Pension Schemes Bill

Baroness Scott of Needham Market Excerpts

Committee stage
Tuesday 3rd February 2026 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baroness, Lady Noakes, who always throws out good challenges. I welcome the opportunity and hope that I can persuade her with the answers I am about to give.

Let me say at the start that the Government’s objective is clearly to move to a market of fewer, larger providers so that savers can benefit from better governance, greater investment sophistication and lower costs. The measures in the Bill, together with the review and the regulation-making powers in Clauses 42 to 44, are carefully calibrated to reduce fragmentation or preserve the scope for innovation if and where doing so demonstrably serves members’ interests. That is the key.

I accept that much of the fragmentation is a product of history, but we have seen, in the pensions investment review and the responses that came back to the consultation, that master trusts are creating multiple default arrangements. We do not want to see the same issues arising over time as exist in GPPs, where members are in too many default arrangements that do not offer value. The point I would make to the noble Lord, Lord Palmer, and the noble Viscount, Lord Younger, is that this is about members’ interests and returns for members. We are trying to address the multiplicity of default arrangements that do not serve members because they offer poor value.

Amendments 168 to 170 from the noble Baroness, Lady Noakes, would aim to broaden—

[The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)]

My Lords, the Division Bells are ringing. The Committee will therefore adjourn for 10 minutes.

[Baroness Sherlock (Lab)]

I was going so well; I was in full flow.

--- Later in debate ---

[Baroness Noakes (Con)]

My Lords, Amendment 175 is a probing amendment about the best interests test, which is a part of the power to make unilateral changes to FCA-regulated pension schemes in Chapter 5 of Part 2 of the Bill. I am grateful to the noble Baroness, Lady Bowles of Berkhamsted, for adding her name to this amendment.

The FCA requires the firms it regulates to comply with a consumer duty, which means that firms must act to deliver good outcomes to retail customers—in this case, those within pension schemes. The duty was introduced after a long period of consultation and is intended to replace a lot of rules-based consumer protection measures. This Bill, on the other hand, goes in the opposite direction by requiring the FCA to layer some specific rules in relation to the best interests test on top of the consumer duty.

My amendment, in effect, asks the simple question of how the best interests test relates to the consumer duty. In what ways does it differ from the consumer duty? If there are differences between the two, the Government need to be clear about what they are. Alternatively, they need to require the FCA to make it clear what the differences are, and the Bill does neither. Can the Minister say why achieving better outcomes for the members affected by the unilateral change is necessary? For example, if members are being transferred to another scheme using the power in new Section 117B, why is it necessary to go beyond good outcomes?

In addition, transferring members who will be better off, while leaving behind those who are no worse off, may mean that over time some groups will be stranded in uneconomic schemes because they are the last man standing. How does the Minister think that this will work if there are several transfers over time and each taken in isolation was better for some but no worse for others, but cumulatively there is a detriment for those left behind? In practical terms, how is this meant to work in practice? I beg to move.

[The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)]

I inform the Committee that if this amendment were to be agreed to, I cannot call Amendment 175A for reasons of pre-emption.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I support the general issues that the noble Baroness, Lady Noakes, has raised. Of course, if this whole clause were deleted, the amendment that I am seeking in addition would disappear.

I want to speak to my amendment which is about new Section 117D(2), which says:

“The best interests test”, in relation to a unilateral change, is that it is reasonably likely that effecting it will”,


change. I do not like the words “reasonably likely”. We have to examine what “reasonably likely” means in legal terms.

Reasonably likely is a threshold of probability that is lower than the civil standard of “more likely than not”. More likely than not means above 50%, so reasonably likely means less than 50%. Having “reasonably likely” means that lower than 50% might have a better outcome, which is unacceptable. I find it hard to believe that that is what is intended. When you look at a phrase such as “reasonably likely”, you would think that the reasonable is somehow enhancing the likeliness, but in legal terms it is not. It is taking away from it. Therefore, I hope that that can be looked at and that the Government will address that issue.

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176: Clause 49, page 68, line 4, leave out subsection (3)
Member’s explanatory statement
This is a probing amendment which seeks to test the definition of “default pension benefit solution”.

[The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)]

I should inform the Committee that, if this amendment is agreed to, I cannot call Amendment 177 for reasons of pre-emption.

[Viscount Younger of Leckie (Con)]

My Lords, it is a pleasure to speak to this group of amendments on guided retirement. Perhaps I should begin by saying that we welcome the direction of travel set out in the Bill in this area. The Minister will perhaps be pleased to hear that.

Poor outcomes at decumulation have long represented one of the most persistent weaknesses in the defined contribution system, and there is a strong and widely accepted case for providing better support to savers who do not or cannot make active and confident choices at the point of retirement. We will continue to engage constructively with the Government to ensure that these reforms succeed. However, their success will depend not on intent alone but on whether the framework is workable in practice, sufficiently clear in its operation and properly aligned across regulatory regimes. It is in this constructive and probing spirit that I have tabled Amendment 176, together with clause stand part notices on Clauses 49, 50, 51 and 57, which I will take together for the sake of brevity.

Amendment 176 seeks to probe the definition of a default pension benefit solution, and in particular how such defaults will be framed in practice. The Bill recognises, rightly, that default solutions will not be suitable for everyone, and it therefore requires trustees to consider members’ circumstances, needs, interests and characteristics when designing them, including the possibility of different defaults for different cohorts of members. That principle is sound, but it immediately raises an important practical question: how, in reality, are trustees expected to carry out these assessments in a consistent, proportionate and defensible way?