Pension Schemes Bill

Baroness Noakes Excerpts

Consideration of Commons amendments and / or reasons
Monday 20th April 2026 Lords Chamber

Finally, Motion G1 contains a welcome amendment in lieu from my noble friend Lady Noakes that rightly raises the importance of competition. We are dealing with private markets, where one of the most fundamental principles is the benefit of competition. It is competition that drives choice, sharpens incentives and, ultimately, delivers better outcomes for members. That point also goes directly to the argument that we on these Benches have made on scale. As the Government bring forward significant changes to the structure of this market, competition and innovation must be treated as central considerations, not afterthoughts. The Government must not sacrifice these principles in pursuit of scale alone. Competition and innovation translate directly into better performance, better service and better value for those saving for retirement. We will support my noble friend if she seeks to test the opinion of the House.

[Baroness Noakes (Con)]

My Lords, I tabled Motion G1 in this group. The Bill will consolidate today’s pensions market into a small number of large firms. It may well bring benefits, but it also carries the risk that the market will ossify around those large firms. Healthy markets need to be open to the challenge of new entrants, which can provide healthy competition to the incumbents. In turn, that has the potential to deliver for pension savers in the long run. At the end of the day, the only thing that matters is what is good for savers. I agree with the Minister on that.

In rejecting my Amendments 35 and 43, the other place said that

“it is not necessary to impose further requirements relating to innovation and competition”.

The Bill does not mention competition at all. It talks about restricting new entrants, and it mentions innovation only once. Innovation and competition are absolutely central to markets that work for consumers. My noble friend Lady Stedman-Scott’s Amendment 37B in lieu now incorporates innovation, so I have confined my Amendment 35B in lieu to the broader concept of competition. My amendment would require only that regulations have regard to competition among providers of pension schemes; it is no more onerous than that. It would apply to the several regulation-making powers of the Secretary of State attached to Clause 40 and to the powers of the regulators to make regulations under Clauses 42 and 44.

Regulations can create barriers to entry, which is why large firms love them. I believe that the Secretary of State and the regulators should use their powers to foster competition so that barriers to entry are not erected and new entrants are given a proper chance to flourish. If those making the regulations do not secure this for the benefit of pension savers, no one else will. My amendment in lieu would help to ensure that the scale provisions in the Bill deliver long-term benefits for pension savers.

[Lord Vaux of Harrowden (CB)]

My Lords, I offer Motion E1, in the name of the noble Baroness, Lady Bowles, my wholehearted support. I also say in passing that I wholeheartedly support Motion G1 in the name of the noble Baroness, Lady Noakes.

The Minister has once again explained that the mandation powers are intended to backstop the voluntary Mansion House agreement. She has tabled an amendment that simply limits the amount of assets the allocation of which may be mandated to no more than 10% by value and 5% in the UK, with the UK to be defined later. The Mansion House agreement is a voluntary agreement. If the Government have a mandation power, they are basically saying, “If you do not do this, we will force you”, which would mean that it is not, in reality, voluntary. The trustees would be forced to act against what they believe is in the best interests of scheme members. Why else would they not want to invest in these apparently fantastic assets?

Under the Bill—and the Minister’s amendment in lieu does not change this—the only exemption to that would be if the trustees could prove that the mandated asset allocation would cause,

“material financial detriment to members of the scheme”,

not just that it would not be in their best interests, but would cause material financial detriment. It cannot be right to force trustees to invest in a way that they would feel would cause any financial detriment, let alone material financial detriment, even if limited to just 10% by value.

The Minister’s amendment still does not put any restrictions around the type of assets or, indeed, specific assets that can be mandated. Here I very much disagree with what she said earlier. It does not limit it to the assets in the Mansion House agreement. Despite the proposed new subsection (5A), which requires the regulations to describe the examples that are listed in subsection (4), these remain just examples. Subsection (5) remains very clear that a qualifying asset does not have to be one of the examples. The Minister’s amendment does not change that in any way. I do not agree that the deletion of subsection (8) has any such effect. The Bill will now just be silent on the allocation of assets within the 10%. There is nothing here that stops mandation in a single asset type or class.

There is nothing here to prevent any future Government mandating any assets they please. While the Minister might point to the report that the Secretary of State must publish under subsection (12), which, among other things, sets out how the financial interests of members would be affected, it is important to note that that applies to only the first set of such regulations under this subsection. Any further future mandation, perhaps under a different Government, is subject to no such safeguard, just the negative process. Such assets could be mandated for any reason they wish to give. As an example, what if Nigel Farage were to find himself in a position of influence? He is a well-known enthusiast for and investor in cryptocurrencies. There is nothing in this Bill that would stop him mandating that the relevant funds should have 10% invested in cryptocurrency. Any Government could use this power to mandate whatever pet project they wanted. Let us be clear that the definition of assets in the Bill is sufficiently wide that it could be mandation into specific assets, specific projects, rather than a class, if that is what they wanted to do.

Even if it is to be used only as a backstop to the Mansion House agreement, is that such a good thing? Let us look at the example assets set out in the Bill. One is private debt. You do not have to be an avid reader of the financial pages to know that there are growing concerns about whether private debt may be the cause of the next big financial crisis. Many investors are trying to get out, which is why many large funds are now restricting redemptions. When someone like Jamie Dimon starts talking about cockroaches, we should take notice. Any sensible pension fund would be treating private credit with huge caution at the moment, but this is specifically one of the asset classes that the Government want to encourage and mandate. Government mandation of asset allocation has no place in the regulation of pensions. The fiduciary duty should remain sacrosanct. I urge all noble Lords to support the noble Baroness, Lady Bowles, in her amendment.

--- Later in debate ---

Moved by

[Baroness Noakes]

At end insert “and do propose the following amendment in lieu—

35B: After Clause 57, insert the following new Clause—
“Sections 40, 42 and 44: regulations and competition among providers of pension schemes
(1) In section 143 of the Pensions Act 2008, after subsection (1), insert—
“(1A) In making regulations under section 20(1A), 20(1C), 26(7A), 28A, 28B, 28E, 28F and 28J the Secretary of State must have regard to the benefits of competition among providers of pension schemes.”.
(2) In making regulations under sections 42 and 44 the appropriate authority must have regard to the benefits of competition among providers of pension schemes.””

[Baroness Noakes (Con)]

I beg to move and wish to test the opinion of the House.