Pension Schemes Bill

Viscount Thurso Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

I hope that the Minister will see that these amendments could strengthen the Bill and embed discipline where it matters most, at the point of irreversible choices. I beg to move.

[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.