Pension Schemes Bill

Viscount Thurso Excerpts

Consideration of Commons amendments and / or reasons
Tuesday 28th April 2026 Lords Chamber

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

Noble Lords will be aware that we have one outstanding issue on this Bill still in play. Unsurprisingly, it is the reserve power on asset allocation. As this is the fourth time the House has been asked to consider the question, I will spare noble Lords a detailed exposition of the merits of this policy. Let me simply say that the Government’s underlying position has not changed, reflecting our policy intent to ensure that savers’ best interests are secured by bigger and better pension schemes investing in a wide range of assets.

Today, the Government return to their previous amendments, all of which the elected House endorsed. These spell out the intended purpose of the reserve power to underpin the industry’s commitments in the Mansion House Accord and rule out other uses, such as a focus on any specific asset or asset class. Today, we are also bringing forward a final set of changes that aim to respond to points made in this House and the other place, while retaining the policy intent I have set out. These have three elements.

First, there is a new requirement on regulators, in this case the TPR and the FCA, to make an assessment of the extent to which there is evidence for the collective action problem that we have discussed in debates on this Bill. There will be a requirement for this assessment to be incorporated into the production of the ex-ante report that the Bill requires to be published before any use of the reserve power. Our amendments today would also place a duty on the Government to have regard to this regulatory assessment before any use of the power. It was always the Government’s intent to evaluate progress against the Mansion House Accord commitments in terms of the broad direction of travel over a substantial period of time rather than shorter-term movements in private asset exposure. To reinforce this, we also propose to add to the Bill that the power cannot be exercised any earlier than 2028.

Our second set of changes builds on the savers’ interest test to reinforce the central role of trustees and providers. Our amendment in lieu would change the bar required to engage the savers’ interest test. Rather than having to demonstrate that meeting the asset allocation requirements would be likely to cause material financial detriment, a scheme would instead have to show that meeting the requirement is likely not to be in the best interests of members. This reflects language regularly used when considering trustee duties. In addition, we have more tightly specified the regulator’s role, confining it to ensuring that the trustees’ or providers’ assessment of what is in the best interests of members is reasonable, rather than replacing that assessment with its own.

Thirdly, our amendments address worries about differential treatment of particular investment vehicles by allowing for consideration of direct or indirect holdings in the six asset classes named in the Mansion House Accord.

This Bill has its roots in much work that has been under way for some time in government but also in Labour’s commitment to ensure that workplace pension schemes take advantage of scale and invest in a wider range of productive assets. That was why one of the first things the Government did on taking office was to launch a comprehensive review of pensions investment. That review found clear evidence that the DC pensions market is operating with an excessively narrow focus on cost, to the detriment of saver outcomes. That is where the reserve power comes from. It exists because the review found, and the industry itself has told us publicly and privately, that the competitive pressure focused on cost minimisation is the single biggest barrier to diversifying in savers’ long-term interests.

Of course, things can change over time, and a range of other factors may come into play; the changes that we propose today address that worry and others. They require regulators to assess whether these competitive pressures remain a material barrier to more diverse private asset investment before any use of the power. They put trustees’ or providers’ assessments of savers’ best interests centre stage.

I am grateful for engagement across the House with this Bill and for the engagement with the opposition parties particularly in recent times. This House has done its job in revising this Bill, and I commend the government amendments to the House. I beg to move.

[Viscount Thurso (LD)]

My Lords, I rise for the last time in your Lordships’ House to congratulate the Minister, to thank her for all the hard work that she has done and to say how much I have appreciated my interaction with her. We have arrived at a perfect compromise in that none of us is entirely satisfied—which has always been the definition of a great compromise. We are in a place where the major concerns that many of us had on the mandate part of this Bill have been, if not removed, modified to the point at which they are liveable with. As the Minister said, it is this House at its best.

When I came into this House in 1995, if your Lordships had said to me, “The last time that you speak will be on the fourth ping-pong of a Pension Schemes Bill”, I would have said, “On your bike—not a chance”. However, I have enjoyed the work of being part of this Bill, and I think that both the Government and the Opposition have done their job well. I hope that when this goes on to the statute book, it will deliver for pensioners.

[Baroness Altmann (Non-Afl)]

My Lords, it is a pleasure to follow the noble Viscount, Lord Thurso. I pay tribute to him. He will be much missed by this House. His work on this Bill and in many other areas has been most welcome and helpful and his demeanour and the manner in which he has co-operated with us and with Ministers has been appreciated by everybody. I declare my interests as far as pensions are concerned. I am an adviser to a master trust and a non-executive director of a pensions administration company.

I will not delay the House too long, but I want to welcome the changes that have been made. I thank the Minister for her patience, her engagement and for listening and working with this House. We have now achieved much safer and better outcomes for members of pension schemes. These will allow trustees and managers to look after the best interests of members so that they do not feel forced to invest in ways that they might not otherwise have chosen to or which are against their best judgment.

There will not be an exclusion of listed investment companies. Again, I thank the Minister and the Government for listening to the serious concerns that were expressed by this House. I also welcome the changes that we have made along the way to the Bill. It is a much better Bill. I thank all colleagues across the House who have co-operated so well.

I must pay tribute to the noble Baroness, Lady Bowles, for all the work that she has put in, and the Front Bench on this side as well, who have worked so hard to make this Bill a better Bill. I wish this Bill well. Hopefully, a lot of pension scheme members will enjoy better retirements in the future—I certainly hope so—as a result of what we are doing now.