Pension Schemes Bill

Lord Fuller Excerpts

Monday 23rd February 2026 Grand Committee

I say that, by the way, not just because of the economic, social and environmental benefits that this will bring to the beneficiaries and, indeed, to the country, but because, in trying to promote these things sensibly, the UK finance industry is recognised globally as being good at this. Finding the right way to do this is to the benefit of the beneficiaries and the country, as well as to the benefit of the finance industry. But it is not just about what we can do on this pensions Bill—it is, for example, on coal. How do we manage to get the coal companies properly to tell us how they value a coal mine? If they look like they are in breach of the accounting standards, that is something that we should be pushing. When we look at value for money from pension funds, there is the consultation Act—and this has not mentioned stewardship at all, yet we would all agree that stewardship is an important part of it. Maybe those are two other ways we could go and, with a systemic view of where we want to get the finance and pensions industries to, we could go further and maybe better.

[Lord Fuller (Con)]

My Lords, in the opening remarks in this debate, somebody said that there was uncertainty in the fiduciary duty. I can tell noble Lords that there is no uncertainty in the fiduciary duty except from those trying to muddy the waters and sow confusion.

When it comes to investing money, investment managers are trying to juggle several different points. I think that the noble Lord, Lord Pitt-Watson, made that point very well—they are trying to manage long-term versus short-term risks; UK-EU versus US, the rest of the world and emerging markets; equities versus bonds; property versus private equity; and new technology versus established activities. It is hard enough to balance all those competing objectives with different timescales without then having to follow all this stuff. With regard to biodiversity, we cannot measure it as it is today, and if we cannot measure it how on earth are we going to issue the compliance notice contemplated in proposed new Section 41F?

What we have heard today is a lot of “the sky is going to fall in” whataboutery, which denies the simple truth that the people with the most expertise in decarbonisation are those most involved in energy production. They have the experience and capital, and the greatest incentive to change the way they do things. To prevent people investing in companies that are involved in energy production is denialism of the worst sort. I have been a member of the LGPS Scheme Advisory Board since its inception about 13 years ago; my term ends next month. I have seen it all: pressures for ethical investors, saying that you cannot invest in oil, arms or sugar, and you cannot invest in the supermarkets because they sell sugar.

Where does it end? There would be no data centres because they are built on a field that might have had some biodiversity or because they use energy. This overly simplistic approach leads to what the noble Lord, Lord Pitt-Watson, spoke about. It is not responsible investment but irresponsible investment. There is no confusion in my mind between fiduciary duty and risk management, yet these amendments seek to conflate those two totally separate issues into one thing. I will give an example. Through the work we have done in the Local Government Pension Scheme, a Mr Lynk lobbied very strongly on the grounds of fiduciary duty that the LGPS should disinvest from certain Middle East investments. That was wrong, and we fought it because we clarified what fiduciary duty was. I am glad that we did. We cannot afford to have those waters muddied once more.

I am a member of the Norfolk local government pension scheme—a scheme with £6 billion in assets under management and probably more than 120,000 members when you take into account actives, deferreds and pensioners. I often sit on the bus from my home in Brooke going into Norwich. If I go after 9.30 am, just about every single person on that bus is a pensioner. A great majority of those pensioners will be in receipt, simply through the demographics of Norfolk, of a Norfolk County Council pension or will be a beneficiary of one of the other admitted bodies or councils. The LGPS manages for millions of people. The pensions are not large. Those pensioners rely on that modest pension of between £3,000 and £5,000 on average. That is fiduciary duty—ensuring that their pensions are paid in full, on time, for the rest of their natural lives.

What I am seeing here today is virtue signalling. It is diverting away from the absolute need to have the beneficiary at heart. If there are risks through coal production, biodiversity or whatever, let them be taken into account in risk management. They are not fiduciary duty. It is either a wilful or an accidental misunderstanding to conflate risk management with fiduciary duty. When you are a pension trustee or an investment manager, you are working for the beneficiary. That process, that idea, is being lost by the amendments in this group. On that basis, I cannot support any of them.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I briefly rise in support of the aims of the amendment in the name of the noble Baroness, Lady Hayman. I urge that we get on—as the noble Baronesses, Lady Hayman and Lady Penn, have so eloquently said. Listening to the debate, I do not think that there is any dispute that trustees have a fiduciary duty. No one wants to change that, as I understand it. But the refinements and an understanding of that duty in the modern age are unclear.

In 2014 and 2017, the Law Commission tried to clarify these but did so in a way that ultimately did not help. In 2023, the Financial Markets Law Committee, which I chair—although I am speaking purely in a personal capacity—decided that we ought to look at this issue because it was of such fundamental importance to the operation of the financial markets and to make sure that people understood the implications of fiduciary duties as regards various factors that they could take into account. In a report that was produced two years and a few days ago, the Financial Markets Law Committee, which had assembled a group from right across the pensions industry and those interested, produced a report that was unanimous in the view that it was permissible, as an exercise of fiduciary duties, broadly to take into account sustainability and climate change risk. It has tried to set out in some detail the reasons why it reached that view and why it was important that this was understood.