Pension Schemes Bill

Lord Moynihan of Chelsea Excerpts

Report stage
Monday 23rd March 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

My Lords, I support Amendment 164 in the name of the noble Lord, Lord Palmer. I agree that there seems to be something of an injustice in relation to survivor pensions for the police. For policemen who pass away, pensions for their spouse are suspended if the spouse remarries or even moves in with a partner. Do the same provisions apply in the Armed Forces, NHS and Civil Service pension schemes, or does the deceased member’s partner not lose their pension in those schemes if they remarry or cohabit, unlike for the police?

[Lord Moynihan of Chelsea (Con)]

My Lords, I revert to the amendment from my noble friend Lady Neville-Rolfe. I thank her for this important contribution and welcome the contributions from various noble friends, the news from the noble Lord, Lord Palmer, that he would be minded to support this amendment, and even the super news from the noble Lord, Lord Davies of Brixton, that he too might support some form of inquiry.

I have been struggling for some weeks now to think how I could persuade the House that my noble friend Lady Neville-Rolfe’s amendment was crucial and urgent, and how we have got ourselves into a really dangerous situation with public sector pensions. We discussed this in Committee. The noble Viscount, Lord Thurso, gave a speech in which he seemed to believe that these pensions were necessary because pay was—I think this is the number that was given—30% below that of the private sector. As I think we know, studies show that public sector workers get about 6% more for the same job as the private sector worker before these generous pensions. Yes, a commitment was made for these pensions, but so was it made to the civil servants of Greece and of Ireland—suddenly there was no money and those commitments were reneged on. We do not want to get to that situation.

The mood of the House is always to say, “Look, these people are working hard. They need a good a retirement. There is a wonderful security in being promised a salary increasing with inflation that is about two-thirds of what they were getting before until they die. All that is wonderful, we should be generous, and it would be an injustice to take it away”, but the fact is that this House is also for scrutiny and looks at the finances of this country, not just at where we can give more money to people. I listened earlier this afternoon to people arguing for more money to be laid out. It is what we tend to be quite good at, but the fact of the matter is that we now know that there is no money, when we cannot afford to spend enough on defence and when, as my noble friend, Lord Elliott of Mickle Fell, said, we are paying out more in benefits than we are receiving in income tax. In area after area, there are calls for money that is not available, and the Government, quite rightly, reject those calls for more money to be spent. There is no more money.

--- Later in debate ---

[Viscount Thurso (LD)]

Might I ask the noble Lord what the notional employer’s contribution is that he is putting into his calculation?

[Lord Moynihan of Chelsea (Con)]

I am putting the same contribution in that is made by employers—by the Government—right now. If you carry on doing it, you have a bunch of obligations for past promises. In the future everybody has a defined contribution scheme but you have the defined benefit scheme up to now. By 2060, as my noble friend Lady Neville-Rolfe told us, those obligations will result in £130 billion of annual payments, even if we stop now. If the economy grows by a considerable amount more than it has been growing in the past few years, those will amount to 3% of GDP being paid to pensioners of the public sector.

If you think that a £58 billion black hole is bad enough, fancy that £130 billion black hole that you have left to future generations because we failed to act—and because we refused even the reasonable request of the noble Baroness to have an inquiry. If we go beyond that and keep on with these schemes each year, that £130 billion will be dwarfed by a far larger amount. We are paying civil servants more, we have more civil servants and they are living longer, so the payments each year will rack up until at some point it will be like Greece or Ireland.

Right now, the bond markets are not at all impressed with us. Both the 10-year rate and the 30-year rate are well above those rates that noble Lords opposite claimed were evidence that Liz Truss crashed the economy. If she did, then goodness, they have crashed it much more. The bond markets are saying, “We’ve got you on watch and, if this goes on and you keep on with the deficits that you’ve got, you’re going to get into considerable trouble”.

We have the opportunity to think about this and, at least, to look at it. I hope that noble Lords will agree to this amendment. I also hope, by the way, that, if there is an inquiry, it is headed by somebody who is not in receipt of such a pension. In the private sector, we have a rule. If you have a great employee and they come to you and start talking gibberish, strangely, you think, “Oh, it’s going to be about their remuneration”. When it comes to their own remuneration, people find it very difficult to be realistic, logical and fair. So I hope not only that the Government will accept this amendment for an inquiry but that they will put somebody in charge of it who is not a captive of that public sector pensions system.

[Viscount Thurso (LD)]

My Lords, very briefly, I will support our Front Bench and the noble Baroness, Lady Neville-Rolfe, because it is quite a wise thing to have an inquiry. I wholly reject the argument the noble Lord, Lord Moynihan, just made: his maths is suspect and his conclusions are wrong. I have a son who is a special constable—until very recently he was a constable—a daughter-in-law who is a constable and another son who is a primary school teacher. As I said to him then, I say now: tell it to them that their pensions are not part of their remuneration, and I say you will be looking for teachers, policemen and nurses until kingdom come.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for introducing their varied amendments calling for a series of reviews. I have been trying to keep track and I think we are now up to 23 reviews called for in Committee and up to 14 amendments on Report calling for reviews. I know that the party opposite would like to have fewer civil servants; if noble Lords pursue all the amendments, half the civil servants left will be doing reviews.

I will at least try to work through what we have here. Amendment 157 from the noble Baroness, Lady Neville-Rolfe, proposes a review of public service pension schemes. As we discussed in Committee, a major review took place through the Independent Public Service Pensions Commission of the noble Lord, Lord Hutton. That happened under the coalition Government and the reformed schemes were introduced from April 2015. I will just remind the House of the changes that were made then to make the schemes more affordable.

The scheme design changed from final salary to career average. Pension ages were increased to state pension age for most schemes and to 60 for the police, firefighters and Armed Forces. Member contribution rates were increased across the scheme, except the non-contributory Armed Forces Pension Scheme, and other aspects of scheme design were modernised: for example, supporting more flexible retirement. At the time, it was estimated that these reforms would save £400 billion over 50 years.

The noble Baroness, Lady Neville-Rolfe, asked about the 25-year guarantee. This does not mean of course that pensions cannot be changed in any way until 2040, nor was a guarantee written in to individual members. But the central elements of the reforms introduced in the PSPA 2013 were designed to last for at least 25 years, and a high barrier was set out in that Act for any proposed changes to the key design elements, including a requirement for consultation with scheme members or their representatives, with a view to reaching agreement to help deliver that stability.

I will look at some of the specifics that have been raised. First, those reforms have been fully bedding in only from April 2022, and their full effects will be seen over the coming years. Following reforms introduced by the noble Baroness’s party, schemes now meet the benchmarks set by the Hutton commission and public service pensions continue to form an important part of overall public sector remuneration, which is taken account in pay setting. That was a key point made by the noble Viscount, Lord Thurso: a pension is part of a pay package and is taken account of by the review bodies in making those judgments on pay.

Much of the information that is called for in this review is already published on a regular basis. The OBR publishes a forecast of in-year balancing payments between the Exchequer and the unfunded public service pension schemes—and projections of long-term spending as a share of GDP—in its fiscal risks and sustainability reports. As I indicated in Committee, these projections show spending falling over the long term from around 1.9% to 1.4% of GDP, indicating that the schemes are expected to become more affordable, not less, for future generations. In addition, valuation reports and the whole of government accounts set out the different accounting treatment of scheme liabilities and how to interpret the headline figures.

[Lord Moynihan of Chelsea (Con)]

Does the Minister acknowledge that in 2012 the Hutton report said that the cost would fall, in an uncanny replication of what she just said, to 1.2%, but that it did not? It remained at around 2%. It says now that it will fall to 1.2% but, as I said, these are people with skin in the game. I hope she will agree that their record in forecasting is not strong.