Pension Schemes Bill (Third sitting)

Debate between Kirsty Blackman and Steve Darling

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Pension Schemes Bill (Second sitting)

Debate between Kirsty Blackman and Steve Darling

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Steve Darling]

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

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

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

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

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

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

[Kirsty Blackman]

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

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

Pension Schemes Bill (First sitting)

Debate between Kirsty Blackman and Steve Darling

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Steve Darling (Torbay) (LD)]

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

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

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

[Kirsty Blackman]

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

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