Pension Schemes Bill (Eighth sitting)

Kirsty Blackman Excerpts

Committee stage
Thursday 11th September 2025 Public Bill Committees

[Torsten Bell]

I shall take that up directly with the new Economic Secretary to the Treasury, who I am sure will talk to her colleagues in the Department for Education. I can offer the hon. Member some entirely anecdotal optimism on that issue. Whenever I now do school events in Swansea, I am seeing very high levels of financial engagement. After I have given a very worthy speech, most of the questions are not about how to reduce inequality but instead are about personal financial advice. I think the youth of today are all over it—that is my lived experience.

I have mentioned small pots and value for money. I want to flag two other areas. Dashboards have been mentioned, and they are a very large part of how we provide support. The default pensions solutions are crucial to reducing complexity, and that is probably the biggest measure in the Bill. The need to provide more advice or guidance for people to access their defined-contribution pots is reduced significantly because of the existence of default solutions. We definitely still want people to have access to advice and the ability to opt out of those defaults, but default solutions help significantly. That is why the communication of those default pension solutions, which we discussed quite extensively, is so important for people. That is why that is in the Bill.

We have touched on making more support available. We have universal access for people of any age to free impartial support through MoneyHelper—that is what the Money and Pensions Service is providing—and we have a specific focus on support for over-50s in Pension Wise. Several hon. Members have said, absolutely rightly, that access to financial advice fell in the aftermath of the reforms over a decade ago, but there is some better news on Pension Wise. The 2024 Financial Lives survey showed that of those who accessed a defined-contribution pot within the last four years, 40% had accessed Pension Wise. I think that is probably more than most hon. Members in this debate would expect, though it may not be enough. However, those people had used Pension Wise when heading towards access; they had not used it as a mid-life MOT product, which is a different thing. That 40% was up from 34% in 2020, so some things have gone in the right direction. I am gently noting that, not claiming any credit for it because it predates the election. There is a lot of overlap between what those systems of advice are providing and the measures in new clause 1.

Regarding new clause 40, I absolutely agree on how we think about under-saved groups. The groups identified in the new clause are more or less the same groups of people experiencing financial wellbeing challenges whom MaPS targets, so that is a point of consensus, but I am absolutely open to suggestions of what more we can do to make sure that we are tackling that issue. The Pensions Commission is considering the wider question of adequacy, which is why we are looking at not just average adequacy but the fairness of the system.

[Kirsty Blackman (Aberdeen North) (SNP)]

Will the Minister give a commitment that the commission will specifically look at groups that are less likely to have a sufficient pension, rather than just looking at an average and increasing that average?

[Torsten Bell]

I can absolutely give that guarantee, because that is in the terms of reference of the Pensions Commission. I will come back to the wider question of the commission in one second. I will not go into detail, but targeted support is a large part of providing more guidance, and we expect the roll-out of that early next year. There is more coming in that space; we are not relying solely on MaPS.

How should we think about the interaction of dashboards and bigger DC pots? At the moment, for lots of people entering their retirement, their DC pot may be a smaller part of their overall pension income, but as we move forward, it will become the large majority of their income. That will be very visible because of dashboards. One of the reasons MaPS has been reluctant —although I do not want to say “reluctant”—to promise to deliver the kind of automatic enrolment that is being discussed by the Committee is that a lot of planning work is under way to make sure that when dashboards come online, MaPS is ready and set up to deal with the significant increase in demand for help and in engagement that may come from that. The experience of some pension schemes in Australia is that as pension pots become bigger, there is much more demand for support and guidance. We should expect that demand to grow in the years ahead with or without dashboards, but definitely with dashboards and the other measures together.

[Kirsty Blackman]

When dashboards increase engagement, as we all expect they will, will the Minister report back to the House, or encourage someone to report back to the House, on how much engagement has increased by, so that we all have an awareness of it, rather than it being in stats kept in the background that we do not know about?

[Torsten Bell]

Absolutely. I think we will want to look at the impact across a range of measures of engagement. Do dashboards help consolidation of pots? Do they encourage people to save more? We also need to be aware of riskier behaviours that dashboards could trigger. We are currently engaged in significant user testing of the system to make sure that we have done what we can to make sure that when people have visibility of their pension pots, they do not adopt behaviours that we do not want.

On the question about the Pensions Commission from the angle of the advice and guidance sector, it is an independent commission so I cannot speak for it. However, I think the commission will have heard the focus of that question, and the length of this debate in Committee.

Turning to the specific question put by the hon. Member for Horsham on what he said was the purpose of this group of new clauses, I assure him that my mind has been entirely focused by him on this issue, and that I will continue to talk to MaPS about what further lessons there are to learn.

[John Milne (Horsham) (LD)]

I thank the Minister for his reply. I take his comments about trying to reduce complexity. That is a wholly good thing for all concerned, not least us. Other contributors asked, how necessary is this? Are there not services already out there, or is this not the direction of travel? Do we really need to take this action now? In answering that, I will turn the Minister’s argument about mandation back at him: if it were not necessary, it would have happened already. That is very much the case. People are not taking advice, and sadly, they are reaching retirement very inadequately prepared for it.

That, indeed, is the other half of this question. This is not just about giving advice on the best way to make use of one’s pension through auto-enrolment or whatever; it is about alerting people at a young enough age—40 or whatever—to the fact that what they have is not going to cut the mustard in any way. It is not going to deliver the standard of lifestyle they want. They still have time at 40 to do something about it, whereas at 50 or 60, they have what they have. I am 65, so my fate is sealed. That needs to be part of any solution.

On underserved cohorts, WASPI women are the classic example—a group of people who were tragically under-informed, who received inadequate letters from the Department for Work and Pensions and so on. That led to terrible distress and is a problem to this day.

[Kirsty Blackman]

Does the hon. Gentleman share my concern, and will he suggest to the Minister, that although it is important for those who will have great big DC pots at some point in the future, because of auto-enrolment, it is also important for people to get advice if they have a mixture of DB and DC pots, or if they have small DC pots that have built up as a result of auto-enrolment? It is not just a future problem, but a problem for people who reach pension age between now and when those big DC pots are the norm.

[John Milne]

That is a very fair comment—I will not repeat it. Overall, we would like to press new clause 1 to a vote, in order to put it on the record, without necessarily expecting victory.

Question put, That the clause be read a Second time.

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[Steve Darling (Torbay) (LD)]

I beg to move, That the clause be read a Second time.

New clause 2 is about market consolidation, and ensuring that the Minister undertakes to report back so we can see how it is progressing. Clearly, market consolidation will have positive impacts, but there is a law of unforeseen consequences, so it is important to ensure that there is a regular health check on what is happening in the market. It is not only about that law of unintended consequences, but about checking out the opportunity for new entrants to come into the system, and making sure that there are no unexpected barriers. To our mind, it is good practice that one would hope would be undertaken.

The new clause is a probing amendment; we will not be pressing it to a vote, but I look forward to reassurances from the Minister. We are keen to get on the public record what he says in this area, because we know from conversations with the industry that there is some interest in the matter.

[Kirsty Blackman]

I highlight again that the Regulatory Policy Committee considered the monitoring and evaluation plan in the impact assessment to be weak. It said that although everything would be reviewed around 2030, there were not many other points that the Government had committed to reviewing.

In the new clause, I probably would not have picked a timescale of 12 months after Royal Assent, given the length of the road map and the timings for the introduction of a significant number of things. I appreciate that as the new clause is crafted, it can pick up on problems before they occur. If things are moving towards consolidation in advance of the timelines, the Government should be able to analyse where the prospective issues are. However, the Minister could commit to providing Parliament with a review, and either giving information to the Work and Pensions Committee or making information and statistics publicly available.

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

The hon. Member has spoken passionately about local government schemes, and I have quite a lot of experience of them. Does she agree that they have many regulations that would meet some of the proposals in new clause 2? That might allay some of her concerns and mean that we do not need a Division on the new clause.

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[Kirsty Blackman]

I agree that there is a particularly high level of transparency in regulations around local government pension schemes that is not available in any of the other pension schemes that we are discussing. Because major primary pensions legislation does not happen often—we have a lot of secondary legislation around pensions—this is a real opportunity to ensure that the changes that are made have the desired and intended effect.

I have asked various Governments about post-implementation reviews of legislation, and I have had some interesting responses from Government Departments that did not know which pieces of legislation required a post-implementation review, nor whether they had been done. Part of my concern is that no matter whether the Government change, if there is a change of personnel, there does not appear to be any tracking process in Departments to say when post-implementation reviews will take place or whether they have been done, and there is no feedback process in place either.

Bill Committees that consider legislation have no right to an update on whether that legislation worked, and that makes no sense. If the Government say that a certain tax will take in £10 million over the next three years but nobody tells us whether that worked, how can the Government then expect us to believe that tweaking that tax will take in another £10 million when they cannot tell us how much it took in in the first place? My concern is that post-implementation review processes are not strong enough; there is not enough checking in Government to ensure that reviews take place.

I appreciate that the Minister wants this to work. He wants consolidation to happen and to have the desired positive effects. He does not want the negative effects. This is about commitment to a level of transparency so that we can all see what has and has not worked. It is not a criticism, because we all largely agree on a good chunk of this legislation; it is about all of us understanding what things in the legislation have been more positive or more negative than expected.

[John Grady]

Is it possible to identify any particular gaps in the competition regime? Chapters 1 and 2 of the Competition Act 1998 cover things like exclusivity arrangements, and so on. There is a regime for market studies, which would also enable this issue to be addressed, and, manifestly, this would be of serious consumer interest under the competition regime. I just wonder what gap new clause 2 addresses in the current regulatory regime.

[Kirsty Blackman]

My understanding is that new clause 2 calls for a report. It addresses transparency. It is all well and good that stuff on competition regulations is published—I have no idea where it is published. We are asking for a report to the House, which we would all be able to access. I did not write the new clause, but it would be helpful if the Minister agreed to transparency and to review this in good time so that we can make better decisions on future legislation.

[Torsten Bell]

The first thing to say is that this is focused on scale. We appreciate that the Bill would lead to major changes to the pensions market—the hon. Member for Torbay is absolutely right—and we want to understand and monitor the consolidation and scale process over the coming years. To state the obvious, market changes such the scale measures we are talking about take time, and many of the measures in the Bill will not even be implemented within the 12 months. On that basis, I hope that the hon. Gentleman will not push the amendment to a vote.

I agree on the wider point about the Bill as a whole and the need for strong monitoring and evaluation. I would probably take a slightly different approach from the hon. Member for Aberdeen North. The Bill contains a large number of measures, and the right way to monitor their implementation will be different for different parts of the Bill. When it comes to the questions of scale, which are the focus of this amendment, the monitoring—[Interruption.] That is not the response I was looking for. The monitoring is slightly more visible because we are talking about the number of workplace schemes, or at least workplace defaults, that exist.

Let me lay out a bit of what we have in place to monitor. We will be able to monitor scale, charges and, because of the interaction with the value for money regime, returns and asset allocation. Lots of the key success metrics that are meant to come with the scale changes, as well as the delivery of scale itself, will be visible. My honest view is that it is on all of us—obviously, it is particularly on the Government—to pay attention to that as we go.

On the wider question of whether we will consider further, I have already committed to do that and to come back and reflect on Report on how we do that. I put on the record my view that that is a reasonable thing to do, and I will do it, but we need to think about it differently for different parts of the Bill.

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[Steve Darling]

[Interruption.] I am not quite used to getting interrupted by thunder. Perhaps I should get used to it, with Jennie winning Westminster Dog of the Year, or at least the popular vote. Clearly, it was rigged—I jest.

On a more serious note, we are looking at a cohort of pensioners, the pre-’97 pensioners, who have been left behind without indexation. We heard moving evidence from two gentlemen who shared the challenges that many of those pensioners face, living in higher levels of poverty because of the failure to index.

Our proposal is to ensure that there is a responsibility to explore the possibility of amending the fiduciary duties—something I was not even aware of until I started exploring the Bill—to support the possibility of indexation. I am aware that a more prescriptive new clause has also been tabled. As Liberal Democrats, we sympathise with the aims, but we feel that we need to have confidence that the system has the capacity to pay out. Our proposal is a steady hand on the tiller approach. It is about sense checking and ensuring that there is an ability to support the appropriate levels of indexation. I hope that the Minister will look kindly upon the proposal, as it is the more level-headed approach, with all due respect to Plaid and the SNP.

[Kirsty Blackman]

I rise to speak in support of the new clause tabled by the Liberal Democrats and new clauses 18 and 19, which were tabled by my wonderful colleague from Plaid, the hon. Member for Caerfyrddin (Ann Davies).

The witnesses who came before us last week to speak about the lack of indexation for pre-1997 pensions made an incredibly passionate and powerful case for changing the system. We mentioned earlier the Work and Pensions Committee’s report, which suggested that the Government need to look at this issue seriously. I was quite disappointed by the Government’s response, which did not actually say very much. All it said was that changing the system would have an impact on the Government’s balance sheet. Well, yes, it might have an impact on the Government’s balance sheet, but it would have a significant impact for people who are in this situation through absolutely no fault of their own. They did the right thing all the way along, but the company they were with collapsed and the Pension Protection Fund or the financial assistance scheme has not given them the uplift.

The group of people we are talking about are getting older. They are not young any more. We know that older pensioners are the most likely to be in fuel poverty and to be struggling with the cost of living crisis. They are the ones making the choice about whether to switch on the heating. Given the rate of inflation that we have had in recent years, there is a real argument for utilising a small amount of the PPF’s surplus to provide a level of indexation. The cut-off is very arbitrary; it is just a date that happened to be put in legislation at that time. Were the Government setting up the PPF today, and the compensation schemes for people who lost their pension through no fault of their own, I do not think they would be arguing for not indexing pensions accrued before 1997. That would not be a justifiable position for today’s Government to take.

I am not sure whether the Bill is the right place to do this, but my understanding is that it needs to be done in primary legislation; it cannot be done in secondary legislation. Given what I mentioned earlier about the significant length of time between pieces of primary pension legislation, if the Government do not use the Pension Schemes Bill to address this problem today, on Report or in the House of Lords, when will they? How many more of the pensioners who are suffering from the lack of indexation will have passed away or be pushed into further financial hardship by the time the Government make a decision on this, if they ever intend to?

As I have said, I cannot see a justification for not providing the indexation. We know the PPF levy changes have been put in place because of that surplus, and there is recognition that the surplus exists and has not been invented—the money is there. I understand that the situation is different for the two funds, but particularly with the PPF, I do not understand how any Member of this House, let alone the Government, could argue against making this change to protect pensioners.

It may have an impact on the Government’s balance sheet, but it does not have an impact on the Government’s income, outgoings and ability to spend today. The PPF money cannot be used for anything other than reducing the levy or paying pensions. It is very unusual to have such ringfenced, hypothecated money within the Government’s balance sheet, but this money is ringfenced. The Government cannot decide to spend it on building a new school or funding the NHS. It can be used only for paying the pensions of people whose companies have gone under.

I very much appreciate the hard work of my colleagues in Plaid Cymru on this issue in supporting their constituents, as well as people such as Terry Monk, who gave evidence to us last week along with Mr Sainsbury. Now is the time for the Government to change this to ensure fairness and drag some pensioners out of poverty, so that they have enough money to live on right now during this cost of living crisis.

[Mark Garnier]

I want to follow on from the two powerful speeches by the Liberal Democrat and SNP spokespeople, the hon. Members for Torbay and for Aberdeen North, in highlighting the fact that this problem is—dare I say it—disappearing over time. This feels slightly similar to the ongoing contaminated blood debate, and it is a similar type of thing. The people who would be compensated for the contaminated blood are, for tragic reasons, disappearing. Indeed, I think there are now 86,000 pensioners who were caught up in this particular problem, and the longer this is kicked down the road, the smaller the problem will become, for obvious reasons.

The principle behind this is absolutely right. It is incredibly important that we as a country, society and community look after all these people. Where people have done the right thing and put money into their pension, but it has not followed through, that is a big problem.

One thing does bother me: I do not want to be too political, but the Government have dug themselves a freshly made £30 billion black hole in the last year. Although the SNP spokesperson is absolutely right that the £12 billion in the PPF is available to spend only on pensions, the problem is that because it appears on the country’s balance sheet, if the money to pay the price for this—I think it is £1.8 billion—came out of that, there would be a £1.8 billion increase on the country’s collective balance sheet. The argument would go that it would then reduce it. At some level, fiscal prudence has to come in to make sure we are not creating a deeper black hole. Because of the change of accounting at the back end of last year, this could turn the Government’s £30 billion fiscal black hole into a £32 billion one, even though that money is earmarked only for pensions.

I would like to hear from the Minister how the Government will resolve that. I would like him to make an undertaking that we will hear something about it on 26 November, and that there will be something in the Budget to resolve this fiscal conundrum. We need to know where the money will come from, and that the Government have set it aside. This is a perfect opportunity to deal with a problem that has been going on since 1997, and that becomes more profound every time the Office for National Statistics announces the rate of inflation. If the Minister gave us that assurance, I would trust him—being an honourable and decent man—that he could make his current boss get something done about this on 26 November.

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[Steve Darling]

I beg to move, That the clause be read a Second time.

I am afraid I have a difficulty, Ms Lewell: I am appearing soon in a Westminster Hall debate as a spokesperson, so I will have to go part-way through this debate—accept my sincere apologies for that.

New clause 7 is the beginning of a series of new clauses on pensions injustices. It is intended to probe. I know from fellow MPs that there are significant amounts of casework about people who fall short of being acknowledged as receiving benefits from pensions, such as spouses or partners of different descriptions.

Our world is complicated. I am adopted, and went from having one sibling to nine siblings in total; I have a complicated family. We all have complicated families. Equally, historically, pensions may not have taken account of how people’s lives might have become more complicated, such as with partners and the way that life moves on. We ask the Minister to reflect on that, and see how he may be able to tackle this injustice. I apologise for leaving before we complete the debate on the new clause, Ms Lewell.

[Kirsty Blackman]

If the new clause is pressed to a vote, I will not take part because it does not impact pensions in Scotland. However, I want to relay to the Committee and the Minister that I have heard a number of heartbreaking stories on this subject; I am aware that it is not the Minister’s fault that such situations have occurred. What has most impacted me is when I have heard the stories of people having to choose not to live with their partners if they are to continue to receive pensions.

Someone’s deceased police officer partner may have died a significant time ago. Finding happiness in a new relationship is a lovely thing, but that person might have to choose between getting the survivor’s pension and living with their new partner. That is a horrific decision that nobody should ever have to make. It would be great if the Minister recognised the issue: that people are being pushed into making difficult choices because of how the schemes have been written. I do not necessarily want the Minister to commit to changing the legislation, as I do not know whether it is within his gift to fix this, but will he recognise that the current situation is unfair? I think that would be a step in the right direction.

[John Milne]

Further to the remarks made by my hon. Friend the Member for Torbay on the new clauses, and as the hon. Member for Aberdeen North commented earlier, pension Bills come along once in a generation, so we are taking this opportunity to bring a number of long-standing issues under scrutiny, hopefully for comment.

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[John Milne]

Obviously, all mine were absolutely above board. Currently, the privacy and electronic communications regulations do not clearly cover pension-related marketing from schemes or targeted support firms. This new clause seeks to close that loophole. People should be able to trust that communications from their scheme or adviser are genuine and not just spam dressed up as guidance. We would position this as a balance, so that legitimate communications to scheme members remain possible, but only within clear safeguards. In summary, it is a simple consumer protection measure that would protect savers from nuisance emails and potential mis-selling.

[Kirsty Blackman]

I have a brief comment on the direct marketing purposes. An increasing number of people rely on email communication to get updates on their pension, rather than paper updates. I am aware of a significant number of people of younger generations who are not keen on opening letters that come through their door. They may also not be keen on opening emails, but at least they will be able to search for them, because they will not delete them, and will be able to find out what is in them.

I spoke to somebody the other day who was quite surprised at the low percentage of people who had signed up to use the app for the National Employment Savings Trust. Most of the providers and individuals I have spoken to have seen an increase in the number of people who are keen to use apps or communicate only via electronic communication. The point made by the hon. Member for Horsham is incredibly important. We need to ensure that a balance is in place and that people are provided with the correct and actual updates in a way that they want to receive them, but that they are protected from scams.

[David Pinto-Duschinsky]

I do not disagree with the hon. Lady, but does she agree that this might be a tiny bit premature, given that there is currently a consultation going on about making changes to these rules? The objective of the new clause is valuable, but maybe putting it in statute is not the right way to go.

[Kirsty Blackman]

Mr Speaker and previous Speakers have encouraged us as Members not to worry about repetition. Generally, the more we can talk about and highlight issues the better. Part of the point of the new clause is to ensure that the Minister recognises and says from the Front Bench that this is an important issue. Whether or not there is an actual consultation taking place, if we can have that commitment—we will probably ask him for that commitment again and again, given the nature of this place—we would be very happy to receive it.

I agree with the hon. Member for Horsham that the balance is really important. When it comes to guided retirement products, it is key that companies do not worry that the privacy and electronic communications regulations, or any legislation, is going to get in the way of proper communications, but that people are also protected from potential scam communications, and that we are able to crack down on anyone undertaking scams and looking to take significant amounts of money—these are the largest amounts of savings that the vast majority of us will ever have in our lives.

[Rebecca Smith (South West Devon) (Con)]

I have a query off the back of the comments of the hon. Member for Aberdeen North.

We heard in the evidence sessions that there is a danger that overdoing the requirements for marketing will get in the way of providing guidance. That came up directly in the response to some of our questions, I think specifically from Legal and General and Aviva. Companies are already in a position where, if they are not careful, offering guidance is considered marketing. Therefore, they do have their hands tied by existing legislation.

I am slightly intrigued why this new clause has been tabled, given that Liberal Democrat colleagues will have also heard that evidence. More work is needed on this issue than just adding a new clause to the Bill; I heard from the hon. Member for Hendon that there is a consultation.

Although I understand the point about protecting vulnerable customers from scamming, I feel the evidence we heard demonstrates that more work is needed, work that is not included in the Bill, to make sure that pension companies are able to advertise in such a way that they can play their part in the guidance process that we have debated at length, and in how people get that financial education.

I understand the premise of the new clause, but we have many more questions to answer on this. If anything, I think we need to be making it easier for pension companies, the legitimate people in the room, to be able to communicate. There could be unintended consequential issues; we are trying to deal with scammers, but we might inadvertently stop people accessing information that we are trying to help them to receive.

[John Milne]

I thank the Minister for his clarification, and I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

[Kirsty Blackman]

On a point of order, Ms Lewell, I am aware that I cannot make a speech at this point, but will the Minister write to me on whether he is planning to do anything about pre-1997 indexation of the PPF and FAS? If he writes to me about that, I will be happy not to push new clause 18 to a vote.

[Torsten Bell]

I suspect that I have already written to the hon. Lady, because she has raised some constituency cases with me, but she can receive another one of those letters.

New Clause 33

Report of defined benefit schemes impact on productivity

“(1) The Secretary of State must, within 12 months of the passing of this Act, publish a report on the impact on corporate productivity of defined benefit schemes.

(2) The report must include an assessment of—

(a) investment strategies of defined benefit funds,

(b) the returns on investment of defined benefit funds, and

(c) the impact of investment strategies and returns on productivity.

(3) The Secretary of State must lay a copy of the report before both Houses of Parliament.”—(Mark Garnier.)

This new clause would require the Government to commission a report on the impact on corporate productivity of defined benefit schemes.

Brought up, and read the First time.

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[Torsten Bell]

We have now had a few discussions about the case for monitoring and evaluating the Bill and what is going on in the pension landscape more generally. I do not want to repeat everything I have said previously, so I will just address whether this is the right approach or whether it should be done through the Pensions Commission that is under way and looking at most of these issues. My view is that the Pensions Commission is focused on the headline issues that the hon. Member for Wyre Forest has just mentioned. I do not want to confuse that work by having another process consider the same issues at the same time. It is also valuable to have the independence of the commission when doing that.

My main message is that we do not have to wait long, because the Pensions Commission will report in 2027, which is earlier than the five years that we would have to wait for the Secretary of State’s inevitably excellent report as a result of this new clause. We should have faith in Baroness Drake, Ian Cheshire and Nick Pearce to deliver that.

[Kirsty Blackman]

I am not as au fait with the terms of reference of the review as the Minister. Is it possible that it will say, “We recommend that another review is undertaken in five, 10 or 15 years?” Will it look at whether the review is all we need at this point in time or whether we will need another review in future?

[Torsten Bell]

I do not want to speak for the commissioners because that would be to prejudge their work. I can tell the hon. Lady what the terms of reference require and they definitely rule out long-grassing in that they require actual recommendations for change to deliver a fair, adequate and sustainable pension system. It would certainly be open to them to say, “Do these things, and we also think that monitoring should be x and y.” That would be for them to say, and as it is an independent commission, I do not want to prejudge that. It definitely cannot be just that; it would have to include recommendations for change.

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[Kirsty Blackman]

I asked questions earlier about the consultation processes that DWP and the FCA are undertaking and about ensuring consistency in that consultation. This is a similar issue. I like the way that the new clause has been written to ensure that there are protocols so that everybody knows what side of the line they fall on. That can be a particular issue for organisations that have responsibility for both trust-based and contract-based pensions. They may be trying to scale or make efficiencies through investing or having similar default products, even though we are talking about two different types of scheme.

It would be helpful if the Government would commit to ensuring that, where those issues arise, and people are having conversations with the FCA and the Pensions Regulator about what side of the divide they fall on, the Government are keeping a watching brief. If there is regular confusion, the Government should ensure that they clarify the guidance so that people know which side they fall on. Those schemes that are either hybrid or have some sort of umbrella that encapsulates both trust-based and contract-based regulation will then know which side they fall on. They will be able to comply with both regulators, if that is the requirement, or with one of them.

As we said earlier, it is incredibly important that scheme members—current pensioners and prospective pensioners—get an excellent level of service. The vast majority of people do not know, and do not care, whether they are in a trust-based or contract-based pension scheme; all they want is to get as good a pension as possible when they hit retirement. Anything that the Minister can do to ensure that companies have a huge amount of clarity about where they fall, and that scheme members get the best outcomes when they hit retirement, would be helpful.

[Torsten Bell]

We all agree that we want providers and, most importantly, consumers to operate in this landscape as easily as possible. Particularly in the case of consumers, we do not want them to know the difference between the two. I have been very clear with both regulators that that is the objective, and I have been very clear with both Departments that oversee them that that is what we are doing.

Delivering that in practice requires thinking about how we legislate, and that is what we have done with the Bill to make sure that we are providing exactly the same outcomes through both markets. It is about Government providing clarity to regulators—we are absolutely providing that—and then about how the regulators themselves behave.

I am very alive to the issue that is being raised. There is some good news about the existing arrangements, which need to continue, because they are examples of effective co-ordination between the FCA and TPR. I have seen that through joint working groups, consultations, shared strategies and guidance, and regular joint engagement with stakeholders. The value for money measures in the Bill are probably the most high-profile recent experience of entirely joint working between the FCA, TPR and DWP.

The wider collaboration is underpinned by what is called the joint regulatory strategy and a formal memorandum of understanding that sets out how the two regulators should co-operate, share information and manage areas of overlap. I think that that basically achieves the objectives that the hon. Member for Wyre Forest set out, even if it is provided not by the Secretary of State but by a memorandum of understanding between the two organisations. I can absolutely reassure him and the hon. Member for Aberdeen North that I am very focused on this issue.

--- Later in debate ---

[John Milne]

I thank the Minister for his reply. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 45

Transfer of British Coal Staff Superannuation Scheme investment reserve to members

“(1) Within 3 months of the passing of this Act, the Secretary of State must by regulations make provision for the transfer of the British Coal Staff Superannuation Scheme investment reserve to members of the scheme.

(2) Those regulations must include—

(a) a timetable for transferring the total of the investment reserve to members of the scheme, and

(b) plans for commissioning an independent review into how future surplus will be shared.

(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”—(Kirsty Blackman.)

This new clause would require the Secretary of State to set out in regulations a timetable for transferring the whole of the BCSSS investment reserve to members and committing to review how future surplus will be shared.

Brought up, and read the First time.

[Kirsty Blackman]

I beg to move, That the clause be read a Second time.

New clause 45 is about the transfer of the British Coal staff superannuation schemes’ investment reserves to members. I am aware of what the Minister said earlier about the various schemes where there have been unfairnesses and the fact that the Government generally do not make commitments about trying to overcome some of the unfairnesses in historical schemes. However, exactly those kinds of changes were made to miners’ scheme in the autumn Budget last year—the investment reserves were transferred to members and changes were made in relation to the future surplus—yet that has not happened for those who were in the British Coal staff superannuation scheme.

I will not push the new clause to a vote, although my Plaid Cymru colleagues might do so on Report. It would be helpful if the Minister confirmed that he is aware that although the miners’ scheme has been changed, there is still an issue with the British Coal staff superannuation scheme, and that the Government are keeping that under review and considering what they can do to ensure that the surplus is transferred to members.

[John Milne]

Any changes to the BCSSS pension scheme rules require Government action; trustees can only act within their current rules.

I pay tribute to my hon. Friends the Members for Brecon, Radnor and Cwm Tawe (David Chadwick), who has been working hard to raise his constituents’ voices in relation to this urgent issue, and for North East Fife (Wendy Chamberlain). This is another one of those cases where time is not on the side of the claimants. We believe that six members are dying every day in relation to illnesses contracted from mining. Time is literally running out for members, so this is an urgent issue.

--- Later in debate ---

[Torsten Bell]

I am grateful for this new clause, which was tabled by one of my neighbours in south Wales, the hon. Member for Caerfyrddin (Ann Davies). It is obviously an important issue for many ex-mineworkers and for families across Great Britain. It is basically straightforward: I want to reassure the Committee that the Government have been discussing the transfer with the scheme trustees for many months. Those discussions are actively under way. We expect to be able to make an announcement about the way forward in reasonably short order.

I am glad that the new clause will not be pushed to a vote—because if anything, it would risk slowing down the implementation of an agreed outcome—and I totally appreciate the point that the hon. Member for Aberdeen North has made. Any proposal for change will need to be consulted on with the scheme’s trustees on behalf of their members, but that will be coming forward. I hope that provides the Committee with the reassurance it is looking for.

[Kirsty Blackman]

I appreciate the reassurances that the Minister has given me. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 46

Trustees: independence

“(1) The Pensions Act 1995 is amended as follows.

(2) In section 29 (Persons disqualified for being trustees), after subsection (d) insert—

‘(da) he has a personal or financial interest in the pension scheme, except for member nominated trustees.’”—(John Milne.)

This new clause makes pension scheme trustees truly independent of the sponsoring companies so that they can protect scheme members’ interests without any conflict of interest.

Brought up, and read the First time.

[John Milne]

I beg to move, That the clause be read a Second time.

The new clause would have the effect of making pension scheme trustees truly independent of the sponsoring companies so that they can protect scheme members’ interests without any conflict of interest. Trustees should act solely in the best interests of their members, not those of the sponsoring employer.

Currently, conflicts of interest can arise where company-appointed trustees also have personal or financial ties to the scheme sponsor. The new clause seeks to strengthen independence, excluding conflicting trustees while still allowing member-nominated trustees. Members deserve trustees who are free to challenge employers and prioritise pensions over corporate interests. Having strong, independent trustees means stronger protection for savers’ retirement security.

--- Later in debate ---

[Kirsty Blackman]

I would similarly like to offer thanks, particularly to Hansard colleagues and the other House staff who have had to put up with us. This has been a particularly well-natured Bill Committee. I appreciate that the Whip had to change during it, and I do appreciate the fact that both Government Whips had to carry the Committee a little to make sure that everything worked. I am not going to agree with how young the Minister is, although I do agree that all the Front Benchers who have spoken, as well as all the Back Benchers who have spoken, have done an excellent job. It is nice to be part of a Committee that is cross-party in that we agree on a lot of positives in the Bill, and we have also disagreed very agreeably throughout.

Unfortunately, I do not have much in the way of staff members to thank, because this has been a one-woman band. However, I very much appreciate the hard work that everybody has put in to make sure that we can ask the Government lots of questions on the Bill so that the Government can do their best to answer us, even if we do disagree with the answer sometimes.

[John Milne]

I feel I ought also to thank everyone, and the Minister especially for a superb performance. I think we can all agree that this is a very good Bill, with lots of really good things in it. I am particularly interested in the investment side of it, with the greater resources to invest in UK plc, which we certainly do need.

Sadly, I expect the Bill will not receive the publicity that many do—it has not been in the headlines so far—and that is a pity. Much more trivial and ephemeral stuff, frankly, gets all the headlines, while something that is interesting and dynamic, like the measures in this Bill, will probably be displaced by the latest resignation.

Pension Schemes Bill (Seventh sitting)

Kirsty Blackman Excerpts

Committee stage
Thursday 11th September 2025 Public Bill Committees

[John Milne (Horsham) (LD)]

I beg to move amendment 268, in clause 58, page 67, line 34, leave out subsection (a) and insert—

“(a) that, as at the date of the application, the financial position of the ceding scheme is—

(i) not strong enough to enable the trustees to arrange an insurer buy-out, or

(ii) not affordable for the next 36 months following an assessment, certified by the scheme actuary, of all funding options to become strong enough;”.

This amendment expands the onboarding condition to give an alternative to a single day snapshot of a scheme’s funding position.

The Bill tests a scheme’s funding position on a single snapshot day. We feel that is too rigid and could unfairly exclude schemes. A scheme might just miss the mark on that day, even though funding prospects over the next three years are realistic and affordable. The amendment would allow actuaries to certify affordability over a 36-month horizon, providing a fairer and more flexible test. It would protect members by ensuring viable schemes are not shut out, while still requiring strong actuarial oversight. That is especially important in an environment where economic conditions and markets can move significantly and take scheme funding positions with them.

Schemes have not always enjoyed the present funding levels, and today’s surplus is tomorrow’s deficit. We should have regard to that fact and approach the legislation in a manner that reflects it. In the assessment over a longer time period, the trustees would also be able to consider and respond to the situation in relation to dividends, changing investment strategies and expected scheme contributions, among other key factors. In summary, the purpose of the amendment is not to block the superfund option for schemes, but rather to ensure that the legislative framework is set squarely on the basis of protecting DB scheme member benefits and the security and soundness of the pensions system.

[Kirsty Blackman (Aberdeen North) (SNP)]

We have discussed other parts of the regime—for example, new entrants and their ability to scale up, and the longer-term prospects for that—which were perhaps a bit more flexible than this part. Although I am not entirely convinced that the exact wording of the amendment provides the best way to go about it, if the Minister gives some reassurance and a commitment to consider the possibility of not just taking a snapshot day, and to look at the potential ability to scale up or grow, I would be more comfortable with the legislation than I am currently.

[Torsten Bell]

I thank the hon. Members for Torbay and for Horsham for the amendment. It is sensible to discuss one of the key questions in the design of superfunds policy. My main reassurance is that this exact option, or options in this space, were part of the extensive consultation on superfunds. That is important to understand. They were in the consultation, and a wide range of views were expressed in the responses, many of them pointing to the clear practical difficulties of providing the legislative test to assess whether a scheme could afford an insurance buy-out in future, as opposed to its exact position at the time of the assessment.

For reasons I will come on to, that does not mean that it is not important to look ahead to whether a scheme is likely to be able to buy out in the future, but we have taken the view, following the consultation, that that should not be the test on the face of the Bill. That is because, when it comes to projections looking ahead, both the cost of an insurance buy-out and the scheme funding levels can fluctuate significantly. Forecasts ask for more judgment to be exercised compared with an assessment of what the buy-out market is offering at the time it is carried out. It is about the current funding levels. Clause 58 already states that schemes can transfer a superfund only when they are currently unable to secure members’ benefits with an insurer.

I will offer two elements of reassurance to the hon. Member for Horsham. First, we need to be clear about the role of the legislation, which is as I just set out, and the role of the trustees, who are the ones who would approve a transfer to a superfund. Trustees will absolutely be looking ahead and thinking about the kinds of issue that the hon. Member highlighted. Do they wish to see a superfund transfer or a buy-out transfer in future? Is it plausible that they would get one? They will be relying on the guidance of the TPR and the clear intent in the legislation, which is that superfunds will provide an additional option, not replace the core approach of most defined-benefit schemes’ goal, which is an insurance buy-out. I therefore do not support putting the proposed test on the face of the Bill. Also, as the hon. Member for Aberdeen North pointed out, there are issues with the drafting of the amendment, which requires trustees in legislation to do what they will, in practice, be doing anyway.

The second point of reassurance I can offer is that the Bill sets out a power to substitute another condition to replace this condition, if needed. We will consult the industry to assess what, if any, further requirements might be added to satisfy members before the regime comes into effect. I hope that on that basis, the hon. Member will be happy to withdraw his amendment.

[John Milne]

I thank the Minister for his reassurance, but urge him to keep this in mind. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Kirsty Blackman]

I beg to move amendment 277, in clause 58, page 67, line 34, leave out from “application” to end of line 36 and insert

“the Trustees agree, after due consideration, that it is the best option for their fund’s members;”.

This amendment would prevent a fund from having to carry out an insurance buy-out option.

The amendment asks a reasonable question about the duties of the trustees, and the possibility that they will be overwritten by the legislation and taken away from trustees. I would appreciate some reassurance from the Minister on whether the trustees will still have a duty to act in the best interests of scheme members once the legislation goes through, and whether the amendment tabled by the hon. Member for Tamworth would make things better for trustees, with them better able to act in the best interests of pension scheme members.

[Torsten Bell]

I will answer the hon. Lady’s question directly, and then come to the amendment more broadly. The best way to think about this amendment is that it asks us to remove one of the core framings of the superfund regime, which is that it is not replacing buy-out, where that is available, to trustees. The amendment enables trustees to do what they like, including moving to a superfund even if they could have moved to an insurance buy-out. That is not the policy intention of this Government, nor was it the policy intention of the previous Government. It also does not align with most of the responses to the consultation.

As I said earlier, the job of the legislation is to provide clarity regarding the overall framework, which is that superfunds exist for those schemes that are not able to afford an insurance buy-out. Within that, it is for trustees to make wider judgments, as they do all the time. Directly to the hon. Lady’s question, trustees’ duties to take the decisions that deliver the best outcomes for their members, as a short hand, is totally unaffected by this. This is just a constraint on what the superfund regime is there for, and not because we do not want to see arbitrage between an insurance regulatory regime and a superfund’s regulatory regime. I hope that provides some clarity.

[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Torsten Bell]

I beg to move amendment 215, in clause 58, page 68, line 1, at beginning insert

“that it is reasonable to expect”.

This amendment adjusts the onboarding condition in relation to the capital adequacy threshold. The Regulator now needs to be satisfied, as at the time it decides the application, that it is reasonable to expect that the threshold will be met immediately following the superfund transfer (rather than that the threshold definitely will be met at that time).

--- Later in debate ---

[Torsten Bell]

This is an important clause whose role is to set out the criteria for the Pensions Regulator to approve each transfer to a superfund, having dealt with the authorisation of superfunds separately. Those include that the superfund has been authorised by the regulator and that the ceding employer scheme has no active members; we are talking about closed defined-benefit schemes.

The clause also sets out onboarding conditions, which are designed to ensure that members’ benefits are well protected. Superfunds are secure, but not as secure as an insurance buy-out. Schemes with sufficient funds to buy out benefits with an insurer may therefore not enter a superfund. Other onboarding conditions require that the trustees of the ceding scheme make the assessment in the interests of scheme members that the transfer to a superfund will make it more likely that the members’ benefits will be paid in full, and that the capital adequacy threshold is met—which is the main answer to the earlier question from the hon. Member for Aberdeen North. Those and other measures, alongside a known and up-front capital buffer, will ensure that there is a very high probability that members’ benefits will be paid.

Affirmative regulation-making powers will allow greater specificity about the onboarding conditions, including the financial metrics of the capital adequacy threshold and the information that must be provided to the regulator to satisfy the onboarding conditions. I commend clause 58 to the Committee.

[Kirsty Blackman]

I have a quick question, which may also be relevant to other clauses that we discussed earlier, but which I did not bring up at that point. It is about the consistency of consultations and regulations from the Department for Work and Pensions and the Financial Conduct Authority, particularly when consultations are taking place and there are scheme members and prospective pensioners who expect their pension to work in the same way as others and do not have a clue what the arrangements are—for example, whether it is regulated by the FCA or anyone else. Can we still expect parity of service and clarity?

I am aware that the different structures may require slightly different regulations. I want reassurance from the Minister on ensuring that scheme members see a consistent level of service that makes sense in the regulatory frameworks. I also want reassurance that larger organisations running different types of scheme can easily work within and respond to both types of consultation because there is enough consistency applicable across different regulatory mechanisms, within the constraints of the law and depending on the scheme type. I have been asked by insurance and pension industry professionals to raise that with the Minister, and any reassurance that he can give would be appreciated.

[Torsten Bell]

The first reassurance I can give is that this part of the Bill requires only one regulatory framework, because it all sits within the Pensions Regulator and within the defined benefit part of the landscape, as I am aware the hon. Member for Aberdeen North knows.

On the hon. Member’s wider point, which is relevant to many parts of the Bill, I absolutely agree and will offer a two-part reassurance—we will also come to a new clause later that directly gets at this issue. I entirely agree that having two regulatory regimes is no excuse for having different consumer experiences across the two halves of the regime. To address that, I have made sure that the Bill supports the same outcomes, and have stress tested that considerably, but also made it clear that, as a Government policy agenda, our goal is that that should be the case, full stop, including in some areas where it has not been historically. That is absolutely what we need to keep working towards. We should all have that in our heads.

When it comes to the regulations, it is also our clear intention that the FCA and TPR should be working very closely together, as we discussed with the value for money regulations, for example.

Question put and agreed to.

Clause 58, as amended, accordingly ordered to stand part of the Bill.

Clause 59

Special provision for certain schemes coming out of assessment period

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Steve Darling (Torbay) (LD)]

The Liberal Democrats welcome the direction of travel. As the shadow Minister identified, the industry has demanded some elements of the clauses, but they are mostly about supporting consumers. The end users of these services should be a key element of what the Bill is about.

[Kirsty Blackman]

I agree with the point that the Liberal Democrat spokesperson just made. The clauses represent good decisions both for those who work in the industry and for members of the public—people paying into pension schemes and hoping to get an adequate pension when they retire.

I want to comment on a few things included in the clauses. The Work and Pensions Committee report that was published a couple of years ago asked for several of the changes that are being made here, and I appreciate that the Government are now moving towards making a significant number of them in what is the most major piece of pensions legislation we have seen in years. I do appreciate the changes being made.

I am incredibly supportive of the changes to the terminal illness criteria, which create consistency with other Government legislation on the definition of terminal illness. As the Minister said, if this allows more people to access payments earlier and can improve their quality of life when they know how very short their remaining time is, it will be incredibly helpful. It will enable those individuals to access additional payments and funding more easily and quickly, so that they can make the most of the short time they have left. I appreciate that change.

The pensions dashboard changes are sensible, because people will be able to see the widest possible range of things when they log into the dashboard. It will do what it says on the tin, which is to bring everything together in one place, rather than people having to go somewhere else.

Lastly, I do not disagree on the PPF levy changes; I think this is the right decision. However, there is a significant surplus, and there are other things that could have been done with it; we will discuss new clauses 18 and 19 later. I thought the Government’s response to the Work and Pensions Committee report that I mentioned was sensible when it came to the PPF levy changes: “Yes, we agree this needs to be changed and we will look into it.” The response on the pre-1997 lack of uplift for members in the PPF and the FAS was not so helpful. It was more like, “Well, this is an impact on the Government’s balance sheet.” That is genuinely what the Government’s response says.

I am concerned that there are two very different ways of looking at the answers to those questions. In both cases, the answer could have been: “There is a significant surplus. We agree we should do something about it.” Changes could then have been made to support people who are in some cases really struggling to make ends meet, as was mentioned in last Tuesday’s witness session. That could have made a significant difference to their lives. If the Government had committed to allowing or encouraging the PPF to apply an inflationary uplift and provide support—even if they did so in a particularly progressive way, to support folk with the lowest earnings—that would have made the biggest possible difference to people who are genuinely struggling right now.

[Torsten Bell]

I thank all hon. Members for the consensus around these amendments. We will return to the question of indexation shortly with some of the new clauses. I also want to correct the record. In the exciting debate on the Pensions Ombudsman, I mentioned 1931 but meant 1991. It is not quite as old as I suggested, so I am glad that is now noted.

Question put and agreed to. 

Clause 93 accordingly ordered to stand part of the Bill. 

Clauses 94 to 96 ordered to stand part of the Bill. 

Clause 97

Amendments of Pensions Act 2004

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Kirsty Blackman]

I really appreciate the trip down memory lane that the hon. Member for Wyre Forest has taken us on. I wish I had the tenacity to hold on to “I told you so” for 14 years. I am going to say it all the time anyway, even though I will not be able to hold on as long as he has.

Turning to the Liberal Democrats’ new clauses 1, 40 and 43, I am aware that the Government, and the people of these islands, are looking at the sufficiency and adequacy of pensions and ensuring that people can have adequate pensions when they reach retirement age. I appreciate that the review is being undertaken and that work is being done, but this is about an additional way to ensure that people think about that as early as possible. I have a colleague who says “EMILY”, which stands for “Early money is like yeast”, and it is the same in election campaigns as it is in pensions. The earlier people boost their pension fund the more it grows, because of the magic of compound interest.

It is great that we have auto-enrolment at a relatively early age—albeit not early enough—so that people can begin to grow their pension pot. However, I do not think people understand the importance of putting as much money as they can into their pension pot as early as possible, as has been said, particularly when they are in their mid to late 20s and have so many competing interests—trying to get on the housing ladder, or paying for their university debts or for small children, who cost an inordinate amount of money. When people have all those competing interests at the same time, funding their own pension can fall down the list of priorities. However, if they were aware of how important it is to put that funding in as early as possible and how much it would mean to them in retirement, they might make slightly different choices.

There are an awful lot of good things in these new clauses that could be explored. Around 40 is a sensible age at which advice could be provided, as new clause 1 suggests, because that would give people enough time to make some changes. Giving people more advice when they are initially auto-enrolled would also be incredibly sensible. They might not read it then, but they might. The more we can do to provide people with advice, the better, because then they will have the opportunity to take it up.

As the pensions dashboard comes online, that may create a higher level of interest in finding out what everything looks like. Earlier in Committee, I made some points about DC pots and the difficulty in translating that number into what someone’s annuity, or their monthly or weekly payment, looks like, and that only increases and compounds the problem. People do not understand what this means for them in retirement, because it is difficult to do those sums without advice. It is not easy to try to work out, and even if people are given advice at 40, although it may take into account their circumstances at that point, these could drastically change by the time they reach retirement age. They may have a very different level of annuity from that which was suggested, even with the same predicted pension pot growing in the expected way.

On targeted advice for cohorts that are saving less, with the review of adequacy it would help if the Government would commit to ensuring that undersaving groups are strongly considered, so that all the advice and tactics—whether automatic appointments or ensuring that people are given access to the pensions dashboard—are in place for the highest engagement.

Lastly, on the auto-enrolment sessions, I have spoken about how when people hit 50 they are posted a bowel cancer screening test, and when people are of an age for vaccines they are given an appointment and just need to go along. People are posted a letter or sent an email saying, “This is the time and date for your smear test,” and they go along. We recognise that preventive measures are important. People are much more likely to take up that vaccine or smear test and are much more likely to also go to that session if we make it as easy as possible.

The Liberal Democrat spokesperson, the hon. Member for Horsham, mentioned the Pension Wise service. It has an incredibly high level of satisfaction. If only any of us on this Committee or our parties had that level of support from our constituents—we would be absolutely dancing to get that level of positivity. The Pension Wise service has that level of positive feedback because people recognise and appreciate the advice. However, that advice is given once, or only after a certain point. My understanding is that a 25-year-old cannot phone, ask for an appointment and get an understanding of where things are looking for them and where that protection is. However, sending people an actual appointment and telling them that this is the time is something. They can then choose to cancel that appointment. Obviously, some people will not turn up; we see some people not turning up for vaccines. It does not stop us sending invitations to those vaccine appointments because we know they increase uptake.

I have heard this Government—or maybe the previous one—complain about increased costs if there is an uptick in the number of appointments. There would obviously be an increase in costs and pressure on the service should more individuals engage. However, more people having a sufficient pension and being able to take informed decisions—pay more, or withdraw their DC pension in a sensible way, rather than just putting it into a bank account, which we have heard is what a significant number do—will save the Government money and contribute to the economy. If we increase the number of people with better access to more money in retirement we will grow the economy. Although there is likely to be spending associated with increasing the provision of advice, it would make such a positive difference to those individuals and the economy that it could not be a bad thing.

I do not know whether today is the time to add the requirement for those appointments. If the Government were willing to consider the possibility of sending out appointment invitations, that would help. I would still support the amendment, but it would help. I know the review is taking place. If the Government committed to considering that as part of the review, that would be helpful—of course, if they could commit to just doing it, that would be better. Doing so would give us all an assurance and understanding that they are not just putting blockers in the way because it is been suggested by somebody else. We would like the Government to seriously consider it. If they are not willing, they should reply to MPs about why it is not possible and why they think it will not increase uptake.

Hon. Members who spoke about the cost of advice are absolutely correct. It is not that people do not want advice—some may not want advice and will not care, others will just take whatever they happen to get when they hit retirement age and some do not have the capacity to understand the advice if they were to seek it out—but some simply cannot afford advice. They do not have the money today to pay for that advice. There is a group of people who cannot pay for advice now because we are in a cost of living crisis. Their electricity bills and so on have gone up and the price of food is still suffering from inflation. Those people may not have a couple of thousand pounds—perhaps significantly more—lying around to pay for that advice. The people who will have the most in retirement are the most likely to grow their pensions further because they are the only ones who can afford the advice. As the hon. Member for Horsham said, we need more people to know about Pension Wise, so that they can get some advice and make good decisions.

I would appreciate it if the Minister would seriously consider all the amendments that have been tabled by the Liberal Democrats.

Ordered, That the debate be now adjourned.—(Taiwo Owatemi.)

Pension Schemes Bill (Fifth sitting)

Kirsty Blackman Excerpts

Committee stage
Tuesday 9th September 2025 Public Bill Committees

[Mark Garnier]

Again, I have no real comments, apart from to ask the Minister, perhaps when winding up, if he could explain how the Government came to the penalty levels of £10,000 for individuals and £100,000 for others. It would be useful to understand what the thinking was behind that.

[Kirsty Blackman (Aberdeen North) (SNP)]

My question was not dissimilar to the shadow Minister’s question on the amounts of the penalties—£10,000 for an individual and £100,000 in any other case. There is no delegated authority to raise it beyond those levels. There is an ability to set the amounts, provided they do not go above those. Would the process have to be in primary legislation should the Government wish to raise it above those levels? I am not generally in favour of a level of delegated authority, but if we end up in a situation where inflation is out of control, £10,000 may not seem a significant amount for an individual and £100,000 may not seem significant for a larger organisation. They may not be enough to prevent people or create the level of disincentive we wish to see. Have the Government looked at whether £10,000 and £100,000 are the right amounts?

On the clarification about FCA regulation, and the fact that if somebody is FCA regulated in another capacity, it may stop them from being subject to this, it is absolutely sensible that the Government have tabled the amendments. I am happy to support the changes and the clauses.

[Torsten Bell]

I thank the hon. Members for Wyre Forest and for Aberdeen North. The main question raised is about the level of the fines. To provide some context, the answer is yes—that would need to be amended by further primary legislation; there is not a power in the Bill to change that. It is an increase on previous levels of fines for individuals and organisations—from £5,000 to £10,000 for individuals, reflecting the high inflation we have seen in recent years. On that basis, it gives us certainty that we have seen a substantial increase, and we would not need to change it in the near future, but I take the point that in the longer term, we always need to keep the levels of fines under review, and we will need to do that in this case. I hope that provides the answers to hon. Members’ questions.

Question put and agreed to.

Clause 30 accordingly ordered to stand part of the Bill.

Clause 31

Enforcement by the FCA

Amendment made: 41, in clause 31, page 29, line 38, leave out subsection (4) and insert—

“(4) For the purposes of this Chapter a person is ‘FCA-regulated’ if they are an authorised person (within the meaning of the Financial Services and Markets Act 2000) in relation to the operation of a pension scheme.”—(Torsten Bell.)

This amendment clarifies that the definition of “FCA-regulated”, in relation to a person, refers to the person being FCA-regulated in respect of the operation of a pension scheme (as opposed to in a capacity unrelated to small pots regulations).

Clause 31, as amended, ordered to stand part of the Bill.

Clause 32

Power to alter definition of “small”

[John Milne (Horsham) (LD)]

I beg to move amendment 4, in clause 32, page 30, line 12, at end insert—

“(4) The Secretary of State must, at least once every three years, review the amount for the time being specified in section 20(2) to consider whether that amount should be increased, having regard to—

(a) the effectiveness, and

(b) the benefit to members

of the consolidation of small dormant pension pots.”

This amendment would require the Secretary of State to review and consider increasing the level of small pension pot consolidation every three years.

The purpose of the amendment is to require the Secretary of State to review at least once every three years the threshold for small dormant pension pot consolidation. It aims to ensure that the level set in clause 20(2) remains effective and relevant over time. The Minister will be aware that we have already considered the right level at which to set the consolidation; we tabled amendment 262 as a probing amendment, which would have changed the small pot consolidation limit from £1,000 to £2,000. As we have discussed, industry has a very wide range of views on what would be the best figure.

However, this amendment asks for a review, not a particular figure. As before, we do not intend to push it to a vote. To us, a formal review process seems sensible, but whether it should be set at three-year intervals or any other figure is open to question. Given the lack of certainty about what figure industry would like, it seems a good idea to review the threshold after we have seen the measure working in practice.

The pensions landscape evolves quickly, with more job changes and rising numbers of small inactive pots. Therefore, a static threshold risks becoming out of date and undermining the policy’s effectiveness, whereas a regular review keeps the system responsive to members’ needs. It would consider effectiveness—whether consolidation is working to reduce fragmentation and improve efficiency, and the benefit to members, so whether savers are seeing clearer statements, reduced charges and better value for money. It would also simplify retirement saving by reducing the number of scattered small pots, would help members to keep track of their savings and avoid losing pensions altogether, and would improve efficiency for providers, which could reduce costs for savers.

I stress that the amendment does not dictate that there should be an automatic increase. It simply requires the Secretary of State to consider whether the amount is still appropriate. Therefore, in our view, it strikes the right balance between flexibility and accountability. To summarise, this measure would keep consolidation policy up to date, effective and beneficial for pension savers. A regular, three-year review is a simple, proportionate step to ensure that the system works as intended.

[Kirsty Blackman]

I am happy to support the Liberal Democrat amendment. I have already mentioned the Regulatory Policy Committee’s impact assessment—it considers the monitoring and evaluation plan to be weak, saying:

“The policies are all due to be reviewed in 2030. More detailed plans are needed, outlining success metrics, reporting requirements, and methodologies, across the policies.”

The amendment fits quite neatly into what the RPC said, which looks for an understanding and acceptance that there needs to be regular reviews, given that the Government have not committed to a three-year—or shorter—time period on this issue.

There seems to be widespread support for the small pots consolidation across the House. This amount has been picked, and as I said in a previous sitting, there is not necessarily a perfect answer. It could be that change is required, or that all the companies and organisations that are consolidating small pots immediately manage to do it amazingly. It could happen as smoothly as possible, as a result of which the Government could decide to increase the threshold.

I think that compelling the Secretary of State to look at this is completely reasonable to ensure that they are doing it on a relatively regular basis, so that the threshold can be changed if necessary. There is potentially widespread support across the House for ensuring that there is a requirement to monitor the threshold on an ongoing basis. It is not that we do not trust, agree with or appreciate the Secretary of State’s work, but it would give us a level of comfort that it would be done regularly should the Minister accept that, consider something similar on Report or, at the very least, make a commitment from the Dispatch Box that a written statement will be made to Parliament on a fairly regular basis explaining the reasons for keeping or changing the level.

[Torsten Bell]

I thank the hon. Member for Torbay for tabling the amendment. The Government share his commitment to ensuring that the pot limit remains appropriate. As we have just heard, it is a matter of consensus, and it is good to debate how we best do that. The Government’s view is that the amendment is not necessary at this stage. Clause 32 already enables the Government to undertake a review at any time. That is a deliberately flexible approach that allows us to respond to developments in the market—not least reflecting on the question from the hon. Member for Aberdeen North about inflation—but also to any other material changes, and it empowers the Government to act when needed.

The amendment risks creating unintended consequences with a rigid cycle of Government reviews, which might mean that reviews do not happen when there is a good reason for looking at the matter, and that the Secretary of State is forced to carry them out when there is no rationale for doing so. We favour a more flexible approach. I take seriously the request for clarity that there will be regular reviews, and I can give that clarity. That is the intention.

A wider question has been raised about the success of the policy and its monitoring, which is separate from the level of the threshold. Changes to the threshold might be one response to success metrics, but others might be about the operation of the consolidation process more generally. I commit to actively monitoring those—not least what is happening to people’s pots as they are moved, how people are responding to that and levels of awareness. That is exactly what we need to be doing, irrespective of what happens on the scale of the threshold over time. There is cross-party consensus on the objective here. We have taken a slightly different view on the flexibility of that review and how often it happens, but I give all hon. Members a commitment that that will happen.

[Kirsty Blackman]

I have just one more brief comment. It drives me completely mad that whoever is standing at that Dispatch Box seems to believe that they will be in government in perpetuity. Given that this is the second colour of Government I have faced across the Committee floor, it may be that the Minister and his Secretary of State—who has changed, by the way—are very keen on doing a regular review, and I appreciate the Minister committing to it. However, it is not that easy for him to commit a Secretary of State of a different political stripe. Therefore, to give us all certainty, it would be great if the Minister went away and considered the possibility of including a more regular review on Report, so that a Secretary of State of any party is required to conduct one more regularly.

[Torsten Bell]

I thank the hon. Member for that comment. The nature of every piece of legislation means that a future Government can take a different decision. Thanks for the reminder of the nature of British politics—that is how it operates. I am slightly more relaxed than she is, because there will be significant pressure from the industry, and from everybody, to keep this under review. That is not a matter of controversy. It is conceivable that there may be a Government who are steadfastly against ever again looking at the small pots threshold, but having lived through the last 15 years, I would put that low down the list of uncertainties in British politics. However, I take the intention behind the hon. Lady’s point, and I promise never to assume that Labour will win every election from now until eternity.

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[Torsten Bell]

Never! No. We should clarify what we mean by “industry”: in a lifetime provider model, employers take on a significantly greater administrative burden, because they have to engage with potentially every pension scheme in the country. Admittedly, we are limiting the number of those in future, but still, that is what employers find burdensome about a lifetime provider model. That was the preferred model of the right hon. Member for Godalming and Ash (Sir Jeremy Hunt) when he was Chancellor, but it was never actioned as Government policy.

As I said before, the 2014 Act was about “pot follows member”—for good reason, to try to address the small pots worry. I hope that that at least reassures the hon. Gentleman that my notes were the right way up.

[Kirsty Blackman]

I am now entirely confused. Can the Minister please clarify for all of us what the Bill actually does in terms of the consolidation?

[Torsten Bell]

I am glad we are all thoroughly confused. Three broad approaches have been set out to this small pots problem. The first is the one that the Bill takes forward, which is the multiple default consolidation solution—the automatic sweeping up of small pots into consolidated schemes to make everyone’s lives easier. Members would have one large scheme, or several larger schemes, but no really small schemes that they had to consolidate themselves. They could then choose to consolidate those larger schemes as they wished; there is a debate to be had about the size of the threshold in future. That is an automated approach.

One thing that is really important, about the point on average returns made by the hon. Member for Wyre Forest earlier, is that this is not about average. A scheme can only be a consolidator if it offers good value, so a pot cannot be swept into one that does not.

There has been much debate about other approaches over the years, and I have tried to distinguish between two of them. They aim to provide more of what has been debated here, which is slightly more ownership of one pot by the individual. However, “pot follows member” is, in practice, still maintaining the relationship between an employer and a single provider. It is not the individual but the employer who chooses the scheme. That is the approach we are rejecting today.

There is then a longer-term discussion about whether there are attractions to a lifetime provider. That is the case in some of the countries that have been mentioned—the “stapled to your lapel” model—where it is the individual who chooses their provider; obviously to some degree individuals can opt out now if their employer is happy. That is not on the table here. It needs to be considered, but it is a much more fundamental change to the relationship between the employers and the pension schemes.

[Kirsty Blackman]

I thank the Minister for that clarification. These are almost two different stages in the same process: we need to do the consolidation of the small pots right now, and then look at what we are going to do so that small pots will not ever exist and nobody will end up with a small pot, because we do one of the two options or some other option presented for the next step.

My understanding is that if we were to move to what the Conservatives have proposed in new clause 36, that would solve future problems but probably not deal with the situation where somebody has five small pots already. It does not schoomp them all together—I do not know how you are going to write that, Hansard; I am really sorry.

I appreciate what the Minister says about ensuring that the next step is kept under review and not automatically ruling out some of the options presented for the future. I tend to agree that we need to get this bit done—get rid of all those tiny pots that are dormant right now—and then move on to having that discussion, perhaps as part of the sufficiency and adequacy discussions, so that we have a pensions system that ensures that people are as well off as they possibly can be in late life.

Question put and agreed to.

Clause 32 accordingly ordered to stand part of the Bill.

Clause 33 ordered to stand part of the Bill.

Clause 34

Interpretation of Chapter

Amendment made: 42, in clause 34, page 31, line 1, leave out

“No. 42, ‘FCA-regulated person’”

and insert

“‘FCA-regulated’, in relation to a person,”—(Torsten Bell.)

This amendment is consequential on Amendment 41.

Clause 34, as amended, ordered to stand part of the Bill.

Clauses 35 and 36 ordered to stand part of the Bill.

Clause 37

Repeal of existing powers

Amendment made: 43, in clause 37, page 34, line 20, at end insert—

“(3) In consequence of subsection (1)(b), in section 256 of the Pensions Act 2004 (no indemnification for fines or civil penalties), in subsection (1)(b), for ‘that Act’ substitute ‘the Pensions Act 2014’.”—(Torsten Bell.)

This amendment amends section 256(1)(b) of the Pensions Act 2004 in consequence of the repeal of Schedule 17 to the Pensions Act 2014 by clause 37(1)(b) of the Bill, including uncommenced amendments of section 256(1)(b) on which the reference to “that Act” in section 256(1)(b) relies.

Clause 37, as amended, ordered to stand part of the Bill.

Clause 38

Certain schemes providing money purchase benefits: scale and asset allocation

[Torsten Bell]

I beg to move amendment 44, in clause 38, page 34, line 27, leave out

“‘other than an authorised Master Trust scheme’”

and insert

“‘that is not a relevant Master Trust and’”.

This amendment clarifies a verbal ambiguity in the amendment of section 20(1) of the Pensions Act 2008.

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[The Chair]

I remind all Members that we are talking about the technical amendments. There will be a chance to talk about the clause later.

[Kirsty Blackman]

Thank you, Ms McVey—I was about to start by saying that I will not talk about clause 38; I will just talk about the technical amendments.

I have made the point before about the significant number of amendments. I do not know why the Government chose to table this number of amendments rather than submit a new clause that would replace the entirety of clause 38 and make all the changes that they wanted to make. I appreciate that the Government got in touch with us with some briefing information in relation to the changes to this clause, but we had that information very recently rather than significantly in advance. Given the huge number of technical amendments, it is very difficult to picture what the clause will look like with them all. Would the Minister agree that there could have been a better way to approach amending clause 38?

[Torsten Bell]

Let me first respond to the thrust of the comments from the Opposition; I will then come directly to that question. I am conscious that, having sat through Second Reading, most hon. Members have heard my views, and the Government’s views, on this, but let us set out the facts. It is the industry itself that set out the case for change. That is what the Mansion House accord does: it says that a different set of asset allocations is the right way to go in the longer term.

I support the industry’s judgment. The previous Conservative Pensions Minister has welcomed its judgment. I think it is the view of every senior Conservative ex-Minister sitting on the Opposition Back Benches that that change needs to come. [Interruption.] I am not speaking for the Opposition Front Bench; the hon. Member for Wyre Forest has just spoken eloquently for himself. I am speaking for former Conservative Ministers, including former Chancellors. If anything, they accuse me of being too timid—I am not sure what the characterisation of their current Front Bench would be in that regard. That is the status of the debate on this.

Why is there consensus? Leaving aside some of the points that have been raised, it is because this is in savers’ best interests. That is the motivation and the goal. It is also wrong to set out the conflict in terms as broad as the hon. Member for Wyre Forest has just used, because there is a clear savers’ interest test within the Bill that enables trustees or scheme managers to say that proceeding in a certain way would not be in the interests of their savers, and the asset allocation requirements would not bite.

Turning directly to the question about unreasonable Ministers—I have heard rumours of such things. They can exist, and there are protections against them: there are the usual judicial review protections, but in the Bill there are specific requirements to provide a report justifying any use of the reserve power and how it would play out. There are significant limits on the assets—it is broad asset classes—that can be set out in an asset allocation and there are limits to which assets can be covered.

There is the savers’ interest test, and importantly, there is a sunset clause for exactly the reason that we cannot predict what 2040 looks like today. I recognise that hon. Members will not support that part of the clause, but I hope they recognise that the goal is the same, which is that a change in investment behaviour is in savers’ interests. That is what the industry is telling us. As I said last Tuesday, the danger of a collective action problem—the problem that saw commitments made by the industry and the previous Conservative Government not delivered—is partly what this reserve power helps to overcome.

I have absolutely heard the points made about the volume of amendments. They are on the record, as will be all the points made during this process. To answer the question directly, the reason there are so many is that we had lots of useful feedback from industry over the summer, and I wanted to provide more clarity through the clause and make sure that we had the best version of it. We did not want to leave it until Report, so people have had a chance to see it as we go through Committee. I absolutely recognise the points made, and the specific point about the drafting choice of a large number of amendments versus an additional clause. I am sure the drafters will have heard that comment.

Amendment 44 agreed to.

Amendments made: 45, in clause 38, page 34, line 32, leave out “Conditions 1 and” and insert “Condition 1 and Condition”.

This amendment makes a minor verbal change to facilitate differential commencement of the scale and asset allocation conditions.

Amendment 46, in clause 38, page 34, line 37, leave out “of that scheme”.—(Torsten Bell.)

This amendment reflects the fact that a main scale default arrangement may be used by multiple schemes.

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[Mark Garnier]

The Bill sets a minimum asset threshold of £25 billion for workplace pension schemes to operate as megafunds by 2030. This is not, in itself, particularly controversial, and we are all fully aware of the arguments about scale being effective when running pension funds. The requirement is intended to drive consolidation, improve economies of scale and boost investment in UK assets, but there is concern that such a high threshold could disadvantage boutique or niche funds or new entrants into the market that provide specialist services to cater for financially literate members who prefer a more tailored approach to their pension management. For example, Hargreaves Lansdown has highlighted that its £5 billion fund serves members who value investment autonomy and expertise. The risk is that the policy could reduce competition, limit consumer choice and stifle innovation by making it harder for smaller, specialist providers to operate or enter the market

Clause 38 provides little detail of the meaning of the “ability to innovate” and how “strong potential for growth” will be measured, but it is essential that the Bill provides a credible route to support innovation. If we tie the pensions market up by restricting it to a handful of large providers focused on back-book integration and building scale, there will be less space for innovation aimed at pension member engagement. The benefit of the existing market is that its diversity provides choice and creates competition, and competition is an important part of this. Smaller schemes are chosen by employers for specific reasons. If we lose that diversity and essentially create a handful of the same scheme propositions, employers and members will lose out on this benefit.

Realistically, it will be extremely challenging for new entrants to the market to have a chance of building the required scale. Our amendments create an innovation exemption for pension funds that provide specialist or innovative services as part of the new entrants clause. This will allow boutique or niche providers to continue operating if they demonstrate diversity in the market or serve a specific member need, even if they do not meet the £25 billion threshold.

[Kirsty Blackman]

Amendments 250 to 253, as well as Government amendment 113, which we will discuss later, clarify the word “innovation” and look at how best to define it. There are two different approaches from the Government and the Opposition to what innovation means. I raised the issue of defining innovation on Second Reading, so I am glad that both parties are trying to clarify it here, but I am not entirely happy with the way in which the Government have chosen to do so.

When we come to Government amendment 113, I do not feel that the chosen definition of “innovative products” is necessarily right. There could be a way of working that is innovative not in the product but in the way people access the product. For example, some of the challenger banks that we have had coming up are not necessarily providing innovative products, but they provide innovative ways to access those products, and in some cases, their pitch is that they provide a better interface for people to use. I think there is potentially a niche in the market for innovative services rather than innovative products. Government amendment 113 perhaps ties too much to products, although it depends on what the definition of “products” is.

Obviously regulations will come in behind this that define “innovative”, but I think the pitch made by the Opposition for the addition of “or specialist” is helpful. “Innovative” suggests that it may be something new, whereas there could be specialist services that are not of that size but are specific to certain groups of people who value the service they are receiving, one that is very specific to their circumstances, and who would prefer that operation to keep running and to keep having access to it because of the specialist service that is provided.

I am concerned about Government amendment 113. My views are perhaps closer to the Conservatives’ amendment, but thinking particularly about services rather than the products, and the way in which the services are provided to people and the fact that there could be innovation in that respect. Also, as the hon. Member for Wyre Forest said, there could be particular niche areas that do not need to be that size in order to provide a truly excellent service to perhaps a small group of people. It depends on how the Government define “innovative” and what the regulations may look like this, but I am inclined to support the Conservatives’ amendment.

[Torsten Bell]

I thank the hon. Member for Wyre Forest for tabling these amendments. We all recognise the importance of innovation in the pension landscape, but I respectfully oppose the inclusion of the amendments in the Bill.

One point that is at risk of being lost from the discussion so far is the central insight that is the motivation for this clause, which is that scale really is important. Scale really does matter. It has the potential to unlock a wide range of benefits, from better governance to lower costs, to access to a wider range of assets. All of those are integral to improving member outcomes, and if we provide many carve-outs, every scheme will say it is a specialist provider that should not be covered because its members value its inherent difference from every other, and we risk undermining the premise that I think has cross-party agreement, which is that we need to move to a regime of bigger schemes.

One of our aims in this Bill, which is relevant to the asset allocation discussion we just had, is to provide clarity that the change will happen, people will not duck and dive around for years attempting to litigate what is and is not a specialist provider and so on. Innovation is really important, as is competition in the market, but we need to do this in a way that does not undermine the purpose of the scale requirements, which I think is a matter of cross-party consensus.

Having said that, while innovation in the market is important, the Government’s view is that it is not an alternative to achieving scale. That is why we have provided for a new market entrants pathway. There, the innovation grants a temporary exemption from scale requirements, not a permanent exemption as the amendments would enable. That is because scale is very important indeed. Applicants to the pathway will be able to enter the market if they can demonstrate they have strong potential to grow to scale, and if they have some kind of innovative design. That is not a permanent exemption from scale requirements, and there should be cross-party consensus on avoiding that.

To provide reassurance on some of the points that have been raised, I emphasise that the scale requirements apply only to providers’ default offers. Providers of specialist offers and the rest, and self-invested personal pensions, are all able to continue to offer those specialist services, but the main offer in the workplace market does need to meet scale requirements. I hope with that explanation, hon. Members will not press the amendments.

[Mark Garnier]

I am not entirely happy with the Minister’s comments. I am slightly surprised, and I thought he might have listened a bit more carefully. We absolutely understand the economies of scale. A large, £25 billion pension fund can do amazing things. We are 100% behind that. We have not disagreed with that at all. However, I somehow feel myself listening to the Minister and hearing the reverse of the arguments we were making as we tried to allow new-entrant banks into the market after the financial crisis.

Those of a certain age—and the Minister turned 43 the other day, so he will remember the financial crisis—know that the problem was that a few very big banks were spreading the contagion. I remember being on the Treasury Committee and the Parliamentary Commission on Banking Standards after the financial crisis, when we were trying to sort out Labour’s previous mess, and not a single ab initio banking licence had been issued for 100 years. The only way that companies could get into the banking market—as Virgin and Metro were doing—was by buying dormant banking licences. I remember having long conversations—successfully, as it turned out—in order to try to allow companies such as Starling into the market. I think that Starling received the first ab initio banking licence for 100 years.

Having learned over the past 10 or 15 years about the effects of having large scale only, we are now having an argument about potentially stifling the pensions equivalent of companies such as Starling, Metro, Revolut and other innovators coming into the pensions market. I was hoping that from debating the amendments I could be convinced that the Minister would take away the thinking behind what we have come up with: that innovation should be good, and that there should permanently be new, fresh blood coming through. However, I do not think that he has got it. I was not going to push the amendments to a vote, but I now feel motivated to do so.

[Kirsty Blackman]

I want to make a brief comment about the definition of “specialist”. I appreciate the Minister’s clarification about the default products provided, but there could be a sensible definition of “specialist” that included, for example, that if providers can demonstrate that over 75% of their members engage in the management of their pension fund every year, that would be a very specialist and well-liked service. I understand that the scale is incredibly important. However, if a provider can demonstrate that level of engagement in its pension scheme, because of its innovative product or service, I think it would be sensible to look at the scale requirements, even if that provider does not yet meet them.

The Opposition have kindly left it up to the Minister and the Government to define what “specialist” would be, so I will support the Opposition amendments on that matter. However, when we come to Government amendment 113, I will require some clarification from the Minister about the definition of “products”.

[Torsten Bell]

I am reassured that our agreement that scale is the desirable outcome is clear. It is great to have that on the record. I also put on the record that there is agreement about the value of innovation and about new entrants. I think that the only distinction is between a new entrant that then grows and a new entrant that does not. Our approach is to allow new entrants, but they need to be ones with a plausible sense that they can get to scale. Inherent to most of the innovation in the market—for example, in collective defined-contribution schemes—is that they would have to operate at scale to be effective. I think that the banking analogy is actually quite apt.

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[John Milne]

I will speak to new clause 4 on targeted investment vehicles. Its purpose is to empower the Secretary of State to establish or facilitate targeted investment vehicles for pension funds. Overall, the pensions industry is supportive of the Bill, as are the Liberal Democrats, but some sections have expressed concern that a requirement to invest in UK infrastructure and assets could lead to excess demand for a limited stock of investment, especially in the early days when the economy is adjusting. In a worst-case scenario, it could lead to overpaying for investments or difficulty in reaching Government targets. Government assistance to ensure a healthy flow of investment vehicles would therefore serve to prevent that from happening.

Furthermore, there is a unique opportunity to create vehicles that would allow schemes to invest in projects with clear social and economic benefits. It could include many different types of investments. For example, the Government could support the development of investment vehicles designed to revitalise high streets and local communities, provide affordable and social housing development, provide care home accommodation or support other projects that deliver long-term value while strengthening society.

The new clause sets out regulations that would set clear rules on which schemes can participate. Different provision could be made for different schemes and types of investment vehicles. The Pensions Regulator and the Financial Conduct Authority would be given defined responsibilities in authorising, supervising and regulating these vehicles. To be clear, trustees would only be expected to consider the investments where consistent with their fiduciary duties and long-term value for money for members. Pension funds are among the largest sources of long-term capital in the UK, so harnessing even a small proportion for socially beneficial investment could deliver real economic and community impact. Pooling of assets would also facilitate open access for smaller schemes. Done properly, that could align members’ retirement interests with a wider public good.

To summarise, the new clause is designed to ensure a constant supply of suitable investment vehicles so that pension funds can invest at scale in areas that are currently not receiving sufficient attention. At the same time, it would create a framework where pensions could be a force for social renewal and financial security. The clause ensures opportunities with safeguards in place for schemes to contribute to national priorities, while still securing value for members.

[Kirsty Blackman]

Although I am delighted by the intention of the hon. Member for Wyre Forest to get one over Reform with amendment 275, and I am quite happy to back that notion, I am also pretty happy with nationalised water in Scotland. Scottish Water is significantly better performing than the other water companies, so I would not automatically say that nationalised water is a bad thing, given that our water is lovely in Scotland. However, we could do with a little more rain on the north-east coast, given that we have had the driest spring and summer for 40 years, which is not ideal. I gently disagree with the hon. Member because the amendment does not take into account the Scottish context. I would love to see more investment in Scottish Water from pension funds or from Government-led investment vehicles or decision making.

On amendments 248 and 249, I am much more relaxed about mandation than the Conservatives are, as Members might expect given my ideological position. I have much less of an issue with going in that direction. I have heard all the Government have said about not planning to use those powers. It is reasonable for the Government to direct the economy in certain directions—that is what tax and Government spend are for. A good chunk of that is about ensuring that we make interventions so that the economy grows in the way that we want it to.

In many cases, Governments have historically refrained from picking winners when a decision to do so could have grown the economy faster. For example, historically, the Government could have given more backing to certain ports to ensure that they could grow, particularly through renewable energy or by building offshore wind farms, because we could do with more local capacity throughout the UK. Had Governments of all colours been clearer about which areas and regions they were backing, that understanding could have enabled those areas to win more contracts.

On new clause 4, the options for how mandation could work and the investment vehicles that are in place, I have talked about affordable and social housing development. The biggest thing the Government could do to encourage social housing, in particular, is to cancel the right to buy, which would allow local authorities to build significant levels of social housing. That is how we are managing to increase our housing stock in Scotland. We are not there yet—nobody says that we are—but we are able to build new social housing in Scotland at a scale that most local authorities south of the border are not, because cancelling the right to buy has made it affordable. I would love to see more investment in social housing.

I would have liked renewable energy to be included in the Lib Dems’ new clause 4. I appreciate that we cannot include everything, but it would have been nice, particularly when it comes to smaller renewable energy projects and in combined heat and power initiatives. Large-scale CHP makes a really positive difference in Aberdeen city. We have a large combined heat and power network, which heats a significant number of our multi-storey blocks at far lower prices. They are still seeing an increase in prices, absolutely, but they do not need to worry about putting money in the meter, because they know they will have hot water and heating for a fixed monthly fee, rather than paying more in winter and less in summer.

Lastly, harking back to the Future Generations Commissioner for Wales, it would be interesting for the Government to consider whether any potential mandation benefits future generations, given the intergenerational gap and given that people my age and younger are increasingly of the view that we will never get a state pension, because it will simply not exist by the time we reach retirement age—I am sorry if not everybody is at that level of cynicism, but most people my age and younger are. Looking at where our private pensions are invested and at the Government’s direction of travel, it would at least be an interesting thought exercise, in advance of any Government decision on mandation, to consider whether that money would benefit future generations or make things worse for them. In Wales, decisions can be called in for judicial review, should a public authority act against the wellbeing of future generations.

Looking at whether investments that could be directed by the Government would benefit or have a detrimental impact on future generations would be an interesting way to tie the Government’s hands. That way, we could see investment not simply in massive motorways, High Speed 2 or dual carriageways, but in things that have a demonstrable benefit, or at least no adverse impact, on the wellbeing of future generations. Surely that should be a positive thing for us all, given our huge responsibilities for the future of the planet and to those who will be living on these islands. Requiring that to be considered when the Government look at mandation could be a great way to do it.

I am not sure what I will do when we come to new clause 4—it will be voted on at the very end because it is a new clause. I like the idea, but I am not convinced that I would go down that exact route. I will not be supporting the Conservative amendments in this group, which I understand the shadow Minister is terribly shocked about, but there are places where we can have significant ideological disagreements, and this is definitely one of them.

[Mr Bedford]

I refer the Committee to my entry in the Register of Members’ Financial Interests, having worked in the water sector before being elected to Parliament. I will be speaking predominantly to amendment 248. The Committee heard evidence from industry experts who expressed concerns about the Bill’s mandation power. They were consistent and clear in raising concerns about the reserve powers in the Bill. I would like to reiterate some of those concerns raised by the industry, which I believe hon. Members should support today.

At the heart of clause 38 is its impact on the fiduciary duty of trustees—not just a mere technicality, but a duty that has been at the heart of trust-based governance for centuries. Trustees have a legal duty to act solely in the best interests of their members. However, the Government believe it is acceptable to tear up that duty through a ministerial power grab. If the Bill is passed in its current form, Ministers will have the power to override the judgment of trustees, which I do not believe is appropriate. That is not to guide or support, but to mandate them—to potentially force them to act against what are arguably the best interests and returns for their members.

That leads me to the potential impact on pensions adequacy in the UK. We are facing a pensions adequacy crisis, as I and other members of this Committee have said before. The majority of people are not saving anywhere near enough for retirement, and the cost to the state pension will only continue to rise, yet we have seen that the Government are willing to take investment decisions out of the hands of pension fund trustees.

--- Later in debate ---

[Mr Bedford]

I trust the pensions industry to make those judgments because they are the experts in this area, not Government Ministers, who often have short-term views. On Second Reading, one of my hon. Friends raised the example of HS2 and how Government priorities and policies can change over time. Would the hon. Member be happy for his constituents to have their money invested in a Government project or a large infrastructure scheme that is then scrapped, and to see huge losses to their pension scheme? I have huge concerns about the mandation point.

Clause 38, in its current form, undermines the trust that I mentioned earlier. I therefore urge hon. Members to back our amendment to ensure that the fiduciary duty remains and that we protect the security of millions of savers.

[Kirsty Blackman]

I corrected the Minister the other day on the definition of fiduciary duty, and the hon. Member for Mid Leicestershire just made a similar error. The fiduciary duty is not to act in the best interests of scheme members but to act in the best interests of getting them the pensions they were promised, or of growing their pensions. It is not necessarily about their best interests; it is about the best interests of their pension and the size of it.

We spoke about this quite a lot in relation to the local government pension scheme. There could be investments that make a person’s life significantly better than having an extra fiver a year in their pension. These are two different things. I appreciate that fiduciary duties should be what they are—I am not arguing with that; I am saying that the definition is not about acting in the best interests of scheme members but simply about growing their pension pots.

In terms of the two Lib Dem amendments and the points made about the investability of projects, we could argue about chickens and eggs and what will come first: will it be the economy growing in order that pension funds can find more investable projects, or will it be a pipeline of projects ready for funds to invest in, which is what the witnesses giving evidence last Tuesday suggested they need? If the Government are clear, not necessarily that they will include mandation but that there is a stick at the end of the process if the carrots do not work, confidence in that pipeline will grow in order for those projects to be there. I would love those projects to include what the Liberal Democrats are suggesting—housing and regeneration of town centres, for example—as well as investment in renewable energy and an increase in energy efficiency measures.

[John Milne]

Renewable energy schemes—particularly community energy, which I am a big fan of—are a very good addition, so we would support that.

[Kirsty Blackman]

I am delighted that the hon. Member agrees with me.

[Torsten Bell]

I shall speak briefly because I am conscious that we need to adjourn shortly for Treasury orals, which I know everybody will be joining us for. I will not rehearse the arguments I have already set out against the purpose of amendments 248 and 249, other than to note that I do not agree with the characterisation by the hon. Member for Mid Leicestershire.

Amendment 275 seeks to prevent the Government from designating securities in UK water companies as qualifying assets for the purpose of the asset allocation requirement. I recognise the points that the hon. Member for Wyre Forest made, and I am not surprised to hear that Reform has not thought through its policies in this regard. The Government have set out the safeguards we have put in place around the use of this power. We do not think we should single out a particular sector in primary legislation, so I ask Members not to press their amendments.

I thank the hon. Member for Horsham for introducing new clause 4. The investment he references is exactly the kind that we think would raise financial returns and improve quality of life at retirement. That is the purpose of these changes. He rightly raises the bringing together of the demand side—that is, the Mansion House accord and the change in investment behaviours—with the supply side. That is exactly what the Government are doing via planning permissions and everything else, to ensure that the pipeline of projects is there, including via the British Growth Partnership work, which is intermediating all of that. On that basis, we think that the new clause is unnecessary, but I completely agree with much that it contains.

Pension Schemes Bill (Sixth sitting)

Kirsty Blackman Excerpts

Committee stage
Tuesday 9th September 2025 Public Bill Committees

[Sarah Edwards (Tamworth) (Lab)]

I beg to move amendment 276, to clause 38, page 42, line 41, at end insert—

“(aa) the progress towards the targets set out in the Mansion House Agreement (2025) and the state of the supply pipeline of qualifying assets;”.

To clarify the extent of the review to be conducted before the “mandation” power is deployed.

It is an honour to serve under your chairship, Mr Turner. It may be that the subject of my amendment is already covered or that the Minister may wish to take it away for consideration. I commend the tracked changes document that was shared with us and that has enabled us to read clause 38 with all of its new additions in a much easier format. I implore the House to use that tool in other Committees, because it has made it much easier this afternoon.

The all-party parliamentary group for pensions and growth heard from the pensions industry at the roundtables that it held, and this amendment speaks to a point that I made on Second Reading. It is a clarifying point concerning the Mansion House agreement, which sets out targets and a supply and pipeline of investments to be made available by pension funds to invest into. It is a point of clarification because it is arguably good and noble to channel that investment, but the pipeline needs to be managed to ensure good outcomes for members, whose money will be helping to build these projects. It is about future-proofing the Bill, because as the Minister has said in previous sittings, he may not be our Pensions Minister forever.

In short, the purpose of my amendment is to clarify the extent of the review to be conducted before a mandation power is deployed. It is merely a clarification point for the pensions industry.

[Kirsty Blackman (Aberdeen North) (SNP)]

I rise to support amendment 276. It is similar to some of the points that I brought up earlier, which were also brought up in the oral evidence session, about the consistency and existence of that pipeline and the fact that it needs to be there. Reviewing in advance of a decision being made on mandation would be the sensible thing.

I mentioned earlier the issue with chickens and eggs—which comes first?—and I think the amendment brings more of a focus in primary legislation on ensuring that the pipeline exists in order that these companies and organisations can meet their commitments under the Mansion House agreement. It is all well and good for them to have the Mansion House agreement, but if the opportunities are not there and are not investment-ready, it will be difficult for them to meet those targets. This is a sensible amendment, and I am more than happy to support it.

[Torsten Bell]

Before I come to the detail of the amendment, I should re-emphasise the point made by my hon. Friend the Member for Tamworth about the volume of amendments to clause 38 in particular, which is why I asked for the amended clause with track changes to be circulated to the whole Committee. I hope that Members have found that useful.

Turning to the amendment, I have a lot of sympathy for what my hon. Friend is trying to achieve. It is important that we monitor progress on the Mansion House commitments and continue to stay focused on the strength of the pipeline. There are parts of the Bill that would already facilitate that, including data collection that is consistent with monitoring the Mansion House progress, and the strength of the pipeline, which was obviously relevant to consideration of the saver’s interest test, and thus left in the Bill. I suggest that, given our sympathy with the idea of this amendment but its interactions with several other existing parts of the Bill, we commit to reviewing it with a view to deciding whether we should come back with something similar on Report, if the hon. Lady is content with that.

--- Later in debate ---

[Torsten Bell]

I beg to move amendment 107, in clause 38, page 43, line 9, at end insert—

“28CA Information

(1) Regulations may make provision about information that the trustees or managers of a relevant Master Trust or the provider of a group personal pension scheme must give to the Regulatory Authority about the allocation of assets of the relevant Master Trust or group personal pension scheme.

(2) The regulations may make provision about—

(a) the types of information that must be given;

(b) when it must be given;

(c) the form and manner in which it must be given.”

This new section would allow regulations to require the provision of information about asset allocation to the Secretary of State and the Regulatory Authority.

The amendment is supplementary to a provision in the introduced Bill, proposed new section 28C(10)(d), which permits the Government to make regulations about the provision to regulators of information relating to the allocation of assets by the relevant pension providers. The amendment ensures that, in the event that the regulator does not possess crucial information that the Government require in order to design the possible asset allocation framework, or to write the report on saver and growth impacts that they will be legally required to produce, the Government can obtain that information via the regulators.

[Kirsty Blackman]

I want to ask the Minister why the amendment has been tabled. Have the regulators asked for it so that they can get the information they need, or has the provision been identified by the Government? Basically, what consultation is being done to ensure that the amendment makes sense and is doing what people need it to do?

[Torsten Bell]

The direct answer is that, yes, the amendment comes from discussions with regulators, to make sure that the flow of information is sufficient to live up to Parliament’s intent and that meaningful reports on the saver and growth impacts can be provided.

Amendment 107 agreed to.

--- Later in debate ---

[Steve Darling]

It is a pleasure to serve under your chairmanship, Mr Turner.

Will the Minister put a little more flesh on the bone in respect of the ladder of opportunity for new entrants? We need to make sure that we do not end up with a system with large schemes and nobody being able to get into the super-league of opportunity that we have currently. We want to see innovation over time and hoped that, through the new clause, we could bake that into the system. We can have aspirations for how future Ministers deal with these matters, but we must give confidence to the industry in respect of future entrants, so that it continues to be a vibrant industry that drives investment and growth for people’s pensions. That is essential. We would be extremely grateful for some more flesh on the bone.

[Kirsty Blackman]

I appreciate the Minister’s clarification that I had talked about amendment 113 prematurely, but it was relevant in the context of the previous discussion.

I also appreciate the Minister’s clarification on the definition of “product”. I understand why he wants to make the amendment to tighten the Bill up a wee bit; however, it potentially tightens it up too much. Before Report, will he consider whether the use of the word “product” is right? Does he need to look at including that word in the definitions provided at the end of clause 38—I do not think it is currently included—to cover not only the physical things or offerings to people in terms of the products and investments they could look at, but the niche and specific service provision that might be attractive to people who are looking to invest their pensions because they have specific life conditions, or because their life and work does not fit into a normal box? I appreciate the earlier clarification in respect of the default products, which was incredibly important and helped to clarify my mind, but it would be helpful if the Minister agreed to take away my suggestion.

I can understand why the Liberal Democrats tabled new clause 3. We should consider where we are with the innovation pathway, and the fact that the new entrant pathway exists and the relevant regulations have not yet been created. I assume that the Minister and his team will listen to a huge number of people. Clause 38 says that

“such persons as the Secretary of State considers appropriate”

must be consulted; I hope that will be a wide group of people with significant experience in the industry.

Given that so many of us have mentioned challenger banks and new financial institutions, perhaps the consultation will look at what has been learned in that respect and whether some of the innovative decisions, and the regulations that allowed the provision of innovative products, should be included in the scope of the regulations. I would rather the innovation be quite wide, rather than quite tight, given that the scale thresholds and requirements have to be met anyway.

If somebody has a credible plan to reach that scale, surely pretty much any of the innovative solutions they may be suggesting are good, because they are also providing a credible plan to get that significant level of scale and the efficiencies that come along with that. Potentially the definition of products in the defined terms at the end could be a good vehicle for the Minister to ensure that the scope is as wide as he would like it to be.

--- Later in debate ---

[Torsten Bell]

This is a group of minor amendments, mostly aiming at improving the clarity of proposed new section 28F, for example by removing duplication. I draw Members’ attention to the most significant amendments, which are amendments 117 and 118. They make clear that the Government must introduce the savers’ interest exemption mechanism if they are to introduce asset allocation requirements. That is a “must” rather than a “may” because the Government’s intention is that there must always be a savers’ interest exemption.

[Kirsty Blackman]

I have a brief comment on Government amendment 117. Because there were so many amendments, it was quite difficult to ensure that the Minister went through all of them with a fine-toothed comb. The explanatory statement for this one does not make any sense to me—it perhaps makes sense to other people. Reading the explanatory statement was deeply unhelpful, and I ended up being more confused than I was before. I appreciate the intention—what the Minister said amendment 117 was for—and the way that he described the rest of the amendments in this group, but I am pointing out for future reference that it would be helpful if we could understand the explanatory statements.

[Torsten Bell]

Noted.

Amendment 117 agreed to.

Amendments made: 118, in clause 38, page 45, line 9, at end insert—

“(1A) The Secretary of State must make regulations under subsection (1) so that they have effect whenever regulations under section 28C(1) or (2) have effect.”

See the explanatory statement for Amendment 117.

Amendment 119, in clause 38, page 45, line 14, leave out “the scheme or”.

This amendment means the asset allocation requirement can only be suspended where it would cause material financial detriment to the members of a scheme.

Amendment 120, in clause 38, page 45, line 15, leave out from “the scheme” to end of line 17.

This amendment simplifies the description of what may be done by regulations under new section 28F(1).

Amendment 121, in clause 38, page 45, line 17, at end insert—

“(aa) may make provision about the basis on which the Authority may or must form such a view, including about the evidence which the Authority may or must take into account;”.

This amendment clarifies that the regulations can circumscribe the basis on which the FCA or TPR can reach a view on the material financial detriment test in subsection (2)(a).

Amendment 122, in clause 38, page 45, line 23, at end insert—

“(c) must provide for the Authority’s determination on an application to be referred to the Upper Tribunal.”

This amendment ensures that decisions on an application for the suspension of the asset allocation requirement will be referable to the Upper Tribunal.

Amendment 123, in clause 38, page 45, leave out lines 24 to 26.

This amendment is consequential on Amendment 121.

Amendment 124, in clause 38, page 45, line 28, after “as” insert “material”.

This ensures that regulations under subsection (4) can also make provision about what kind of detriment is classed as “material”.

Amendment 125, in clause 38, page 45, line 30, leave out subsection (5).—(Torsten Bell.)

This amendment is consequential on Amendment 129.

--- Later in debate ---

[Torsten Bell]

These amendments relate to compliance and enforcement. Government amendment 127 allows the Pensions Regulator to issue risk notices to the trustees or managers of a relevant master trust or the provider of a group personal pension scheme if there were an issue in relation to the scheme relating to the quality requirement. This will require the relevant master trust to develop a resolution plan to address the regulator’s concerns. The regulator may then direct the relevant master trust to implement the measures in that plan.

Amendment 128 allows regulations to make provision for the imposition of penalties where a relevant master trust or GPP scheme accepts contributions from an employer when it should not. It will allow the regulator to issue penalties of up to £100,000 in relation to each employer from which contributions continue to be accepted. It will also give the provider the right of appeal against the penalty.

Amendment 126 enables the FCA to monitor and enforce compliance of any FCA-regulated person in scope of chapter 3 of part 2 of the Bill. It also provides that the Treasury may make regulations to enable the FCA to take action for monitoring and enforcing compliance of any FCA-regulated person with any provision under chapter 3. I commend the amendments to the Committee.

[Kirsty Blackman]

It looks like these amendments came up because of conversations with the regulator, which is looking to ensure that it can use the powers that the Bill intends to create. This is not the first time we have had amendments that have been suggested by the regulator. I would appreciate it if the Minister could go away, and, perhaps when he is making regulations or bringing forward future legislation on pensions, ensure that he has more in-depth chats with the regulator in advance, so the original legislation can be drafted in a way that will work for the regulator, rather than having to be amended after Second Reading.

[Torsten Bell]

Point noted.

Amendment 127 agreed to.

Amendments made: 128, in clause 38, page 45, line 31, at end insert—

“28H Penalties

(1) Regulations may make provision about the imposition by the Regulatory Authority of a penalty on the trustees or managers of a relevant Master Trust or the provider of a group personal pension scheme where the scheme—

(a) fails to meet the condition in section 20(1A) by virtue of not being approved under section 28A or 28C, and

(b) accepts contributions from an employer in relation to a jobholder on the basis that it is an automatic enrolment scheme in relation to that jobholder.

(2) Regulations may make provision about the imposition by the Regulatory Authority of a penalty on the provider of a group personal pension scheme where the scheme—

(a) fails to meet the condition in section 26(7A) or (7B), and

(b) accepts contributions from an employer in relation to a jobholder on the basis that it is an automatic enrolment scheme in relation to that jobholder.

(3) The regulations must provide—

(a) that a penalty must not exceed £100,000 in relation to each employer from which contributions are accepted as mentioned in subsection (1)(b) or (2)(b), and

(b) that there is a right of appeal against the imposition of the penalty.”

This amendment allows regulations to make provision for the imposition of penalties where a relevant Master Trust or a group personal pension scheme accepts contributions from an employer in relation to a jobholder on the basis that it is an automatic enrolment scheme in relation to that jobholder.

Amendment 126, in clause 38, page 45, line 31, at end insert—

“28I Enforcement by the Financial Conduct Authority

(1) The Treasury may make regulations to enable the Financial Conduct Authority to take action (in addition to any action it may otherwise take under the Financial Services and Markets Act 2000) for monitoring and enforcing compliance of any FCA-regulated person with any provision of or under this Chapter.

(2) The regulations may apply, or make provision corresponding to—

(a) provision made by or under this Part in relation to the Regulator, or

(b) any provision of the Financial Services and Markets Act 2000,

with or without modification.

(3) In this section, ‘FCA-regulated person’ means an authorised person (within the meaning of the Financial Services and Markets Act 2000).”

This amendment allows monitoring and enforcement functions to be conferred on the FCA in relation to the compliance of FCA-regulated persons with provisions of or under Chapter 1 of the Pensions Act 2008, including the new provisions on scale and asset allocation.

Amendment 129, in clause 38, page 46, line 9, leave out subsection (14) and insert—

“(14) In section 99 (interpretation of Part)—

(a) the existing words become subsection (1);

(b) in that subsection, at the appropriate places insert—

‘“group personal pension scheme” means a personal pension scheme which is available, or intended to be available, to employees of the same employer or of employers within a group, but does not include—

(a) a stakeholder pension scheme (as defined in section 1 of the Welfare Reform and Pensions Act 1999), or

(b) any pension scheme that requires all its members to make a choice as to how their contributions are invested;’;

‘“Regulatory Authority” has the meaning given by regulations under subsection (2);’;

‘“relevant Master Trust” has the meaning given by section 20(4);’;

(c) after that subsection insert—

‘(2) The Secretary of State may by regulations define “Regulatory Authority” for the purposes of this Part.’”

This amendment consolidates certain interpretative provisions. It also amends the definition of “group personal pension scheme” so that only schemes where all members select their investment approach are excluded.

Amendment 130, in clause 38, page 46, line 19, leave out “26(7A), 28E” and insert—

“26(7A), (7B), (7C) or (7E),”.

This amendment, together with Amendment 132, ensures that regulations relating to the new scale and asset requirements are subject to affirmative parliamentary procedure.

Amendment 131, in clause 38, page 46, line 20, at end insert—

“(15A) The following provisions of the Pensions Act 2008 (which relate to transition pathway relief) are repealed at the end of the period of 5 years beginning with the day on which they come into force—

(a) paragraph (c) of Condition 1 in section 20(1A);

(b) section 26(7C)(b);

(c) section 28D;

(d) the word ‘28D’ in section 143(5)(a).”

This amendment provides for transition pathway relief to cease to be available 5 years after the commencement of the scale requirement.

Amendment 132, in clause 38, page 46, line 20, leave out “28C,” and insert—

“28C (other than subsection (10)(d))), 28D, 28E, 28F, 28H, 28I,”.

See the explanatory statement for Amendment 130.

Amendment 133, in clause 38, page 46, line 21, leave out subsection (16) and insert—

“(16) If this section is repealed under section 101(5A) (repeal where asset allocation requirement uncommenced) in respect of the insertion of the provisions mentioned in that subsection, the Secretary of State may by regulations amend this section in consequence of that repeal.

(17) Regulations under subsection (16) are subject to the negative procedure.”—(Torsten Bell.)

This amendment is related to Amendment 228. It allows for regulations to be made tidying up the various references to the asset allocation requirement in clause 38 in the event that the power to commence that requirement is never exercised.

Question put, That the clause, as amended, stand part of the Bill.

--- Later in debate ---

Without the amendments, the clause could be interpreted as allowing default solutions to be provided only to a subset of scheme members, which was never the intention and which could result in some pension scheme members missing out entirely. The intention is that all eligible members in a pension scheme will be provided with a default solution, but that a scheme may provide different default solutions to different cohorts of members. The amendments will also remove some potential ambiguity in the clauses and ensure that they work as amended.

[Kirsty Blackman]

If you will give me a bit of leeway, Mr Turner, I promise to speak only once on default pension benefit solutions. I might stray slightly outwith clause 42.

I am looking for clarity from the Minister on default pension benefit solutions. We have heard a lot of concern about how communications cannot be made to members, how there are possible issues with advertising and how members are communicated with. Can the Minister confirm that he is taking that concern seriously and has ensured that, under the General Data Protection Regulation and other data protection legislation, schemes can communicate legally with members in order to provide pension benefit solutions without being traced by the Information Commissioner’s Office or marketing regulators? Providers have raised that concern regularly.

I made it clear on Second Reading and in the oral evidence sessions that I think this proposal is a good thing. It is a massive concern that so many people are taking a lump sum without any plan for what that might look like or how the rest of the money will enable them to continue to live their life as they would like. I am really pleased that we are moving towards a better situation. However, we have not asked providers to do this before; it is something new. Providers will have to upskill themselves to make this change, both in their conversations with scheme members and in assessing whether the solutions that they provide are the correct ones.

Pension providers and insurers are used to putting people in boxes and saying, “This is a box of people for whom this solution might work.” However, some providers may not be used to clumping people together like that and providing solutions that will work for as many of them as possible. I do not think that there is a different way to do it. However, I would appreciate reassurance from the Minister that this will be kept under review; that there will be a significant amount of conversation with providers, as well as with scheme members who are receiving advice or a direction to a default scheme; and that regulators will keep an eye on whether the suggested default pension benefit solutions are appropriate for as many people as possible.

Of particular interest to me is the review timescale. What will happen to ensure that the proposal is working as intended? As I say, I think it is the right thing to do, but I want to make sure it works. I want people to have the best possible outcomes in retirement. If the position is marginally better than it is today, that will be good but not great. It would be lovely if it were way better, and if people were being suggested or guided to the solutions most appropriate for them. We do not just want to move from people dumping everything in a bank account to some people not doing so. It would be great to know that the solutions provided were working for a majority of people.

I would welcome any comfort that the Minister can give me on the review period and on what reassurance Parliament will have that people are being offered the solutions. As I say, provided that I get decent answers from him, I will be quite happy not to talk again for this entire portion of the Bill. I am sure that people will be delighted to hear that.

[Torsten Bell]

I thank the hon. Lady for rightly raising the important question of communication to members. I draw the Committee’s attention to clause 44, which explicitly aims, in quite some detail, to engage with that question. It contains requirements on providers—again, with the detail to come in regulations—about how they set out their general policy, but also how they communicate to particular individuals as they head towards retirement and, potentially, enrolment in a default solution.

It is absolutely right to say that this measure is new for providers, for regulators and for the industry in the UK, and we should always have that in mind. We should take some comfort from the success of automatic enrolment in doing something new. Other countries had moved to auto-enrolment solutions ahead of us, and the same is true here to a degree. In Australia, there is a similar pattern: it has got further ahead in terms of the average size of pots, has seen some of the negative outcomes that we can potentially see in the data in the UK, and has then moved to a version of this and is working that through. We will be able to learn from its experience, as well as just working this through ourselves.

The hon. Lady asked how the measure will be taken forward. We aim to launch a public consultation in the spring and summer next year. These requirements would come in earlier than some of the wider changes that the Committee has discussed—on small pots, for example, which will come far later, and on value for money. We think it is urgent that we get on with this, because we are approaching a situation in which DC pots will be significant for some members, but I completely appreciate her point that it is a large change for the industry.

Clause 44 requires some direct communications with members. I reassure the hon. Lady that there is nothing in the GDPR or other data protection requirements that would prevent providers from communicating in that way. They will not require consent from members to do it, which is important, because otherwise it would not be effective. There are wider questions about direct marketing—communications that are not about setting out the actual situation—in this space, and I am considering those. They are tied up with questions about targeted support and the rest, but it is important for us to continue thinking about this in the pensions space, where there is a history of downsides to direct marketing. We want to make sure that this is not that, but provision of information about the working of a scheme of which someone is a member.

[Kirsty Blackman]

Once this measure beds in—once we have people being moved to default benefit solutions, or those boxes and the solutions have been created—how will it be kept under review? Will there be a process for review five years down the line, when a significant number of people have been moved to default benefit solutions, to ensure that it is working as intended and that any potential problems that Australia perhaps did not come across can be ironed out?

[Torsten Bell]

I thank the hon. Lady for that question. There is not a formal requirement on the Secretary of State to carry out a review as we are going. My honest view is that any regulator and Secretary of State will want to actively monitor what happens. I very strongly expect that this will be discussed at great length at every single pension conference around those years, because all the providers will be talking to each other about how they are taking these things forward.

The hon. Lady will remember the discussion last Tuesday with some providers, including the National Employment Savings Trust and People’s Pension, about how they are already planning to bring these solutions forward. Although they are new for the industry, most providers had already been thinking about this, because they know that it would be the right thing to do even if there were not a Government requirement to do it, and because I have been clear with them for quite some time that this is the direction of travel in both the trust market and the GPP market.

I am not sure that we need a rigid, set date for a review, but I will take away the hon. Lady’s wider question about what reassurance we can offer that people will be actively monitoring what has happened rather than just watching and seeing what happens. I can certainly write to the regulators, for example, to make it clear that that will be our expectation.

Amendment 147 agreed to.

Amendments made: 148, in clause 42, page 55, line 11, at beginning insert

“at least in such circumstances or”.

This amendment allows for regulations to provide that particular events (as well as times or intervals) trigger a requirement to review default pension benefit solutions.

Amendment 149, in clause 42, page 55, line 13, leave out “relevant” and insert “pension”.

This amendment ensures that the definition of “pension benefit solution” is capable of operating in relation to a pension scheme that is not a relevant scheme (such as a collective money purchase scheme).

Amendment 150, in clause 42, page 55, line 25, leave out

“as a default pension benefit solution,”

and insert

“of the scheme as the pension benefit solution under which—

(i) the eligible members of the scheme generally, or

(ii) a subset of those eligible members,

will receive pension payments unless they choose to receive pension payments under a different pension benefit solution,”.

This amendment clarifies the definition of “default pension benefit solution”.

Amendment 151, in clause 42, page 55, line 40, at end insert

“;

(d) such other factors as may be prescribed.”—(Torsten Bell.)

This amendment allows other factors to be added by regulations to the factors that trustees or managers of a relevant scheme have to take account of in determining what default pension benefit solutions the scheme should make available.

Pension Schemes Bill (Third sitting)

Kirsty Blackman Excerpts

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Steve Darling (Torbay) (LD)]

As the Liberal Democrat spokesperson, and echoing the hon. Member for Wyre Forest, I broadly welcome the thrust of the Bill. We heard in evidence that a lot of the industry is playing catch-up and is about 15 years behind those who are best in class. As Liberal Democrats, we are keen to make sure that we are supporting particularly those who are more challenged in being able to save or to make the right decisions, and that we use what levers we can to tackle issues such as climate change and cleaning up our environment. We look forward to working with colleagues on this Committee.

On the local government pension schemes and the pots, we welcome the direction of travel. However, for us it is about making sure that we keep local links to communities, and driving positive change through that investment in our local communities is absolutely essential. I look forward to the debates over the next few weeks.

[Kirsty Blackman (Aberdeen North) (SNP)]

I declare an interest as a holder of deferred membership of a local government pension scheme in Scotland, which will come into scope should the Government amendments go through, as I imagine they will. First, I thank the Government for working with the Scottish Government to make these changes and for taking the decision to agree with the Scottish Government’s request for these changes to be made. It is appreciated.

While I am on thank yous, the people who manage local government pension schemes are managing an incredibly significant amount of money and are ensuring that benefits are provided to many millions of people in those schemes. The hard work they do to steward those funds appropriately cannot be overestimated, so I say thank you to all the trustees who take that action on behalf of so many of us. Those working in the public sector tend to get a lower salary than they would in the private sector, but they often get access to a defined-benefit pension scheme or a career-average pension scheme, which is better than many people in the private sector get. There is a bit of give and take there.

On Tuesday, we heard from the Local Government Pension Scheme Advisory Board and also from one of the pension schemes. There was a commitment that came forward in the evidence to ensuring trustees are appropriately trained—I am not for a second saying that they are not appropriately trained right now, but we must ensure that level of training is provided when they have many other competing demands on their time. It is important that the Government ensure the correct monitoring, evaluation and also support of those organisations, so that if new training is required—for example, if environmental, social and governance provisions change, or decisions about where it is best to invest funds change—the Government commit to ensuring that trustees are given all the training they need. I believe that all pension trustees have a difficult job, but particularly those managing local government pension schemes, who are often local councillors—a task that, I know, is not a part-time job and is incredibly busy.

The other concern raised on Tuesday, and which was just mentioned by my Liberal Democrat colleague, the hon. Member for Torbay, is about the locality of the decisions made. It is important that the pooling of resources means more investment in important and key projects than would result from a smaller organisation. Hopefully, the reduction in administrative costs will ensure that those schemes are significantly more efficient, but I am keen that we do not lose the local voice within the pension schemes that we have now.

The case was made very eloquently on Tuesday that, while pension schemes take into account value for money—what we would have called best value in local government in Scotland—in decision making, they should ensure that they are not supporting projects that the community are absolutely up in arms about, because so many of their members will live in that community. Scheme members need that guaranteed return, but they also need their communities to be nice places for them to live.

I am slightly concerned that, with pooling, the ability for local projects to be put forward could potentially be lost. Although I am not asking for any specific changes, I would ask that the Government keep an eye on that. Should there be significant numbers of smaller projects that are not being supported because of the changes that previously might have been supported, the Government should consider whether they need to take action to ensure that those voices are better heard and that those smaller projects still have the opportunity for investment.

Thank you very much for allowing me to speak on this, Chair. I am assuming that we have also spoken on the clause stand part and are unlikely to debate that again at the end; I have therefore made most of my general comments here rather than particularly specific ones on the amendments.

[Torsten Bell]

I thank everyone who has spoken. I am grateful for the welcome for the Bill as a whole, for this chapter and for the amendments that particularly relate to Scotland. As the hon. Member for Wyre Forest pointed out, this Bill builds on progress that was put in train over the last decade, and I am glad to see that. It is only because of that progress that we are now able to accelerate quite significantly.

Questions were raised about mandation. I want to be absolutely clear that questions about asset strategy will sit directly with the administering authorities, as they do today. It is for them to set out those asset allocation decisions, which are, in the end, the biggest driver of returns for members. The investment decisions sit with pools, never with Governments. We will provide clarification, if we come on to one of the amendments later, to make clear that the Government will not be directing individual investment decisions of pools; that was never the intention.

Questions were raised about the administrative costs of transition. Those do exist, as they have in previous moves towards pooling, and will obviously need to be managed sensibly, but I think we all agree that those costs are small relative to the very large savings that will come from a much less fragmented system.

Points about the importance of trustees were powerfully made, and I absolutely agree. Stronger governance reforms have already been put in place for the LGPS trustees in England and Wales, and these reforms build on that through stronger governance more generally.

I also hear the argument about local voice. As I said, the administering authorities are responsible for setting the strategy in relation to local investments. Strategic authorities, because of a Bill that was passed earlier this week, will have a requirement to collaborate with the LGPS on those local investments. I take the points that were made, and I think there is consensus on these amendments.

Amendment 7 agreed to.

Amendment made: 8, in clause 1, page 1, line 12, leave out “Secretary of State” and insert “responsible authority”. —(Torsten Bell.)

This amendment and Amendments 10 and 11 are consequential on Amendment 7. References in Clause 1 to the Secretary of State are changed to “the responsible authority”. That term is defined by Amendment 24 to refer either to the Secretary of State (as regards England and Wales) or to the Scottish Ministers (as regards Scotland).

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[Kirsty Blackman]

I want to ask the Minister about the comments made on Tuesday in relation to the transparency already required of local government pension schemes. My understanding is that local government pension schemes are already pretty transparent, and that they are required to publish significant amounts of information.

On the amendment and the requirement for annual reporting, the case was made on Tuesday—I forget by who—that a particular moment in time may not give a true picture of what is going on. Investments may not provide an immediate return. In fact, pension funds are not necessarily looking for an immediate return; they are looking for a longer-term return so they can pay out to tomorrow’s pensioners as well as today’s. Pension schemes are one of the best vehicles for the patient capital that we need to be invested in the economy for it to grow, so I am little concerned that a requirement for annual reporting on specific investments may encourage short-term thinking. Can the Minister confirm what transparency regulations there are in relation to local government pension schemes and how they compare with those for other pension schemes?

[Rebecca Smith (South West Devon) (Con)]

I want to build on what the hon. Member for Torbay asked. As a former local councillor myself—I am not part of the pension scheme, I hasten to add, so I do not have an interest to declare—the bit from the evidence session that came out for me, thinking through this bit of the Bill, relates to the equivalent in treasury management. As a council, we often borrowed from the Public Works Loan Board to invest in, for example, a shopping centre to get the income from rent, business rates and so on. What safeguards or requirements will be put in place to ensure that any money spent from a pension fund goes on capital rather than revenue? I appreciate that council tax revenue increases could be used for that, but are there any safeguards to ensure that the money is not just spent and then does not exist anymore?

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[Mr Bedford]

At present, the Bill arguably lacks a clear definition of how the priorities of the asset pools must follow, particularly on what qualifies as local investments. Our amendment seeks to address that gap by simplifying this. Put simply, we believe that local should mean local. These asset pools should prioritise investment in large-scale projects, actively promote local growth or make tangible improvements in local infrastructure—improvements that directly benefit the people in that local area.

Where no such opportunities exist, other investment options should be considered, but we cannot allow a situation where, for example, an LGPS fund raised in the midlands is continuously redirected elsewhere in the country. Unfortunately, the Bill appears to suggest that the other areas included in the consolidated LGPS schemes could benefit disproportionately. My constituents may ask me, “Why aren’t these funds being used locally by investing in local opportunities, rather than being gifted to councils in other areas of the country, assisting in the same way?” I believe the amendment will add clarity on that to the Bill, and I would welcome the Minister’s comments on it.

[Kirsty Blackman]

I was thinking about how the amendment would work in practice in my local area. I live in the Aberdeen city council area. We are landlocked. We are surrounded by the Aberdeenshire council area. If those local authorities were in separate local government pension schemes, the effect of the amendment would be that Aberdeenshire council could not class an investment in Aberdeen as a local investment despite the fact that its local authority headquarters are in Aberdeen. That is the only sensible place for them because Aberdeenshire goes all around Aberdeen, and it is the only place to which someone can reasonably get transport from all the areas in Aberdeenshire.

Although I understand what the hon. Members for Wyre Forest and for Mid Leicestershire are saying about the classification of local investments, I am not uncomfortable with the fact that the clause includes

“for the benefit of persons living or working in”

the area. If, for example, people in Aberdeenshire invested in a new swimming pool in Aberdeen city, I imagine that it would be used by a significant number of people in Aberdeenshire, and would absolutely be for their benefit.

We should remember that the local government pension schemes will have to prove that the thing they are investing in is for the benefit of local people living or working within the scheme area, although it may be slightly outside it. For example, if they invested in a small renewable energy project providing renewable energy to local people across a border, they would fall foul of this. It would not be classed as a local investment despite the fact that it would be very much for the benefit of people living or working within the scheme area.

The level of flexibility in the clause, and the fact that the schemes will have to justify their investments anyway, is more sensible than what the amendment suggests. I understand the drive to ensure that provision is made for local investment in local areas, but because of the nature of some of those boundaries, it makes more sense to keep the clause the way that the Government have written it.

[Torsten Bell]

I will give a very short speech because the hon. Member for Aberdeen North has just made every single point that I was going to make. I understand the motivation behind the amendment, but we do not support it because it would prevent investments that straddle boundaries—for example, investments in transport and infrastructure that would benefit people living in both Wales and neighbouring English counties. We have heard other examples as well. It would be wrong to limit authorities in where they could invest in this way. I ask the hon. Member for Wyre Forest to withdraw the amendment as it unnecessarily limits the remit of local investment.

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[Torsten Bell]

Clause 2 sets out how assets will be managed in the LGPS under the reformed system of asset pooling. It requires that asset-pooling regulations introduced under clause 1 include requirements for all LGPS assets to be managed by pool companies. The clause would therefore introduce a statutory requirement to consolidate all LGPS assets into those pools, delivering the significant benefits that I know all hon. Members present agree on.

The clause also sets out that the regulations must require administering authorities to formulate, publish and keep under review an investment strategy for their authority’s assets. It also stipulates that regulations may set out from whom administering authorities can take advice on their investment strategy, a point raised by the hon. Member for Wyre Forest. The Government intend to use regulations to require that the pool be the primary source of advice. That will ensure that advice is provided on a consistent basis and free from competing interests, given that pools exist solely to serve their administering authorities. That is an important wider point to remember: the administering authorities are the shareholders of pools and are working together to deliver for members; they are not competing interests.

Regulations must also require administering authorities to co-operate with strategic authorities to identify and develop appropriate investment opportunities. This requirement will soon see the LGPS involved at an earlier stage on local investment opportunities. For the purposes of this provision, for England the definition of strategic authorities matches that in the English Devolution and Community Empowerment Bill, while for Wales it includes corporate joint committees. Members may wish to note that there is a reciprocal duty on strategic authorities in the English Devolution and Community Empowerment Bill.

In summary, the Government are introducing the provisions to finalise the consolidation of assets into pools, and to codify the role of the administering authorities in setting investment strategies and how that engagement with strategic authorities will happen.

I thank the hon. Member for Wyre Forest for tabling new clause 31, which would require the Government to publish guidance on how LGPS surpluses—of which there are now more, which is welcome—can be deployed to address financial needs in local authorities. I recognise that the hon. Member seeks to support local authorities in considering their financial positions against potential funding surpluses.

Decisions on employer contribution rates in the LGPS are rightly taken locally, not by central Government. Contribution rates for employers are set every three years as part of a valuation process—which hon. Members will know is approaching shortly—in which administering authorities will work with their actuaries and employers, including local authorities, to determine a contribution rate that is sustainable for employers and will allow the fund to pay out pensions in the future. As part of that process, a local authority is able to utilise a surplus in its funding position by reducing employer contribution rates. The LGPS is currently in a healthy funding position, as I said, and it is expected that some employers will follow that path. But crucially, again, that is a decision to be made locally on the basis of each employer’s needs.

The existing statutory guidance says that funds should set out in their funding strategy their approach to employer contributions, including a reduction of contributions where appropriate, and should carefully identify and manage conflicts of interest, including conflicts between the role of the particular administering authority and other local authorities that are participants.

[Kirsty Blackman]

This is a genuine question that I do not know the answer to. Is reducing the contribution made by employers the only way that the funds can currently utilise a surplus, or are there other methods by which they can spend it?

[Torsten Bell]

That is the only way that I have seen taken up by local authorities, and it is the main one that local authorities are discussing, although, as I have said, that is a decision for them. I hope that at least partially answers the hon. Lady’s question. I commend clause 2 to the Committee, and ask the hon. Member for Wyre Forest to withdraw his new clause.

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[Torsten Bell]

Clause 3 concerns how procurement law relates to the LGPS. New clause 21 is intended to replace clause 3, and I will endeavour to explain why it is a technical but valuable amendment. The existing clause and the replacing new clause are identical in their purpose and desired outcome. The reason for the change is technical: rather than stating in the Bill how procurement law affects the LGPS, new clause 21 will instead move the LGPS exemption directly into schedule 2 to the Procurement Act 2023, thereby future-proofing it against changes to the Procurement Act itself.

The amended clause has two aims. First, to broaden the scope of cross-pool collaboration, and secondly, to put client authorities, of the kind mentioned by the hon. Member for Wyre Forest, on the same footing as share- holders. That is necessary because the Procurement Act effectively caps the potential for collaboration through joint ventures between pools, as the vertical exemption in schedule 2 to that Act requires demonstration that no more than 20% of a pool’s turnover can be generated on behalf of anyone other than that pool’s shareholders. That may limit the collaboration between pools that we expect to see more of.

Legislation should not act as a barrier to collaboration. The clause addresses that by exempting LGPS pools from the 20% limit, such that the relevant procurement rules are satisfied so long as a pool is acting in the interests of any LGPS authority. Furthermore, given that LGPS authorities can choose to participate in their pool as a contracting client or as a shareholder, the clause also enables all LGPS authorities to benefit from the exemption, regardless of whether they are a client only or a shareholder. This means that LGPS pools will be able to specialise as centres of excellence for particular asset classes and for other pools to access those services, thereby reducing duplication and enabling the investments at scale that we heard so much about in the evidence session.

I ask that clause 3 does not stand part of the Bill, but commend to the Committee new clause 21, which replaces clause 3.

[Kirsty Blackman]

The Government have requested to withdraw clause 3 and replace it with new clause 21. I am slightly confused as to how we got to the point where the Government did not make this decision in the first place, and how the Bill we discussed on Second Reading did not include the change being made to the Procurement Act, instead of the change being made directly in the Bill. Have the Government done significant consultation over the summer, or received input from various organisations that has made it clear that the new way they are now proposing is better than the original?

I can understand that there are two different ways and that there may be a toss-up about which one is best, but why have the Government come down on the side of changing the Procurement Act rather than making the change in primary legislation in the Bill? The Minister has made a little bit of that case, but if he could expand on why the Government have chosen to change their approach, it would be incredibly helpful.

[Torsten Bell]

I will be very straight with the hon. Lady, in answer to her fair question. It would obviously be preferable if the clause were not changing between Second Reading and Report, so it is a completely reasonable question to ask. The straight answer is that it is both because of consultation responses, or people’s feedback, and because the legal advice is that this is a more foolproof way to make sure that the intent of the Bill on Second Reading is put into effect.

As I set out earlier, the key change is that other changes to the Procurement Act will not have unintended consequences for the LGPS in future. I hope the hon. Lady understands that that is the motivation. There is nothing else going on here. The change has happened over that period because that is when comments came in and when legal advice was received.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

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[Kirsty Blackman]

I thought clause 3 was being withdrawn.

[The Chair]

I put the Question that clause 3 stand part of the Bill and some people shouted aye and nobody shouted no—so that is it. I suggest that Members will have to deal with this on Report. The only way we learn how to conduct procedure in this House is through experience, and I am sure the Minister and the Government Whip will not forget this experience.

Clause 4

Scheme manager governance reviews

Amendments made: 18, in clause 4, page 4, line 35, leave out “for England and Wales”.

The amendment would secure that Clause 4 applies to scheme regulations relating to a pension scheme for local government workers for Scotland, as well as scheme regulations relating to a scheme for local government workers in England and Wales. Clause 1 does not extend to Northern Ireland (see Clause 100).

Amendment 19, in clause 4, page 4, line 40, leave out “Secretary of State” and insert “responsible authority”.

The amendment and Amendments 20, 21, 22 and 23 are consequential on Amendment 18. References in Clause 4 to the Secretary of State are changed to “the responsible authority”. That term is defined by Amendment 24 to refer either to the Secretary of State (as regards England and Wales) or to the Scottish Ministers (as regards Scotland).

Amendment 20, in clause 4, page 5, line 1, leave out “Secretary of State” and insert “responsible authority”.

See the explanatory statement for Amendment 19.

Amendment 21, in clause 4, page 5, line 19, leave out “Secretary of State” and insert “responsible authority”.

See the explanatory statement for Amendment 19.

Amendment 22, in clause 4, page 5, line 33, leave out “Secretary of State” and insert “responsible authority”.

See the explanatory statement for Amendment 19.

Amendment 23, in clause 4, page 5, line 38, leave out “Secretary of State” and insert “responsible authority”.—(Torsten Bell.)

See the explanatory statement for Amendment 19.

Question proposed, That the clause, as amended, stand part of the Bill.

[Torsten Bell]

Thank you for the learning, Sir Christopher.

Clause 4 enables the Government to make regulations that require LGPS administering authorities to undertake and publish an independent review of their governance arrangements at least once every three years. I am sure that Committee members will agree that good governance is critical to the healthy functioning of a pensions scheme. The clause will ensure that authorities face external scrutiny of their governance processes. Many authorities already carry out governance reviews of this form and this measure will merely ensure consistent high standards.

The clause also enables the Secretary of State to direct an authority to undertake an ad hoc governance review if they are concerned by significant weaknesses in an authority’s governance or suspect that an authority is not complying with regulations. As a result of the amendments we have already discussed, the power can also be exercised by Scottish Ministers in relation to the LGPS in Scotland.

New clause 22 enables the Secretary of State to give specified LGPS administering authorities certain additional powers, which most administering authorities will already have by virtue of being local authorities. The new clause allows the powers to be extended to administering authorities that are not local authorities, such as the Environment Agency. The new clause will simply create a level playing field for all administering authorities in England and Wales.

[Kirsty Blackman]

What is the Government’s rationale for not including Scotland in new clause 22? Is it because the Scottish Government looked at the original Bill and had not seen the amendments? Or is it because the differential structures between Scotland and the rest of the UK mean that it would not help in the Scottish situation? If the Minister is not clear on the answer, will he please commit to ask the Scottish Government whether they want to be included in the new clause and the relevant changes to be made so that it applies in Scotland? If the regulatory systems are the same, it seems sensible that a level playing field apply. It would be incredibly helpful if the Minister could make the commitment to check whether the Scottish Government want to be included.

[Torsten Bell]

I am happy to give that commitment. I am not aware of any administering authorities in Scotland that would be affected, but I am happy to take that point away.

Question put and agreed to.

Clause 4, as amended, accordingly ordered to stand part of the Bill.

Clause 5

Mergers of funds

[Steve Darling]

As the Lib Dem spokesman for this part of the Bill, I welcome the direction of travel.

[Kirsty Blackman]

If the hon. Member for Wyre Forest can confirm that he does not intend the change to apply in Scotland, because we do not have strategic authorities, I am quite happy not to vote for or against it and to leave it to those who do have strategic authorities.

[Torsten Bell]

I thank the hon. Member for Wyre Forest for the amendment and for the points he raised. Amendment 244 would amend clause 5 to allow fund mergers only if the two funds are in the same strategic authority, so it would be a highly constraining power. I recognise the logic, but our view is that it is far too constraining.

I emphasise to Members that the Government do not have any plans to require the mergers of LGPS funds, and that our strong preference is that when mergers take place, that happens by agreement between the administering authorities. The Government would use the power to require a merger of pension funds only as a last resort, if local decision making failed to deliver satisfactory arrangements.

I reassure Members that during the reform process Ministers and officials have looked carefully at how local government reorganisation, which is ongoing and very important, as the hon. Member for Wyre Forest rightly pointed out, maps on to the existing LGPS geography, and we will continue to do so. There should not be any friction between the emerging unitary structures and the LGPS. I reassure the Opposition that the administering authorities that were in the Brunel and Access pools are already carefully considering their choice of a new pool in the light of local government reorganisation.

In summary, it is important that local government pension funds and Ministers retain flexibility in their decision making so that decisions can be taken in the best interests of the relevant scheme. I ask the hon. Member to withdraw amendment 244.

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[Kirsty Blackman]

Perhaps it reflects my ideological position that I am much more comfortable seeing this happen with local authorities than I am here, and I am looking for more guardrails. In fact, there are more guardrails around how local government pension schemes do this. It can be done pretty much only if it is to reduce employer contributions, which increases the amount of money that local authorities have for either reducing council tax, as the hon. Member for Wyre Forest said, or for spending on whatever it is that they want to spend money on a day-to-day basis.

I would like to see more power go to trustees. I am concerned—this was raised previously—about the level of employer pressure that could come to bear on trustees about releasing surplus, when it may not be in the best interests of all the scheme members but the employer might be really keen to use the money. I am also concerned that we have had quite a lot of different ideas about what the surpluses could be used for. The Liberal Democrat spokesperson, the hon. Member for Torbay, made the same point as the Government about ensuring that employers could invest more to grow the economy, whether that is in bits of tech that make the company more productive or workplace benefits for those who are scheme members.

Why did the Government decide not to strengthen the powers of trustees in relation to the surplus release? Could the Government look in future at tightening what surplus release could be used for? Trustees have a fiduciary duty to ensure that members’ pensions grow as promised, and that they get the benefits that they were promised or that their defined-contribution scheme in other circumstances grows at the right level. However, if the fiduciary duty applies, why is there not a similar application in terms of surplus release? Why is there not a similar requirement on trustees to ensure that that surplus release goes the way that we think it should go?

On Second Reading, I said that there had not been enough clarity from the Government about how they want that surplus to be released. Are they encouraging or instructing trustees to release surplus to employers if it will be invested in the business, or if it is being done to invest in workplace training schemes? I am not convinced that there is enough clarity on this issue.

Given the Government’s drive to ensure that more people are working and that there is a reduction in the amount of economic inactivity, they could say, “Actually, if you are going to use this to improve access to work, to ensure that you can employ more disabled people, we will absolutely sign off a surplus release, provided that you have met all the other criteria.” The Government could encourage trustees to do that. I feel as though there are more levers that the Government could use and that they are not taking this opportunity.

I have not tabled any amendments on this issue, but I raised it on Second Reading. It would be great if the Government gave me some comfort that they are considering whether—in the future with the Bill or, down the line, in the guidance that is given to trustees—to strengthen the hand of trustees, so that they can direct employers better and so they do not come under pressure from employers; or whether the Government will take policy decisions or directions, and point them out to trustees so that they are encouraged to go in a certain direction to ensure that there is growth in the economy, which is apparently the Government’s first mission.

[Torsten Bell]

I welcome the broad consensus about the direction of travel from everyone who has spoken. I will come first to the remarks from the hon. Member for Aberdeen North, who made some key points. She understandably makes the direct comparison with the LGPS. To a large respect, that reflects the fact that the LGPS is an open scheme where the ongoing contributions are much more of a live question, but I take her point.

I will make a few remarks on her more controversial points about the role of trustees and what funds are used for. The powers of trustees are very strong. Trustees have an absolute veto on any surplus release under the clause, as they do currently, and they have fiduciary duties about how they should use their powers. That is stronger than was implied in some of the remarks that we have heard.

As for the wider point about pressure on trustees from employers, that can affect lots of issues and is not specific to the one we are discussing today. That is what the fiduciary duties of the trust system exist to protect against and what the regulatory work of the Pensions Regulator ensures does not happen. If there was inappropriate pressure on trustees, it would be a very serious issue. That is not specific to the surplus question—that applies to trustees just doing their job. My strong impression with every trustee I talk to is that they take that duty very seriously indeed. I agree that we should always keep that under review.

[Kirsty Blackman]

There is an absolute veto power—a yes or no—but it is also about the power for trustees to be able to say to employers, “This is how we would like you to use the money.” There is less flexibility for trustees there. Once the money is handed over to the employers, there is no comeback for trustees if employers do not use it as suggested.

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[Mark Garnier]

I will not take up too much of the Committee’s time, but suffice it to say that we all heard the evidence that was presented on Tuesday, and we in the Conservative party agree with the Liberal Democrats’ amendment. We will support it.

[Kirsty Blackman]

I will not say much just now. I would like to hear what the Minister says, and I might bob again after that, Sir Christopher.

[Torsten Bell]

I thank the hon. Members for Torbay and for Horsham for their amendments and for giving us the opportunity to discuss the matter of defined-benefit members and pre-1997 accruals. I should be clear that clause 9 and the related amendments refer to defined-benefit schemes, not to the questions of the Pension Protection Fund and financial assistance scheme compensation, which were discussed at such length—and, as several hon. Members have said, powerfully—at the evidence session on Tuesday.

The Government understand the intent behind the amendments. It is crucial that the new surplus flexibilities work for both sponsoring employers and members, for example through discretionary benefit increases where appropriate. That point was raised several times on Second Reading before the summer recess.

On pre-1997 indexation, it is important to be clear that most schemes—as I said, these schemes are not in the PPF or receiving FAS compensation—pay some pre-1997 indexation. Analysis published last year by the Pensions Regulator shows that only 17% of members of private sector defined-benefit pension schemes do not receive any pre-1997 indexation on their benefits, because different scheme rules specify whether someone receives that indexation.

Under the Bill, decisions to enable the scheme to release a surplus will always rest with trustees, who have a duty to act in the interests of scheme beneficiaries. Trustees, working with the sponsoring employer, will be responsible for determining how members should benefit from any surplus release, which may include discretionary indexation. My personal view is that, in lots of cases, it should, but that is where the discussion takes place. The Government are clear that trustees’ discretion is key to this policy. Trustees are best placed to determine the correct use of the surplus for their members, not least because that will involve making some trade-offs between different groups, particularly of members, and it is trustees who are in the position to do so.

It would not be appropriate for the Government to mandate that schemes provide uncapped indexation, in line with the consumer prices index, to all members prior to the making of a surplus payment. Where trustees plan to award discretionary increases, they are best placed to identify what increase is affordable and proportionate for the scheme and its members.

Although scheme rules may require an employer to agree to a discretionary increase—this point was made by several Members who were anxious about it on Second Reading—the trustees will have the final say when deciding to release surplus, and they are perfectly within their rights to request such an increase as part of any agreement that leads to a surplus release. That is a powerful power for trustees to hold on to.

The Pensions Regulator will publish guidance for trustees, as I previously mentioned, and for their advisers, noting factors to consider when releasing surplus and ways in which trustees can ensure that members and employees can benefit. That will happen following the passage of the Bill. These measures already give trustees the opportunity to secure the best outcomes for their members, which could include discretionary increases. I am grateful for the contribution from the hon. Member for Horsham, but on those grounds, I ask him to withdraw the amendment.

[Kirsty Blackman]

As I said, I wanted to hear from the Minister. I agree that trustees should be the ones making the decision on how to spend any surplus and whether to make an uprating. However, as some schemes are barred by their scheme rules from making such an uprating, my concern is about allowing them the flexibility to make it in any circumstances if they decide that that is the best thing to do. It is not about tying their hands and saying that they have to make an uprating; it is about allowing every single scheme the flexibility to make it if they decide that that is the best thing to do.

Where there are employer blockers or other issues in the scheme rules, can anything be done, in the Bill or anywhere else, to remove those blockers so that we can ensure that trustees have an element of choice and remove some of the unfairness that we heard about on Tuesday?

[Torsten Bell]

I think I can offer the hon. Lady some reassurance. It is true that within some scheme rules it will be clear that discretionary increases of the kind that we are debating would require employer agreement. I know that that has worried some hon. Members who think that that could be a veto against such releases in a surplus release situation.

My view—and the guidance to be released by the TPR will make this very clear—is as follows. It may formally be for the employer to agree to those discretionary increases. The scheme rules may apply to that, although in some schemes the trustees may be able to make that decision on their own—that will be a distinction that will depend on the scheme rules. However, even when the scheme rules say that the employers must agree, they will have a strong incentive to agree with the trustees if they are asking the trustees to release. That is why I say that the process of surplus release will change the dynamic of those discussions, which I recognise are currently not proceeding in some cases because employers are saying a blanket no to discretionary increases. We do not need legislative change to make that happen.

[Kirsty Blackman]

Would the Minister encourage those schemes that find that they want to release the surplus in relation to the uplift, but are struggling to get that process across the line, to go to the TPR, look at the guidance that is coming out and ask for assistance with making those discretionary uplifts?

[Torsten Bell]

I absolutely would. I have been making exactly those points to anyone who will listen.

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[Steve Darling]

I rise to speak in respect of amendments 265 and 267, which echo the issues already covered by the shadow Minister. Allowing 60 days’ notice to scheme members is extremely important to the Liberal Democrats—and, to be fair, I am sure it is also important to the Government—and the central intention is to protect outcomes for members of schemes and ensure that there is enough flexibility. That 60 days’ notice is really important to us.

Ensuring that there is enough money in the scheme for any buy-out is the second element, which the hon. Member for Wyre Forest has already alluded to. We think it is very important that the finances are there and that we put scheme members at the centre of the proposals before us. I look forward to hearing from the Minister what reassurance he is able to give us on those points.

[Kirsty Blackman]

I will speak specifically to amendments 260 and 265. Any communication with scheme members is a good thing, particularly if there are to be changes such as those we have been discussing. Sometimes, surplus extraction may not be for the benefit of scheme members; sometimes it may be for other reasons, and trustees have a duty to make clear what they think it is for and to release a surplus only if they think it is a reasonable thing to do. However, they may not have a full understanding of how members feel about what the surplus could be used for. For example, scheme members who are active members might feel that they would love their company to invest in something to make their lives and their jobs easier, and might be keener on that extraction than the trustees might think, so it would be great to have that input.

Amendments 260 and 265 are incredibly similar—surprisingly similar, in fact—and I am happy to support both, were they put to a vote. Amendment 261 is consequential; on amendments 247 and 267, I do not feel I have enough information on what trustees think to make a reasonable judgment on whether either amendment would be a sensible way forward for trustees to meet their fiduciary duty, which is to provide the best guaranteed return for scheme members. I will step out of votes on amendments 247 or 267, but I will support the amendment that requires members to be consulted in advance.

[Mr Bedford]

I rise to speak to amendment 260. I thank my hon. Friend the shadow Minister for outlining our rationale for the amendments. My comments regard informing members. I support the right to pay surplus to employers—I think that is the right thing to do, so long as the correct safeguards are in place—but it is right to inform members of that decision. Not only is it the right thing to do, but it will improve member engagement in the whole pensions process. I made a point in Tuesday’s evidence session on the importance of financial education, and a number of witnesses supported that position. By more actively engaging with members, we will ensure that they take part in their own pension provision and ensure that the right decisions are made in their own interests.

--- Later in debate ---

[Torsten Bell]

The hon. Member rightly returns to an important question. As I set out at the evidence session on Tuesday, our pension policy road map, published at the same time as the Bill, details exactly when we are planning to bring forward regulations. My understanding is that these particular regulations should be consulted on in the spring of next year—if that is not right, I will make sure we come back to him with further details. As I say, the road map provides the details of that timeline. It is a very important question for people to be clear on. In that consultation, I am sure the evidence we have heard will be taken into account.

Amendments 260 and 265 correctly aim to ensure that members are well informed and represented when it comes to their pension schemes and retirement. The new paragraphs would be inserted into clause 9 of the Bill, which amends section 37 of the Pensions Act 1995. Section 37 already provides that regulations must require members to be notified in relation to a surplus payment before it is made.

This is therefore not about the flexibility of trustees; it is redundant, given the requirements already in the Bill. It is similar to the existing requirement under section 37 of the Pensions Act 1995, and we will again consult on these draft regulations following Royal Assent. Furthermore, trustees already have a clear duty to act in all matters in the best interests of the beneficiaries of their scheme, and they are best placed to decide, in consultation with the sponsoring employer, what actions are best for members—I will not keep repeating that point as we go through the rest of this Bill.

Finally, I thank the hon. Member for Wyre Forest for proposing amendment 261, with its requirement for actuarial confirmation that proposed payments from a DB surplus to employers will not adversely affect members’ benefits, and that members have been notified ahead of that release. Those are valuable objectives, but they are already achieved by the robust safeguards in place, including trustee discretion, the prudent funding threshold —on which we will consult—and the actuarial certification that a scheme is well funded.

In addition, the defined-benefit funding code and the underpinning legislation already require trustees to aim to maintain a strong funding position, and that is actively overseen by the Pensions Regulator. I believe the safeguards we have put in place put members at the heart of the policy, which is a point of cross-party agreement, and will allow trustees to continue to be the people who strike the correct balance between the benefits for employers and members. I hope this offers some reassurance to the Committee that, for the reasons I have outlined, these amendments are unnecessary; I urge hon. Members not to press them.

[Kirsty Blackman]

The Minister has said that trustees are required to act in the interests of and to the benefit of scheme members. However, they are required to act so that members will get the benefits that they are promised under the pension. They are not required to act to the benefit of scheme members. As I said earlier, there is a distinct possibility—particularly with surplus, which is not going into the pension scheme and which can only be paid if those benefits are already guaranteed—that the surplus is only a surplus in the case where members are definitely going to get those benefits anyway.

It is the case that trustees might not know what is to the benefit of members. Requiring them, or asking them, to consult members on what they would like, or to provide members with information about how money is going to be spent, could get better results for those members. It is not going to change the amount of pension they will get, which is the trustees’ requirement; however, it may change their lives in a more positive way. Whether or not they are people currently paying into the scheme and actively employed, there are ways that the surplus could be spent that would benefit or disbenefit their lives.

In making that case, I think there should be a consultation with members. The hon. Member for Mid Leicestershire made the point very well that we should encourage people to take more interest in and have more input into their pensions, so that they have a better idea of what is going on, of the possibility of surpluses and of how they are spent. I would appreciate it if the Minister, when he is considering the regulations and the changes being made, could think about how best to consult scheme members. Given that trustees have a duty to act not in the best interests of members, but in the best interests of members’ pensions, I would love to see, around the surplus, arrangements that benefit scheme members—whether they are currently paying, future or deferred members, or those already getting their pensions—rather than solely the employer and the employer’s intentions.

Ordered, That the debate be now adjourned.—(Gerald Jones.)

Pension Schemes Bill (Fourth sitting)

Kirsty Blackman Excerpts

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Mark Garnier]

Forty-third! He looks 28. None the less, I hope he is getting plenty of pension advice; who knows when he may need it?

This is a very good provision. The more informed people are about their retirement opportunities, the better. I suppose I have to declare a bit of an interest, inasmuch as I will retire in five years’ time, hopefully. It is incredibly important that people are well prepared for their retirement, and the more information a member of a pension fund has, the better it is. If the amendment is pressed to a vote, we will support it wholeheartedly.

[Kirsty Blackman (Aberdeen North) (SNP)]

I am in massive agreement with putting more investment into the provision of advice. On Tuesday, we heard the terrible stats that only 9% of people actually get advice on their pension from a financial adviser. Yet this amendment is the wrong vehicle to achieve that, given that it is looking purely at DB surpluses.

My understanding is that people who have DC pensions are much more likely to need advice than those who are on DB pensions, because that someone with a DC pension cannot tell how much they will get before they actually apply for the annuities when they retire. Their life circumstances may change between the age of 40 and hitting retirement. My understanding is that those on DB pensions have a pretty clear idea of what they are getting on a weekly, monthly or annual basis, in addition to a lump sum that they may be awarded as part of that DB pension scheme. Using the surplus created in DB schemes to fund advice for DC scheme participants would not be in the best interests of the scheme members.

I agree that we need more advice; I think that the proposal made in new clause 1 for earlier advice is incredibly important, because by the time someone gets to the age of 50-plus or very close to retirement, they do not have time to fix any issues. I would love to see people, when they are first auto-enrolled, getting advice on how much pension they are likely to get from whatever percentage of pay is put in, what a top-up looks like and how putting money into their pension as early as possible gives them the best possible outcomes in retirement, rather than panicking at the last possible moment to try to increase it.

On the mid-life MOT, free advice is already available for people at the age of 50, but it is drastically under-utilised. The Government could move in the direction of ensuring that when people get their bowel cancer check pack through the post, they also get a date and a time for an appointment with the Pensions Advisory Service, so that they do not have to proactively make it themselves. That would make a massive difference.

Successive Governments have believed that doing that would cause too much uptake and there would not be capacity to provide that service, but as we come to the generation of people who have been auto-enrolled hitting 50, when they are due that mid-life MOT, the benefits would be so great and would provide prospective pensioners with clarity about how much they could get. They could be told that taking the entire thing in cash and putting a chunk of it into a bank account is a truly terrible idea—we know that far too many people do that. I am in favour of anything that the Government can do to expand the free advice service that is there already, but I think that the funding vehicle proposed in amendment 3 is not the right way to go about it. I would like the Government to put more money into it, and many more people getting the advice that they need.

The guidance and targeted support mentioned on Tuesday are incredibly important, increasingly so as we see the trend away from DB schemes towards DC schemes. I was looking at my family’s personal pension the other day, and the amount of money in the DC pot. I do not have the faintest clue what it means. I know something about pensions, but being able to translate that large figure into a monthly amount is simply impossible until it is time to apply for the annuity, when we get the understanding of what our life circumstances look like.

I would like changes to be made to the advice given. I do not think that we are in the right position. I wonder if the review will take some of this into account. On pension sufficiency, as the hon. Member for Mid Leicestershire said, people being better informed and more engaged with their pensions is an incredibly positive thing, but we are not there yet. More needs to be done to encourage people down that route.

[Mr Peter Bedford (Mid Leicestershire) (Con)]

I want to reiterate a lot of the points mentioned by the hon. Member for Aberdeen North. Financial education is key to unlocking many of the challenges that we face in adulthood, whether budgeting, debt management, saving or planning for retirement. I introduced a ten-minute rule Bill, the Financial Education Bill, earlier this year; I know we already have an element of it in secondary schools, but we need to go further as a country and ensure that everyone, from the very young upwards, has that education to inform the key decisions in our lives.

I take the hon. Member’s point on DB schemes funding those seeking advice for DC schemes, but it is often the case that members have pensions in both DB and DC schemes: people move quite fluidly from a job in the public sector to one in the private sector, and will inevitably have membership in both DB and DC schemes. The Bill would benefit from the amendment proposed by the Liberal Democrats.

I also take the hon. Member’s point on the need for better engagement by employers. I know some large companies offer employees mid-life MOTs on financial education and management. Certainly, FTSE 100 companies that I have worked for offer employees that kind of support as they approach retirement. I am sympathetic to new clause 1, which amendment 3 is connected to, because it is essential that as we get older and plan for retirement, we are fully informed on those decisions. I will support the Liberal Democrat amendment.

--- Later in debate ---

[Mark Garnier]

Conservative amendment 258 would ensure that all regulations made under proposed new section 37(2A) of the Pensions Act 1995, which governs surplus payments from defined-benefit pension schemes, are subject to the affirmative procedure always, not just the first time that they are made. That would give Parliament ongoing oversight and scrutiny of any future regulations in the area. Without the amendment, regulations on defined-benefit surplus extraction would not consistently require parliamentary approval. That would potentially lead to insufficient scrutiny.

The amendment aims to provide better parliamentary control over regulations as they are introduced. The key worry is the risk that the Secretary of State, whoever he or she may be, might use these powers to allow the payment of a surplus at funding levels below buy-out standards at some point in future, which could jeopardise scheme security and could happen without parliamentary scrutiny. The amendment is about improving the transparency and accountability of surplus extraction regulations for DB pension schemes, ensuring that Parliament maintains consistent oversight and guarding against premature surplus extractions that might undermine scheme funding security.

[Kirsty Blackman]

The Liberal Democrat and Conservative amendments are very different methods to achieve a similar outcome. Conservative amendment 258 is a bit wider, in the sense that it would require the affirmative procedure for a wider range of things, but both parties are concerned about the possibility of regulations allowing a surplus below the buy-out threshold level.

I think the amendments are reasonable asks. I am generally in the habit of supporting more scrutiny of regulations; upgrading the requirements for regulations from the negative to the affirmative procedure is very much in my wheelhouse, given that it is so difficult for Parliament to oppose regulations made under the negative procedure unless the Leader of the Opposition puts their name to a motion praying against them. In practice, that very, very rarely happens. Given that both amendments are asking for relatively small changes to ensure increased parliamentary scrutiny, particularly where the threshold drops below the buy-out level, I think that they are not unreasonable. I am happy to support them both.

[Torsten Bell]

I thank the hon. Members for Torbay and for Wyre Forest for their amendments. On amendment 264, I hope that I have already reassured hon. Members that there are many safeguards built into the policy for surplus release, both at an individual scheme level and at a wider policy level, including the ultimate control of trustees, the need for prudent funding to be maintained and the actuarial certification.

The Government’s view is that it is not for the Secretary of State to assess every single scheme in the way that the amendment intends. To offer some more reassurance, however, TPR and the PPF have carried out scenario testing in this area; we heard the PPF chief executive’s reassurance in oral evidence on Tuesday. In that regard, I do not think the amendment is necessary. It would also involve the Secretary of State holding a lot of evidence about every single DB scheme in the country, which I do not think is a good use of resources.

[Kirsty Blackman]

The point is about the regulations on the surplus and the times at which schemes can pay it. It is not about looking at each individual scheme; it is about looking at the level that is set in the regulations. Much as I am sure that the Minister is having a lovely birthday, he would probably admit that he is not going to be the Pensions Minister in perpetuity. It is unlikely that he will still be the Pensions Minister in 50 years’ time. He may therefore not have control of these regulations. This is about putting guardrails in place so that, no matter who is in government, the level cannot be reduced below the full buy-out funding level.

--- Later in debate ---

[Mark Garnier]

These are not amendments that we feel particularly inclined to support. They would require pension fund managers to make, publish and keep under review data to show that their portfolio investments are consistent with the goals of the Paris agreement on climate change and clean energy. That would include publishing prescribed information relating to climate change alignment and sewage discharge. Those are immensely important and worthy ambitions and intentions; we share their spirit, as we want a cleaner planet, cleaner waterways and improvements to our climate, but I do not think that this is the place to do it. Pension funds should be allowed to look at the best interests of their members, irrespective of wider public and social aspirations, so this is not a proposal that we feel we can support.

[Kirsty Blackman]

I think this is the place to do it. In fact, I think every place is the place to do it. When we debated the Advanced Research and Invention Agency Act 2022, for example, I proposed that the organisation should be created on a net zero basis. I have tabled many amendments to whatever Bill I have been faced with that have included trying to meet our Paris agreement targets. I have served on Bill Committees quite a lot in the past few years—something my party keeps putting me up to do, for some reason.

The Paris agreement is the biggest issue. I have spoken already about how trustees are required to act in the interests of scheme members’ pensions rather than the interests of scheme members themselves. The Labour Government have tried to overcome that more generally, in terms of decision-making powers. They have tried to do that in Wales with the Future Generations Commissioner, who has the ability to judicially review decisions taken by public bodies in Wales. They can be called in for judicial review, and the Future Generations Commissioner can say, “This decision will cause a problem for future generations. It should be reviewed.” The Government are failing in their ambition to do the same thing in this Parliament. It is bizarre that I am about the only person in this place shouting about how great the Welsh Labour Government’s Future Generations Commissioner is—it is a really good idea.

When people out there are asked what the major issues currently facing the world are, many—particularly younger people—say that climate change is the biggest crisis we face. Scientists tell us that too, so it is completely reasonable that we ask everybody involved with anything to consider the impact of their decision making on our net zero target and on climate change. We ask all sorts of organisations to consider environmental, social and governance impacts. This is another time to do that, because we are creating a value for money framework anyway. We want value for money, but we want the best value—value for future generations. There is no point in everybody having great pensions if they do not live to see them because the planet is not here for them.

If we ask scheme members what they want, I think a significant number would say, “I would like more investment in things that make the planet a better place. I would like more investment in renewable energy and insulation for houses.” They would say that those are some of their priorities. They would obviously still like a guaranteed return too, but it is completely reasonable, in terms of the value for money framework and the best interests of people out there, that we consider the Paris climate change agreement. Sewage is important too, but it is not quite the existential crisis that climate change is.

A value for money framework must look at value for money in a wider sense. One of the things we have spoken about in Scotland a significant number of times is population wellbeing. The Scottish Government are finally members of the Wellbeing Economy Alliance. That is not necessarily about saying that GDP is not important; it is about saying that gross domestic wellbeing is important, and that sometimes we must take decisions that are slightly more expensive but will have a significantly less negative, or more positive, impact on the planet or the wellbeing of the population.

When we think about a value for money framework, it is completely reasonable to talk about the Paris agreement. It is completely reasonable to ask about it in respect of any Government decision. I have written to the Chancellor in the past to ask for a carbon assessment to be published alongside the Budget—what is the impact on the Paris climate change agreement of the tax and spending decisions taken in the Budget, and how do they get us closer to our target?

I am happy to support all the amendments. As the hon. Member for Torbay said, they are not about forcing people to take decisions that are net zero in nature; they are about forcing them to consider the Paris agreement, or the regulatory targets for sewage discharges, when taking decisions. I do not think it is too much for us to ask trustees to be mindful of the impact on the planet of the decisions they are taking.

The vast majority of people in my constituency do not have significant savings. If we look at the general population, we see that about 50% of people have less than 100 quid in savings. They have very little money and are not able to invest in renewables projects. They are not able to direct their money because they do not have any money to invest. What a lot of them do have, following auto-enrolment, is pots of money invested in pensions, but they have very little ability to influence how that money is spent. Scheme trustees have a significant amount of ability to influence where money is invested, but scheme members do not, in the main, have that ability. If we asked people where they would like to see their pensions invested, many of them would pick things that might offer slightly less of a return but are significantly better for the planet. The aims in the amendments are admirable and I am happy to support them.

--- Later in debate ---

[Mark Garnier]

I beg to move amendment 254, in clause 10, page 10, line 20, at end insert—

“(2A) Value for money regulations must require responsible trustees and managers to make an assessment of, benchmark and regularly report the—

(a) net benefit outcomes,

(b) investment performance,

(c) quality of service, and

(d) long term members outcomes

of regulated VFM schemes.”

This amendment broadens the definition of value for money to require assessment of net benefit outcome, investment performance, quality of service, and long-term member outcomes, and require schemes to report on these.

On the wider point about value for money, we broadly support the introduction of a robust value for money framework as set out in clause 10. The framework, which was initially introduced under the previous Government, is essential to promoting transparency and accountability in the management of defined-contribution pension schemes, and it mandates responsible trustees or managers to assess and publish reports on the performance of their schemes. Ultimately, that should mean improved performance. It is worth bearing in mind, though, that there are potentially perverse outcomes —as we have seen, for example, with the Phoenix Group—as the consequences of an intermediate rating could drive less growth. I suppose it could be a less risky approach, but greater risk can lead to greater growth. None the less, we need to be careful as there could be perverse outcomes.

I tabled the amendment as we are worried that the current value for money framework for defined-contribution pensions risks focusing too narrowly on costs and charges as the primary determinant of value for members. By contrast, the Australian superannuation system adopts a more holistic definition of value for money, including a net benefit outcome metric, which is defined as the sum of contributions and investment earnings minus all costs, fees, taxes and insurance premiums. Australian trustees are required not only to consider costs, but to act in members’ best financial interests, broadly encompassing factors beyond merely minimising fees. The Australian framework incorporates additional core metrics including service quality, investment performance and member outcomes. This broader approach reflects a more comprehensive assessment of value for money delivered to members.

[Kirsty Blackman]

Will the hon. Gentleman clarify what “long term members outcomes” means? Does it mean people that have been members of the scheme for a long time, or does it mean members’ outcomes over the long term? The amendment is ambiguous.

[Mark Garnier]

That is a very good question. Ultimately it means, “What is the performance of the fund?” Members’ best interests can include a lot of different things, but ultimately we need to see the fund grow with the best performance it possibly can, given all things brought together. When members start to receive their pensions, they will therefore get the best terms they possibly can.

We run the risk of trying to look at the wrong definition. For example, there has been an argument recently about the local government pension scheme—this came up earlier this week—with the Reform party talking about the fact that the scheme is charging 50 basis points. The argument is that reducing it to 10 basis points would save money. However, as I was discussing with a Government Back Bencher the other day, one of the problems is that if fees are too low, that reduces the ability of the managers to assess more complicated financial opportunities. If fees are kept at 50 basis points, the capacity to start analysing unlisted investments is retained. If fees are reduced to 10 basis points, the ability and skill of the managers to look into more than investing in other people’s funds or into simple listed equities is reduced. If we start to look at it as a cost-based issue only, we miss out the fact that we get quite a lot of extra expertise if slightly higher management fees are paid.

The Australian framework incorporates additional core metrics including service quality, investment performance and outcomes. There is a concern that the UK value for money framework overemphasises costs and risks discouraging investment in asset classes, as I discussed, that historically produced higher returns but that might have higher shorter-term fees or complexities. This narrow focus could also dampen innovation in pension scheme design and reduce member engagement, ultimately harming long-term retirement outcomes for scheme members. It may be valuable to learn from the Australian approach by developing a value for money framework that balances cost transparency with metrics that encourage good investment strategies and quality services, aligning regulators’ and trustees’ incentives with members’ long-term financial interests.

Our amendment tries to broaden the definition of value for money using the Australian model as a template. It would require the assessment of net benefit outcome, investment performance, quality of service and long-term member outcomes, not just cost. It would introduce a requirement for schemes to report and benchmark across these holistic measures, thereby enabling a more balanced and meaningful comparison of value.

--- Later in debate ---

[Torsten Bell]

On we go! I was going to thank the hon. Member for Torbay for his words on his amendments, but I shall move on to them anyway, and to clause stand part. Ultimately, value for money is a much-needed member protection measure for savers enrolled in a defined contribution scheme. I should remind the Committee why we have it and why it is so important: because the risk of poor value for money now lies in the defined contribution market to such a large extent with individual savers. That is what the Bill is ultimately, most importantly, about.

It is important to remember that members of defined benefit pension schemes already have protections and benefit from the sponsor employer shouldering all that risk, as was mentioned earlier by the hon. Member for Aberdeen North. Those employers also have greater agency to deal with the value-related issues, such as the effective administration of their pension schemes.

Clause 10 sets out that certain pension schemes and arrangements will be in scope for the value for money framework. The clause provides regulation-making powers to specify the types of schemes and arrangements that will be in scope of the value for money requirements. We envisage that those initially in scope will be default occupational pension schemes offering defined contribution benefits. That is fundamental, given that the vast majority of defined contribution savers are saving into exactly those kind of pension schemes. To spell out what that means, we are not talking about non-workplace defined contribution pensions—that is, personal pensions. There is a regulatory power to extend in future if required, but initially we are talking about workplace defined contribution pension schemes.

With that explanation, I hope that the hon. Member for Torbay will not press his amendment, and I commend clause 10 to the Committee.

[Kirsty Blackman]

I rise to speak to clause 10 and the consultations that the Secretary of State will undertake in advance of making the value for money regulations. Subsection (7) says:

“The Secretary of State must consult with such persons as the Secretary of State considers appropriate before— (a) making value for money regulations; (b) issuing guidance under subsection (6).”

I appreciate that that is in there—it should be in there, as it is important. However, I do not know the road map off the top of my head, although the Minister might. Will the value for money regulations be published in draft in advance of the final decisions being made? I understand that they will go through the affirmative procedure when they do come before Parliament, but, in order to consult, will the Secretary of State publish the drafted regulations so that all of us can see them?

Also, on the right people to consult, I would always recommend that the Secretary of State runs those regulations before the Select Committee in advance of publishing them, so that it can suggest any changes. It is far easier for the changes to be made in advance of the statutory instrument being laid, when it is in draft form, than for there to be an argument in a Delegated Legislation Committee—I am sure that nobody on either side of the House wants there to be arguments in a Delegated Legislation Committee. We would all, I am sure, hope that there would be widespread agreement in advance.

The value for money regulations are really important, and it is important that they are got right. I am pleased that there is to be a consultation, but I push the Minister to agree that it will be significant—not just a couple of people in advance—so that potential problems with the value for money regulations are ironed out, and we do not see 273 amendments to them down the line.

[The Chair]

Before I call the Minister, I should say that it is not clear to me whether Mr Darling wishes to speak to amendments 1 and 2, which are in this grouping.

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[Mark Garnier]

This seems like a very technical clause, and we certainly have no objections to it. I also have no doubt that we will not be voting against the Government amendment. I think we are very happy with it.

[Kirsty Blackman]

I have a similar question to the one I had earlier. We need to ensure that those responsible for generating the data are kept in the loop and that they have enough of a timeline to create the correct data. The Government must listen if they say, “We’re very sorry, but we can’t this bit of data in the way that the Government want.” I seek reassurance from the Government that this would be a conversation, so that the Government get the data they want, but that an unreasonable burden will not be placed on the trustees or managers who have to provide that data. That conversation needs to continue as time goes on.

[Torsten Bell]

The answer to the hon. Lady’s question is that that conversation is going on to a huge degree. Because there are so many lessons to be learned from abroad and so many technical questions to be worked through, including about the provision of data—these are important technical questions for the scheme to work and be operationalised—there is a high level of consultation on the value for money framework. It is absolutely an ongoing conversation. It was happening for some time under the previous Government, and it is continuing now. Another phase of that discussion will be launched in the near future and will continue as we move to the operational phase.

Amendment 29 agreed to.

Clause 11, as amended, ordered to stand part of the Bill.

Clause 12

VFM assessments

--- Later in debate ---

[Torsten Bell]

Clause 15 details the actions that may be required when an arrangement falls into an intermediate rating. That could be an arrangement that is at risk of not delivering value, or one that provides a certain level of value, but needs more work to improve the value it offers. It allows for regulations to detail the actions required of trustees and managers for schemes or arrangements rated intermediate. That could include producing an improvement or action plan, outlining their planned steps towards improved value for members or informing the employers currently paying into the arrangement of its value for money rating and ensuring that the arrangement does not take on new employers until it improves the value rating. That last point was raised at the evidence session on Tuesday.

As clause 14 provides the ability to set a number of sub-categories of rating within the intermediate category, clause 15 enables different consequences to be attached to those sub-categories depending on the value being provided. We are proposing to give schemes in the intermediate rating a period of up to two value for money assessment cycles to make the improvement needed to provide value to their savers.

It is important to differentiate between the intermediate and the “not delivering” rating. Schemes rated as not delivering are essentially not providing value to savers, with no identifiable improvements within a reasonable amount of time. Those schemes will be required to make an assessment of their next steps, which will most likely be to transfer the savers to a scheme that is providing value. That is the ultimate sanction within this framework.

Schemes that are rated intermediate will have identified where improvements can be made and will be required to complete an improvement plan. This would outline the proposed changes to improve their VFM rating within two years. As well as providing definitions of employer and participating employer in the context of the clause, it also allows for the content of an improvement plan to be included in secondary legislation.

[Kirsty Blackman]

When questioned on Tuesday, the Minister talked about the issues that had been raised about intermediate ratings, and the possibility of intermediate points within intermediate ratings. It would be helpful if he could confirm from the Front Bench that he will take action to ensure that the negative consequences that were raised, with people being so keen to avoid falling out of that, do not happen. The Minister will be aware that confirmation from the Front Bench is helpful in clarifying the intent of the legislation and would put some of our minds at rest.

[Torsten Bell]

Let me directly address that point, and then I will turn to the Government amendments. The answer is yes. I did not respond, but I should have, to the related point raised by the hon. Member for Wyre Forest in the previous grouping. The experience in Australia was that there was a binary cut-off, but with a very high-stakes outcome if people fell on the wrong side of it. That did lead to herding behaviour. That is one of the most well-established lessons from the Australian experience, and it is certainly central to the evidence that we have heard in the consultations. I can absolutely provide the confirmation that we will be avoiding that outcome, not least via these multiple levels of intermediate ratings.

Government amendments 30 to 34 introduce other changes. These amendments are of a minor and technical nature and clarify the policy intent. Amendments 30, 31 and 33 make drafting corrections. Amendment 32 clarifies that the Pensions Regulator’s assessment of a transfer solution is to be based on the trustees or managers’ assessment carried out for the purposes of the action plan. Finally, amendment 34 removes a power that we no longer need.

Clause 16 details the actions that must be undertaken when schemes or arrangements are rated as not delivering value for money. This is necessary to help protect pension savers from lingering in arrangements that are “not value” and allow them to be moved into arrangements that do provide value. These actions may include submitting an action plan to regulators, informing employers currently contributing to the arrangement of its “not value” rating and closing the arrangement entirely to new employers.

Clause 16 also enables regulations to set out further actions that will be required of trustees or managers, including the conditions under which a “not value” arrangement may not have to be closed to new members. The clause also allows the Pensions Regulator to require trustees or managers to initiate the transfer of members from the “not value” arrangement into another that does offer value. It outlines the conditions when this would apply.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Consequences of a “not delivering” rating

Amendments made: 30, in clause 16, page 16, line 20, leave out

“the responsible trustees or managers to transfer”.

This amendment corrects an error.

Amendment 31: in clause 16, page 16, line 21, leave out “(all or” and insert “all (or”.

This amendment corrects an error.

Amendment 32: in clause 16, page 16, line 31, leave out sub-paragraph (i) and insert—

“(i) based on the assessment carried out by the responsible trustees or managers under section 14(6)(a) in the action plan of the scheme or arrangement, transferring the benefits of all (or a subset of) the members of the scheme or arrangement to another pension scheme (or arrangement under a pension scheme) could reasonably be expected to result in the generality of the members of the scheme or arrangement receiving improved long-term value for money, and”

This amendment clarifies that the Pensions Regulator’s assessment of a transfer solution is to be based on the trustees or managers’ assessment carried out for the purposes of the action plan.

Amendment 33: in clause 16, page 16, line 34, leave out “the measures” and insert “any other measures”.

This amendment makes a minor clarification.

Amendment 34: in clause 16, page 17, line 8, leave out subsection (5).—(Torsten Bell.)

This amendment removes a power which is no longer needed.

Clause 16, as amended, ordered to stand part of the Bill.

Clause 17

Compliance and oversight

Question proposed, that the clause stand part of the Bill.

--- Later in debate ---

[Mark Garnier]

Broadly, we welcome clause 20, which builds on important work that was started under the previous Government to address the issue of small, dormant pension pots. This is a critical step forward to consolidate small pots, which can otherwise be costly and inefficient both for pension schemes and, importantly, for their members. However, we have some concerns about certain aspects of the measure that require further scrutiny.

Notably, the Bill gives the Secretary of State the power to change the monetary value that defines a small pot at a later date. Although that is a logical measure that will probably need to be exercised as the small pots regime becomes more established, there is a risk that drastic changes to the minimum pot size could significantly alter the defined-contribution market in unintended ways. In particular, the potential market impact on schemes serving members with lower average account balances needs to be carefully considered. Automatically consolidating larger pots could reshape the market landscape, affecting members and schemes differently across the spectrum. Pensions UK has suggested that any future increases in the monetary value of the definition of a small pot should be subject to robust consultation with industry stakeholders, alongside an independent market impact assessment, to understand fully the ramifications of such changes.

The Liberal Democrat point is extremely important. I hope that the Minister will verify how the small pot size was set at £1,000. The amendment seeks to increase that to £2,000, but why not £5,000 or lower it to £500? It is very difficult.

The other problem with the clause is that a small pot defined as inactive could be inactively invested—for example, sitting in an index fund for 10 years without anybody worrying about it—and have crept up or down in value. It could be £1,005 one day and £995 the next. Does that change it from being an okay pot to a small pot, and therefore due for consolidation? This is a very difficult measure. Inevitably, it comes to the point of where it is defined. Similarly, will the amount be indexed against inflation, or against the stock market indices? How will the Secretary of State decide to increase it?

There are so many questions about this. My gut feeling is that £1,000 is too small, but equally that it is incredibly difficult to determine what the right size is. I look forward to the Minister extensively discussing with the Committee exactly how he came to £1,000 and not £1,001, £999 or indeed any other number.

[Kirsty Blackman]

There is possibly cross-party consensus that there is no perfect answer to this problem, but there are lots of wrong answers. If the value had been set at £100,000 or at £1, those would have been very wrong answers. I applaud the way the Liberal Democrats have approached this, by looking at the responses they have received and being willing to flex on the basis of them. I hope the Minister has approached the numbers in the same way.

This amendment is a test of change. It is asking, “Does this work? Does this make a difference?” Whatever value the Government chooses to set the limit at, we will see if it works. At that stage, the Government can assess whether it was the right level or not. This comes back to the point that I made during the evidence sessions about monitoring and evaluation of whether this has worked and how the Government will measure whether it has worked as intended. At what stage will the Government look at that?

At what stage after implementation will the Government make a call about whether the measure has achieved their aims, or whether the number needs to be flexed to meet the aims not just of the Government, but of savers, active and inactive, in their pensions, who would quite like to get a decent return when they hit pension age but perhaps do not have the capacity, the ability, or the time to be involved in actually making the decisions about moving and consolidating the pots.

It would be helpful if the Minister gave us some clarity about what monitoring and evaluation will look like, and about why £1,000 was chosen, so that we can understand the rationale. As I said, there is probably wide agreement that there are quite a few wrong answers but no perfect answer, and this is possibly the best that we are going to get at this moment.

[Torsten Bell]

The hon. Lady is not only telling me I am going to be fired, but then clearly angling for the job by again giving the speech I was going to give. I agree that there is broad consensus across the room that there is no perfect answer, but there is a balance of risks. We are attempting to introduce a large change to the pension system that will affect millions of people, and we need to do that in a steady and gradual way—yes, with the intention of considering going further in the future, but not in a rushed way.

Let me talk through a few of the issues and points that were raised. As I am sure those proposing the amendment know, our view is that we should stick with the £1,000 limit at this point and then come back to consider future increases once the system has been put in place. We want all hon. Members to have it in their heads that the implementation of this aspect of the Bill is on a slightly slower timeline than some of the other bits we have discussed—for example, because we need the value for money regime to be in place before we move to the small pots part of the picture.

Directly on the question of where the £1,000 limit came from, it came from extensive engagement and formal consultation with industry stakeholders over quite a large number of years. There is no academic answer to why it is £1,000 and not £900 or £1,100, but it does strike a balance between the pressures on a competitive industry and the level of administrative hassle, and the number of people who will be affected. We need to build a system that can manage the flows.

To give Members some idea of quantity, the evidence gathered from pension schemes last year showed that the £1,000 threshold would bring approximately 13 million pots into scope. I appreciate the logic behind calling for a higher threshold, but this one would mean a significant 13 million pots. The hon. Member for Wyre Forest is looking aghast at that number. I am just providing it as a bit of context. For further context, it already represents more than half of all deferred small pots, so it is not that we are trying to affect hardly any to start with; it is a significant number. That is in 2024 terms; the picture will look different in 2030 or so when the measure comes in, but that helps Members to have a sense of it.

On how to change the threshold, I can absolutely provide the reassurance that was asked for: that will be done in a public-facing way. An affirmative resolution is always required to change it. Unlike some other aspects of the Bill, where the first regulations are subject to the affirmative procedure but later changes can be made through the negative procedure, any change to the pot size requirement will always require the affirmative procedure, for exactly the reasons that have been discussed, which are that this would be a material change that affected the industry and individuals as they go through. Certainly, we would consult on that in the future.

For those reasons, I am glad that this is a probing amendment. I hope I have been probed, and we would like the clause to stand part.

[Kirsty Blackman]

On that point, perhaps I am reading the clause completely wrongly, but it says:

“Small pots regulations…are subject to the affirmative procedure if they…are the first such regulations…otherwise, are subject to the negative procedure.”

I am confused.

--- Later in debate ---

[Kirsty Blackman]

I have a question on the definition of “dormant”. The clause states that a pension pot is “dormant” if no contributions have been made for 12 months and if

“the individual has, subject to any prescribed exceptions, taken no step to confirm or alter the way in which the pension pot is invested.”

I am concerned that that definition is too wide.

If somebody has just said, “How much is in my pot?” and is confirming what is invested in it, are they considered to be somebody who is actively involved in their pot and who may not want consolidation? There is obviously a requirement to tell people anyway that it is going to be consolidated. What if they were actively involved, but only to the level that they checked the numbers?

For example, I have a small pension pot. I have tried to amalgamate it with another one, but it did not work because I have changed my name. I would love for it to be amalgamated; I cannot work out how to do it, but I have engaged with that pension pot in recent times and therefore it may not be considered a dormant pot.

Can the Minister give us some clarity or promise future clarity about what “dormant” means? If there has been a rough engagement with it, is that dormant? If people are very keen on their pension pot and have spent a lot of time saying, “Actually, it should be invested like this,” that is definitely not dormant, no matter how small it is. A lot of people will have had only a passing interest and would be delighted for it to be consolidated.

[Torsten Bell]

The hon. Lady’s last point is basically the right one. The policy objective is that where someone is not actively engaging in their pot, that is available for consolidation. The kind of minor administrative engagement—trying to access the website—is not what is envisaged by the clause. It is to make sure that somebody who has taken active choices about how their pot is invested is not treated as being disengaged when they have done something that is, it turns out, very unusual.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Small pots data platform

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Kirsty Blackman]

Does the Minister have any hypothetical examples? I am not asking him to commit to anything being a prescribed condition, but just to give us some examples so that we have an idea.

[Torsten Bell]

That is a fair question. The most prevalent example will be people whose existing pot, although small, has unusual and valuable guarantees attached to it, or benefits that they would lose if they transferred into the default fund of another provider. That is likely to be the most common use of the clause. The clause will provide for transparency by allowing regulations to be made to set out in more detail how those decisions and others will take place.

Given the admin costs and unprofitability of small dormant pots, we do not expect schemes to abuse this exemption. For the benefit of people who do not spend lots of time looking at these matters, I should say that lots of schemes are happy to see small pots go, because they are expensive for them to operate; they are neither in the provider’s interest nor in the saver’s. This clause strikes a careful balance.

Clause 24 will ensure that pension savings are not left idle, requiring all eligible pots to be held by a default consolidator. As Members will know, millions of workers accumulate small pension pots as they move between jobs. Specifically, the clause will allow for the transfer of those dormant pots without requiring active consent—again, that is something that Governments do not do lightly, but it is required by the best interests of savers in these cases—where a transfer notice has been issued and no objection received from the member, as I set out in relation to clause 22.

If a member does not opt out, the trustees and managers of the scheme are required to act on the transfer notice and transfer the pot to the designated consolidator. Clause 24 also provides legal certainty, because it will empower schemes to consolidate pots even if doing so breaches existing scheme rules. That removes administrative barriers and places the member’s interest at the heart of the system.

Clause 25 plays a role in providing legal clarity and continuity for individuals whose small dormant pots are transferred. The clause sets out what happens when a pension pot is moved to a different pension scheme or a different arrangement within the current scheme. This ensures that an individual’s membership status, rights and obligations are automatically and seamlessly updated at the point of transfer—so it is not just that a member’s pot has been transferred, but that they have become a member of the scheme that they are entering, even though they have not signed up to a contract explicitly in so doing. This means that they automatically acquire all the rights and responsibilities that come with that membership. In schemes where membership results in a new contractual relationship, the clause will deem that a new contract is formed at the point of transfer.

Clause 26 will play a critical role in ensuring that the transfer of small pots to consolidating schemes is undertaken in a legally robust and administratively efficient manner. By establishing clear timeframes for transfers, it will allow for the safe and effective consolidation of small dormant pension pots.

This clause introduces two key timing rules. First, it mandates the minimum 30-day notice period before any transfer or change of arrangement can take place. That gives individuals the opportunity to review the proposal and respond. That time period is aligned to the approach taken for members who wish to opt out of automatic enrolment.

Secondly, the clause sets out a maximum one-year deadline for completion of the transfer or change of arrangement. It provides clarity and operational certainty for pension schemes and savers. That also enables schemes to maximise the use of bulk transfers, supporting a lower-cost and more efficient transfer process, rather than having shorter deadlines that force them to move individuals in small batches. It also ensures that the small pots consolidation framework remains responsive and co-ordinated. If trustees and scheme managers are waiting for proposals from the small pots data platform, the transfer period can be extended. This clause strikes the right balance by protecting savers and making sure they have time to act, while also providing an impetus for timely action in the consolidation process.

I am grateful to members of the Committee for listening to all those points, and I commend clauses 21 to 26.

[Kirsty Blackman]

I have a couple of questions on the small pots data platform. On Second Reading, I raised issues about the pensions dashboard and the fact that after a significant length of time, it has not yet appeared. I appreciate that lots of people have been doing lots of work on it, but we do not have it yet.

It is vital that the small pots data platform exists and works in order for small pots consolidation to happen. Can the Minister give us some comfort that it will materialise and work? If there is a possibility of any errors in the system or the data is not correct—if the platform is not absolutely spot on—there is the risk of significant problems being created. Is he convinced that enough investment will be made in the data platform for it to work, and that it will be incredibly safe, given that it will potentially have—like the pensions dashboard—significant amounts of data relating to individuals and money? It therefore needs to be as safe from cyber-attack as possible, if it is presumably in the cloud or another such system. I would appreciate any reassurance about that, and lastly, that it will have the required resources to work and that the Government will push to create the resources if they are not there and the timeline is beginning to lag.

[Torsten Bell]

I thank the hon. Member for those questions. She is right to mention the dashboard, and I will say two things about that. First, although these are different systems, there are lots of learnings from the process—as we heard from Chris Curry on Tuesday—not least the impetus that it has provided to schemes to make sure they have put all their record keeping in order. For them to be able to engage with the dashboard, they now have a legal requirement to have that data in a standard format. It is also about how the central system works, but it will be a different system, so the hon. Member is right to raise those questions.

I do not want to offer her total certainty because that is not available to me for a scheme that is looking to be operational in the next decade. We have intentionally left that longer timeline for exactly the reasons that the hon. Member has outlined. I can reassure her that very extensive engagement has been going on with industry about this. I mentioned the feasibility study, but there has also been heavy engagement, including on the security element that she mentioned. That is absolutely key, and lessons definitely have gone through from the dashboard approach to make sure that we are happy with how that will take place. I hope that provides her with some—if not perfect—reassurance.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clauses 22 to 26 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned—(Gerald Jones.)

Pension Schemes Bill (First sitting)

Kirsty Blackman Excerpts

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[The Chair]

Before we hear from witnesses, does any Member wish to make a declaration of interest in connection with the Bill?

[Kirsty Blackman (Aberdeen North) (SNP)]

If the Government amendments in relation to the local government pension scheme go through, I have an interest as I am a deferred member of a local government pension scheme in Scotland.

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

I also wish to declare such an interest.

--- Later in debate ---

[Steve Darling (Torbay) (LD)]

Q We have already had some exploration of mandation and other opportunities around getting greater investment within the United Kingdom. I would welcome some more drawing out of how investing in UK opportunities could be amplified without the need for mandation.

Rob Yuille: We have both mentioned the Mansion House accord already. In addition to the ambition to which providers committed, there were a series of critical enablers. Several of those are in the Bill already—thank you for that—including value for money and the drive to consolidation. But there were other things in there as well, including the need for alignment by the Department for Work and Pensions and the Financial Conduct Authority of their rules and guidance in relation to the charge cap pipeline of infrastructure projects, which I know the Government are proceeding with separately; and the need to ensure that the whole market buys into the value-for-money framework. In the pension investment review, Government did not take forward regulation of intermediaries—employee benefit consultants and so on—and we think that they could keep that under review.

The Government are seeking to take other steps that will evolve over time, such as crowding in investments. There are examples such as the British Growth Partnership and the LIFTS scheme, where the Government are either convening or investing alongside providers, which we would like to see more of. Outside of DC, as has been mentioned already, it is about working with annuity providers on eligibility for certain assets.

[Kirsty Blackman]

Q There is a question around surplus release, and the power of trustees in relation to surplus release. It makes sense that there should be surplus release, but trustees may feel under pressure from employers to release the surplus when it might not be the right thing for scheme members. Do you think the Bill has got that balance right? How can that be monitored to ensure that trustees are not pressured when it is not the right thing for scheme members?

Rob Yuille: The most important thing is that trustees do have the power that is in the Bill—that power should stay there. Conflicts of interest were mentioned earlier; it is interesting what surplus release could do to make occupational schemes more like commercial schemes. With master trusts, commercial schemes and superfunds, if pension schemes could be run for the benefit of the employer by taking surplus, that gives rise to a different relationship and potential conflicts. The Pensions Regulator needs to be alive to that. In any case, TPR is becoming more like the FCA and the Prudential Regulation Authority as a regulator, and I think that needs to continue.

[Mr Peter Bedford (Mid Leicestershire) (Con)]

Q Many aspects of the Bill command cross-party support, but I want your view on where the Bill does not quite go far enough, and where it perhaps goes too far.

Zoe Alexander: I would probably lean towards talking about the local government pension scheme in that context. There are some parts of the Bill where we feel powers are being taken that may not be required; one is around requiring funds to choose a particular pool, and one is requiring particular pools to merge. We think that the LGPS is moving in a very positive direction. Obviously two pools have been closed, and funds are merging with other pools already. We are not sure that those powers are actually required. We think that the direction of travel is set and that the LGPS understands that, so we feel that those powers might be overstepping the mark.

Rob Yuille: I have no view on local government. I think what I am about to say should have cross-party support, or at least cross-party interest. It is a macro Bill about how the market and the system work, but it is also about people and the decisions that they need to make. We are glad to see the small pots provision in the Bill, but it is on an opt-out basis, similar to the default pension benefits solutions. People have decisions to make, such as whether to stay in or not, and they need to be supported in the decision making. We are proposing a textbook amendment that would enable schemes to communicate electronically in a way they currently cannot and in a more positive way—even where people did not have a chance to opt in to that kind of communication, which is seen and regulated as direct marketing. We know that there is cross-party interest in the ability to communicate more clearly with customers, specifically in relation to those provisions.

--- Later in debate ---

[John Milne]

Q Do you think that the finance industry has a clear understanding of how to apply its fiduciary duty? Do you think the Bill makes that clearer or muddies the waters, or somewhere in between?

Patrick Coyne: I think that fiduciary duty is a powerful force for good. Across the Bill, this is about giving those trustees the tools for the job. I think there are a number of areas where that is true. Within the value for money framework, at the moment, it is very difficult for employers or schemes to effectively compare performance. As an anecdote, I was speaking to a provider recently. They were pitching for new business. They came in and pitched their investment data, and the employer said, “You’re the third provider today that has shown us they are the top-performing provider.” That cannot be right.

Then, when you are looking across the Bill towards the DB space, because of the funding reality that many schemes are facing at the moment, there is choice in end game options—so, “How do I enhance member outcomes at the same time as securing benefits?” Actually providing a statutory framework for super-funds as another option is a good first step, as is allowing the release of surplus, if it is in the members’ best interests to do so.

[Kirsty Blackman]

Q I have a question about the balance of decision making. Trustees are obviously required to steward and grow assets on behalf of scheme members. This Bill slightly changes the priorities in relation to value for money. There is potential for future mandation, in that it basically allows the Government, or the regulators, more say in what direction trustees are taking. In practice, it is relatively difficult for scheme members to influence decisions that trustees take. My reading of the Bill is that it does not increase scheme members’ power over the direction. For example, if they wanted to disinvest in something, or if they felt strongly about investing more in UK assets, they will not have any more power to do that. Am I correct in my reading of that? Do you feel that some scheme members feel that they should have more influence over what trustees do and the direction of travel?

Charlotte Clark: It is a good question. It is hard to get over the fact that the vast majority of people are very inert in the pension system. Of course, there are some who are not, specifically around ESG—environmental, social, and governance—investments, but most trustees take those things into account, and there has been clarification about how that aligns with things like the fiduciary duty. Obviously, within the contract-based scheme, there frequently are options, if somebody does not like something that is invested in within the default, to have their own investment strategy, if that is what they choose to do. Do I think this Bill changes that? I do not think so. I think what the Bill is essentially trying to do is use the power of scale and collectivism to get better returns and, really, a better service for most savers.

[Kirsty Blackman]

Q Do the majority of trustees already take into account what they think scheme members would think about certain investments anyway, or about ESG, for example?

Charlotte Clark: Almost certainly.

[Luke Murphy (Basingstoke) (Lab)]

Q I want to ask about Unison’s point about LGPS funds requiring equal member and employer representation on boards—I should declare an interest as a member of said trade union. According to Unison, the Bill will mean a lack of member voice on LGPS board governance. I wonder how you respond to that criticism?

Patrick Coyne: TPR’s responsibility is not for the asset pools, which are FCA-regulated entities, but we do have responsibility for governance across public sector schemes, including LGPS funds. It is really important to recognise the member voice within good decision-making, as Ms Blackman’s question indicated, but there are a number of ways to do that within standardised corporate governance boards and reporting functions, and that is something that we would look to explore over the coming months. With the LGPS boards, like the rest of the Bill, there is the ability, through greater scale, to start hiring better colleagues, introduce better systems and processes, and put in place better governance practices, and we would expect to see that come to pass.

Pension Schemes Bill (Second sitting)

Kirsty Blackman Excerpts

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[David Pinto-Duschinsky]

Q Clearly you are talking about a large administrative challenge, but also about building capacity. We know the funds need capacity to raise their investment sophistication and their ability to invest in a broader set of assets. What do you think the minimum efficient scale for this is, and how quickly could the pools get there?

Robert McInroy: At the moment, there are eight pools across the £400 billion-ish of assets. I believe the plan at the moment is to reduce that to six. You would imagine that that gives a big enough scale. Some of those pools will be £100 billion-plus; that should be able to punch its weight internationally, I would imagine. The LGPS itself is of course open to accrual and to new members joining, so that is just going to grow over time. In some ways, I think these reforms set the plan for the future as the scheme continues to grow.

[Kirsty Blackman (Aberdeen North) (SNP)]

Q I am pleased to hear you talking about what scheme members want, not just in terms of the return that they are expecting, but also the projects that are invested in.

My question is about consolidation and local concerns that people might have. For example, they may not want a wind farm invested in because they are worried about the infrastructure that goes alongside that. If there is consolidation, will that remove the ability to take account of local concerns and to find great local investment opportunities? Will it dilute the input that people have locally, because it is taking it further away from them, or do you think it will be okay?

Councillor Phillips: As we already know, the establishment of the pools does take it away. There is no denying that. The important thing is to have member representation on pools. The scheme advisory board has always been supportive of that, although you need flexibility in how you do it; I certainly would not go for 50:50, because of the governance and regulatory responsibilities that the administration authorities have. I think Border to Coast particularly has employee representatives on there, and that works very well. In particular funds, you will have representatives on the committee and on the pension board. That is always important.

Getting the right engagement is always going to be a struggle, with all the rest of it, but, particularly with some of the ESG issues, that helps to better understand some of the issues. Of course, elected members that sit there are representatives of their community as well. They are aware as well. They are also aware that when they sit at the table on a pension, they have a responsibility first and foremost to that pension.

[Kirsty Blackman]

Q Obviously, there is a mix of people on some of these boards that you would not necessarily find on other trust boards. I have been a councillor, so I am well aware of the different directions you are pulled in if you are a councillor or an officer in local government. Are boards able to find enough engaged members to be on them who have got enough skill? You were also talking about training and ensuring that they are better trained; is that something that you are working on currently?

Councillor Phillips: Absolutely. We laid recommendations from the board before Government some time ago. They have now been implemented and rolled out, and that is very much a crucial part of all of this. The headline is all about the pooling, but the Government’s changes, and training and developing your members, are absolutely critical because of the important decisions that they make.

--- Later in debate ---

[Kirsty Blackman]

Q On that last point about paying the surplus to scheme members—I am afraid we have had a massive pile of evidence—is that written in any of the evidence there, along with a suggestion of how to go about it?

Helen Forrest Hall: Yes, I think at least one of us has something, but we can certainly provide more details if that would be helpful.

[Kirsty Blackman]

Thank you, that would be really helpful.

[The Chair]

If there are no further questions from Members, can I thank the witnesses for their evidence this afternoon? We will move on to the next panel. Thank you very much for your attendance.

Examination of Witnesses

Patrick Heath-Lay and Ian Cornelius gave evidence.

--- Later in debate ---

[David Pinto-Duschinsky]

Q Patrick, we have heard loud and clear your message that getting the value for money framework right is at the core of this. The Bill aims to put that on a sound footing. Which elements are required to get it right? How do you think the Bill will help to build them up?

Patrick Heath-Lay: As a package, the Bill brings forward the concept of value for money in a general sense. We need to move the conversation in our industry, particularly the conversation around workplace pensions, to the subject of value. We are all here to deliver value for members. The bit that always gets a lot of conversation is what value really means, but you cannot walk past the three fundamental drivers of a pension proposition, which are the investment return we give our members, what we charge them for it, and how our service shows up for them, probably in those moments of truth when they need us for guidance. Those are the three core elements to value, which we should not walk past.

We see this as an incredibly important area. I certainly believe that we should try to get this right as an industry, as best we can, from day one, because I think that it will be an important measure that we—regulators, Government, everyone—will lean on to understand how these reforms are playing through.

As an organisation, we have led a pound-for-pound initiative that others have joined. We brought in expertise from Australia, which is about 20 years ahead of us, and brought together a group of providers that are effectively going to dry-run some value for money measures and utilise that concept to provide some findings to regulators and Government that will hopefully help the iteration of our value for money framework. We really do see this framework as an important area, and I would like to see those three elements at its core.

Ian Cornelius: The focus on value has to be the right thing for our members. That is what they care about; that is what we are here for. There is some complexity to work through, such as how you measure value and what timeline you measure it over. Quite lot of engagement is required. We are piloting and trialling it; we almost certainly will not get it right the first time. It will be important to make it as practical and simple as possible. As Patrick said, it has real potential, in combination with the rest of the Bill, to shift the focus from cost to value. In the past, there has undoubtedly been too much focus on cost and not enough on value.

[Kirsty Blackman]

Q This is about people who do not get financial advice, which is the vast majority of people, and their understanding of pensions and what they are likely to get. On a DB scheme, you get an annual statement that says you will get x amount a month or x amount a year. On a DC scheme, it is more like, “This is your total pot.” As everybody’s circumstances are different, they have no idea what that might actually look like if they were to get it on a monthly basis. I appreciate your positive words about the guided retirement and the targeted support. Do you think there is potential in the future for moving towards ensuring people get that advice earlier, so they can ensure the sufficiency of their pot, as well as ensuring that they are making the right decisions when they take that pot?

Ian Cornelius: It is definitely desirable. One of the challenges with auto-enrolment is—it is a positive and a negative—that people are not engaged. Inertia has worked really well, but you have to work to engage them to make sure they are contributing the right amount, thinking about what they will need in retirement and thinking about their circumstances. For example, at NEST, only 40% of our members are registered with us online, so we have a really big job to play to engage more of them, get them to register, and get them accessing the tools and support that are available to deliver the best outcome for them. It is our fiduciary duty to do that. There is a lot more that we can, need and want to do in that space. Guided retirement is a big step forward. Targeted support would be helpful. There is a big challenge for the whole industry there.

Patrick Heath-Lay: I agree. As this unwinds, we should think a little bit more about how engagement will help. It certainly is a big driver. Both the introduction of these propositions and the guidance and targeted support we can provide through those processes will be important, but we also have to accept that even in the most mature economies’ pension systems, people still do not engage very closely on this. Even when they do, they find it incredibly difficult to interpret what they are being told. How many people can do good compound interest calculations, for example? It is sometimes mind-boggling what we expect people to know. There has to be more onus on us through those processes, as an industry, for the guidance that we provide and the obligation on us to enable effective, accountable support to be there. There is much more, and this Bill goes a long way to enable us to do that.

[Kirsty Blackman]

Q In relation to investments and some of the stuff that was not invested in historically, if we are talking about renewable projects and affordable housing—things that, historically, pension funds have maybe not invested in—you said that investing in these projects is a problem for smaller companies until they build up that level of scale. Are there other barriers? Are there legislative barriers, or other barriers—maybe finding schemes to invest in—that you or other companies could do with additional help in overcoming?

Ian Cornelius: Having a strong pipeline of investable assets is key. There is no doubt about that. Patrick touched on this earlier: one other inhibitor has been cost. It is actually quite expensive to invest in private assets. One of the things that NEST does successfully is to drive that cost down, but that is a barrier. The focus on cost rather than value in the past made it harder. The Bill shifts the focus towards value, which will be really helpful. There are a number of challenges that the bigger you are, the easier it is to work through. The Bill as a whole will therefore definitely be helpful, but collaboration with Government and across industry should help to unlock more of those attractive private market opportunities.

Patrick Heath-Lay: I have previously discussed this with the Minister. There is a role for Government to play here. It was even acknowledged within the Mansion House accord that this is for the benefit of savers, and there is a role for all of us to play in finding those efficient routes to deploy that investment through. The problem right now is not whether there is investment to come; there is. The Mansion House accord has created that. There is a wall of capital potentially available. The issue is connecting it in the right way with the investable opportunities—not only the planning and whatever is needed to create those investment opportunities in the first place, but the routes of access and the investment vehicles used. There are further conversations to be had about how we can do that as an industry. Efficient deployment is probably the biggest challenge for us as an asset owner in ensuring that we are sharing that benefit back with members.

[John Milne]

Q Auto-enrolment is a great success story. It has certainly got lots more people investing in a pension than would have done otherwise. However, the fact remains that large numbers of them are nowhere near on course to have a reasonable pension in retirement. Small pot consolidation helps, but we have to admit that it is going to be a modest contribution to solving that problem. Do you think we are missing a trick in the Bill? Is there something else that could or should be there to help—or is that a job for another day?

Ian Cornelius: That is where we welcome the Pensions Commission. It has been set up to actively look at adequacy: what is right, and are people saving enough? There is no doubt that many people are not saving enough and there are a lot of people who are still excluded from retirement savings. There is a big issue and challenge with the self-employed. There is a challenge for the industry and the Government to work on, but the Pensions Commission creates the right environment to do that. Auto-enrolment has been a big success, but it is only a job half done. Completing that job through the Pensions Commission is incumbent upon the Government and industry.

--- Later in debate ---

[The Chair]

I call Kirsty Blackman. Very quickly, please.

[Kirsty Blackman]

Q In relation to private assets and the investment in them, is the balance between carrots and sticks correct in the Bill, or should more carrots, for example, be provided to encourage that investment?

Tim Fassam: That is another very good question. As the previous witnesses said, it is important to ensure that there is a pipeline of assets coming to us. A lot of what the Government are doing with the national wealth fund and the British Business Bank is helping with that. We would like to see—we would say this, wouldn’t we?—a little more focus on insurance versus banks. Banks are a vital form of capital—I am absolutely not suggesting they are not—but there is a skew towards banks. A few more insurance experts in the national wealth fund, and ensuring we have that pipeline of investable assets, could be valuable.

We are very lucky in the UK that we have fantastic start-ups, and amazing universities that are generating brilliant ideas. What we really need is scale-up capital. At the moment, about 70% of firms that need major scale-up capital go overseas for it, and then their head office moves. We need to make sure that we have an attractive environment for those firms to stay in the UK, and that is where scale comes in. A number of witnesses have talked about the benefits of economies of scale and professional asset management capability. That is absolutely right; they are critical benefits. One of the less discussed benefits is if you want to—

[The Chair]

Order. I apologise for the interruption, but that brings us to the end of the time allotted for the Committee to ask questions of this witness. On behalf of the Committee, I thank the witness for their evidence this afternoon.

Examination of Witnesses

Michelle Ostermann and Morten Nilsson gave evidence.

--- Later in debate ---

[The Chair]

We are not quite out of time, but I am going to call other Members to ask questions of the panel. I call Kirsty Blackman.

[Kirsty Blackman]

Q Thank you very much for all your hard work on this, for your passion and for how articulate you are, particularly for those people that cannot be there and cannot make the case themselves. I really appreciate it. I absolutely agree with what you are saying on indexation; I think it is incredibly important. You were talking about the people that would benefit from these changes. Are they overwhelmingly well-off people, or are they people that are really struggling because of the lack of indexation, and who would therefore be more likely to spend the money and to grow the economy by spending their money, if the Government are worried about balance sheets?

Roger Sainsbury: I have to say that there is a great range.

Terry Monk: I cannot remember what it is, but the average FAS member’s pension is something in the order of £4,000 or £5,000 a year, and if you look at the steelworkers, because they are our example, it is those sorts of guys. I worked in the City. I had a different job, but the majority of the people in the scheme had good benefits and good salaries but their pensions were important and they reflected the role they had in their life. I am not sure off the top of my head, but I think the average of the FAS pension is £4,500—some more, some less, obviously.

I want to make a point that I think Roger mentioned: at one stage, we were not at the table to talk as part of the pensions Bill. We lobbied hard. I know some of you have definitely put forward amendments to the pensions Bill to ensure that pre-1997 becomes part of the pensions Bill, which is why we are here today, but we had to work hard just to get that.

[Sarah Edwards]

Q I am interested in exactly what you were saying around the two-tier element, partly around the challenge of the fact that there are people who have got the full recompense or equivalent, and you have not. Do you feel that this is an opportunity to change that dial and set the record straight? Obviously, an amendment has been tabled. I recognise that; I just wanted to get a bit more from you on the fact that there are people who are in a completely different situation, and I just wanted you to build on that point that there are two sides to this. Some have not lost and some have.

Terry Monk: FAS stopped when PPF opened its doors in 2005, so most of the people in FAS did not have much opportunity to accrue any increasing benefits post 1997. The majority of them are old—the average age of the FAS member is now 73, which is much younger than I am. It is that age group of people who would really benefit, and their widows and their spouses—let us not forget them—and they would therefore spend money that they currently do not have to spend. They can afford their council tax. They can afford their heating. It would change their lives, in terms of feeling that they have achieved this success on their behalf and on behalf of the members.

Roger Sainsbury: I would like to talk a bit about the concept of an amendment. We have observed that one amendment has already been offered: new clause 18 suggested by Ann Davies MP. Our team and I have had a bit of a look at that in the last couple of days. While we very much appreciate her good intention in putting the amendment forward, it actually does not do the job in a number of respects. I do not know how many of you have ever grappled with the obscure and complex language of schedule 7 to the Act, but it is mighty complicated. Some time ago, I and my team spent several days trying to work out what an amendment should be to deliver what we wanted. I have got some first class people on the team, but in the end we decided we actually could not do it, and would have to leave it to the expert drafters in the Department.

That is yet another reason why—I mentioned it in the written evidence—at a meeting I have already asked the Minister if he would himself table the requisite amendment. When you come up against the sheer complexity that Ann Davies has obviously already come up against, this is another reason why we think that would be a very good idea. It is slightly unusual for a Minister to table an amendment to his own Bill, but it is permitted, as the Minister said when I was talking to him about it. In a complex situation like this, it would absolutely be the best way of getting straight to the desired answer, so I plead with all of you to join me in urging the Minister to take this on.

--- Later in debate ---

[Steve Darling]

Q I have two key questions. We have heard repeatedly in evidence today about questions to do with secondary legislation and guidance. As we go through the Bill Committee and further stages, what confidence do you have as Minister that you will be able to give some clear signalling to the industry about what is likely to be in that guidance and legislation, to drive the confidence it needs in the short to long term?

The other area that I want to ask about relates to the information that we heard from Nest: only 40% of its members had signed up online. That demonstrates that the issue is about getting positive engagement from those who are perhaps less financially secure. Are you confident that we are doing all we can through the Bill to help those who are most financially challenged? How are you going to hold yourself to account as we proceed to ensure that that is the case?

Torsten Bell: Those are great questions. On regulations, you are absolutely right. This pensions Bill, like most recent ones—although there have been exceptions that have come with unintended side effects, to go back to what was just mentioned—does rely heavily on secondary legislation. My view is that that is the right thing to do and is almost in the nature of pension schemes. That is partly because the detail should rightly be consulted on and partly because things will change in the context.

You are right that there is a large reliance on secondary legislation. Yes, in some areas, as we go through the detail, clause by clause, we will be able to set out to you where our thinking is up to. In lots of cases you will already see consultations by the FCA and TPR, starting to develop the work that will then feed into the regulations—that is particularly true, for example, on value for money, which we have just been discussing. I also think that it is important for us to provide clarity on when we will bring forward those regulations and when we will consult on the input to them, so that people know that. That was why, when we published the pensions reform road map, and when we published the Bill itself, I set out when we anticipate bringing forward those regulations so that everyone in the industry and in the House can see when that will happen. Page 17 of the road map sets out how we envisage that happening, and it is absolutely right. When we come to the clause-by-clause discussion, there will certainly be things where we will not be able to say, “This is exactly what will happen,” and rightly, because there needs to be further consultation with the industry on those things.

On the broader question of engagement with people, particularly those with smaller pensions—there is a very heavy correlation between the chance of someone being engaged with their pension and the size of that pension pot, partly for obvious reasons, but for wider context reasons, too—the pensions dashboard that Chris Curry mentioned earlier is a large part of facilitating that engagement. Lots of countries have had versions of the dashboard; it does make a material effect. One of the lessons from Australia is that the average size of DC pots, as they start to build rapidly—as that becomes the default system in an auto-enrolment world—does have a material effect.

I was with someone who runs one of the big supers recently; her view was that they hit a tipping point when there was suddenly this huge engagement where people were looking at the app provided by the super every week. There are pros and cons to that, by the way. Remember that there is a reason why we default people into pension savings. There are good and bad ways to engage with your pension. We do not want people on an app, in the face of a short-term stock market downturn, making drastic decisions to do with their investments that have long-lasting consequences. It needs to be done right; that is exactly why, when it comes to the dashboard, we are user testing it extensively.

[Kirsty Blackman]

Q I have two questions. If the Minister could just answer “yes” to the first one, that would be great. The Regulatory Policy Committee has said in its assessment of the impact assessment that the monitoring and evaluation plan is weak—it has used that word. It has said that more detailed plans are needed on monitoring and evaluation, outlining success metrics, reporting requirements and methodologies. Will the Minister commit to considering those and to updating us during the course of the Bill Committee about when monitoring might happen?

Torsten Bell: I am happy to take that away. Obviously, the monitoring will need to be different for different parts of the Bill, which are on different timelines.

[Kirsty Blackman]

Q The other question is in relation to the fact that there are 273 amendments—240 normal amendments and 30 new clauses—which we got yesterday. I have raised my concerns with the Minister privately about this, but I want to say publicly that this is a really big issue. It is very difficult for us to read 273 amendments in 24 or 36 hours, and to be able to make sense of the Bill. Does the Minister understand that this is an awful lot of amendments to be dumping on Committee members, and that it might make the line-by-line scrutiny significantly longer as we try to work out what the Bill will look like? The one that we discussed on Second Reading is very different in some areas from the one that the Government are now proposing.

Torsten Bell: Let me address that in two minutes before the Chair cuts us off. I definitely recognise that there is a large number of amendments. It is not unprecedented—the Procurement Act 2023 had 350 Government amendments, and 155 on Report.

[Kirsty Blackman]

I was on that one as well.

Torsten Bell: We have all made life choices. The thing that I am trying to avoid—and the reason why there are so many at this stage—is what has happened with other Bills, such as the Data Protection and Digital Information Bill in the last Parliament. I do not want to table loads of amendments on Report, after the line by line. That is the alternative. This is a very large Bill. The number of amendments, in part, reflects the fact that everyone has signed up to a Bill that is complicated and very large. My judgment was that it is right to get as many of those amendments down now, so that you have them for line by line. Also, I have gone out of my way over the last 24 hours to spell out to you all where the major changes are. The substance and the purpose of the Bill have not changed. In almost all cases, the amendments are relatively minor and technical.

[The Chair]

Last question—Luke Murphy.

Oral Answers to Questions

Kirsty Blackman Excerpts

Monday 1st September 2025 Commons Chamber

[Alison McGovern]

I know that so many of my hon. Friends will, like her, welcome the changes we are making to statutory sick pay, which will improve eligibility for 1.3 million of the lowest-paid employees and remove the waiting period. Many of those who will benefit are low-paid women. The removal of the waiting period will mean that all employees receive at least £60 more at the start of their sickness absence compared to the current system, but we will continue to evaluate the measures as they are implemented.

[Kirsty Blackman (Aberdeen North) (SNP)]

Scotland is the only part of these islands where child poverty is falling, as a result of the Scottish child payment and the mitigation of the bedroom cap. When will the Labour Government move from empty words to actual action to take children out of poverty?

[Liz Kendall]

We are already extending free school meals to all families on universal credit. We have extended the holiday activities and food programme, so that we feed poor kids not just during school but in the holidays, too. We have introduced a new fair repayment rate in universal credit. We have made the first ever multi-year settlement for the crisis and resilience fund to help struggling families. We are introducing and rolling out breakfast clubs. Our child poverty strategy will be published in the autumn. We are already taking action to tackle poverty and we will do more. I say to the hon. Lady that the Scottish Government need to look at how they are spending the biggest ever funding settlement, given in the spending review, including on employment support, because helping parents into good quality jobs is the long-term key to tackling poverty and inequality.

Universal Credit and Personal Independence Payment Bill

Kirsty Blackman Excerpts

Committee of the whole House & 3rd reading
Wednesday 9th July 2025 Commons Chamber

So here we are again: no agency, no co-production and no idea how this tragic tale will end. I just ask that it ends tonight on the right side of history, through acceptance of my amendment, at least for those with fluctuating conditions.

[Kirsty Blackman (Aberdeen North) (SNP)]

We are at a really interesting point with this Bill: a year’s worth of politics happened last week, and it feels like there is more to come. Like the Chair of the Work and Pensions Committee, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), I begin by thanking all the disabled people’s organisations who have worked incredibly hard and assisted us in winning some concessions. No matter where we end up, they should be incredibly proud of the work they have put in, as should the disabled people already receiving PIP and the universal credit limited capability for work element who have continued to fight on behalf of future claimants even though they have no selfish need to do so. That shows the strength of the community and the amount that disabled people care for each other.

It is unfortunate that disabled people need to come together in a group to fight what is supposed to be a Labour Government. Given the change promised by Ministers, that first change should not have been to attack older people by cutting the winter fuel payment. The Government have also refused to take action on child poverty by bringing forward the child poverty strategy, and now they are balancing the Budget by cutting money from disabled people.

This is not the Labour party that I wrote about in my history Highers—I wrote about the rise of the Labour party, what it was founded on, and how the whole point of it was about supporting people and the principles of the left. This is not what I imagined a Labour Government would look like. I had hoped that they would actually deliver for some people—for disabled people and those the Tories spent 14 years marginalising—yet they are choosing to make the easy cuts that affect disabled people. I do not think those are the right cuts to make. I agree entirely with my Green colleague, the hon. Member for Brighton Pavilion (Siân Berry), who suggested that there are much better ways of balancing the Budget. The fiscal rules are self-imposed, anyway.

To look at some of the specific issues with the Bill, I agree with the hon. Member for Brighton Pavilion in relation to the essentials guarantee and amendment 39. Making people poorer will not magically improve their health. I fully agree with new clause 11 on co-production, and I urge the Minister to take action on that.

In Scotland we have created the adult disability payment. If the Minister looks on the Social Security Scotland website, he will see that it says

“social security is a human right...any of us, at any time…may need this support.”

We centred the decision making on dignity, fairness and respect. I am not saying for a second that the adult disability payment is perfect—there are issues with every system—but I urge the Minister to look at how it was co-produced and the lessons we learned from that when he is planning the co-production of the review of PIP assessments.

I am massively concerned that we are not clear about the basis on which the Timms review is being done. What is the point of the review? I understand that it is to review the PIP assessment process—I have got that bit—but what is the Government’s aim? Is it to cut billions of pounds from the PIP bill? Is it to make the assessment process more humane so that people with chronic conditions do not have to fill in the same form over and over again, explaining what it is that they cannot do? Is it to reduce the number of mandatory reconsiderations? Is it to make the system better, centring it on dignity and respect? Some clarity from the Government on that would be incredibly helpful.

[Anna Dixon (Shipley) (Lab)]

I am sure that the hon. Lady is familiar with the terms of reference for the Timms review, which clearly set out that its purpose is to ensure that PIP assessment is

“fair and fit for the future…and helps support disabled people to achieve better health, higher living standards and greater independence.”

I hope that she will agree that my right hon. Friend the Minister for Social Security and Disability is very well placed to lead the review in co-production with disabled people.

[Kirsty Blackman]

I thank the hon. Member for clarifying that. It would be great if the Minister could clarify from the Dispatch Box that there is no requirement on him or his review to save money. If the hon. Member can give that commitment on behalf of the Minister, that is great, but has the Treasury asked the Minister to reduce the bill? If the terms of reference say, “We do not want money to be saved,” that is grand, but I could not find that in the terms of reference.

I would like to hear from the Minister on whether he has been asked to save money through the review. Disabled people looking at this have already been terrified by the Government’s actions and their “Pathways to Work” Green Paper. I think we should hear from the Minister whether he will be trying to save money or putting dignity, fairness and respect at the heart of the decision-making process and ensuring that co-production happens with that.

I have some questions about the severe conditions criteria. I am concerned because the Bill’s wording is different from what the DWP has been putting out in press releases. Press releases such as the one quoted today in The Guardian have been saying that people with fluctuating conditions will be eligible under the severe conditions criteria. However, the Bill says that a claimant would need to have a condition “constantly”.

The Minister needs to give an explicit commitment from the Dispatch Box. The UK Government have decided not to give the Bill a proper Bill Committee, where we would have asked these questions, hashed this out and got that level of clarification, and people are really scared. As the Minister will know, a significant number of amendments have been tabled on these conditions, from parties across the House. Concerns have been raised, because schedule 1 to the Bill states:

“A descriptor constantly applies to a claimant if that descriptor applies to the claimant at all times or, as the case may be, on all occasions on which the claimant undertakes or attempts to undertake the activity described by that descriptor.”

So if one of the descriptors is about being able to get around or being able to wash yourself, that paragraph says that the descriptor must apply “constantly”. If that is not the case, we need a clear explanation about that from the Minister. I cannot find the need for a condition to apply “constantly” in previous legislation. It seems to me that this is a new addition.

[Tom Hayes (Bournemouth East) (Lab)]

Last week we heard the Minister say, from the Dispatch Box, that descriptors, activities and associated points will all be subject to the Timms review, which will be co-produced with disabled people. Was the hon. Member listening to that statement, and does she accept that as a fact given at the Dispatch Box?

[Kirsty Blackman]

No! The Timms review is about personal independence payment; I am talking here about are the descriptors relating to limited capability for work—they are totally different things. I do not understand how the Timms review could possibly cover this paragraph, because it is about personal independence payment and the assessment process for that. If it is covered by the Timms review, why have the Government not removed it from the Bill? Why is there not a clause in the Bill right now that removes the severe conditions criteria and that specific paragraph?

[Sir Stephen Timms]

The form of words in the Bill, including the word “constant”, exactly replicates the way the severe conditions criteria are applied at the moment. The “constant” refers to the applicability of the descriptor. If somebody has a fluctuating condition and perhaps on one day they are comfortably able to walk 50 metres, the question to put to that person by the assessor is, “Can you do so reliably, safely, repeatedly and in a reasonable time?” If the answer to that question is no, the descriptor still applies to them. The question is whether the descriptor applies constantly. If it does, the severe conditions criteria are met.

[Kirsty Blackman]

That clear information from the Dispatch Box is what I was asking for. Hearing that will give people a lot of comfort. As the Minister is aware, a commitment from the Dispatch Box will be looked at when it comes to any sort of legal challenge in relation to the descriptors. If people are not asked if they can or cannot do something reliably on other days, I will expect disabled people’s charities to use the Minister’s comment from the Dispatch Box when they bring mandatory considerations or challenges to say, “The Minister was utterly clear that I have answered the question correctly, in line with the legislation.” I encourage them to do so.

Given the way the legislation is written, I will still not support the severe conditions criteria and the cut. I agree with colleagues who have said that 750,000 people are expecting to lose money as a result of this. As one of my Labour colleagues, the hon. Member for York Central (Rachael Maskell), has said, this is still £2 billion of cuts on disabled people that the Labour party has chosen to make, or that is what it says in the impact assessment. It has chosen to make that cut to 750,000 people, asking itself, “Where can we make £2 billion of cuts? I know, let’s do it to disabled people.” We could have an additional £2 billion in taxes on the very richest people who do not rely on that money for the everyday items that they desperately require.

[Sorcha Eastwood (Lagan Valley) (Alliance)]

I completely agree with that contention. This is how we judge a society: by how it takes care of the most vulnerable. As the hon. Lady says, and not to discredit anybody, but it appears on the face of it that people have simply decided to say, “This is where we will go”, when in actual fact there are other avenues that can be explored, and people want us to do that before we get into any of this.

[Kirsty Blackman]

The hon. Member has been a real champion for her constituents in this and she is absolutely correct: this is not the first place that I would expect any MP to look to save money, and especially not the first place where I would expect a supposedly progressive Government to look to save money. I am deeply disappointed that we have ended up in this situation and unlike what was said before, I do not think there are victorious faces on the Back Benches. I think people on the Government Benches are absolutely heartsick, no matter what side of this debate they are on. They wish that those on the Government Front Bench had not put this forward and that they were not in the position of having to pick a side, because it should never, ever have come down to a Labour Government choosing to make cuts on older people, children in poverty and disabled people as their first matter of business.

[The Second Deputy Chairman of Ways and Means (Sir Roger Gale)]

Order. The winding-up speeches will have to start at 5.30 pm. There are 37 Members standing on both sides of the House. I am not allowed to impose a time limit, but were I to do so, it would be about four minutes. It is for Members to decide whether to allow their colleagues to speak or to take up more of the time, in which case it is quite clear that not everybody will be called to speak. I call John McDonnell.

--- Later in debate ---

From the state point of view, that switch is cost neutral. In fact, since state pensions are usually much higher than PIP payments—perhaps double—then the state has made a significant saving. When we consider other factors, such as greatly increased post-covid NHS waiting lists, it is clear that the rise in PIP demand, while still significant, worrying and worthy of attention, has been overstated.

[Kirsty Blackman]

The hon. Gentleman mentioned the NHS and waiting lists. Does he share my concerns about the severe conditions criteria and the requirements for the diagnosis to be made by an NHS professional, in the course of NHS duty, when people may not have access to that? There is also a requirement for the condition to be considered “lifelong” by NHS professionals or health professionals, who may be unwilling to say that schizophrenia or bipolar disease, for example, are “lifelong” because they do not want to tie people down to that diagnosis.

[John Milne]

Yes, I agree that that is an additional concern.

The implication has been made, both by this Government and the previous one, that much of the rise in claims is down to benefit chasing and people simply exaggerating their conditions. This is an assumption that needs serious interrogation because it looks to be substantially untrue. For all these reasons and more, the best course of action would be to pull the Bill now and to make a fresh start. Denying adequate support today will only shift the burden tomorrow on to social care, the emergency services and our already overstretched NHS. We have been warned by the UN not once, but three times, that our welfare system is failing disabled people. Amendment 36 is a chance to show that we are listening.