Pension Schemes Bill

Liam Byrne Excerpts

Wednesday 3rd December 2025 Commons Chamber

[Manuela Perteghella]

I thank my hon. Friend for his important intervention. New clause 19 would not create a precedent for ministerial direction of investments more broadly, if that is an issue. In fact, it would be much narrower than the Government’s own proposed reserve power. Existing measures cannot substitute for action now. Large schemes remain invested in the most dangerous fossil fuels, and the Government have not yet even consulted on transition plan requirements for pension schemes, meaning that enforcement is unlikely before the end of this decade.

I urge the Minister to acknowledge that transition plans alone are too little, too late, and we must address pension fund climate risks this decade. New clause 19 would provide a route to do so responsibly and effectively. Taken together, these two new clauses—one addressing long-term systemic financial risk and the other addressing immediate human need—would make our pension system more responsible, more resilient and more compassionate. I hope the Minister will consider them both in that spirit.

Finally, I will speak in support of new clause 11, which would introduce an independent review into state deduction in defined benefit pension schemes. That is necessary because Midland bank’s—now HSBC—outdated clawback policy has misled 51,000 former employees and deprived them of the pensions they were promised. This policy, which was abandoned by most organisations in the 1980s, allows HSBC still to deduct the value of an employee’s state pension using a 77-year-old formula, with payslips disguising it as “state deduction”. It hits the lowest-paid staff hardest and disproportionately affects women. For the same reason of long-standing injustice, I also support all the new clauses and amendments in relation to the indexation of pre-1997 benefits. In conclusion, this Bill is a chance to make pensions fairer, greener and more ethical and to put some of this historic injustice right.

[Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)]

I begin by congratulating the Minister on bringing the Bill forward to this stage. He has been one of the country’s practical idealists since I first began working with him in 2008, and he is demonstrating those credentials once again in stewarding this Bill through the House today with such expertise and intelligence. He, like me, has long been concerned not only by the endemically low investment rates in this country—now languishing at the lowest in the G7—but that we should build up a system of universal basic capital, so that the wealth we create in this country is more fairly shared.

I rise to speak to clause 17, which is in my name, and I give enormous thanks to the 33 Members from all parts of the House who have added their names to it. That depth of cross-party support tells us something important: that here in this House is broad and deep support for the principles enshrined in the new clause. There is a shared belief across this House that working people should be able to use their savings to build a richer and stronger country in which to retire.

My new clause calls for something very simple. It calls for something that has been missing for far too long. As we know, pension fund trustees have fiduciary duties to the people they represent and the people they serve, but those duties need clarity, and for too long that clarity has been missing. What we have instead is confusion, and from that confusion comes a caution, and from that caution comes a world in which pension scheme providers are simply not investing what they could and what they should in the productive assets of our country.

The flight of British savings from investment here has long bedevilled the country. It is a sight to behold. We are not short of savings, but we are desperately short of investment. We have somehow magicked a situation in which we have £3 trillion-worth of long-term savings, but we have the lowest investment rate in the G7. I think the Bill will help to turn that around. I think it will help to break that curse. There is much in it that is welcome: the consolidation of funds, the consolidation of pots, the simplification of structures, and a stronger framework for long-term investment. For all its virtues, however, as it is drafted today we are still left with the core problem, and unless we solve that core problem, the Bill’s noble ambitions will be defeated by its notable omissions. We risk creating bigger and better-managed funds that still fail to invest in our country, and still fail to invest in our country’s future.

The Bill will fail to channel the investment that we need in affordable homes, in net-zero investments, in cleaner power systems, in affordable transport systems, in the social care that we all need for the future, in regeneration, and in the national infrastructure of growth. It will fail because it fails, as currently drafted, to clarify exactly what it is that pension fund trustees can consider. We want those trustees to have the freedom to invest in good things here, not out of some patriotic flourish but because it is plainly in members’ best interests. When national investment grows, our national productivity rises, and when pension pots get bigger, they will get bigger faster if we have a country that is more productive and growing faster than it is today. When a country grows, the returns that shape retirement grow with it.

Many scheme providers today simply do not feel that they have the permission to make those investments. They are unsure of the law. They fear litigation. They worry about the possibility that looking at system-level risks, from low productivity or high housing costs or climate stress, might fall outside their legal remit. This is where the problem lies. It is a paradox that I think we can no longer ignore. We ask trustees to act in members’ best interests, yet the law today is so unclear that many of them feel unable to invest in the very things that could secure the long-term interests of their members: growth, productivity, and the living standards on which those members will one day rely. Today’s rules were built to ensure prudence, but what they are doing is creating paralysis. A framework that was meant to safeguard the future is, in practice, preventing pension savers from shaping that future. Scheme providers want to do more, members expect them to do more and our country needs them to do more, but all that can only happen if Parliament now provides the clarity that the courts have not provided.

This is not an academic matter. At a recent conference, fewer than one in five practitioners said that fiduciary duty was “completely clear”. I believe that 31 industry leaders have now written to the Minister for Pensions to request that legal clarification, including a dozen chief executives. Publicly, the chief executive of Nest, the provider of the UK’s largest defined-contribution scheme, has said much the same.

Fiduciary duty dates back to case law that is centuries old, back to a 19th-century brick factory in Pontefract and, before that, the inheritance of a market lease at some point in 1726. I am afraid that these cases simply cannot answer the questions that trustees must answer today, and they cannot help with the challenges that trustees face today: globalised portfolios, system-wide risks, intergenerational impacts, and the real-world living standards of their members. That is why the spirit of new clause 17 is so important, modest though it is. It does not alter the statutory purpose of pension schemes, and it does not ask a single saver to accept lower returns. What it does is cut through the confusion and allow the Government to produce regulations and guidance that spell out clearly and consistently what trustees must consider, and what they may consider, when making investment decisions.

I warmly welcome the Minister’s commitment to introduce new legislation. I hope that if he gets his skates on, he can table an amendment in the other place once the Bill moves from our precious hands, but mere guidance is not enough, because sometimes it can be ignored. Guidance does not eliminate liability risk and does not give trustees a solid statutory floor, so I urge the Minister to ensure that the legislation he brings forward delivers guidance that is statutory in its bite. I urge him to go big, by pairing guidance with underpinning regulation that gives trustees legal clarity; to go broad, by ensuring that every single kind of scheme falls within the ambit of the legislation; and to be specific, by explaining precisely what those powers can be used for and the way in which they can be allowed to ensure productive investment. That clarity, if we get it right, could avoid the need to resort to the mandating powers that some Members of this House have objected to. It could unlock investment by giving schemes confidence to act, rather than making them fearful and hesitant.

We in this House have a profound duty to ensure that the maximum amount of pension savings in this country not only yield a return to give comfort to savers in their golden years, but do a double duty: they should help to provide the productive investment that we need to build a bigger and richer country. After all, a nation that invests is a nation that builds, and a nation that builds is a nation that will grow its pension pots to help ensure that pension savers enjoy their golden years in comfort.

The steps that we have heard from the Minister go some distance towards helping us deliver on the spirit of new clause 17. I am very grateful to him for his announcement today, which could unlock billions of pounds for affordable homes, clean energy and comfort in retirement for millions of the people we came to this House to serve.

[Ann Davies (Caerfyrddin) (PC)]

I thank the Minister for his opening remarks this afternoon. The Bill has provided an opportunity for the Labour UK Government to address long-standing pension injustices. Such injustices include the British Coal staff superannuation scheme scandal, whereby surplus sharing arrangements saw billions of pounds heading to the Treasury while former mineworkers’ pensions were eroded, and the lack of indexation for pre-1997 pension accruals under the financial assistance scheme and the Pension Protection Fund, which has caused hardship for pensioners. Addressing such scandals is exactly what my new clauses 2 and 6 set out to do.

New clause 2 would require the Secretary of State to set out a timetable for transferring the whole of the BCSSS investment reserve to members, and to commit to a review on how future surplus will be shared. The coal mining legacy of south Wales extends to my constituency of Caerfyrddin, with the Amman and Gwendraeth valleys bearing the scars of previous industry, so it is of no surprise that my constituents were among those whose funds had been withheld, causing immense hardship for pensioners who had paid into the system for decades. In fact, it affected over 180 residents in my constituency, 20 of whom came to a drop-in earlier this year to share their stories of how this long-running issue has affected their lives.

When the hon. Member for Aberdeen North (Kirsty Blackman) kindly moved new clause 2 on my behalf in Committee, the Minister’s answer gave some hope for long-awaited action. I therefore welcome the recent confirmation that the UK Government have finally listened and have implemented the transfer of the full £2.3 billion reserve to trustees. I pay tribute to my constituents for their hard work, and to former mineworkers everywhere for their long-fought campaign to make this day a reality. On behalf of 180 of my constituents, I thank the Minister. 

Former Allied Steel and Wire workers have also campaigned tirelessly to receive their rightful dues in retirement. When the company went bust in 2002, ASW employees lost not only their livelihoods, but the pensions they had worked hard for, and which they were relying on for security later in life. The financial assistance scheme and the Pension Protection Fund were introduced to provide some relief to pensioners in such a situation, but pension contributions made before April 1997 were not inflation-proofed, leaving pensioners without the secure retirement that they were promised.

--- Later in debate ---

[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.