Pension Schemes Bill

Lord Bourne of Aberystwyth Excerpts

Thursday 18th December 2025 Lords Chamber

[Lord Bourne of Aberystwyth (Con)]

My Lords, it is a great pleasure to follow the noble Baroness. She speaks with great experience and knowledge, and I certainly very much agree with the points she made on fiduciary duties and the need for clarity on them.

I congratulate the noble Baroness, Lady White of Tufnell Park, who is not in her place at present, on a maiden speech of great humour and informed with important principles and pointers to what we should be seeking in this legislation. We will certainly look forward to her future contributions in your Lordships’ House.

I want to make some generalised points about the Bill—echoes, inevitably, of what has been said previously in the debate. But I would also like to focus on four specific areas: first, mandation of investment; secondly, fiduciary duties; thirdly, addressing the wrongs suffered by the pensioners of the former Allied Steel and Wire company; and fourthly, the Delegated Powers and Regulatory Reform Committee report. The Minister, whom I greatly respect, referred to this in opening but dismissed it somewhat breezily—possibly not; maybe I am being unfair. There are some important concerns there that we have to address.

The Bill proposes many sensible reforms. It is a largely good piece of legislation. The creation of megafunds delivering lower-cost, diversified investments and better returns is sound and sensible. The consolidation of the Local Government Pension Scheme is also very sensible. There is much to welcome in this legislation.

My fundamental concern, along with many others who have spoken from around the House—almost universally—is the objection to defined contribution schemes and the Government’s backstop power to mandate investment. This really concerns me. It is potentially in conflict with the fiduciary duties of pension trustees. I would like to hear in the Minister’s response what the Government are proposing for that potential conflict.

Government-dictated investment risks undermining trustees’ fiduciary duty and risks distorting markets. Far more preferable, surely, is the voluntary approach that we have in the Mansion House Accord—built on reforms of July 2023 and based on, later again, the approach of my right honourable friend, the then Chancellor, Sir Jeremy Hunt MP—a voluntary agreement of 17 of the UK’s largest workplace pension schemes, signing up to committing at least 10% of their default funds to private markets by 2030, with a minimum of 5% in UK private assets. That is surely the preferred approach. It may well be the Government’s preferred approach, but I have real concerns about the backstop approach that is also in this legislation. The approach in the Mansion House Accord is expected to unlock up to £50 billion for high-growth UK companies and major infrastructure. That seems to be the sensible way forward, and it is based on the approach of Australia, for example, and other states.

Another area I want to touch on, which has also been touched on by the noble Baroness, Lady Bowles, is the fiduciary duties and the need for clarity here. These duties are in many ways similar to the duties that company directors owe to their companies. The fiduciary duties of company directors are in many ways based on case law, but there is also a statutory framework since the Companies Act 2006, which is very important to underpin the case law that is vital in interpreting the duties. It seems sensible to have a statement of duties on which the case law then elaborates and on which it rests.

There is a need to set the duties of pensions trustees in a broader context. How do they take account, for example, of the impact of climate change, the local community and the views of pension savers? The Government talk of guidance, but in my view there is a very strong case for the introduction of a statutory framework, as we have in company law.

I also want to raise the case of the wrongs suffered by pensioners of the former Allied Steel and Wire company, and indeed others, who have lost out because of the pre-1997 pension compensation not being index-linked. Allied Steel and Wire, a company largely based in Cardiff at the time, went into liquidation in 2002, affecting around 1,000 workers in Cardiff but also in Belfast and Sheerness.

A pensions action group was set up 2003, after the collapse, by those who had lost not just their jobs but their occupational pensions. These workers’ pensions are not protected by the Pensions Act 2004, which helped members of defined benefit schemes that went into liquidation but after 6 April 2005—so obviously it preceded that. In fairness, a government scheme, the Financial Assistance Scheme, was set up and helped to provide some relief for these pensioners—up to 90%—but it was not inflation-proofed. This led to the erosion of the pensions’ value over time. As the pensions built up before April 1997 were not linked to rising prices, that failure for index-linking meant that they have suffered massively and continue to suffer.

I know the incoming Government promised to re-examine the situation, but the Minister will realise that there is still real hurt among these pensioners that this has not been recognised in proper compensation. These pensioners played by the rules; they deserve the pensions they invested for. It seems the Pension Protection Fund has a considerable surplus, which could be used to right this very obvious wrong, and I hope the Government will take this unfinished business on board.

Lastly, the Delegated Powers and Regulatory Reform Committee report, to which my noble friend Lady Coffey and the noble Baroness, Lady Bennett of Manor Castle, referred, outlines some very serious concerns. There are almost as many delegated powers, 119, as there are clauses in the Bill, 123—that is serious. It is a pretty damning report, I have to say. It refers to a licence for the Minister to make subordinate legislation. I feel that is something we will inevitably have to return to as we go through Committee and Report, and I would be very interested in hearing what the Minister has to say on that.

I otherwise welcome the legislation. There is a lot to be welcomed in it—it is good legislation—but I have those reservations.