Pension Schemes Bill

Kirsty Blackman Excerpts

Report stage
Wednesday 3rd December 2025 Commons Chamber

[Torsten Bell]

I recognise the right hon. Member’s point. I think the level of pessimism may be overstated. My view is that our changes on surplus, which put trustees clearly in the driving seat, provide for more ability for trustees to seek to change that balance of power within their relationship. I do not want to prejudge the individual discussions between all trustees and their employers—those will be different in different circumstances—but trustees are in a stronger position given the changes on surplus release that we are introducing through this Bill. But I am not pretending for a second that that solves overnight the points that the right hon. Member is making.

[Kirsty Blackman (Aberdeen North) (SNP)]

To take us back to the consultation and action to provide guidance for trustees, we all think that is a good thing, as trustees have a difficult job to do and providing them with more guidance is incredibly helpful. On the timeline for the consultation and the legislation arising from it, it would be incredibly helpful if the Minister could, as soon as possible, provide us with a road map for what that will look like when it returns to the House and, in particular, set out whether it will involve primary or secondary legislation.

[Torsten Bell]

The hon. Member brings me back to the part of my speech I was coming to. The direct, quick answer to her question is that I would envisage taking powers in primary legislation and then consulting on the statutory guidance relating to the powers provided to the Government. That is the order in which I would think about it, but, exactly as she has asked for, I will endeavour to provide more clarity on the timeline.

As I said, I think there is good support for such a change across the industry—actually, I heard calls for it long before I became Pensions Minister—and it is time that we get on with setting out more details and providing that clarity to trustees so that, rather than debating whether trustees have the ability to invest with these longer-term structural or systemic factors in mind, they can get on with doing so, if they so wish. I should say that this is about giving trustees that ability and not specifying that they must do so.

I hope I have usefully set the scene for the debate. Let me close my opening remarks by reiterating my thanks to everyone who has engaged with the Bill so far. I look forward to hearing hon. Members’ further contributions this afternoon.

--- Later in debate ---

[Dr Scott Arthur (Edinburgh South West) (Lab)]

I thank the Minister for introducing the debate. I want to speak in support of Government new clauses 31 to 33, and in the context of new clause 22. Before I do so, let me say that I think it is really good that today’s debate has brought people together after four days of debate on the Budget. There seems to be a lot of agreement today, which is good. In particular, we are agreeing on the pre-1997 measures that were announced in the Budget last week. Nobody mentioned them much in their speeches over the past few days, but today we are all talking about them, which I think is really good.

I warmly welcome the Government’s confirmation in the Budget that we will legislate to allow the Pension Protection Fund and the financial assistance scheme to provide some inflation protection for pre-1997 pensions. This is an issue I have campaigned on, alongside Members from across the House, and I am genuinely pleased to see concrete progress included in the new amendments to the Pension Schemes Bill before the House. I thank the Minister for meeting me in the Treasury in the week running up to the Budget, and for drawing the Chancellor into that discussion. We had our picture taken in the Chancellor’ office, and one of my constituents spotted that there was a mouse trap, which shows that the Treasury hangs on to even the crumbs, as well as to the pounds and pennies.

For years, more than a quarter of a million PPF and FAS members have seen a significant part of their pension frozen—left to lose value year after year—and last week’s announcement begins to right that wrong. It matters deeply for people in Scotland. More than 26,000 pensioners will be helped by this change, which is 26,000 former workers in manufacturing, retail, hospitality and countless other industries. Having spoken to many constituents in this position, I know that many of them have felt forgotten. This reform sends a message that they have not been forgotten, and also that they have been listened to, which I think is even more important.

This decision is important not only for what it delivers, but for what it signals. By acting, the Government have effectively acknowledged that the lack of pre-1997 indexation was an injustice. By recognising that injustice in the public system, I feel that the Government have established an expectation that the private sector must also look at this matter.

The private sector requires encouragement in this area, as a number of companies—primarily under US ownership, in my assessment—are not currently providing regular discretionary increases on pre-1997 pension payments. Many of my constituents, pensioners who used to work for the likes of ExxonMobil—it has been mentioned a few times—and Johnson & Johnson, have told me of sponsoring companies taking a 10-year funding holiday from pension payments into the fund, while simultaneously blocking the indexation in payments. I take the view that the money in the funds belongs to the pensioners and that the funds themselves have a responsibility to move that money from the funds into pensioners’ pockets—and hopefully into the tills of local businesses in my constituency.

The Pensions Regulator itself notes that 17% of pre-1997 pensioners receive no inflation protection, not because of actuarial need but because scheme rules enable companies to do so. For a long time this was an academic matter because inflation was so low, but over the past five years it has eaten some pensions alive, and affected pensioners in Edinburgh South West are now really feeling it. I hope very much that the private pension schemes that do not already provide significant indexation to pre-1997 pensions but have the financial capacity to do so—many do—will see the signal from the Government’s changes to the PPF and the FAS schemes and improve their own schemes for the benefit of those pensioners. I have some slight concerns about the Bill, in that it might not go far enough in forcing them to make those improvements, but I have great faith in the Minister’s negotiating powers.

It is hoped that the surplus release enabled by the Bill will help to underpin additional corporate investment in the UK, but there is a risk that in cases such as ExxonMobil it may simply enable such companies to move the money in those funds outside the UK and into the bank balances of shareholders in other countries. That money really does belong in pensioners’ bank accounts, but there is a credible argument for also using it to invest in the UK. It does not seem like a good outcome for that money to be lost to our economy.

That can be avoided by addressing the issues of trustee governance. Some trustees undoubtedly act in the interest of scheme beneficiaries, but scheme rules do not always allow it and contrary guidance from the Pensions Regulator may be non-binding. Additionally, trustee boards often lack independence, particularly when we see a majority or even all members have been appointed by the employer—perhaps a conflict of interest. Mindful of that, I commend the Minister for announcing that his Department will consult on trust-based pension scheme governance, strengthening the member voice and supporting lay trustees working closely with the Pensions Regulator to ensure that trustees act in the interests of all beneficiaries, and comply with the law and their scheme rules. Again, the money belongs to those beneficiaries.

I have high hopes for the review, as we need significant reform if we are to secure meaningful protection for these pensioners. The urgency is clear: many of these individuals and their spouses are of an advanced age—I hope none of them hears me say that and thinks it is an insult—and we need to act quickly if they are to benefit. Addressing this injustice requires not only technical improvements in governance and trusteeship, but the political will to act. I am proud that this Labour Government are stepping up to act and looking at this issue in detail. We saw progress last week in the Budget and there is a commitment to do more.

Before I end, I want to touch on two slightly aligned issues. First, we have spoken a lot, across the House, about people who have pre-1997 private pensions and we worry that those pensions are not enough to support them. Each week, in Oxgangs in my constituency, I go to a community meal where I meet people who do not have any private pension. They survive on the state pension, often in quite difficult circumstances. When we talk about poor pensioners, it is right that we think about pre-1997 and others with private pensions who are struggling, but we should never forget who is really feeling the cost of living crisis.

Secondly, I have to thank my union, the University and College Union, for the work it has done over many years to protect my pension. I know I will benefit from that. Hardly a month goes by without me getting an email from it saying that there is some risk to pensions in a university somewhere in the UK. I commend it for its work.

[Kirsty Blackman]

I appreciate the chance to speak in this debate, especially without time limits—it is lovely. I absolutely love a very technical debate in the Chamber, but unfortunately not enough Members do. It would have been nice to see huge numbers delighted to talk about the technical aspects of legislation, but being a veteran of previous Finance Bills, I am aware that there is not often a huge turnout for these debates.

I am thankful for—but have a few criticisms of—the Government’s position throughout the Bill. I will start with a couple of issues around timing. It is appreciated that the changes are being made. The hon. Member for Edinburgh South West (Dr Arthur) mentioned the Budget debates, and I mentioned in my speech then how delighted I was that the change had been made, and how great it was that pre-1997 indexation would be taking place.

However, when I made my speech last Thursday, we had not yet seen the Government amendments. I was aware that there would be Government amendments, because it had been announced, but we did not have the opportunity to properly scrutinise them, or to consider whether those amendments should be amended, because of the timeline of when the details were provided. I appreciate that the Minister tabled the amendments in advance of the deadline, which is great, but there are questions that I potentially would have asked, and I may have tabled some probing amendments, if I had seen those Government amendments in advance.

On the 1997 indexation, I apologise that on Thursday, when I was talking about this, I mentioned the FSA instead of the FAS—I apologise to the Food Standards Agency; I did not mean anything by it. If I do that again, I apologise. In terms of the PPF and the FAS, the PPF got in touch with me last week, and I had a good meeting with it about what the indexation will look like and how many members would potentially be impacted. It suggested that it was getting in touch with 165,000 members, which I thought was a very significant number, with an impressively fast turnaround in the time it was looking to reach out to them. Those are significant numbers, and I appreciate that.

However, I am concerned that the uplift does not involve a one-off payment in order to bring the pre-1997 contributions up to some sort of level. The contributions were made pre-1997, so the compound interest on that would be unbelievable—it would be very significant. If there is no one-off payment to be made, and no recognition of the fact that the indexation has not taken place, then we are looking at adding 2.5% a year on to a tenner—or whatever—instead of 2.5% every year up until now, which would be a significantly different sum.

I appreciate that the change has been made, and I also appreciate that the PPF levy is still going to have the potential to reduce to zero. The PPF’s plans are still intended to go ahead, and it is still able to meet its financial obligations, even with the changes that have been proposed by the Government. However, I would appreciate it if the Government considered the possibility of a small one-off addition to the pre-1997 accrual that members have, in order to bring them closer to what the pension should have been if they had had that indexation previously.

Older pensioners are the group affected, some of whom are very unwell. As was mentioned by the Chair of the Work and Pensions Committee, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), a number of them are no longer with us. The Chair also mentioned Terry Monk, who has been in regular contact with me via email, and I thank him and all of the members who have fought so hard for this change. They have achieved something, although I expect they will probably go on fighting for more. I can understand that and I will be happy to back them in the search for more justice.

On some of the other issues that have been brought up in this debate, around the fiduciary duties, the right hon. Member for Birmingham Hodge Hill and Solihull North (Liam Byrne) and I probably have a similar idea of what “best interests” looks like, what the words “best interests” mean, and what the interests of scheme members are. Some of the ideas that he was talking about around investments are ideas that I would fully align with.

However, we can all define best interests in different ways. The shadow spokesperson, the hon. Member for North West Norfolk (James Wild), talked about the fact that fiduciary duties mean having to get the best returns—he said something like that—but it is not the best returns, but the best interests. Some people may define best interests as best returns, but some people may not. Some might define best interests as better transport systems for the majority of the scheme beneficiaries who live in a certain area, for example; if there were a more efficient transport system, more housing and better schools and hospitals, that would significantly benefit those members in that area.

[Liam Byrne]

The hon. Lady is absolutely right. Many members would say that they wanted their investments to help to create a more equal country—a less unequal country—not least because we now know from the work of the OECD and the International Monetary Fund that more unequal countries grow more slowly.

[Kirsty Blackman]

Absolutely. Productivity and growth are real possibilities if there is better patient capital investment, not just in social housing and renewable energy projects, which I would dearly love to see and have spoken a lot about—in particular social housing—but in tech and appliances, so that companies can use capital investment that is invested for the long term. That could have a significant impact on productivity.

Turning back to the Minister’s announcement around fiduciary duties and that definition, although there will of course be political argument about what best interests mean and how we define best interests, trustees will at least have the benefit of the guidance and will not necessarily labour under the misapprehension that they have to get the best possible financial return.

I draw the Government’s attention to the Well-being of Future Generations Act 2015 in Wales, which I talk about a lot, and which is about making the best decisions for the future. It is not necessarily about chasing economic growth at any cost; it is not necessarily about building certain things. Instead, it is about ensuring that future generations are best provided for. Some of the lessons that could be learned from that could be put into the fiduciary duties consultation that is coming forward about what the term best interests actually means and how it could be defined.

We have largely covered the mandation powers and their direction in the discussion of fiduciary duties. I am pretty relaxed about there being some mandation and some requirement, not least because of the points the right hon. Member for Birmingham Hodge Hill and Solihull North made about the growth in the economy that is likely to occur should capital be invested more in things that will increase productivity. There probably is a balance to be struck between benefiting pensioners of today and the future; if there is a lower return for pensioners 30 years in the future, we might again be causing a level of generational unfairness that we need to think about. How does that balance up? Does that new hospital or that new social housing provide enough of a benefit for those younger people, who will become pensioners in 30 or 40 years? Does that stack up? I do not think that will be an easy decision to make.

However, generally I think we can look at mandation; I do not take an ideological position against it like some with Conservative beliefs. I am, though, happy to support the Conservatives in their amendment that would require a report on what those mandation powers look like, because the more transparency from the Government—the more transparency from everybody in this place, frankly—the better. I therefore think a report on that would be absolutely grand.

I will mention a couple of other things. New clause 3 about terminal illness is a really neat solution to a problem. My local authority has implemented a “Tell us once” policy, whereby if someone has had a bereavement in their family, for instance, they have only to tell their distressing story to the local authority once and everything will be changed—their council tax and benefits—and they will no longer get various charges. I therefore think the solution proposed in new clause 3 is neat.

The Minister might come up with some issues around potential data sharing between the PPF and the DWP. However, if he could come up with a solution so that people do not have to tell their distressing story numerous times—having to explain again to somebody else that they are terminally ill and having to provide a huge amount of paperwork to do that when they have already had to do that with the DWP—that would be hugely helpful.

My understanding from my conversation with the PPF on Friday is that it is pretty good at supporting members, and I felt that it would be willing to be flexible about this should it get direction from the Minister and should the data-sharing issues be sorted out, but I am just guessing—I am not putting words in the PPF’s mouth. I just feel that it is a very member-focused organisation and might be quite keen to support its members in that regard.

[Dr Arthur]

This is a very slight aside, but is it not interesting that, when it comes to claiming benefits, there are so many silos and barriers to organisations, councils, Government agencies and Departments talking to each other, but they suddenly start speaking to each other and the benefits are stopped overnight when someone passes away?

[Kirsty Blackman]

I would like to see much more conversation. Gateway benefits allow people eligibility for other things, and sometimes those do not work either. A person might be eligible for universal credit, but they do not necessarily get the follow-through to free school meals, for example. Anything we can do to make that path smoother, either in the cessation of benefits or in agreement on eligibility, would be really helpful. I agree with the hon. Gentleman; we have seen issues with carers, for example, being chased for overpayments that were not their fault.

Again, I support the Government’s move on the consolidation of small pots, which I think is incredibly sensible. I am famously a massive supporter of the pensions dashboard and have never been at all critical of its timelines, but when it comes online there will be a rush for consolidation anyway. This is all about consolidation for people who have not touched their small pots, and making sure they get a return from that is totally sensible.

Guided retirement and the mid-life MOT are mentioned in a number of amendments, and ensuring that people are given the correct advice at the correct time is incredibly important. When the Government do their sufficiency review—when we are looking at the adequacy of pensions and what people will get when they hit retirement—I would be very surprised if that and the consultation do not conclude that more people need more advice earlier. The more advice that people have on their pension, and the more money they put into their pension at the earliest time, the bigger their pension will be.

I have already mentioned compound interest: if we put £100 into our pension when we were 21, it will be significantly bigger by the time we retire than if we put £100 into our pension when we are 40. That is just a fact. The more advice that we can give people at various important life stages, but particularly significantly before retirement, would be really helpful. That is another thing that should be included.

Finally, the hon. Member for Boston and Skegness (Richard Tice) spoke at a press conference about the local government pension scheme and how terrible it is that it is spending so much money on fees. That was in September, after Second Reading, at which he did not speak about that. He did not table any amendments on it before the Committee stage, and he has not shown up to raise it on Report. It is almost as if Reform MPs are saying things in press conferences and not doing any actual work. [Interruption.] I told him I was going to mention him. It is almost as if they make statements in press conferences and do not do anything, just as they have not shown up today.

Should a Reform Member have been particularly keen to make changes to the LGPS—such as to cap the level of fees it can pay, which are probably not unreasonable, as the LGPS is phenomenally successful in its returns for members—they could have amended the Bill, but they would have had to show up to do so. I suggest that the media organisations who are happy to cover press conferences ask the Members giving those press conferences what they will actually do to get their policies implemented. If such Members have an opportunity, they should use it rather than just shouting from the sidelines.

As I think I have made clear, I am largely supportive of an awful lot of things in the Bill, the direction of travel and many of the technical measures, which are great fun to have a good look at. I have some concerns about pre-1997 indexation. I am delighted that it has happened, but more could have been done. I will be interested to follow the progress of the fiduciary duty statutory guidance and the sufficiency and adequacy review and whether there will be mandation powers.

Lastly, on new clause 3, can we please make it easier for members who are terminally ill to have that conversation? I would very much appreciate the Minister committing to taking that away and considering how the PPF and FAS can get that information more easily without requiring people to jump through significant hoops.

[Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)]

I welcome the real progress made on the pre-1997 fund. I do not have as much specific technical knowledge as most hon. Members in the Chamber, and I was not on the Bill Committee, but I have looked at the amendments and would like to comment on them, as I was lucky enough to chair a local government pension scheme committee—I think it was very well run—and sit on a pool oversight board. I will use that experience as an example.

Our LGPS in Cornwall was a good example of responsible investment and good practice in the sector. The Bill will consolidate LGPS funds into six pools from eight on the basis that that will be effective in achieving scale and diversification of assets and cost savings. Brunel—the pool that Cornwall is in—is not to go forward. Forming Brunel was costly and, as I said on Second Reading, the Cornwall fund was due to break even following the forming of that pool only this year. The costs involved in moving to another fund are expected to be high, which concerns me, as that may impact members, though we hope those costs will be recouped by investment growth as a result of the consolidation.

Being in a bigger pool did enable funds to invest in local infrastructure such as housing, transport and clean energy. Cornwall was good at that: we used our £2.3 billion—not a huge fund when we think of the size of many of these pools—to invest in affordable rental housing near Camborne, where 67 new homes were built on a brownfield site. I am looking forward to seeing the infrastructure projects that further consolidation will make possible.

On Second Reading, I raised concerns that moving to larger funds may affect local links. Brunel is a strong south-west pool and, although it covers as far up as Oxford, we have managed within that pool to be effective on a local level.

The Environment Agency—I noted the amendment on that—was part of our pool, and it did have slightly different rules, which was tricky and somewhat impacted on our pool. I am pleased that the scheme managers will now have a duty to co-operate with strategic authorities, as the inability to do that often led to perhaps unintended consequences. In social housing, for example, we may have been looking at investments that were the same as the local authority’s. It would make sense to be able to talk about such investments so that we are not doing silly things like competing against each other.

In Cornwall, we had a strong responsible investment policy, and our carbon-neutral date was earlier than the rest of the pool by five years. We were able to maintain those policies and our environmental, social and governance focus by having a strong presence on the oversight board, which enabled us to influence the pool and be a bit different within it. I hope that will continue so that pools do not end up following the lowest common denominator when it comes to things like social impact, investment and ESG matters, but instead will be raised up to the highest level. In our local fund, we had employers and employees on our pension committee, and that worked well. The union reps and the employers gave some very valuable input, and I think that would be valuable for the larger pools as well.

Our local social impact fund was, in the end, 7.5% of our investments. We could channel our investment into rented housing and local renewables in Cornwall, as well as more widely around the UK, and I hope that local government pension schemes will still be able to set their own local investment targets in that way, even when working with local authorities.

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

I figured that, as I had only about 17 minutes in which to speak on Report, the House deserved to hear from me again on Third Reading, but I shall be very brief in expressing my views and those of my hon. Friends.

Members spoke earlier about people’s understanding of pensions, and I continue to have concerns about people’s understanding of defined contribution schemes. People who are given a figure for how much money is in their defined contribution scheme are often confused about what that will actually mean when they hit retirement. Those schemes are very different from defined benefit schemes, and, given the massive increase in the number of people investing in defined contribution schemes rather than defined benefit schemes, those issues will continue unless an incredible amount of education is provided so that people can understand what they might receive in their pensions, rather than just the amount in the total pot.

The Minister has made a number of changes to the Bill that I appreciate, not least the pre-1997 indexation for the Pension Protection Fund. The fiduciary duty announcement that he made today is, I think, extremely helpful in clarifying for trustees what their objectives are. He also mentioned that the Association of British Insurers had come up with an agreement. In my experience of serving on a significant number of Bill Committees, it is very unusual for so many changes to be made. I appreciate the fact that the Committee members were listened to, and that some of the concerns raised by Members in all parts of the Committee have been tackled during the Bill’s progress. I have already raised concerns about the short notice that we had for some of the amendments and new clauses and the fact that we were not properly able to scrutinise the Government changes, both in Committee on Report.

Finally, let me thank Matt and Fergus, who helped me with some of this. We rarely see pension Bills presented, and I would love to see another—shortly, probably. Given that the Minister has made commitments in relation to fiduciary duty, and given that he said he expected such a measure to appear in primary legislation with guidance to follow, I assume that a Bill will follow those commitments. I also think that the adequacy review may—hopefully—kick up some requirements for legislation.

This House should get used to talking about pensions. As the generations shift, the state pension will become a smaller percentage of what people rely on in retirement, and auto-enrolment and defined contribution schemes mean that significantly more people will rely on private pensions. Ensuring that they have the best possible outcomes for retirement is something that all Members of the House can support, and we need to have a legislative framework that keeps pace with how people are actually investing for the future, rather than one that reflects how people invested 20 or 30 years ago.

As the Minister will be aware, I would be delighted to debate more pensions Bills as they come forward. We will do our best to provide cross-party support wherever we can.

Bill read the Third time and passed.

Budget Resolutions

Kirsty Blackman Excerpts

Thursday 27th November 2025 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I will start by welcoming a few of the measures in the Budget. I was contacted yesterday by the Pension Protection Fund about the indexation of pre-1997 pensions. The hon. Member for Caerfyrddin (Ann Davies) fought hard for this on the Pension Schemes Bill Committee, and I spoke about it on a number of occasions, so I am pleased that this change is being made. I think it will make a real difference to the oldest and poorest pensioners who are covered by the Financial Services Authority.

I want to talk about the two-child benefit cap. Alison Thewliss, previously my colleague, who fought very hard to get the rape clause removed, is delighted that this change is being made. The SNP has worked incredibly hard on this, not just over the course of this Parliament, in which we have moved two votes in the House specifically on the two-child benefit cap, but in previous Parliaments, because we know that it is the most cost-effective way of taking children out of poverty. In fact, yesterday in Scotland we tabled measures to mitigate the two-child cap in Scotland from next year. Thankfully we will no longer have to mitigate that policy, because the UK Government have agreed to do it.

We are pleased that this has happened and are very glad that the Government have caught up. However, I point out that it has taken some time, and about 100 children a day have been pushed into poverty as a result of keeping the cap in place. I invite Labour Members to reflect on the fact that a number of their colleagues were suspended for supporting my party in our move to scrap the two-child benefit cap. If it is the right thing to do today to get children out of poverty, it was the right thing to do then.

Turning to the total welfare bill, I have heard of a number of people—particularly from parties that are further to the right—talking on the radio about the growth of the total welfare bill and the fact that by the end of the forecast period it will reach £406 billion. The growth that is happening is about £91.5 billion, and almost half of that —£44 billion, which is 48%—is in pensions alone. I do not think it is right to couple those two things together when talking about the growth of the welfare bill. I understand that people do, and that the Red Book and Blue Book also couple them together. However, when people who say that we should get the welfare bill down talk about this £406 billion figure, they really need to be clear that half of that increase is in pensions. It is because we have the pensions triple lock and an increase in the number of pensioners.

Looking at the OBR’s figures in the fiscal risks report that was published in July, out to 2070 there is a significant increase in the percentage of GDP going to pensioners—from 5% to 7.7% by 2070. I am aware that it is quite a way in the future, but we need to be clear that, because of the growing number of older people, and the fact that they are living longer, there is an increase in the number of pensioners. Therefore, there is an increase in the amount we are spending on pensions. It is right for the Government to have to justify why they are increasing the welfare bill, but talking about that entire £406 billion figure as an increase in the welfare bill is not the right way to go about it, if that is what we are looking to tackle.

There are a couple of things more that I want to raise. With regard to energy prices and the cost of living generally, on coming into power, the Labour Government promised a £300 reduction in energy prices. Even with the Chancellor’s changes, we have seen a continued increase in the cost of energy. In fact, even with a £150 rebate, there will be more money on energy bills for the average family than when the Labour Government came into power. The SNP put forward a proposal in advance of the Budget talking about a bank levy similar to one that was introduced previously, specifically to pay £300 to billpayers to ensure that that Labour promise was met.

We still believe that the cost of living is too high. Let us look at the current 4.9% level of food inflation. It is impossible not to buy food; everybody has to buy food, just like they have to pay for energy. People can avoid taking foreign holidays and they can avoid buying a car, but they cannot avoid buying food and paying for their homes to be heated. Those inflation figures are therefore key and important.

Lastly, as hon. Members would expect, I will talk about the energy profits levy and oil and gas. Yesterday, alongside the Budget, the North sea future plan was published, and that entire document includes one mention of the energy profits levy and just when it talks about responses to surveys. Not once in that entire document do the Government mention the energy profits levy. I receive emails from people about oil and gas and the just transition, and the energy profits levy is the key measure that is causing a thousand jobs a month to be lost. If economic growth really is the Government’s key priority, they need to look at the energy profits levy, and they need to do so before 2030. My constituents are losing their jobs and that economic growth is failing as a result of this UK Government’s policies.

Pensions

Kirsty Blackman Excerpts

Tuesday 11th November 2025 Commons Chamber

[Pat McFadden]

The hon. Member is right; this issue has gone on for a long time. I took the view that, in the light of the evidence being cited, the right thing to do was to look again at it and at the decision in the round. I cannot speak for the previous Government’s failure to engage with the ombudsman—that is a matter for them—but I can tell the hon. Member that this Government are engaged with the ombudsman on the action plan discussed earlier, and we will continue to be engaged. As I said, I will come to a conclusion and report to the House as soon as possible.

[Kirsty Blackman (Aberdeen North) (SNP)]

The Secretary of State said that as part of the legal proceedings challenging the Government’s decision, evidence has been cited about research findings from a 2007 report. Who cited that evidence? Was it the Department for Work and Pensions or the Government, or was it the people opposing the Government in the court case? If it came from Government sources or from within the DWP, why was it not uncovered before? Can he give us every assurance that he is doing everything he can to ensure that all relevant evidence is uncovered in advance of the next decision being taken?

[Pat McFadden]

The hon. Lady asks about the nature of this evidence. It is a report from 2007 and, as I said, it is a DWP evaluation. The survey was not drawn to the attention of the previous Secretary of State because its potential relevance to the making of her decision was not evident at the time. I will consider this survey and any other relevant evidence in the process to which I referred in my statement.

Public Authorities (Fraud, Error and Recovery) Bill

Kirsty Blackman Excerpts

Consideration of Lords amendments
Wednesday 5th November 2025 Commons Chamber

[Andrew Western]

The hon. Gentleman will be aware that it is enshrined elsewhere in legislation that claimant error is recoverable as part of universal credit. I can also assure him that, as part of this Bill, the eligibility verification measure will enable us to identify errors that are legitimate as well as illegitimate—deliberate, shall we say—in order to minimise the level of debt for individuals who have, I accept, done this accidentally and ensure that they are caught earlier. Any overpayments will be smaller as a direct consequence. One advantage of the Bill is that it can minimise suffering for people who have inadvertently made a mistake.

Before I turn to the Lords amendments, I thank my noble Friends Baroness Anderson and Baroness Sherlock who expertly guided the Bill through the other place. I share their appreciation for all the peers who contributed to its detailed scrutiny and their invaluable insights that have helped the Government to strengthen the Bill.

The Government made important changes to the Bill in the other place, and I now ask this House to endorse those Government amendments. They were made to ensure that the Bill delivers its aims and to clarify the operation of the powers, as well as to ensure that the safeguards this Government have introduced are strong and effective. More procedural yet still important amendments have been made to part 2 to reflect the Scottish Government’s position on how the powers should be applied to devolved benefits. Across the Bill, we have made amendments that are more technical in nature, including to reflect the recent Data (Use and Access) Act 2025 and to ensure flexibility in the commencement of certain provisions of the Bill across the different nations of the United Kingdom.

In the interests of time, I will focus my update to the House on the most substantial and pertinent areas, on which there has been extensive engagement with external stakeholders and points have been made by peers in the other place. First, the Government tabled a group of amendments to part 1 to enable the Public Sector Fraud Authority to be merged with another statutory body, rather than necessarily being set up as a stand-alone statutory body, although the power to do so remains. That builds flexibility into the legislation, enabling the PSFA to achieve the aim of separation between investigators and Ministers in future, while avoiding the need to set up an entirely new statutory body if it is not considered proportionate to do so.

Linked to that, I would like to speak to a minor and technical amendment that I propose to make to Lords amendment 75 to schedule 2. Amendment (a) simply ensures that authorised investigators are captured within the regulation-making power set out in schedule 2 if or when the powers conferred under part 1 of the Bill are transferred to another public authority, or if the PSFA is set up as its own statutory body. It does not change the use of any powers laid out in the Bill.

The Government also amended parts 1 and 2 to ensure that the Government must disclose relevant information to the PSFA independent reviewer and the eligibility verification notice independent reviewer. Effective oversight is a critical aspect of this Government’s approach. These amendments do not represent a change in that approach; indeed, they further strengthen the commitments this Government have made to support open and transparent use of the powers. I will return to the point about oversight later in relation to Lords amendment 43.

The Government made several amendments to the debt provisions across parts 1 and 2. Those are a consequence of the extensive engagement by the PSFA and the Department for Work and Pensions with the financial sector, and they clarify important aspects of the operation of the powers, including in situations where a liable person might have a legal deputy managing their affairs. They also strengthen the rights of debtors by ensuring that a deduction order cannot be in suspension indefinitely, and that after a two-year period in suspension, it will not be resurrected. The Government have also responded to the continued confusion that seems to have arisen on the DWP debt recovery provisions in part 2 and who those powers apply to.

The Government have made amendments explicitly stating that a direct deduction order, as outlined in schedule 5, and a disqualification from driving order, as outlined in schedule 6, cannot be made where the person is entitled to and in receipt of a benefit from the DWP. That clarifies the existing intent that these powers are only for use with those who are not on benefits where the money cannot be recovered from a payslip and where the person can afford to pay and is refusing to do so. I remind the House that this power addresses an important point of fairness. It cannot be right that those who can pay money back can avoid doing so, and the amendments underline that point.

The Government also acted to strengthen the legislative safeguards around the use of the eligibility verification measure. I remind the House that that measure simply enables the DWP to ask financial institutions for limited data that will help the Department to identify incorrect payments and verify eligibility for specific benefits. The amendments made by the Government in the other place will introduce an explicit, necessary and proportionate test before an eligibility notice can be issued, and clarify the purpose for which an eligibility notice can be issued to only assisting in identifying incorrect payments. That puts the existing policy intent in the Bill. Again, I will return to the eligibility verification measure when I address Lords amendment 84.

I turn to the other amendments made in the other place. We welcome the challenge and scrutiny provided by peers’ contributions, but we cannot accept changes that risk undermining the powers. The Government’s position will continue to reflect that, including in our amendments in lieu. First, Lords amendment 1 would give the Minister for the Cabinet Office the power to initiate an investigation when they consider it necessary in the public interest. [Interruption.] Just so that he is sure of that power, the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Makerfield (Josh Simons), has joined me on the Front Bench.

We are proposing technical changes to Lords amendment 1 through amendments (a) and (b) in lieu. Those changes will give the Minister for the Cabinet Office the power to initiate an investigation when they consider it necessary in the public interest. The other place asked us to go further than the original drafting of the Bill allowed, and our amendments show that we have listened. The Government believe that it will almost never be necessary for the Minister to exercise that new power because of the collaborative approach in the normal working of government, but it will be available if there is a genuine need.

Our amendments in lieu also make consequential changes to clause 2 to preserve the intention that the PSFA should not take on matters assigned to the Secretary of State with responsibility for social security or His Majesty’s Revenue and Customs. The reason for that is that the DWP and HMRC already have well-established functions and frameworks to tackle social security and tax fraud. Of course, it goes without saying that both Departments may still collaborate with the PSFA if a fraud crosses many departmental boundaries.

I turn now to Lords amendments 30 and 31. The Government wholeheartedly agree that the measures in part 1 of the Bill are powerful and must be used with care. We agree that staff must be appropriately trained before they are able to use these powers, and that robust oversight—both internal and external—is essential. Our amendments (a), (b) and (c) in lieu mandate statutory guidance and a new reporting requirement, and set internal record requirements. The amendments in lieu ensure strong ministerial and parliamentary oversight of the powers, as was called for by the other House, without involving Ministers unnecessarily in operational decisions.

The statutory guidance will detail how the Minister will exercise the function of investigating suspected fraud against public authorities. It will outline structures of internal oversight, the delegation of powers, standards for the training and appointment of all authorised officers and investigators, and the PSFA’s collaboration with an independent reviewer. New reports will be prepared following the end of each financial year and laid in Parliament by the Minister, stating how many times the investigation and enforcement powers in part 1 have been used. There is now a requirement in the Bill for the PSFA to keep internal records of the use of those powers, available for scrutiny by an independent reviewer. Together, those measures ensure that Ministers are accountable for the use of the powers, and show how they are delegated. In places, they build on processes that would already have been in place, but we have put them in the Bill.

Let me move on to part 2 of the Bill, focusing first on Lords amendment 84 on the treatment of information obtained under an eligibility verification notice. Although I understand the intent of the other place, I cannot accept the amendment as drafted, and I urge Members instead to back Government amendments (a) and (b) in lieu.

Lords amendment 84 risks compromising the weight that the DWP may be able to attribute to information obtained through an eligibility verification notice. The Government have been clear that EVM information on its own has no tag of suspicion attached, and that the DWP must look within its own systems first and check for any inconsistency before taking further action. However, depending on the information held, EVM information may form an important part of any further action. We must not compromise that. The amendment also risks legislating for a person’s state of mind—in this case, that of a DWP-authorised officer. That is something that we should avoid where we can. It is far better to focus legislation on the actions that must or must not take place following receipt of EVM information.

The second part of the amendment, relating to the seniority of staff who must review EVM information, risks undermining the existing public law principle that staff at DWP take decisions on the Secretary of State’s behalf. There is also uncertainty about what would constitute a suitably senior person. In any case, the Secretary of State must be satisfied that officials are suitably trained and experienced to take decisions on their behalf.

Government amendments (a) and (b) in lieu of Lords amendment 84 seek to address those risks and build on the amendments that the Government tabled on Report in the Lords. They more accurately reflect the policy intent and focus on the actions that DWP staff must take following receipt of EVM information. The amendments in lieu clarify that where the DWP has received EVM information, it must also have regard to all other relevant information that it holds before taking further actions.

First, the amendments in lieu require an authorised officer to consider all information held that is relevant to the question of whether to issue an information notice, as well as the relevant EVM information, before issuing the notice under the Department’s investigatory powers. Secondly, they require a DWP agent to consider all information held that is relevant to the question of whether to suspend a payment, as well as the relevant EVM information, before suspending that payment. Finally, they require a DWP agent to consider all information held that is relevant to the question of whether to change an earlier benefit decision, as well as the relevant EVM information, before making that change.

I believe that our amendments succeed in offering the necessary reassurances about the way individuals within the DWP will take decisions once EVM information is received by the DWP—namely that no decisions will be made using EVM information in isolation—and I therefore urge hon. Members to back them.

[Kirsty Blackman (Aberdeen North) (SNP)]

I am still not exactly clear why the Minister disagrees with Lords amendment 84. I understand that he is saying that DWP agents will look at EVM information and everything else, but what happens in circumstances when they have only EVM and not much else by way of information? Is he unable to agree with Lords amendment 84 because if the DWP has only EVM information, he wants decisions to be taken based only on that and not on anything else?

[Andrew Western]

There are a couple of issues with Lords amendment 84 as drafted. It could minimise clear evidence from an EVN that has been returned. The point about what information DWP agents would have to consider is pertinent, because it may answer a question about why, for example, someone has more than £100,000 in a bank account. It is about considering all information, not about having no further information on which to act. I am probably not explaining that tremendously well, but I am effectively saying that an EVN could provide information that is sufficient for us to launch a fraud investigation, but we would want to consider all relevant information, including that EVN, to see whether that information is valid or should be discounted for any reason of which we are aware.

I cannot accept Lords amendment 43, which would add three additional requirements to the role that the EVN independent reviewer would be required to undertake. On proposed new paragraph (d) in Lords amendment 43, regarding costs incurred by business, the Government are committed to keeping costs associated with the measure proportionate and to a minimum. Officials have discussed this part of the amendment with the finance industry, which acknowledges that it may place a significant burden on financial institutions if they are asked to report on costs every year. That is something we clearly would want to avoid.

--- Later in debate ---

[John Milne (Horsham) (LD)]

Everyone accepts that we need to keep a handle on fraud, but the powers being taken in the Bill, including DWP access to people’s private bank accounts, go much further than anything we have seen in the past. Can we trust the DWP to exercise these sweeping new powers in a fair and responsible way? Unfortunately, past DWP errors have had the most tragic consequences.

Philippa Day was 27 years old when she died. She was found unconscious next to a letter from the DWP refusing her request for an at-home assessment. Philippa had agoraphobia and anxiety, making it impossible for her to attend a personal independence payment assessment in person. Those at the DWP knew that—they were told by her sister, and they would have been told by her mental health team if they had bothered to speak to them, but they did not. The letter by her side was the last of a long back-and-forth exchange with the DWP. During their final conversation about the DWP, Philippa said to her sister, “I’m done trying to fight them.” But why was she having to fight them in the first place? Surely this is a system that was designed to help.

The coroner’s report identified 28 separate failings by the DWP and its private assessor, Capita. Errors were made from the very outset: her PIP claim form was lost, her mental health needs were not logged, and no attempts were made to communicate with her mental health team or her GP to ensure that the very system designed to help her would do just that. It is easy to see, with a system riddled with errors and seemingly devoid of compassion, how someone could be driven to just give up the fight. Philippa wrote:

“I’m not dying because I’m suicidal... I’ve been so trapped for so long, and then comes along the government people, who I had assumed are there to help. Since January the 11th 2019 my benefits have been severely cut”.

I also want to share with the House what happened to Kristie Hunt. Kristie was training to become a nurse. She was 31. She had been on PIP and employment and support allowance until she rejoined the workforce after 13 years—admirable, considering her struggles with mental health. She, like Philippa, was basically a strong person.

Kristie informed the DWP about her return to employment, but staff forgot to log her call, so Kristie was hounded by calls and letters from the counter-fraud team. The DWP even sent incorrect information to her local council, resulting in further letters and threats of losing her home. For months, Kristie was subjected to erroneous accusations of fraud and threats of losing her flat and the life she had fought so hard to build back. On her final call with the DWP, she was noted as being confused and tearful, yet no one even asked whether she was okay. No one flagged concerns for her welfare. All they wanted was the money.

Kristie is an example of a person using the system that was designed to support her back into work, but was instead the victim of mistake after mistake. There are many others I could describe: Karen McBride, Stephen Carré, David Holmes, David Clapson, Errol Graham, Kevin Gale, Jodey Whiting, Roy Curtis and James Oliver. All of them were wrongly hounded by the DWP, which at least contributed to their deaths.

It does not reassure me that part of the name of this Bill starts with “Fraud”, when the biggest cause of overpayment is departmental error. The DWP has a long track record of badly handled mistakes. That is a cultural failing, and it is wildly optimistic to assume that everything is suddenly going to be fine going forward. Do the Government really believe that this Bill has enough checks and balances to protect vulnerable claimants? One thing is for sure: there will be more DWP mistakes.

Going forward, I would ask that the Government commit to making coroners’ reports automatically available to the public in every case where there is a link to the DWP’s actions.

[Kirsty Blackman]

It is not easy to follow that excellent speech. I really appreciate the hon. Member for Horsham (John Milne) reading out the names of people who have been failed by the system that was meant to support them—and we should remember that the system is what failed them. As he said, in a number of cases they were incredibly strong people who had fought through adversity but were then failed by the system. A significant number of disabled people have had to fight for so much of what they have. They have had to fight every day just to manage to get to work or get to the shop. They have had to fight for so much, and the system that is meant to support them should not then be another battleground.

I want to talk about a number of different things in the Bill, but I will start with the fact that this is not a happy Bill and the SNP does not support it. We are unhappy with a significant proportion of the Bill’s direction of travel, such as on the eligibility verification, not least because of the potential future risks. I said to the Conservatives when they were in government, and I will say again now that the Labour party is in government, that you will not be in government for ever. At some point, somebody else will be in government, and if it is somebody who shares the authoritarian ideas of some potential future leaders, I am not sure that I want them to have access to everybody’s bank accounts.

We need to look at the proportionality of accessing universal credit claimants’ bank accounts to see if they are committing fraud. I wonder what proportion of universal credit claimants defraud the system, compared with the proportion of billionaires who defraud His Majesty’s Revenue and Customs and do not pay the level of tax that they should be paying. I do not think it is proportionate for us to say that universal credit claimants need to have their bank accounts looked at because they are likely to commit fraud, whereas people who earn millions and millions of pounds and store it in offshore trusts do not have exactly the same constraints put on all the many bank accounts that they may have.

It is disproportionate for us to assume that social security claimants are more likely to defraud the system than anyone else, especially given that we have significant levels of proof that other people do defraud the system and that a significant number of the errors made—through overpayments, for example—are made by DWP itself, rather than by the claimants. The hon. Member for Poole (Neil Duncan-Jordan) talked about elements of Lords amendment 43 and vulnerable individuals who may be disadvantaged. If we could trust that DWP never or very rarely makes mistakes, I could understand the Government putting forward this Bill. From the written-down facts in coroner’s reports, and from all our constituency casework, we know that DWP makes mistakes. I am not blaming individuals at DWP for making those mistakes; there are sometimes systemic failures and sometimes individual failures. Mistakes are made at DWP, and adding both another layer of places where it can make mistakes and a further ability to sanction people—for example, by taking their car away or looking at their bank accounts—will not be proportionate until DWP is much less likely to make mistakes and to greatly overpay carers, for example, and then attempt to claw back the money. The Government need to get the Department in order before taking action against individuals. I understand that there are people who defraud the system—I am not doubting for a second that that is the case—but, as the hon. Member for Horsham said, putting the word “error” first might have been helpful, given that a significant proportion of the money that is overpaid is due to error.

I turn to the costs and savings mentioned in Lords amendment 43, on how much it costs to recoup money and to undertake an investigation in order to see whether somebody is defrauding the system. We know that a school meal debt system was set up, and we have had bailiffs at people’s doors looking for under £10 of school meal debt. Sending a bailiff to somebody’s door for under £10 involves a disproportionate cost, and I hope that everybody in this room thinks that we should not be spending so much money, and upsetting somebody’s life that much, for the sake of £10. If a person cannot afford to pay £10 of school meal debt, they have pretty significant problems, and sending a bailiff to their door is not going to help. We only know about some of these bailiff situations because they have been brought to MPs, or because they have been reported by various organisations. Aberlour Children’s Charity has done a huge amount of amazing work on public sector debt and some of the methods that are used to recoup that money. The Government should have to report whether it costs a disproportionate amount for us to ensure that we are not paying out a very small amount. I think it is completely reasonable for that question to be asked.

I think it is completely reasonable as well—the hon. Member for Poole talked about this—to think about vulnerable groups and whether they are overly disadvantaged by the system being put in place. Will people with learning difficulties, specific mental conditions and physical disabilities, and those from certain minority communities that are already marginalised, for example Gypsy Travellers, be specifically disadvantaged by the changes? All Lords amendment 43 asks is for reporting to ensure that those vulnerabilities, if there is an entrenchment of inequality and an increase in the disadvantage faced by people, are reported on, so we aware of it and there is transparency, and so we can see that it is creating a significant additional disadvantage on an already vulnerable and marginalised community. I would therefore really appreciate it if the Government agreed, rather than disagreed, with Lords amendment 43.

Finally on Lords amendment 43, the amount of money proposed to be saved by the Bill in its entirety—the total amount of savings—is, I understand, £1.5 billion. Governments of all colours are monumentally bad at reporting back on how much savings have been achieved by any of the measures they put in place on just about anything. Unless a tax is hypothecated, for example, we do not see exactly how much money is saved or exactly how much money is spent, and whether it delivered what was promised by the Government. Again, it is Governments of all colours who do not do post-implementation reviews in the right amount of time, and when there is a change of Government they sometimes just forget that post-implementation reviews exist. We will not know with any level of accuracy, unless we get proper reports on costs and savings, exactly how much money is saved and whether the Government have met their target or expected amount of £1.5 billion, so I have significant concerns.

I appreciate the Minister’s answer to me on Lords amendment 84. I had not understood what he had said originally on his position on Lords amendment 84 and the answer he gave me in response did clarify his position. I do not agree with his position, but I now understand why the Government hold that position. I still think it would be important to ensure there are things in place other than the EVM. I understand the Government want a little bit more flexibility and that they are saying they have to look at all the other information they hold. It is possible that the DWP may not hold any more information or may hold very little more information. Therefore, the decision to initiate a fraud investigation could be taken almost entirely, if not completely entirely, on the EVM. That is why I still disagree with the Minister’s position.

I would like a requirement for the DWP to have more than just that one piece of information. My understanding is that that was what Lords amendment 84 intended to do in the first place, but I appreciate that other amendments in lieu have been tabled by the Government to provide a little more clarity on what is expected. I would expect them to look at all the information provided, as the Minister said. I am just concerned that they may not hold lots of information, and a requirement to look at all the information they hold when they only hold one piece of information gets us back to the situation we were in at the beginning, where it could hinge on one thing rather than looking at a wider suite of things.

Generally speaking, Madam Deputy Speaker—I will sit down in just a moment—the SNP is not in favour of the Bill. We have significant concerns. If the Minister, when he responds, confirmed that the Government will do as much as they can on transparency, and that they will report back on the level of costs and savings that are created by the Bill, that would give me a measure of comfort. I still will not support the Bill, and I might still vote against some of the amendments tabled today, but I think it would make Members from across the House a bit more comfortable to have a better understanding of what is happening and whether the Bill is working as the Government intend.

[Madam Deputy Speaker (Judith Cummins)]

With the leave of the House, I call the Minister.

Welfare Spending

Kirsty Blackman Excerpts

Tuesday 4th November 2025 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

It is interesting to hear what is being put forward, considering that this lot on the Conservative Benches created the welfare system that we currently have, and that lot on the Labour Benches are keeping it going. The reality is that the mini-Budget that massively changed house prices and meant mortgage interest rates went through the roof has contributed to the cost of living crisis. The reality is that Brexit has meant that we are all worse off. The reality is that, with a UK Labour Government now, the economy is not growing: there is no creation of jobs and, for example, we still have a massive issue with productivity. We still have an incredibly broken system, and the problem is Westminster—it is all of you; every one of you on both sides has contributed to the current system.

People are not standing up today to talk about the fact that we have child poverty, and to say that what the welfare system should be doing is improving that system so we do not have so much child poverty. Child poverty is reducing in Scotland. However, the child poverty strategy was pushed back from the spring to the autumn, and now the Minister for Social Security and Disability is saying that it will be the end of the year. When he stood up, he said he was going to seek the support of the House for the Government’s mission, but he is not actually going to do so. What he is going to do tonight is vote against the Tory motion. The Government have not put forward an amendment laying out their plans for what they intend to do.

The Tory motion is a complete and total mess. The Tories seem to be trying to assign value to humans. They seem to be saying, “As long as you’re earning a significant amount of money, you were born in the UK and you’re a British citizen, you’re okay. If you are not—if you don’t fit in those boxes—you are somehow less valuable.”

Both sides have been making the argument that people are either getting universal credit and other benefits or they are in work, but those two things are not mutually exclusive. For a significant number of people, work does not pay. The income of a significant number of people has to be supported by the welfare system, because the economy that both sides have created means they are not getting enough money to be able to pay for the basic things they need. The price of butter, olive oil, potatoes and rice has gone through the roof, and people cannot afford their energy bills because of rampant inflation, which continues, and the cost of living crisis continues to bite because wages have not kept pace with those prices.

The current welfare system is not reducing poverty, but it also has to support people currently in work because they are not getting enough money. If the Conservatives are assigning value to humans—saying that people who are not UK citizens do not necessarily deserve benefits—they are going to be having very interesting conversations with expats in Spain and Canada, with which we have reciprocal social security arrangements. They will be immensely furious that they will no longer be eligible for any of the support they receive from those Governments, and I think it is bizarre for the Conservatives to support such a position, given how many of those expats are Conservative voters who are going to be monumentally stuffed as a result of the Tory position.

I think it is absolutely ridiculous that we are here listening to the Conservatives, who created this system, arguing about how terrible it is. What we should be doing—

[Johanna Baxter (Paisley and Renfrewshire South) (Lab)]

Will the hon. Lady give way?

[Kirsty Blackman]

No, thank you.

What we should be doing in the Budget and in the child poverty strategy is talking about how the welfare system should support people and about how the welfare system fails to support people. I wish the Minister for Social Security and Disability well in his work co-producing his report, but the welfare system is currently broken, and that is not because the costs are spiralling out of control. The welfare system is currently broken because people are being demonised simply for claiming enough to live on.

[Madam Deputy Speaker (Judith Cummins)]

Order. I call the shadow Minister.

Pension Schemes Bill (Eighth sitting)

Kirsty Blackman Excerpts

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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

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).

--- Later in debate ---

[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?

--- Later in debate ---

[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.

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[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.)