted this amendment as being within the scope of the Bill. I have no objection to a debate on public service pensions; I encourage one. I feel totally comfortable with having a debate on public service pensions, because I think they are eminently defendable. I accept very little of what the noble Lord has said, and the doom and the gloom that has been expressed, and a proper opportunity to have that debate would be very welcome, but I shall focus on the need for a review.

Of course, as we have been told, my noble friend Lord Hutton of Furness undertook an independent review of public service pensions in 2010-11. That review was established by the coalition Government; they set it up, they accepted its recommendations and they gave a guarantee. In a Written Statement on 20 December 2011 about Civil Service pension arrangements, the noble Lord, Lord Maude of Horsham, who was then an MP and Minister for the Cabinet Office, gave

“a guarantee, outside of the scheme designs parameters”—

that is what the benefits were—

“of no further reform for the next 25 years”

I do not know what people think a guarantee means, but to me it means no more changes for 25 years. Of course, the Statement was repeated in your Lordships’ House and the noble Lord, Lord Wallace of Saltaire, repeating the Statement, also gave a guarantee for the next 25 years. I mentioned to both noble Lords that I would be quoting their words in this debate, and it would be worth asking them what they think the word “guarantee” means. A guarantee was given to public service workers as part of their terms and conditions of employment. It was not just a policy objective; it was part of their terms and conditions of employment. I think that to make changes without breaking the guarantee would be an extremely bad approach to the settlement.

I agree with very little of what was said criticising public service pensions, but I think there is a need specifically to understand the arrangements. First, retirement age will increase in line with state pension age. That is an adjustment mechanism. The more important adjustment mechanism is that there is a cap on employer costs, and it is members who stand the risk of having their benefits cut if the cost escalates. None of that was reflected in the remarks made so far. That cap, as has been explained, is calculated using a discount rate, and that discount rate is determined in a way that adjusts for economic changes. As mentioned, a higher discount rate reduces the cost of future benefits. At the same time, a lower discount rate increases the cost of benefits. If the cost of benefits increases, as part of the settlement that was reached, members’ benefits have to be cut or their contributions increased. That is the nature of the settlement that was reached in 2011. I think it is totally wrong to mislead the Committee about the nature of the deal that was done. Am I allowed to say “mislead”?

[Lord Moynihan of Chelsea (Con)]

I hope the noble Lord will withdraw that word. I do not recognise what he is saying. My noble friend was talking about the NHS. Was it NHS workers who were required to put in that extra money?

[Lord Davies of Brixton (Lab)]

It is interesting. I thank the noble Lord for his intervention. Okay, I withdraw the word “mislead” and I apologise for using it, but the full picture was not given to members of the Committee about the nature of the public service pension arrangements. Member contributions are adjusted and have been adjusted because of increasing costs. In fact, at the valuation before last, because of the way the economic indicators work, the cost actually fell, and the last Government had to push through urgent legislation in order to stop members’ benefits being increased. I will not use the word “fiddle”, but the terms were adjusted to protect the employer rather than giving additional benefits to members, so if anyone has a complaint about the way this system has worked, it is the members, even before we get to the problem of the 10-year guarantee that arose.

As I said, I would welcome the opportunity of a proper debate defending the way in which public service pensions are provided in accordance with the Hutton report as agreed by the coalition between the Conservatives and the Liberal Democrats. The one thing on which I agree with the noble Lord is that we need pension arrangements in which we are all together. I agree totally. Given that the underlying question is what sort of incomes we want people to have in retirement and whether we want them to be adequate, I think the objective should be to offer people in the private sector the opportunity to accrue pensions on the same terms as those provided to people in public service. I will be setting that all out in my submission to the Pensions Commission.

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[Baroness Coffey (Con)]

My Lords, it is a pleasure to speak to the Committee about pensions dashboards.

I am conscious that this has been quite a long journey in terms of trying to get the pensions dashboard in the Pension Schemes Act 2021 initiated. I am aware that, at the time, the House of Lords was keen that there should not be a private dashboard, but the House of Commons gave its strong view. As a consequence, the Bill went through without specifying that DWP and MaPS had to produce a public sector pension dashboard first because we were concerned—I am still concerned—that the longer people do not know what is going on with their pensions, the shorter the time they may have to make informed choices or, at least, to consider and understand what their pension and retirement will look like in future. That is why I have tabled this amendment.

Two things come out of that. One is that, in essence, what is required is for the Financial Conduct Authority to sort out all the different bits in order to allow private sector pension dashboards to get the necessary data and to be allowed to start operating. Indeed, Pensions Dashboards Regulations that were passed a couple of years ago were amended to remove the dashboard’s available point.

Let me go on a slight journey; I do not intend to delay the Committee for very long, but I am really concerned about progress. I am aware of the reset that happened and the issues around what triggered it, which I do not think are public, but we are nevertheless in a situation where we should be making more progress than we are. It is notable that, in a Written Ministerial Statement in October 2024, the then Pensions Minister, Emma Reynolds, changed the Government’s policy from what had been the case; in effect, it had been neutral on what was happening around trying to get these dashboards going. She put in place a policy, which is still live in government today, saying that we must make sure that the DWP/MaPs dashboard comes out first and is well tested, and then we will start. We are still committed to doing the private sector-run dashboards but not to any particular date.

I am grateful to the Minister for putting on a recent briefing and to the chief executive of MaPS and the team coming to do that, but I have to say that I was somewhat alarmed that it still feels as if we are a long way off. I appreciate the connection deadline has not changed. It was great in a recent parliamentary Answer to see the progress of data provided, but it started to get me concerned about exactly the issues I considered several years ago: that once we get into MaPS and DWP starting to decide what are the best ways to do some of this communication and what user testing works well, they end up missing out on the opportunity of what the private sector does every day in terms of clear communication. That does not mean to say we are looking for a cowboy scheme—far from it as there is still the Financial Conduct Authority—but that we make more rapid progress than is happening now.

I know some of the pensions schemes people are happy to no longer have the six months. I know from the latest update from the programme board as part of the advisory group in December 2025 that despite acknowledging that the Government were clear that there would not be a private sector dashboard allowed anywhere near to the launch date of the public sector dashboard its number one issue was trying to make sure that that was available as quickly as possible.

I am conscious of things that seem to go awry. There had been amber ratings for a while, then, all of a sudden, there was a red rating on the pensions dashboard. Nevertheless, we are still making slow progress, and I feel that we should open this opportunity to make sure we have pension dashboards available as quickly as possible. With the best will in the world, MaPS is not moving quickly enough. I do not believe we will have a MaPS/DWP dashboard until some time in 2027.

The original intention when MaPS took this over— in 2023 I think—was that the connections would be completed by then. I fully understand the history on that. This is the opportunity to get on with this. We have spent a lot of time in this Bill saying we want to make sure people have better returns and better understanding of what is happening with their money in different ways. For me, the dashboards are a key part of that, and at the moment, it feels that while the Government have not deliberately decided to go slowly, we are going slowly as a consequence of their policy choices. It is vital that members of pension schemes know their situation so they can make the necessary choices.

I am sure the Government recognise that they did not communicate all the way back in 2005 and then were found to have caused maladministration in terms of the WASPI women as a consequence. We are not getting into a debate on compensation or something like that, but it is important we let people know as soon as possible, and that is why I have tabled this amendment today. I beg to move.

[Lord Davies of Brixton (Lab)]

I urge the Minister in her reply to stress the need for caution in this area. I am afraid I understand what the noble Baroness, Lady Coffey, is saying: we do seem to have been waiting a long time for the dashboard. However, I have always had questions about the private sector dashboard, and I think they can be answered only as and when the MaPS dashboard is up and running. The problem at heart—and it may be a caricature—is about the point of a private sector dashboard. It could all too easily be a way of getting hold of data. It is the old saying that you are not the customer, you are the product. That is the fear with the private sector dashboard, which is why we have to get the public sector dashboard up and working. We know what the issues are. It may be necessary to have private sector dashboards, but I am still not totally convinced.

[Viscount Younger of Leckie (Con)]

My Lords, I will speak in broad support of Amendment 218D, tabled by my noble friend Lady Coffey.

Let me start by recording my thanks to the Minister, the Pensions Dashboards Programme team and MaPS for the recent briefing session afforded to noble Lords, which was thorough; I felt that it was constructive, and, if I may say so, reassuring in so many respects. We heard that some three-quarters of workplace and personal pension memberships—that is, around 60 million people—are now connected to the ecosystem. This is no small achievement; we should acknowledge that. We were told that the October 2026 connection deadline remains on track, which is of course welcome.

Connecting schemes to the system is one stage, while ensuring that the dashboard operates effectively for consumers is another. Delivering the money helper dashboard, important though that is, is not the same as establishing a fully functioning marketplace that includes private sector dashboards. These are separate phases of the programme and ought to be treated as such.

In that context, we were taken through the money helper dashboard and its intended customer journey. It is a significant and necessary first step—no one disputes that—but it is explicitly designed to be the foundation, not the finished structure. The question that therefore arises is a straightforward one: what is the clearly defined pathway from that foundation to the wider ecosystem that Parliament was originally invited to envisage?

As my noble friend Lady Coffey said, the Government have confirmed, most recently in October 2024, that the money helper dashboard will be made available to the public before any private sector dashboards are permitted to launch. I understand this sequencing to some extent. It is sensible to test the system, assess customer behaviour and ensure that it is secure and reliable. To that extent, I understand the approach that the noble Lord, Lord Davies, has taken; he used the word “caution”. However, mine is a slightly different point—it chimes with those from the noble Baroness and my noble friend Lady Coffey—which is that there should be at least a plan and a timetable.

The Government have stated their commitment to private sector dashboards in principle. A commitment in principle must now be matched by clarity in practice, which is why I think that my noble friend’s amendment is very much necessary. When do the Government expect private dashboards to be authorised? If a firm date cannot yet be provided, can the Minister at least set out the framework within which that decision will be taken? What are the stages? What are the criteria? What is the intended sequence of regulatory approvals? Over what period do the Government expect those steps to be completed?

We are told that private dashboards will proceed only once the service is judged to be reliable, safe and secure, and once, of course, it has satisfied the FCA, the Department for Work and Pensions, the Pensions Regulator and MaPS. This is entirely proper, but does that mean that no indicative timetable can be offered until every test has been passed? Surely not. Is there no internal planning assumption or projected window? How are industry participants expected to prepare if there is no sense of when authorisation might realistically occur? Is there not a risk that the programme becomes defined solely by the October 2026 connection deadline? What sits beyond that date? What is the Government’s intended next milestone? Without a clear forward plan—this is my point—how can Parliament assess progress?

My noble friend’s amendment does not seek to override safeguards. It simply seeks clarity and discipline. The proposal that the FCA should open the gateway to private dashboard operators within six months of the public dashboard going live would establish a reasonable and clear expectation. If the Government disagree with that period, what alternative do they propose? What is their preferred timetable?

There is also a practical issue, which cannot be ignored, because the successful introduction of private dashboards will depend heavily on data quality; that has been mentioned. What is the Government’s current assessment of the accuracy and completeness of data across connected schemes? Where are the known weaknesses, and what remedial action is under way? How frequently is data quality being tested and reported?

I know that this is a familiar question that has been asked as we have been taken through the progress on the dashboards programme—I have been very grateful for the updates—but what engagement is taking place with schemes and providers to ensure that preparation extends beyond technical connection and moves towards operational readiness? Are the communications with industry focused only on meeting connection deadlines, or do they also address the standards required for a competitive, consumer-facing environment?

In conclusion, this programme has significant potential, but potential must be matched by a structured plan. Parliament is entitled to understand not only where the programme stands today but where it is going and on what timetable. My noble friend Lady Coffey is right to press for that clarity and, unapologetically, I have asked a lot of questions that chime with her. I await the Minister’s response with interest.

Social Security Benefits Up-rating Order 2026

Lord Davies of Brixton Excerpts

Tuesday 10th February 2026 Grand Committee

[Baroness Lister of Burtersett (Lab)]

My Lords, I thank my noble friend the Minister for introducing the uprating order so clearly, and I welcome the opportunity to discuss the social security that it provides. It is a shame that it is tucked away in Grand Committee, with only a few dogged noble Lords present, given how important social security is to our society. As the impact assessment for the removal of the two-child limit Bill notes:

“Social security is the Government’s most direct lever”


to reduce child poverty, including the shockingly high level of deep poverty. To quote the recent Joseph Rountree Foundation report:

“Our social security system is one of the surest routes to tackling poverty and destitution that the government has at its disposal”—


so that a well-resourced and effective social security system is

“the bedrock of a strong society”.

At present, after a decade or so of cuts, our social security system is neither sufficiently well-resourced nor effective, but we are starting to turn the tide. Should anyone complain that doing so will contribute to the so-called ballooning welfare bill, I point out that spending on working-age social security is projected to flatline as a share of GDP over this Parliament. Although it is not part of the uprating, we cannot ignore the significant impact that the very welcome abolition of the “vicious”—to quote the noble Lord, Lord Freud —two-child limit will have on the numbers of children in poverty and on the depths of the poverty experienced by those who will remain below the poverty line.

I use this opportunity to ask the spokesperson for the Opposition, who is a decent lady, to dissociate the Opposition from the xenophobic Reform-echoing message of the Oral Question on this asked by one of their Back-Benchers last week, with its pejorative reference to foreign-born children receiving benefits, which I know disturbed a number of noble Lords across the House.

A particularly welcome aspect of the uprating itself, which I admit I did not realise until yesterday would be legislated for separately in a negative instrument just laid, mentioned by my noble friend, is the real increase in the value of the standard universal credit allowance, which will be repeated for the rest of this Parliament. I hope noble Lords will indulge me if I mention it now, given that we do not know whether or when the negative instrument will be debated. The uprating has to be understood in the context of the eight out of the 10 upratings between 2013-14 and 2022-23 that produced a reduction in its real value, leaving the basic level of support at a 40-year low, according to the JRF. A companion evidence pack of the child poverty strategy spells out how these cuts mean that basic benefit levels are worth “significantly less” than how the last Labour Government left them.

Nevertheless, as the Government themselves acknowledge, the real increase is only modest, especially when we bear in mind the differential inflation rate, which has hurt those on low incomes in recent years. The impact of this was emphasised at a Resolution Foundation conference on “Unsung Britain” this morning. There is a long way to go if universal credit is adequately to protect recipients against poverty and hardship. What this means was brought home to some of us by Jo, a member of Changing Realities, who spoke at a meeting here last autumn. She said:

“We are often exhausted parents trying hard to hide from our kids the mental gymnastics of managing tiny budgets in a big-cost world”.


She said that the effects are “immense and enduring”.

The JRF and Trussell, and also previously the then APPG on Poverty, of which I am co-chair, have recommended the establishment of an independent body to advise Governments on the benefit levels needed to meet essentials, as benefit levels have never been based on recipients’ actual needs. Of course, it would be for the Government and Parliament to decide on the actual levels, but they would do so on the basis of empirical evidence. Is this something my noble friend might take back for consideration? The need for benefit levels to reflect actual needs brings me to some buts—my noble friend the Minister knows me too well to think there would not be any.

First and perhaps foremost is the fact that retention of the overall benefit cap means that about one in 12 children who escape the frying pan of the two-child limit will be no better off, because they will be burned by the fire of the cap. Although the cap affects only a relatively small number, it is a key driver of deep poverty. According to the impact assessment for the removal of the two-child benefit limit Bill, 20,000 more households will be capped as a result.

One way that this effect could at least be mitigated would be if the threshold limits were uprated annually, in line with the UC standard allowance. As it is, they have only been uprated once since 2016, when they were cut. A Written Answer to me spelled out the effect on the threshold’s value: those for couples or lone parents would now be increased by £4,702—or £5,409 in Greater London—a year, had they been uprated in line with the UC standard allowance since 2016.

Secondly, it is disappointing that the local housing allowance freeze is being continued. IFS has criticised this approach to LHA as incoherent policy design. As the JRF has shown, one consequence is that four in 10 private renters in poverty are so only after housing costs are factored in, more than any other tenure group. Given that housing costs are identified as a key driver of poverty, there is no justification for a Government committed to reducing poverty and homelessness continuing the LHA freeze.

Although the PIP cuts were thankfully withdrawn, some cuts are still affecting those claiming social security for health or disability reasons. The health element of UC will be halved for new recipients from April. Although not yet confirmed, the proposal to replace the contributory new-style JSA and ESA with a new unemployment insurance scheme, while certainly improving the situation of the newly unemployed, would mean a new time limit after six or 12 months for those who currently qualify indefinitely for new-style ESA. This could have particularly serious implications for the autonomy and security of affected women in couples, for whom the new-style ESA represents an important source of income in their own right. Can my noble friend update us on the thinking on this, as there have been rather contradictory reports in the media?

Returning to child poverty, the latest projections produced by the DWP suggest that, despite the welcome reduction of half a million children in poverty as a result of the abolition of the two-child limit, the largest reduction in a single Parliament since records began, there will still be around four million children—29% of all children—in poverty at the end of this Parliament. This depressing fact is a measure of how dire the situation inherited from the previous Government was.

However, it must also act as a spur for further action now, including the setting of targets and milestones in the baseline report promised for this summer, and a prioritisation of further action to improve social security in future Budgets. The child poverty strategy document itself described it as just

“the first step on our road to ending child poverty”.

Who better to quote than the Chancellor of the Exchequer, who, while expressing her pride in abolishing the two-child limit, last week wrote:

“I know that our work cannot stop here. We must keep building a country where every child has a fair start in life and where every parent is treated with dignity, respect, and the support they deserve”.


We still have some way to go before that country is built.

[Lord Davies of Brixton (Lab)]

I thank my noble friend the Minister for presenting the regulations. I will make a brief grouse that one of the sets of regulations we are debating was not on the table, and it was not even in the Royal Gallery. I know it is only three pages, but it should have been there, so I hope some action will be taken to make sure that it does not become a habit.

I have a couple of questions for my noble friend the Minister. One of the things that annoys me about current debates on pensions is when people fail to clarify or acknowledge that the triple lock applies only to part of the state pension.

Although the basic pension, or the new state pension, has increased by 4.8%, almost all of the rest of the other elements that go towards the total amount that people receive is being increased by 3.8%, so the average increase across the board will be somewhere between 3.8% and 4.8%. I feel it particularly personally because my own state pension will be going up by 4.2%; those of you who are any good at algebra will be able to work out what my state pension is from that simple fact. My question for my noble friend the Minister is: what is the average increase in the state pension across the board for all recipients? It is certainly not 4.8%, and it will not be 3.8%. It will be somewhere in the middle. I have not given notification of this question, so I would be quite happy to receive an answer in writing, but it is a very relevant figure that we should make sure people understand.

My second question arises from the accompanying document: the report from the Government Actuary on the uprating. On page 16 of the report, there are projections for the fund up to 2030-31. We see here that the balance in the fund at the end of the year is increasing from £89.6 billion in the current year and more than doubles over a period of five years to £163.7 billion. This is a relevant figure when we are told that state pensions are too expensive and at a time when the fund from which those pensions are paid is building up increasing balances.

Another relevant comparison is that, in the coming year, the balance at the end of the year as a percentage of benefit payments is 59% and, by the end of this five-year period, will have increased to 89%. This compares with the expectation—or a sort of target, though not a statutory target—that the balance should more typically be something like 17%. We are building up very substantial balances in the National Insurance Fund. Many people nowadays do not take the National Insurance Fund seriously at all, but I believe that it is a real fund; it is accounted for separately. I really want to know this: do the Government have a long-term plan for the balance to be held in the National Insurance Fund?

This has arisen, of course, because successive Governments have come to regard national insurance contributions as simply a way of raising additional revenue; I have made this point when we have discussed contribution rates in the past. This is the only figure we get that actually shows how contributions are affecting the National Insurance Fund. The Government need to explain it in a bit more detail to us again. I would be interested in what my noble friend the Minister says initially, but, again, a written explanation of the Government’s policy in relation to the size of the balance in the National Insurance Fund would be a relevant factor to take into account when discussing the affordability of national insurance benefits.

[Baroness Stedman-Scott (Con)]

My Lords, I thank the Minister for introducing these orders in her usual detail. I will speak to both: the draft Social Security Benefits Up-rating Order 2026 and the draft Guaranteed Minimum Pensions Increase Order 2026. Although they are being debated together today, they are fundamentally different instruments raising distinct policy issues. It is therefore right that they are addressed separately, so I will begin with the draft Guaranteed Minimum Pensions Increase Order.

--- Later in debate ---

Minimum statutory requirements must be workable for all defined benefit schemes and their sponsoring employers. A blanket requirement of this kind would increase liabilities across the board, and many schemes would simply not be in a position to absorb those additional costs. It is essential, therefore, that schemes and their trustees retain the flexibility to manage their funding positions responsibly. Where surpluses exist, schemes are already sharing value in ways that reflect their specific circumstances, including through surplus extraction. That flexibility should not be undermined by inflexible statutory change.

[Lord Davies of Brixton (Lab)]

This is neither the opportunity nor the time to have a debate on the Pensions Act 2011, but the cap on GMPs was limited to 3% because the state took over the responsibility for paying increases on private pensions in excess of 3%. However, under the coalition Government’s legislation amending pensions, those increases were, in effect, lost. The noble Baroness expresses surprise, but we have to go back to the legislation introducing the new state pension, which was introduced by the coalition Government. In doing so, they took away the state’s obligation to pay increases in excess of 3%, so any obligation to pay anything more than 3% is solely on the state, not the employer. It would not be appropriate to suggest that the employer should pay increases over the 3% level because it was the state’s responsibility, but the coalition Government took it away.

[Baroness Stedman-Scott (Con)]

I appreciate the noble Lord’s intervention. I will read Hansard. We will write to the noble Lord and start some correspondence on that issue. I appreciate the points made by the noble Lord. Everybody knows that he knows what he is talking about and that he is well versed in pensions legislation. If he is happy for me to do so, I will pick that point up with my colleagues.

I turn to the draft Social Security Benefits Up-rating Order 2026. The shadow Secretary of State for Work and Pensions, Helen Whately, has rightly led calls for the Government to move more quickly and clearly in setting out their plans for welfare reform. Sickness and disability benefits alone are forecast to cost the taxpayer £100 billion by 2030. The shadow work and pensions team has consistently argued that the Government are failing to confront the structural drivers behind rising welfare expenditure. Delays in doing so carry a cost not only to the public finances but in missed opportunities to redirect spending towards other pressing government priorities.

It is extraordinary that the Timms review has only just agreed the names of the committee members appointed for a review that Stephen Timms is leading into sickness benefits, including with group members representing the disabled. The work has not yet begun. It is nearly two years after the general election, so can the Minister confirm that his committee is on track to give an interim review this spring? Can she also confirm that it will indeed be 2027 before his committee reports and that, by then, no progress will have been made in this Parliament, allowing for likely legislation following a government response?

These concerns sit alongside the wider economic impact of Labour’s jobs tax. The Autumn Budget 2024, in particular the increase in employer national insurance contributions, has been associated with the loss of an estimated 50,000 full-time equivalent jobs. This has implications for not only employment levels but the long-term health of the National Insurance Fund. The difficulty with this draft order is one not purely of substance but of process. The instrument uprates pensions and working-age benefits together, leaving no scope to consider the appropriateness of each element independently or to debate the Government’s policy intentions for each in detail.

Rather than dwell further on the procedural constraint, it is worth noting that the issues raised by this uprating instrument sit alongside the Government’s announcement yesterday on universal credit reform and the legislation now laid before Parliament. Taken together, they speak to the direction of travel in welfare policy and the assumptions underpinning the current uplift. The Government argue that these reforms are intended to rebalance the benefits system, to address perverse incentives and to support more people into work. We are told that the current gap between health-related universal credit payments and the standard allowance discourages labour market participation, and that narrowing this gap for new claimants is necessary to restore fairness and sustainability.

I therefore have a number of questions for the Minister. First, what assessment has been made of the behavioural impact of introducing a significantly lower health element for new claimants? Secondly, although existing claimants and those with severe or lifelong conditions are protected, how confident are the Government that the criteria used to determine severity are sufficiently robust, consistent and fair across the system? Thirdly, the Government have announced £3.5 billion in employment support alongside the expansion of pathways to work advisers. How will success be measured? Will outcomes be judged by sustained employment, earnings progression or reductions in case loads, and over what period?

Finally, the Government expect these reforms to deliver savings of £950 million by 2030-31. Do those projections assume stable labour market conditions? What sensitivity analysis has been undertaken should employer demand weaken further? I hope that the Minister sees the link and will be happy to answer these questions.

--- Later in debate ---

I move on to the comments from my noble friend Lord Davies on the average uprating to a state pension. It is not possible to make direct, like-for-like comparisons between state pension amounts received under the pre-2016 state pension system and the new state pension. Under both systems, the actual amount people are entitled to receive varies according to their national insurance record. It is not the case that everyone in the new system gets more than everyone in the old system, and not everyone who gets to state pension age after the 6 April 2016 receives the full rate of the new state pension. I fear that giving an average increase would therefore risk simply mixing apples with pears, but, if it would be helpful, I can certainly write to my noble friend with a calculation that basically divides the increased expenditure by the number of beneficiaries. If he would like apples over pears or something of that nature—I will stop talking—I would be happy to write to him with whatever we can do on that.

[Lord Davies of Brixton (Lab)]

If it helps my noble friend, I will put down some Written Questions to deal with this question. I probably should have done that in the past.

[Baroness Sherlock (Lab)]

If all my noble friend wants to know is what he has asked me, I can write to him—this would save him the trouble of writing and save me the trouble of writing back to him—but, obviously, he is always entitled to do that.

Finally, the National Insurance Fund is financed on a collective basis, with receipts collected in one year used to pay for certain benefit payments, including the state pension, paid out in the same year. I need to make it clear that, obviously, it is not accurate to suggest that there is a surplus in the fund that can be drawn on. The balance of the National Insurance Fund is managed as part of the Government’s overall management of public finances and reduces the need for them to borrow from elsewhere. Any additional spending from the National Insurance Fund would represent an increase in overall government spending. Without cuts in other areas of spend or additional taxes, it would therefore lead to an increase in government borrowing.

I think I have answered most of the questions asked by noble Lords. The noble Baroness asked some specific questions about metrics. I am not sure that I have an answer to hand; if I have anything, I will certainly write to her. I am grateful, once again, for what is always an interesting debate. I love the fact that this Committee takes these matters so seriously; they truly affect the lives of so many people. I am grateful to noble Lords for their time and expertise.

Pension Schemes Bill

Lord Davies of Brixton Excerpts

Committee stage
Thursday 5th February 2026 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, the Government recognise that the pension compensation system and the safety net it offers need to work harder for members. Payments from the Pension Protection Fund, the PPF, and the Financial Assistance Scheme, FAS, based on pensions built up before 1997, do not get uprated with inflation—pre-1997 indexation. Over time, they have lost a significant amount of their value in real terms. I am therefore particularly pleased to introduce Clauses 108 to 110, which together provide for pre-1997 indexation in the PPF and FAS, and extend this provision to members covered by the Northern Ireland legislation.

Clause 108 amends the relevant provisions in the Pensions Act 2004 and the Pensions Act 2008. It introduces increases on compensation payments from the PPF that relate to pensions built up before 6 April 1997. These will be CPI-linked and capped at 2.5%, and will apply prospectively to payments for members whose former schemes provided for these increases. Clause 109 makes equivalent amendments to the relevant Northern Ireland provisions, in the same way that Clause 108 does to GB legislation. This will ensure that PPF members covered by Northern Ireland legislation are treated in the same way as their counterparts in Great Britain. Clause 110 amends the relevant FAS regulations to introduce increases on compensation payments from the FAS that relate to pensions built up before 6 April 1997. As with the other clauses, these increases will be CPI-linked, capped at 2.5% and applied prospectively for members whose former schemes provided for these increases. We expect that first payments will be made to members whose former scheme provided for increases from January 2027.

Some affected members only had annual pre-1997 increases within their scheme due to the guaranteed minimum pension, or GMP, part of their pension. There is a statutory requirement for pension schemes annually to uplift any GMPs earned between April 1988 and April 1997. As such, PPF and FAS members who had only a post-1998 GMP will also receive increases on a proportion of their pre-1997 compensation payment. That is because the PPF is not legally required to separately identify GMPs when a scheme transfers to the PPF or qualifies for FAS.

We will therefore calculate a standardised percentage amount for PPF members to ensure that those who had this legal requirement for increases do not miss out. That will be done via regulations, and careful consideration will be given to this standardised approach. The Secretary of State will make the equivalent determination for FAS. Clauses 108 and 109 also give the PPF board the same discretion to adjust the percentage rate of pre-1997 indexation as it currently has for post-1997 increases.

These reforms bring a step change that will make a meaningful difference to affected PPF and FAS members. Incomes will be boosted by an average of around £400 for PPF members and around £300 for FAS members per year after the first five years. The pension compensation system will now offer a stronger safety net for members who, up until now, had lost out on pre-1997 inflation protection following their employer’s insolvency or scheme failure.

We have tabled eight minor and technical government amendments that amend the relevant provisions in the PPF legislation, including the Northern Ireland legislation and the relevant FAS regulations. These are to ensure that the pre-1997 increases in the PPF and FAS are implemented as intended and that affected members are able to receive the appropriate increases.

These amendments apply where an eligible scheme operated with more than one benefit structure. For example, a scheme may have paid increases on pensions built up before 6 April 1997 for one group of members but for another group the scheme may have paid increases only on GMPs built up on or after 6 April 1988. As the provisions were originally drafted, the latter group would not have had an entitlement to pre-1997 increases from the PPF or FAS. We want that group of members to receive indexation on a proportion of their pre-1997 compensation, and these amendments remedy the position.

I will comment on the other amendments in the group when I respond at the end of the debate. I beg to move.

[Lord Davies of Brixton (Lab)]

I will speak to my Amendment 203ZB. I thank my noble friend for the decision in the Budget to grant future increases. That is very much to be welcomed. As for the technical difficulties, I would love an opportunity to start discussing GMPs and even better if we got on to the anti-franking rules, but that is not the issue that I wish to raise today. As I have not moved the lead amendment, I have only 10 minutes.

In working out what I had to say, I realised that there are three groups dealing with pre-1997 increases: this group, group 2, the next group, group 3, where the noble Baroness, Lady Altmann, will move her amendment, and group 5, where at last I get 15 minutes as the mover of the amendment. There are issues that run through all three groups. That is not to downplay the importance of group 4 and the AWE proposals. There are intertwined issues here. There is the reduction in real terms of members’ benefits since they came into payment and the introduction of future increases. There is also the issue that is the subject of my amendment in group 2 and of the amendments in group 3, which is the losses that have been incurred by pre-1997 pensioners.

I am glad that the Minister said that those pensioners have lost out. I am glad that we have that common ground: they have lost out. Then there is the issue of pre-1997 benefits for schemes that are still active. Whether or not they are open to new members, they have pensioners and their legal entitlements to pre-1997 benefits differ from those post-1997. There are common themes there and I suspect that my remarks on all three groups could be put together and make a more coherent whole. In particular, there is a big issue about inflation protection for pre-1997. It is all about pre-1997. What was the feeling about inflation protection back in those days when it was under discussion? Even though it applies to this group, I am going to save that for group 3, when I shall move my Amendment 203.

I am not going to address in this group, although this is probably the most important point of all, the impact that this has had on the individuals concerned. I have had a substantial postbag, most of it by email, pointing out the problems that they have faced. I am not going to focus on that now because I have a limited amount of time, but to me it is the crucial point.

I shall start with the PPF and then come to the FAS in a moment. The principle has been established that PPF pensioners deserve increases in their pensions in respect of pre-1997 service. The Government agree with that principle but they are only going to implement it for the future. The same principle should apply to the past as to the future. Why should they be entitled to increases in the future if they are not entitled to exactly similar increases for the past? I am not talking about retrospection. This amendment has nothing to do with retrospection; it just says that these pensioners deserve pensions now in real terms that are the same in monetary value as they were when they came into payment.

The only reason why one would make a distinction between the increases in the future and making good the increases that have been lost in the past is the cost. I cannot think of any other plausible reason. There is no difference between them in terms of justice; it is simply about the cost. However, we know, because the PPF has given us the figures, that that does not apply here. The money is in the PPF that can afford these increases. It has a significant and growing excess of assets over liabilities and, because of that, the levy is being suspended. The employer providing these schemes is gaining the benefit—in effect, a sort of refund of the surplus that has been built up. Well, fair enough, they have paid for it, but so have the members and they are entitled to the increase. Whatever they had when their pensions came into payment should be increased from January 2027 to allow for what they would have got in respect of post-1997 benefits. That is clear and I hope that the Government will accept the point.

Then we come on to the FAS. The big difference between the PPF and the FAS is that the FAS is funded out of general taxation. However, let us be clear why the FAS is there: it is because Governments of both parties failed to provide the protection that they were required to give under European law, in the face of the fantastic campaign that was run on behalf of the pensioners of schemes that became insolvent—and employers that became insolvent—prior to the implementation of the PPF. That is the only reason why they are in the FAS. It was the Government’s failure; it was not their failure. Why should they lose out? Governments failed to provide them with protection. They only introduced the PPF from 2005, but the people who lost their pensions prior to that date are just as entitled. The Government gave in because of the fantastic campaign, as I say, but also because of the threat of further legal action at the European court that they knew they would lose. To make a distinction between FAS members and PPF is totally unfair and unreasonable.

There will be a cost and, because it is the FAS, it will fall on the taxpayers, but one principle is clear: where the Government have a debt to make good something that they have got wrong, they cannot excuse themselves from that debt by saying, “Sorry, we don’t quite have the money”. They should pay up. It is quite clear that the same treatment should be afforded to the FAS members as to the PPF members.

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[Lord Davies of Brixton (Lab)]

I offer my support for the amendment moved and the other amendments proposed by the noble Baroness, Lady Altmann. She suggested that, in some ways, her amendments are more important than mine. I agree and I will come on to why that is so in a moment. I recognise the importance of the government amendments but, in the words of my noble friend the Minister, we have to recognise the impact of the lack of past increases on those affected.

Retrospection has been mentioned. It is a complete red herring. By its nature, any form of compensation will be retrospective. We are not going to compensate people for what happens in the future. The compensation being paid all too slowly to the Post Office managers is retrospective. The money being paid to the infected blood victims is retrospective, but we still have to pay. “Retrospection” is not a relevant word in this context. We are clear, and we all agree, that these people have lost out, to use the words of my noble friend the Minister, so retrospection is a red herring.

My noble friend the Minister also mentioned the significant impact on public finances. That is true because it has been defined in that way, but we are setting the rules. We are not being subjected to rules imposed by outside interests. If the Treasury does not have the wit or ingenuity to adjust the rules in a way that would allow for these payments from the PPF, which, in reality, would have no impact whatsoever on public expenditure, those who have been affected by the lack of increases will draw their own conclusions as to what the Government really want to do. My noble friend also said that this is a compensation scheme and that it was never designed to offer full redress. Well, that is what we are debating; it is exactly what we are saying is wrong and should be rectified.

The point that I wish to emphasise in this section is the need for urgency. That is why this amendment is the important one. To be brutal, we are dealing with a declining population. It has been estimated that more than 5,000 pensioners with pre-1997 rights are dying each year. We have to take action. Even my amendment, which I proposed to bring the pension up to its current real value, does not address the issue for these people because many of them will not be here. Compensation via lump-sum payments, along the lines suggested in these amendments, are, I believe, the way in which this problem should be addressed. I strongly support these amendments.

[Lord Palmer of Childs Hill (LD)]

My Lords, I will briefly speak in support of the amendments. I emphasise that they look at how to do this by lump-sum payments, rather than by increasing pensions. That is important. It is what we in my profession used to call “creative accountancy”. It seeks to achieve a result by lump sums, more or less off the Government’s balance sheet. There has been some blending of the funds in the past. It is a way of doing it in a creative accountancy way, largely getting rid of the problem by lump-sum payments. I hope that the Government will look at this in a creative way in order to provide some justice without incurring an ongoing debt.

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[Lord Davies of Brixton (Lab)]

Does the noble Baroness agree that her scheme would work the other way round, because older members will tend to have more pre-1997 service that younger members, whose pre-1997 service will be relatively limited? A scheme along the lines she proposes will have some element of generational fairness.

[Baroness Altmann (Non-Afl)]

I thank the noble Lord. I would certainly say that there is a significant and obvious element of fairness in this proposal for lump sums to be paid. I argue that it would level the playing field, because those who have lost the most at the moment will continue to lose the most, whereas if you recognise the past losses and the forward uplifts are still being paid then you equalise, to some degree, the fairness and the losses between people of different age groups.

I hope that we can come back to this matter on Report and that we might have a meeting to discuss the potential for something of this nature to be introduced in the Bill. In the meantime, I beg leave to withdraw my amendment.

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[Baroness Altmann (Non-Afl)]

My Lords, I have Amendment 203ZC in this group, but unfortunately the Committee has not received a copy of my amendment.

[Lord Davies of Brixton (Lab)]

It is on a separate sheet.

[Baroness Altmann (Non-Afl)]

Good. I now have it and I want to check that everyone else has it too. That is my first question dealt with.

In speaking to this amendment, the aim is to enable members of pension schemes that have gone into the PPF after their assessment period to be extracted, with regulations laid that will govern the terms on which they can be extracted. This is particularly relevant to the AEAT scheme: I know that we will come to this in later groups, with a requirement for a review of the situation. My amendment is trying to facilitate a practical resolution to the problems faced by the Atomic Energy Authority scheme. There are parallels with the Atomic Weapons Establishment or AWE scheme: employees originally had a scheme similar to and in fact derived from that of the UK AEA.

The AWE staff and their pensions were transferred to the private sector, and in 2022 the Government granted a Crown guarantee to the private company scheme. However, members of the AEA scheme were told that the scheme that they were encouraged to transfer to in 1996 would be as secure as that provided by the Atomic Energy Authority public sector scheme. This was not the case, though, because it was not offered a Treasury guarantee. It would appear that the Government Actuary’s Department failed to carry out a proper risk assessment of the various options offered to those members in 1996. Indeed, they were apparently specifically told not to worry about the security of the scheme to which they transferred all their accrued benefits. Of course, all these accrued benefits are pre-1997.

What happened after that is that they went into a private sector scheme. It was a closed section of that scheme, only for the members who transferred their public sector rights into it. The public sector rights had full inflation protection for pre-1997 and members paid an extra 30% or so contribution into that private sector scheme in order to conserve the inflation protection. However, as part of that, the pension they were saving for, the base pension, was lower than the one for those members in the open scheme who had joined not from the public sector. They were working on the principle that that their scheme was secure and that they would be getting the uplifts of inflation. When it failed—the private sector company went bust in 2012—and they went into the PPF in 2016, they suddenly discovered that they had paid 30% more for inflation protection, which was gone. And because they had paid 30% more for that protection and were accruing a lower pension, a 180th instead of a 160th scheme, their whole compensation was lower than that of everybody else who had not had any assurances from the Government that transferring their previous rights into a private sector scheme would generate these kinds of losses.

This is probably the worst example I have seen of government reassurance and failed recognition of the risks of transferring from a guaranteed public sector scheme into a private sector scheme. This amendment seeks to require the Government to lay regulations that would transfer members out of the PPF, those members of the closed scheme, if they wish to. I am not forcing anyone to do so within this amendment. You have to offer them the option of going or staying if they are satisfied with the PPF. Also, a sum of money may need to be paid to the PPF, which would take away the liability and thereby reduce PPF liabilities, but also sets up an alternative scheme that could be along the lines of the AWE arrangements, for example. That would potentially be another option. On privatisation, the Government received a substantial sum of money from the sale of that company, the private sector takeover of the commercial arm of the Atomic Energy Authority. That delivered less money than was paid to the private sector scheme to take over the liabilities. Therefore, the Government have money to pay with, which they have never really acknowledged.

I hope that this amendment is a potentially direct way to help the AEAT scheme, if the Government are minded to consider it. It builds on a provision that is already in the Pensions Act 2004, which talks about situations whereby there is a discharge of liabilities in respect of the compensation, which this amendment would be doing. It prescribes the way in which subsection (2)(d) of Section 169 of the Pensions Act 2004 could be used to help the AEAT scheme.

I have also been approached by a private sector employer whose scheme failed and went into the PPF. At the time, the employer did not have sufficient resources to buy out more than the Pension Protection Fund benefits for his staff. He now is in a position to do that and would like to do so but, at the moment, he cannot get his scheme extracted. He is willing to pay an extra premium to do that, in pursuance of a moral duty to try to give his past staff better-than-PPF benefits. That is what this amendment is designed to achieve. It is built on the connection between AEAT and AWE, but could also help other private sector schemes if the employer feels—it would normally involve smaller schemes—that there is a moral obligation that they can now meet, financially, to recompense members at a level better than the PPF, once the assessment period is over and the resources have gone in, and to take it back out again.

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Moved by

[Lord Davies of Brixton]

203: After Clause 110, insert the following new Clause—
“Indexation of pre-1997 pensions(1) The Pensions Act 1995 is amended as follows.(2) In Section 51 (annual increase in rate of pension)—(a) omit subsections (1)(b) and (1)(c)(ii);(b) in subsection (2)—(i) omit “on or after April 1997”;(ii) omit “to payments in respect of employment carried on or after April 1997”;(iii) omit “or, as the case may be, to payments in respect of employment carried on or after April 1997”;(c) in subsection (4ZE), omit “or, as the case may be, to payments in respect of employment carried on or after April 1997”;(d) in subsection (5)(a), omit “6 April 1997 or”;(e) in subsection (8)(a) and (b), omit “at any time on or after 6 April 1997”.” Member’s explanatory statement
This new clause would remove references to 6 April 1997 from section 51 of the Pensions Act 1995 in order to require that annual increases to pension payments in line with CPI and RPI apply to pensionable service both before and after 6 April 1997.

[Lord Davies of Brixton (Lab)]

My Lords, I am going to try to put this issue into context. This is the third leg of our discussion, which centres on what we do now in relation to benefits that accrued for pensionable service prior to 1997.

I am going to take the Committee into a little history. The 1997 date was set by the Pensions Act 1995. I was there; although I had long left the TUC, because the TUC’s normal pensions officer had taken leave of absence for a few months, I was, in effect, acting as the TUC’s pensions officer at the time. On the background, in terms of what people understood about pension increases at that time, I will go all the way back to 1971, when the Pensions (Increase) Act was passed. In 1971, it was obviously under a Conservative Government. They linked public service pensions to inflation—initially RPI then subsequently, from 2011, CPI. That was all well and good. It set the standard, quite properly, for the Government of good pension provision, including increases. I make no apology for that. I am sure that we will return to this issue when we have the debate at our next meeting on public service pensions. The Conservative Government set that standard.

Then, in 1981—again, under a Conservative Government —Margaret Thatcher, the Prime Minister, decided, egged on by Aims of Industry, that there should be a review of pensions and pension increases. She took a personal interest—it is all there in the Thatcher archives—and established the Scott inquiry. Chaired by Sir Bernard Scott, a prominent businessperson at the time, it was a five-person inquiry that undertook a detailed study of pension increases, starting with public service pensions. We do not hear much about this inquiry now—there is another more famous Scott inquiry—because it came up with the wrong answer. Despite the committee being hand-picked by the Prime Minister, it came up with the answer she did not want. It said that index-linking was justified—it is worth saying here that, when it says “index-linking”, it is talking about the limited price index, or LPI, so not full indexation in all circumstances but up to a limit—and that there was no case for its removal from public service schemes.

The committee decided that public service pensions were not overly generous overall. It pointed out that the main driver of costs for public service pensions was not index-linking but the final salary benefit structure. Again, as an aside, it is worth noting that, from 2011 onwards, public service schemes moved away from that; they are now all average salary schemes. The committee advocated for parity of pension increases with state pension increases. So this committee, which was set up to tell the world how bad index-linking was, said that everyone should have index-linking. That was in 1981.

There is another stage. Originally, when schemes contracted out, they promised to provide GMPs. Initially, the GMPs were not index-linked but had a flat rate, and the state scheme was left to provide the indexing on the fixed flat-rate private sector schemes. However, by 1986, it was decided that the private sector schemes could provide LPI, initially at 3%. The scheme had to provide GMP, but it provided inflation linking up to 3%, and inflation over that would still come from the state scheme. This is where the contracting out becomes incredibly complicated, of course. That change to the GMP was when a Conservative Government introduced an additional element of index-linking in occupational schemes.

Then we had the Maxwell scandal, the subsequent Goode report and the Pensions Act 1995. There is a theme here. It was a Conservative Government; William Hague was the Secretary of State. From 1997, they introduced LPI index-linking, initially up to 5% and subsequently reduced to 2.5% in 2005—unfortunately, that was a Labour Government, but there you go. So there is this whole consistent move towards limited price indexation in occupational schemes. It became the accepted approach to providing occupational schemes. A scheme that did not provide some element of indexation in retirement was seen as an inferior scheme.

I was there, as I say, so what was my experience? Many schemes, particularly larger schemes, had LPI in the rules pre 1997, following Scott in the early 1980s. Schemes have gradually introduced it more and more; of course, index-linked bonds were introduced specifically as a follow-on from the Scott report. So many schemes, particularly large schemes, had LPI in the rules.

Other schemes said, “We’re going to provide indexation but we’ll do it under discretionary powers”. However, they still expected to provide increases and funded for them. It is my view, having been there, that, pre 1997, the number of schemes making no allowances for LPI increases was vanishingly small. For some, it was in the rules; for others, it was in the funding basis. Practically every member had a reasonable expectation of LPI in retirement in respect of the benefits that they accrued pre 1997. The statutory requirement was introduced to cover all schemes, as recommended by the Goode report; that was absolutely right.

So the suggestion that people are unreasonable in expecting their pre-1997 benefits to be increased is entirely wrong. It was entirely reasonable for them, and that is what people believed at the time, although they may not have a legal entitlement. This does not affect just the PPF or the Financial Assistance Scheme, where we are told that, if the scheme did not have it in the rules, it will not get these increases. It particularly affects active pension schemes—not necessarily those with new entrants, but those with pensioners to whom the scheme is paying money.

Many of the members will have benefits accrued before 1997, and those members have a reasonable expectation of increases. That is why I move Amendment 203 as a basis for discussion at this stage. In the light of what we hear, I may come back to the issue on Report. The law can now move to requiring increases on pensions accrued pre-1997, whatever it said in the rules, because it is a question of not legal but political justification. Politically, people can reasonably expect the Government to provide them with justice, and there is a reasonable moral expectation that they should now get limited price indexation on their benefits accrued prior to 1997.

The issue here is the position in which so many members find themselves. Their trustees—who were perhaps more engaged, years ago, with the operation of the scheme in those days—gave them a reasonable expectation of the benefits. I wrote to many schemes around that time, asking them what their practice was, having got an increase in the rules. Many of them wrote back to me and said, “Yes, we expect to increase these pensions and we are funding the scheme on that basis”.

Trying now, 30 years later, to distinguish between schemes that provided for these increases in the rules and in the funding basis is politically and morally wrong. These people have a reasonable expectation, and we have this opportunity to see that they are treated correctly. I beg to move.

[Baroness Altmann (Non-Afl)]

My Lords, I have every sympathy with the noble Lord’s amendment, and I would love the Government to find themselves able to accept it. I would certainly agree on the moral case and on the historical justification for members having reasonable expectations that their pensions would not suddenly be whittled away to a fraction of what they would previously have had. The Goode report recommended unlimited inflation protection, but it was limited when it came in and it was only from 1997 onwards rather than retrospectively. There are echoes there of what we have just heard about the Pension Protection Fund.

I see that the noble Lord, Lord Brennan, is here; he was instrumental in campaigning for the Allied Steel and Wire members and worked so hard to help them, as the noble Lord, Lord Davies, also did. The noble Lord, Lord Wigley, is no longer here, but this would certainly apply to the Allied Steel and Wire members, and I urge the Government to look at the amendments. I fear that there may be little appetite, given that our previously much more modest suggestions were rejected and bearing in mind that not all schemes are in surplus—there may be an issue. But, if the Government were so minded, there is certainly a good case for considering the amendment that the noble Lord, Lord Davies, so ably moved.

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[Baroness Sherlock (Lab)]

I thank my noble friend Lord Davies for introducing his amendment and for the history lesson. It is living history, but he always has the edge on me because he goes back to 1975, and at that point I was more interested in boys and make-up, so I simply cannot compete, I confess, on that front.

The reality is that this Government have to start in 2026 and where we are now, so we have to address what the right thing to do now is for the DB pension universe and for the schemes in general. I can totally understand why my noble friend has introduced this amendment. Members of some schemes are concerned about the impact of inflation on their retirement incomes, and I am sympathetic. We have been around this in previous groups. This amendment would remove references to 6 April 1997 as the start date for the legal requirement on schemes to pay annual increases on pensions in payment. Obviously, as my noble friend indicated, legislation requires increases on DB pensions in payment to be done only from 6 April 1997. That has been a pretty long-standing framework which reflects the balance that Parliament judged appropriate at the time between member protection and affordability for schemes and employers. These changes are normally not backdated; they are normally brought in prospectively.

Most schemes already provide indexation on pre-1997 pensions, either because it is required under the scheme rules or because they choose to award discretionary increases. The Pensions Regulator has done some analysis and is doing more work on this. The latest analysis indicates that practices differ, but many schemes have a track record of awarding such increases. However, imposing a legal requirement on schemes now to pay indexation on pre-1997 benefits would create costs that schemes and employers may simply not have planned for. These costs may well not have been factored into the original funding assumptions or contribution rates. For some schemes and employers, these additional unplanned costs could be unaffordable and could put the scheme’s long-term security at risk.

Many employers are working towards buyout to secure members’ benefits permanently. Decisions on discretionary increases must be considered carefully between trustees and employers against their endgame objective. The reality is that the rules for DB pension schemes inevitably involve striking a balance between the level and security of members’ benefits and affordability for employers. But minimum requirements have to be appropriate for all DB schemes and their sponsoring employers. A strong, solvent employer is essential for a scheme’s long-term financial stability, and that gives members the best protection that they will receive their promised benefits for life, as the employer is ultimately responsible for funding the scheme. Any change to that statutory minimum indexation has to work across the full range of DB schemes. This amendment would increase liabilities for all schemes, regardless of their funding position or governance arrangements. While some schemes and employers may be able to afford increasing benefits in this way, others will not.

The way DB schemes are managed and funded since the 1995 Act was introduced has changed, but the basic principle remains that we cannot increase scheme costs on previously accrued rights beyond what some schemes might be able to bear or that many employers will be willing to fund, and that remains as true now as it was then. Our view is that schemes’ trustees and the sponsoring employer have a far better understanding than the Government of their scheme’s financial position, their funding requirements, their long-term plans and therefore what they can and cannot afford. They are also best placed to consider the effect of inflation on their members benefits when making decisions about indexation. The regulator has already been clear that trustees should consider the scheme’s history of awarding discretionary increases when making decisions about indexation payments.

We discussed earlier in Committee the Government’s reforms on surplus extraction. They will allow more trustees of well-funded DB schemes to share surplus with employers to deliver better outcomes for members. As part of any agreement to release surplus funds to the employer, trustees will be better placed to negotiate additional benefits for members, which could include discretionary indexation. Although I understand the case my noble friend is making—I regret that I cannot make him and the noble Baroness, Lady Altmann, as happy as they wish—I hope that, for all the reasons I have outlined, he feels able to withdraw his amendment.

[Lord Davies of Brixton (Lab)]

I thank those who have taken part in this debate on an important issue. Many people out there—I have had messages from people who are watching this debate—hope for better news. I am sorry that at this stage the Government are maintaining the line.

On the question of history, I could go back to the 1960s and Richard Crossman’s national superannuation if people would like—I am even slightly tempted to start. But the bit of history I remember is in the 1980s, when many schemes had surpluses and the Government introduced, through the Inland Revenue, limits on surpluses, compelling schemes to deal with them. At that time, employers said to us—I was involved in many negotiations—“Okay, it’s fine, we’ll take the surpluses now, but depend on us. When things get tough, we’ll come up with the additional money required”. What happened is they gave up and walked away. That is why the Labour Government in the early part of this century introduced funding requirements, the Pension Protection Fund and so on because, ultimately, when employers and trustees were put to the test, all too often they failed to deliver the promises that they made when surpluses were available.

The noble Viscount, Lord Younger, rightly tied this to the issue of surpluses and certainly there will be an opportunity on Report to discuss the linkage between employers getting refunds from their schemes and providing better increases for members. That is such an obvious linkage. I would want to go beyond that, but the issue will continue. For the moment, I beg leave to withdraw my amendment.

Amendment 203 withdrawn.

Pension Schemes Bill

Lord Davies of Brixton Excerpts

Committee stage
Tuesday 3rd February 2026 Grand Committee

Amendment 142 in the previous group looked at protecting the trustees or managers in such a situation. Amendment 167 would provide a sensible mechanism for making the scheme members whole if they suffered losses as a result of the government mandation. If the Government are going to force trustees or managers to act in a way that they do not believe to be in the interest of scheme members—that is the implication of mandation—it must be appropriate that the Government bear the risk of any underperformance. Neither members nor trustees should be made worse off as a result of government intervention.

[Lord Davies of Brixton (Lab)]

I possibly touched on this issue in the wrong group, but as the noble Baroness, Lady Kramer, has indicated, I raised, in essence, the same points in the previous debate.

I am in favour of mandation, but what worries me is that the Government do not seem to understand—and have never acknowledged—the consequences, which have been set out so clearly by the noble Baroness, Lady Kramer, and the noble Lord, Lord Vaux. There are consequences if the Government tell people how to organise their retirement income and if, having told them how to proceed to achieve a good income, it subsequently turns out that the Government are wrong. As I said last week, they will not necessarily be legal consequences, but political consequences and moral consequences.

I draw attention to the Financial Assistance Scheme, which we are going to be debating later this week. It was established because the Government had to acknowledge their failure to introduce the appropriate law and protect people, and they lost income. That is an exact precedent for where we are now. That Government had a responsibility to protect those people and failed to do so. After a vigorous campaign by those who had been affected, and the threat of losing a case at the European court, which was possibly more influential on the Government, they had to act. It is not wild speculation that the Government will end up having to meet these moral and political consequences; it has already happened. The Government have to face up to what they are proposing here.

[Baroness Altmann (Non-Afl)]

My Lords, I support this amendment in principle. I share the concerns just expressed by the noble Lord, Lord Davies, about the risk of mandating a substantial proportion of any pension fund to be invested in what is, in effect, the highest-risk end of the equity spectrum, which is meant in other circumstances—if you ask the Pensions Regulator and so on—to be the risky bit of investment.

The Government may need to think again about the consequences of potentially being so narrow—of course, in the Bill, we do not even have the exact definition of what the assets are going to be in terms of these unlisted opportunities—because the opportunity set for risky investments that can actually benefit the economy is a lot wider than seems to be indicated in the Bill. Surely the more diversified the portfolios, the better risk-adjusted returns members can expect. I hope that the Government will give the Committee a more precise understanding of their expectations for the types of assets and for the consequences of being automatically enrolled in a scheme that invests in private equity assets or other unlisted assets that end up failing completely—as has happened so frequently with that type of investment in the past.

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[Lord Fuller (Con)]

My Lords, there are three clauses here and one would have to be pretty churlish to want to reject and disagree with the thrust of what they are trying to achieve. But I am concerned, as is my noble friend Lord Younger, about how we might put in these contractual arrangements. I am concerned that we are going to sleepwalk into a situation where there is unrealistic customisation and we are going to set unrealistic expectations about the ability of schemes—particularly the larger schemes, because we know schemes are going to be much bigger than today—to give personalisation.

We are going to see, if I read these regulations correctly, a huge number of bespoke arrangements. There is going to need to be candour, not just from the schemes themselves but from the members when they are asking questions. What is the duty upon the person to take advice? Normally, at the moment, if you want to change your pension arrangements, you need to take advice and pay for it. Who will pay the fees? Is it the member or the scheme itself?

When I think about candour, it leads me down the path of thinking about what happens to people who are in impaired life situations. Perhaps they have cancer or another terminal disease. I am not going to trespass on the arguments that are made every Friday in your Lordships’ House, but as we have learned from those debates, there is a lack of certainty about people who are in those impaired situations.

That leads on to my noble friend’s point about capacity and capability of trustees to make these judgments—that is difficult. So I am entirely in agreement with the idea that people should be able to have control and a bespoke arrangement just for them, but I am concerned about the practicality of delivering what can be subjective judgments of the trustees. In these large schemes you may have to deal with hundreds or thousands of these applications.

In local government—a parallel world— the EHCP system mandates a personalised regime for children’s special educational needs. I suppose my concern is that it has led to a huge bureaucracy—a cottage industry of a huge amount of appeals, process and, of course, delay. When you have pensions, you cannot have a delay because people are at the end of their lives—are they going to make it?

I want to agree with the thrust of this, and these are probing amendments, but I am interested in the Minister laying out in some detail how these bespoke arrangements might be calculated and defended by trustees with lots of other things to do. I am also very much drawn to the amendments from the noble Baroness, Lady Noakes, about being realistic about the current ways of work, in which people have blended retirements, and about the requirement to have indexation and all those sorts of things. It does seem complicated, and I am interested to hear what the Minister might say about it.

[Lord Davies of Brixton (Lab)]

This part of the Bill is particularly important and the part to which I gave the strongest welcome. There is, inevitably, a caveat: we do not know much of the detail because it depends so much on what the regulations say and require. But this is the necessary and right framework to provide pathways for people to get the sort of benefits in retirement that best suit them.

I have some concern that there has been discussion of having more than one default, which rather defeats the concept of a default. Either the member will have to choose the appropriate default or someone else will, which places a particular responsibility on whoever will take the decision. It is important.

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[Viscount Younger of Leckie (Con)]

My Lords, before I conclude on this group, I thank in particular my noble friend Lady Noakes for her probing amendments, which ask a number of important questions.

I will make a few points and rounding-up comments but, before I do, I want to pick up on my noble friend Lord Trenchard’s remarks. I must admit that I was very surprised to hear the remarks made by the noble Lord, Lord Davies, on his view of the pensions landscape; they were fairly forceful. As he will expect, I entirely disagree with his comments. I just make the point that our party brought in improvements to auto-enrolment and introduced the dashboard system; I pay tribute to my noble friends Lady Coffey and Lady Stedman-Scott. I have more to say but I will give way.

[Lord Davies of Brixton (Lab)]

I just want to pick up the noble Viscount’s point about auto-enrolment. It was a Labour Government and a Labour Bill that introduced automatic enrolment. The only change that the coalition made was to delay it, thereby reducing people’s future pensions.

[Viscount Younger of Leckie (Con)]

We brought this into effect. Of course, that takes us back to the coalition in 2010-15, but so much has been done since then. I will not go on but, if the noble Lord feels so strongly about this, why does he not probe his own Government more on why there is nothing in the Bill about saving more for retirement? I have not even mentioned the points in the Budget on salary sacrifice. I just wanted to get that in, as the noble Lord has become quite political.

Moving on swiftly, Amendment 177 probes whether all default pension benefit solutions are required to provide a regular income and whether that income must necessarily be for life. Here, I pay some respect to the noble Lord, Lord Davies, because he rightly used the expression “pathways for people”, which are what this is all about. I am grateful to the Minister for providing some clarification on this point. She used a very good expression, “freedom to choose”, which is key in our discussion on this particular group.

However, given the significance of this issue for members’ retirement outcomes, it is vital that this clarity is communicated, not just within this Committee but clearly and consistently to those whom these reforms are intended to serve. My noble friend Lord Fuller spoke about the importance of personalisation, which I think is a very good expression.

Communication will be especially important in the context of guided retirement, where members may reasonably assume that a default implies a particular structure or guarantee unless told otherwise. The use of the word “default” is more than semantic, as I know the noble Baroness, Lady Altmann, has laid out in the past—I note she is not in her place. Ensuring that expectations are properly set will be central to building confidence and avoiding confusion at the point of retirement. Again, my noble friend Lord Fuller raised the importance of ensuring that certain cohorts must be particularly noticed and properly treated.

--- Later in debate ---

Let us have a look, in the round, at all six of the regulatory actors in pensions and take that forward. There might be a seventh; I will stand corrected. Then we can go forward.

[Lord Davies of Brixton (Lab)]

Once again, I find myself in the position of being in broadly the same area as the noble Lord, Lord Fuller. I agree with much of what he said. We can always be in favour of reviews. The only substantial objection is that the Secretary of State—or more accurately, the hard-pressed officials—has better things to do, particularly with having to implement the Bill when it is an Act.

The Pensions Commission is also crucial. The noble Viscount, Lord Younger, for whom I have a lot of respect, challenged me on why I am not doing more on adequacy, in effect. Of course, the answer is that I fully support the Pensions Commission; that is where the focus should be on that area. I think my noble friend the Minister is aware of some of my views on the level of inadequacy in pension provision, but the commission is where it should be at.

Pensions are inherently political. I make no apology for making political points. I am against the idea of moving towards a joint regulator. There are two broad types of pension provision: individual contracts and employer-sponsored collective provision. I am very much in favour of the latter as opposed to the former. The former has, and always will have, severe problems, whereas collective provision is what has led the high standard of private provision across, broadly, half of the working population.

The problem with having a single regulator is essentially cultural. One or the other approach is bound to predominate in its thinking. It is impossible to ride two horses, unless you are in a circus, and that is not where we want to be. We need a regulator for collective employer-sponsored provision, and a regulator for market-based provision. That is what we have got so, in a sense, in my few remarks I have already carried out the review that has been called for and reached a satisfactory solution.

[Lord Palmer of Childs Hill (LD)]

My Lords, what worries me is that the noble Baroness, Lady Coffey, says we should grab the challenge. I am not sure that I am ready to grab the challenge and not convinced that we should abandon, in any way, the Financial Conduct Authority. I wonder what representations have been made by the FCA on this. I would like to hear how the FCA feels about the Pensions Regulator taking over and what has happened in the past.

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I have two questions for the Minister. First, how do the Government define significant scale for superfunds? What size of market do they envisage in five or ten years’ time? Secondly, if the Government are serious about achieving that scale, will they commit to reviewing and, where appropriate, reducing some of the barriers I have outlined so that superfunds are able to develop into a robust, competitive and member-focused part of our pension scheme? I look forward to the Minister’s response.

[Lord Davies of Brixton (Lab)]

Everyone agrees that they are a good idea, but in her reply, can my noble friend the Minister tell the Committee what serious contenders there are to take advantage of this quite complicated and lengthy piece of legislation? The practical experience so far is that a good idea has never quite cut it, and other options are now becoming available. Are people actually going to go down this road?

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Baronesses, Lady Noakes and Lady Bowles, for introducing their amendments. I will start with Amendment 181, which would broaden the range of schemes able to apply for a transfer into a superfund by effectively including active schemes.

On the points made by the noble Baroness, Lady Noakes, the responses to the DWP’s initial consultation on DB consolidation noted clear practical difficulties in assessing the future of a scheme. It is not clear how the regulator would conclude that the scheme will have no active members at an unspecified time of transfer. Furthermore, closing DB schemes can be a protracted exercise, where unforeseen complicated issues can arise. This Government, and previous Governments, have been consistent in saying that superfunds should be an option only for closed DB schemes. To avoid such complications for the scheme trustees and the regulator, Clause 65 sets out that closed schemes alone can transfer to a superfund and only where they are unable to secure member benefits with an insurer at the date of application.

Amendment 182 from the noble Baroness, Lady Bowles, would broaden the range of schemes able to apply for a transfer into a superfund by removing the restriction that schemes which can afford insurance buyout cannot transfer to a superfund. By removing this requirement from the Bill, superfunds could compete directly with insurers. That would risk superfunds offering endgame solutions in the same space as insurers, while being held to a lower standard in terms of member security.

The onboarding condition was introduced following industry response to the consultation on superfunds which first identified this risk. There was concern that employers may see superfunds as a way to relinquish their responsibilities at a lower cost than insurance buyout, and that trustees could be pressured to transfer into a superfund when a buyout solution is available. It is important for us to remember that insurers and superfunds operate under very different regimes. Insurers under Solvency UK requirements have stringent capital requirements and their members are fully protected by the FSCS.

Superfunds are built on existing pensions legislation and, as such, the PPF acts as a safety net providing compensation. The PPF provides a great deal of security, but not as much as the FSCS. Superfunds offer a great deal of security, but their capitalisation requirements are not as stringent as insurers as they are not designed to be as secure. That is because superfunds have been designed as a slightly less secure, more affordable endgame solution for schemes that are well funded but cannot afford buyout. They are not intended as a direct competitor for insurance buyout. The onboarding conditions address the risk of regulatory arbitrage, recognising those differences.

Clause 65 therefore provides clarity by ensuring that only appropriately funded schemes can transfer to superfunds. As introduced, it includes the power to substitute another condition if needed. We will consult with industry to assess what, if any, further refinements may be needed to protect scheme members.

Amendment 183 from the noble Baroness, Lady Bowles, would require superfunds to assess their protected liabilities threshold at the lower of a prudent calculation of a scheme’s technical provisions or based on a Section 179 calculation of the buyout price of PPF-level benefits. This amendment, and the noble Baroness, recognise the importance and impact on this threshold of the Chancellor’s Budget announcement that the PPF will provide prospective pre-1997 indexation for members whose schemes provided for this.

The purpose of the protected liabilities threshold is to ensure that in the rare circumstances where a superfund continues to underperform, the scheme is wound up and member benefits are secured at the highest possible level. The threshold is an important part of member protection and has been designed to prevent members’ benefits being reduced to PPF compensation levels should a superfund fail. The threshold also recognises the risk that scheme funding could continue to deteriorate in the time it takes to wind up.

Clause 71 therefore aligns the protected liabilities threshold with the calculation of those protected liabilities. It sets the threshold at a level above the Section 179 calculation, so that members in a failing superfund receive higher-than-PPF benefits. There is the added benefit that PPF-level compensation that is bought out with an insurer protects the PPF itself.

We recognise the impact that changes announced in the Budget have on the superfund protected liabilities threshold, and that it would not be good for members’ outcomes if a superfund is required to wind up prematurely when there is still a strong likelihood that benefits can be paid in full. Any changes to reduce the threshold, however, will require careful consideration and need to ensure that members and the PPF are protected. The level of the protected liabilities threshold will be subject to further consultation with industry as we continue to develop the secondary legislation.

The Committee will also note that for those instances in which technical provisions are lower than the Section 179 valuation of a scheme, Clause 85(4) allows the Secretary of State to provide by regulations that a breach of a threshold has not taken place. These calculations have the potential to converge, and sometimes swap, in very mature schemes and we acknowledge that that occurrence is more likely following the introduction of pre-1997 indexation for prospective PPF benefits.

The use of this power will aim to ensure there are no unintended consequences for well-funded superfunds in those circumstances. It is not our intention to place any additional pressures on superfunds. Providing pre-1997 indexation for PPF benefits is the right thing to do. All members in schemes supported by the PPF benefit from knowing they can count on higher levels of compensation should the worst happen—a fact that should be celebrated. We are committed to working with industry to create, as the noble Baroness, Lady Stedman-Scott, questioned, a viable and secure superfunds market and will consult on issues such as these following Royal Assent to ensure we appropriately balance the metrics of each threshold.

My noble friend Lord Davies asked me to look forward to see what demand there will be for this. That is quite hard to do, but we estimate that around—I am told—130 schemes with £17 billion in assets may take up the option of entering a superfund, but we recognise these figures are highly uncertain. It will depend on how the industry reacts, future economic conditions and competition. The numbers, of course, could be significantly greater if the market grows.

It has been an interesting discussion, but I hope in the light of my remarks, the noble Baronesses feel able not to press their amendments.

Women’s State Pension Age Communication: PHSO Report

Lord Davies of Brixton Excerpts

Monday 2nd February 2026 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I should let the House know that I am joint chair of the All-Party Parliamentary Group on State Pension Inequality for Women, which serves to bring the concerns of many 1950s women to the attention of parliamentarians. I am glad that my noble friend the Minister, in answering the question, accepted the Government’s previous position that there was maladministration here. The Statement itself does not use the word. I was going to ask whether the Government still accept that there was maladministration; clearly they do, because my noble friend used the word twice.

My concern about this Statement is that it says:

“We also agree with the ombudsman that women did not suffer any direct financial loss from the delay”.


The trouble with that is that it ignores the first part of paragraph 12 in the ombudsman’s report, which puts that into context:

“We find that maladministration in DWP’s communication about the 1995 Pensions Act resulted in complainants losing opportunities to make informed decisions about some things and to do some things differently, and diminished their sense of personal autonomy and financial control”.


The report goes on at a later stage to say that this is a material injustice. So, although there was no financial loss, there was a material injustice found by the ombudsman. I could ask a whole series of questions, but my specific question is: do the Government accept that damages can be ordered by the ombudsman even when there was no direct financial loss? The Government appear to put considerable weight on the idea that there was direct financial loss, but there has never been a requirement by the ombudsman to require the Government to pay compensation. Does my noble friend accept that point?

[Baroness Sherlock (Lab)]

My Lords, I do not. I will try to explain. We accept the PHSO’s—the ombudsman’s—findings on maladministration, but we specifically do not agree with the ombudsman’s approach to injustice. The reason for that is that the evidence taken as a whole, including the evidence from 2007, suggests that the majority of 1950s-born women would not have read and recalled the contents of an unsolicited letter. As I said, those less knowledgeable about pensions, the ones to whom it would have made the most difference, were less likely to read it. Therefore, the point is that a letter would have been unlikely to make a difference to what the majority of women knew about their own state pension age.

It is on that basis that we decided it would not be appropriate to pay financial compensation. We accept that the ombudsman recommends it, but it is based on the ombudsman’s approach to injustice, which we do not accept. If we do not accept that it is possible to construct a compensation scheme to compensate only those who have suffered injustice, because we believe the vast majority of those knew that state pension age was changing, then it would not be appropriate and that is the basis of the decision.