Public Service Pensions and Judicial Offices Bill [HL] Debate

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Lord Ponsonby of Shulbrede

Main Page: Lord Ponsonby of Shulbrede (Labour - Life peer)

Public Service Pensions and Judicial Offices Bill [HL]

Lord Ponsonby of Shulbrede Excerpts
2nd reading
Tuesday 7th September 2021

(9 months, 3 weeks ago)

Lords Chamber
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Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I thank the noble Viscount, Lord Younger, for introducing the Bill. I think I am right in saying that both he and I are laymen on this subject in that we are not lawyers or pension experts.

On the public sector pensions, clearly there is a problem which needs to be addressed following the findings of the McCloud ruling. I note that the Supreme Court denied the Government leave to appeal the finding. The Public Accounts Committee has called the Government’s problem a

“£17 billion mistake on pensions reform”.

I recognise that the remedy the Government have opted for, to be included in this Bill—the deferred choice underpin, the DCU—was preferred by a significant majority of respondents to the government consultation, including main trade unions such as UNISON and GMB. The DCU remedy would give people the choice at retirement as to how their pension should be calculated during the period 2015 to 2022. What measures will be in place to ensure that individuals affected will have the information they need at the point of retirement to make an informed decision? This important question was put by the noble Baroness, Lady Janke, and repeated by the noble Baroness, Lady Kramer, and it deserves an answer.

I believe there is a lack of clarity about who will bear the costs of these measures. The noble Baroness, Lady Janke, quoted from the Public Accounts Committee, which has also raised this point about who will bear the costs. Can the Minister explain how these costs will be met, and what impact this will have on future public spending decisions?

Before I move on to the cost control mechanism, I should say how grateful I am for the expertise demonstrated by my noble friend Lord Davies. I also found it particularly interesting that my noble friend Lord Hendy spoke of the context of the police in these proposed changes and how that is impacted within international law. My third noble friend, the noble Lord, Lord Mackenzie, also gave a very interesting and quite alarming explanation of the treatment of the police force regarding these proposed pension changes.

As far as I understand it, there are two problems: the original design of the CCM made it too volatile and the McCloud judgment has created a significant uncertainty, which members have now been living with for more than two years. The Government ran a consultation on the CCM mechanism, which closed on 19 August. When does the Minister anticipate that they will be able to respond to this consultation? Is he in a position to express any view on the key views expressed to the Government in that consultation process?

Clause 80 provides that the breach of the cost cap ceiling in the 2016 valuation will be waived. Trade unions are concerned about where the cost of that waiver will eventually fall and the impact of the McCloud remedy on the 2016 valuation. The impact of the valuation, when we get it, was a point raised by my noble friend Lord Davies and the noble Baroness, Lady Kramer. Separately, can the Minister confirm the Government’s commitment that any benefits improvements due to the breach of the cost floor will be honoured, and further—this was also a point made by my noble friend Lord Davies—that the increased use of Treasury directions for matters that should be subject to parliamentary scrutiny should be at a minimum, because Parliament should be involved as the CCM evolves? Clearly, we will want to scrutinise these things carefully as the Bill proceeds.

I turn to the proposed changes to the judicial retirement age, and here I declare an interest as a serving magistrate. We know that the existing provisions have been in place for 27 years, and we have had a great deal of personal expertise from the noble and learned Lords who have contributed to today’s debate. I will put forward a different view from the one proposed; it is more in line with the views expressed by the noble and learned Lord, Lord Etherton.

In the consultation, the overwhelming number of respondents—some 84%—supported raising the mandatory age of retirement. However, a large body of respondents preferred the age of 72 rather than 75. The people who preferred 72 were the Lord Chief Justice of England and Wales, the Lord Chief Justice of Northern Ireland, the President of the Supreme Court, the Lord President in Scotland, the Magistrates’ Leadership Executive, the Chief Coroner of England and Wales, and the President of Tribunals. All these individuals and bodies favoured 72, not 75. There are debates on this, but it is worth exploring a couple of the reasons why 72 is preferable to 75. Diversity is an important issue; I agree with the points made by the noble Baroness, Lady Kramer, on that. I also agree with her point about the importance of consultation. I do not know whether the Minister can say anything about whether members of the black community have been consulted on these proposed changes; they are liable to disadvantage their prospects for promotion within the judiciary.

I also want to raise a different subject, and here I speak as somebody who appraises magistrates. There are occasions when a small number of people—judges—may experience some level of mental decline. Clearly, there is an appraisal system for trying to deal with this, but it is a sensitive issue. I have probably appraised getting on for hundreds of magistrates over the last few years. One has to be frank: the prospect of mental decline accelerates over the age of 70. There needs to be a mechanism for sensitively dealing with these issues. That also argues in favour of a retirement age of 72 rather than 75, so that these issues of mental decline are not exacerbated.

We in the opposition party support the Bill. We will work constructively with the Government to look at the detail of it, and we wish it well.

Public Service Pensions and Judicial Offices Bill Debate

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Lord Ponsonby of Shulbrede

Main Page: Lord Ponsonby of Shulbrede (Labour - Life peer)

Public Service Pensions and Judicial Offices Bill

Lord Ponsonby of Shulbrede Excerpts
Moved by
1: Clause 16, page 14, line 2, leave out “may” and insert “must”
Member’s explanatory statement
This would require, rather than allow, pension scheme regulations to make provision for circumstances in which a liability owed by a person to a scheme will be reduced or waived. This is to probe further details on what circumstances will be provided for and how the schemes will be designed.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I rise to speak to Amendments 1 to 3 in my name. They are probing amendments to draw out some further detail, and I thank the noble Baroness, Lady Janke, for adding her name to them. I put on record my thanks to the Police Superintendents’ Association for raising its members’ concerns with us.

Recurring themes will emerge in our deliberations on this Bill—particularly questions of oversight, of the details and the actual mechanics of when and how the remedy is to be delivered and of how that will impact on members. With these amendments, we are trying to flesh that out.

I recognise that the Bill is essentially an enabling Bill, and it provides powers for schemes to do the detailed work required by the remedy. Therefore, it is one piece of a very complex picture. The Committee will particularly benefit from the expertise of some Members here today, and we hope to probe some key questions and add to the understanding of what impacted scheme members can expect.

Amendments 1 to 3 are simple probing amendments to Clause 16. Currently, the clause provides that a scheme “may” make provision to waive or reduce a scheme’s members’ liability. These amendments would change that word to “must”. The Explanatory Notes state:

“Clause 16 provides that scheme regulations for a legacy scheme may make provision whereby a liability on an individual to repay overpaid benefits … or to pay an amount in respect of underpaid contributions … is reduced or waived.”


In simpler terms, due to the changes and choices that the Bill provides for, some members may end up owing their scheme funds due to their having underpaid contributions or having been overpaid pension benefits.

Clause 16 provides that schemes have the power to waive or reduce those costs for people in certain circumstances, but the Bill does not provide any detail of what those circumstances will be. The Explanatory Notes give the following example:

“where a pensioner member has been overpaid their pension benefit and reimbursing the … scheme would cause hardship, the pension scheme could write off part of the liability.”

That is a welcome example, but it appears only in the Explanatory Notes. There is no level of detail reflecting that, or indeed any of the possible circumstances, in the Bill itself.

So, I have number of questions for the Minister. Can he provide more detail on the circumstances in which the Government would expect relief to be provided under this clause? Secondly, has the department estimated how many people may be affected in this way? Thirdly, I know the Minister will tell us that the Government’s aim is to provide the schemes with discretion to support their members, but should not every scheme at least be required to set up provisions to provide relief where necessary? Furthermore, on the question of when a waiver or reduction would be necessary, are there situations in which the Government would expect every scheme to provide relief, such as where financial hardship is caused? In this case, would it not be appropriate to include those details in the Bill?

Another question concerns Clause 24, which provides that the powers under this clause must be exercised in accordance with Treasury directions. So, the Treasury intends to provide some directions to the schemes on these issues, but outside the Bill and away from parliamentary scrutiny. What plans do the Government have to consult on the directions and the circumstances this clause may be applied to, so that the schemes reflect the actual situations experienced by members?

I know that the Minister is only too aware of this issue and, in many ways, we keep coming back to it. This is a complex Bill and we have a number of hours to look into that complexity. Clause 16 recognises that the impacts may need to be mitigated. What we are seeking is clarity on the protection and assistance that will be available. I look forward to the Minister’s explanation. I beg to move.

Baroness Janke Portrait Baroness Janke (LD)
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I signed Amendments 1, 2 and 3 and support the reasons laid out for us today by the noble Lord, Lord Ponsonby. It is be important that all members of the scheme understand how this system will work. As we have heard, it is a complex Bill that will affect many people, so I agree that an estimate of the number affected would be helpful. The transparency and consistency of the scheme need to be clear, and I hope the Minister will be able to provide that clarity. I also agree that it would be helpful to have the Treasury directions on the face of the Bill, rather than outside it, so that there are no misunderstandings and the people affected by this provision understand clearly how it will work for them.

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I hope that I have reassured the noble Lord that the Government have considered carefully how the powers in Clauses 16 and 19 should be exercised and that retaining an element of flexibility for schemes is important. There was quite a lot of technical information in my response, but I hope it has gone some way to answering the several questions asked. The noble Lord, Lord Ponsonby, asked whether the department had an estimate of how many members may be subject to a waiver. We do not have an estimate of the number of members with transitional protection who may be worse off. However, schemes consider that the number is likely to be in the hundreds. I hope that that provides some help. With that explanation, I ask the noble Lord to withdraw his amendment.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I thank the noble Viscount for his explanation and for addressing some of the questions which I asked. I will reflect on the answers. I should also apologise to my noble friend Lord Davies as I gave him some bad advice and he did not speak to his amendments. He tells me that similar issues are coming up in the next group; I do not know whether it would be possible for him to speak to his amendments out of order. Nevertheless, having said that, I will reflect on the detailed answer which the Minister has given, and I beg leave to withdraw my amendment.

Amendment 1 withdrawn.
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Finally, Amendment 19 suggests some time limits being placed on the process. Again, I think this reflects some sort of lack of faith in the Government and, whether true or not, they should seek to address this issue. I beg to move Amendment 13.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, first, I thank my noble friend Lord Davies for his comprehensive speech introducing these issues. I also thank the noble Baroness, Lady Janke, for putting her name to the amendments in my name.

There are two issues raised in Amendment 15 to which I would like briefly to add my voice. These are the realities of the current situation which various police forces have raised with us. As I understand it, proposed new paragraph (b) in Amendment 15 refers to members who were given a commitment that they could retain access to the legacy scheme until their retirement but are facing difficulties because their retirement is based on years of service, not a retirement age. What is particularly concerning is the reported risk that the changes will be disproportionately impactful on female officers, who are more likely either to have worked, or to be currently working, on a part-time basis. That permission has been granted for a judicial review on this issue is testament to the complexities which sit alongside this Bill and which still have to be navigated. The amendment would not alter anything in the Government’s plans but would require this situation to be considered as one type of compensatable loss. I am interested to hear what the Minister has to say on this issue.

Proposed new paragraph (c) in Amendment 15 makes reference to what has been introduced to me as the “pensions trap”—as referred to by my noble friend—in which an officer who makes financial decisions based on one pension will find their contributions from the alternative scheme reduced as a consequence. I look forward to the Minister’s response on this issue. As my noble friend says, it has gained a great deal of traction in the press.

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Moved by
21: Clause 26, page 21, line 21, after “description” insert “, provided in clear and accessible language,”
Member’s explanatory statement
This probing amendment raises the need for information in a remediable service statement to be provided in clear, easy-to-understand language.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, this group deals with a straightforward issue, which should not need much explanation, but should be at the heart of our deliberations on this Bill. I raised it at Second Reading and it was also raised powerfully by the noble Baroness, Lady Janke, with whom I share this group. I will speak to her amendment within the group.

In recommendations made in 2011, predating the pensions reforms that gave rise to the discrimination that the Bill seeks to address, the Public Accounts Committee recommended that

“HM Treasury should work with employers and pension schemes to ensure that clear and relevant information is provided to employees on the value of their pensions.”

In June this year, a decade later, the PAC reported that it was “disappointed” by the “limited progress” that had been made and that

“more needs to be done to improve employees’ understanding.”

The crucial relevance to the Bill today is captured—one could almost say understatedly—by the PAC when it says:

“The problem has been exacerbated with further complexities being introduced as a result of government’s response to the McCloud judgment.”


I do not need to put too fine a point on how complex the remedy and the legislation before us today are. We are the people attempting to scrutinise it, and we are only too aware of these complexities. Imagine the impact of this sudden deluge of remedies, liabilities, regulations, protections and decisions on those of our public service workers who are building up their pension in their career, perhaps as a teacher, a firefighter or a civil servant. It must be an utmost priority that scheme members are given accessible, timely, easy-to-understand and easy-to-access information to help them to understand what has happened and what it means for them.

Clause 26 makes provision for remediable service statements—essentially, annual benefits statements for members that would include information on the benefits available under the legacy scheme, information on the impact that making certain choices under the Bill would have on those benefits and a description of how and when a choice can be made. This is the primary mechanism in the Bill for providing information to members on how the remedy could have an impact on them.

Amendments 21 to 23 in my name would require the information in those statements to be provided in “clear and accessible language”. Their aim is to probe whether the content included in the statements will be plain-language, practical descriptions of what these options mean for the value of a person’s pension, or whether members will find themselves faced with a complex financial statement that is too difficult to use.

Amendment 25 raises a specific concern around tax returns: ensuring that members have what they need to fill out a self-assessment tax return. For example, members of affected schemes will have to work out tax relief on contributions, as well as their annual allowance and other values. Will a remediable service statement include the necessary information to allow a member to navigate the tax impacts of the changes to their pension status? If not, will financial advice be available to ensure that they can accurately fill out a self-assessment statement, taking the remedy into account?

Finally, Amendment 24 in my name and Amendment 33 in the name of the noble Baroness, Lady Janke, deal with the key to this issue: what guidance, help or services the Government plan to provide to help impacted members to understand what this means for them, and how members will be signposted to them. If a person has no idea what their statement means, how their pension has been affected and when they are likely to be required to make a decision, who do they call? Where do they go for practical advice? I look forward to the Minister’s reply.

Baroness Janke Portrait Baroness Janke (LD)
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My Lords, I very much agree with the points made by the noble Lord, Lord Ponsonby. There is a huge challenge here for the Government. When you think of how many individuals with individual futures will be affected by this Bill, it is something that really needs deep thought in terms of what kinds of guidance and support will be provided, how they will be resourced and how the Government will signpost them.

It does not sound too challenging to say that members get to retirement then make whichever choice is best for them, but actually lots of complicated decisions requiring support and high levels of knowledge need to be taken. For example, in some cases, members may have built up rights that fall due at different ages. If there is no single retirement age, when do they have to make their choice? In some cases, a higher pension may be owed at the time under one set of rules but, as retirement continues, it may turn out that the other set of rules would have given a bigger total pension. Again, help needs to be given.

The Government have already accepted that people with complex tax issues can have financial advice, but what about the millions of public sector workers who will have to make these choices? On financial planning, we encourage people to make plans for their pensions and explore how they are going to live post retirement, but how easy will it be to make a proper plan with the new system being put in place? For example, will the pensions dashboard provide the information they need?

It is an enormous task for schemes to unpick, administer and communicate. Members are going to need a lot of help to understand what is happening, so it would be very helpful to know what the Government intend to provide in the way of support systems to enable members to make the best choices, and to trustees of the pension schemes as well. We welcome how this is to be resourced and I hope that we will have a clear and detailed statement on supporting elements for the implementation of the scheme. I look forward to the Minister’s response.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, once again I start by thanking the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Janke, for introducing this theme and for their contributions. Providing sufficient guidance for members to make informed decisions regarding their pensions is of course of the utmost importance and worthy of proper scrutiny, so I am pleased to respond to their points and hope that I can give reassurances. The noble Baroness is correct that it is a challenge, but I hope that I can prove, or show, that much thought has been put into this important matter already.

Amendments 21 to 25, tabled by the noble Lord, Lord Ponsonby, and Amendment 33, tabled by the noble Baroness, Lady Janke, all deal with the important matter of communication: communicating the impacts of the remedy and the choices available to members. Amendments 21 to 25 seek to ensure that the information provided to members is clear and easy to understand, as well as signposting them to sources of further information and assistance and ensuring that certain tax information is provided. Amendment 33 seeks to require the Government to publish guidance for members and provide further assistance, such as a helpline or online services, as well as laying a copy of such guidance before Parliament and providing a report on the effectiveness of this guidance.

The Government recognise the importance of providing members with clear, accessible and accurate information. It is this information that will inform members’ decisions about whether to receive legacy or reform scheme benefits in relation to their remediable service, or whether to opt for service to be reinstated under Clause 5. Perhaps I may provide reassurance to the Committee on the measures already in the Bill which provide for members to receive information that shows the option of benefits available to them in the form of remediable service statements. That will include details of any lump sum, pension and survivor’s benefits under the scheme. For the vast majority of members, the decision will be very straightforward: the member will simply choose the option that is most valuable to them.

Clause 26 already contains the appropriate provisions as to what should be included in the remediable service statements; for example, subsection (5) outlines that a statement

“must include … a description of when and how any election”

should be made. The information contained in the remediable service statement will be personal to the member. The statement will set out their entitlements and allow them to clearly understand the benefits available, under the options available, to determine which one they wish to take.

The provisions in the Bill are additional to existing requirements under the Public Service Pensions Act 2013—an important point—which already require the public service schemes to provide members with information about their entitlements. Clause 26 ensures that members are provided with additional information, specifically about their remediable service only. To break this down, first, for active members statements will be provided on an annual basis and enable members to see how the two sets of benefits compare as their careers progress and they get closer to retirement. Secondly, for deferred members, a one-off statement will be provided initially but the member will be able to request up to one further statement per year. For pensioner members, and in respect of deceased members, a one-off statement will be provided, ensuring that these members have the information they need to make an immediate choice in respect of their remediable service.

Schemes will also develop further guidance and tools where appropriate; we expect that some will choose to provide retirement calculators, for example. However, in view of the different requirements of workforces, the different methods of communication currently used by schemes and the different tools they already provide, it would not be appropriate for the Bill to require this to take a particular form. To give an example, the NHS scheme is, as the Committee can imagine, one of the largest—if not the largest—occupational pension schemes in the world. It has considerable expertise in providing bespoke member communications, guidance and support. The information required under this clause will supplement and become part of an established service provided for members.

Furthermore, in relation to Amendment 25, it is worth noting that most individuals affected by the Bill will not have to correct their tax position, either through the tax system or by claiming compensation. The Bill also contains various provisions to reduce interaction with self-assessment. In addition, schemes are already required to provide members, where appropriate, the relevant information to complete their tax return on an annual basis, and this information will be updated and provided to the member where their tax position changes. Therefore, this amendment would duplicate the existing processes. However, where there is an interaction with the tax system, the Government recognise that there will need to be further guidance to complement existing HMRC guidance and scheme processes which already provide the required information to complete a self-assessment return, and this will be provided in time to allow members to make an informed choice, which is an important point to make.

I wholly agree that communication with members will be key to the successful implementation of the remedy but I hope I have reassured the Committee that the Bill already provides for all the information required for members to make necessary informed decisions. Taking all this into consideration, I hope that the noble Lord will withdraw his amendment.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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I thank the Minister for that explanation. I have to say that he did not provide me with a great deal of reassurance because on the one hand he said that all the information will be provided in any event and then, on the other, he said that he recognises that further guidance will be necessary. I am grateful that further guidance will be forthcoming. It is a concern that has been raised directly by the various police forces I have spoken to about this issue. Nevertheless, I beg leave to withdraw the amendment.

Amendment 21 withdrawn.
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So, there are two limbs, two legs, to this amendment. First, in this specific case—without commenting more generally on the issue of directions—an important policy decision is being made in those directions, so they should not be directions. I suggest that they should be regulations. Maybe the Government could take that away and think about it, but there should be parliamentary oversight of such a crucial decision. But, over and above that, it simply does not make sense to include the cost of the remedy in the cost control mechanism. It is included only because of the way in which the principal legislation is written. I beg to move my amendment.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I wish to speak briefly to this amendment. I open by paying tribute to my noble friend Lord Davies for the expertise with which he has raised these issues surrounding the cost control element. I look forward to a comprehensive response from the Minister on this difficult issue—that would be to the benefit of the whole Committee.

I particularly ask the Minister to respond to the point made by the cross-party Public Accounts Committee that this is the Treasury’s mistake, yet, in the words of the committee:

“The Treasury now wants pension scheme members to pay the estimated £17 billion cost to put that right.”


I want also to touch on the Government’s response to the consultation on the cost control mechanism, which was published only a few days ago, as my noble friend said. I know that the details of the reforms are to be dealt with in future primary legislation, and I am sure that that will be thoroughly debated at the time, but the response did not give us any information on how the proposed reforms interact with the issues that we are dealing with in the Bill in front of us today. This is essentially the question that my noble friend was asking.

The response said:

“The Government will provide further details on … the extent to which there will be any interaction with the McCloud remedy at future valuations, in due course.”


It seems that, at the same time as we are having complex discussions on the immediate impact of the 2016 valuations on members, there is little or no information about how the Government plan to deal with this issue in the long term.

Clause 80 is welcome, but Ministers will be only too aware that it neither fully answers the concerns of the trade unions over the inclusion of the remedy in the 2016 valuations nor sheds any light on the Government’s intentions for the treatment of the remedy costs in future valuations. I understand that this is a complex matter, and I look forward to the Minister walking us through this complex landscape of issues.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, we have come to another important part of the Bill. I recognise that the operation of the cost control mechanism is of considerable interest to the Committee, particularly the noble Lord, Lord Davies, whom I thank once again for his remarks, and the noble Lord, Lord Ponsonby, who—I remind myself—gave some valuable contributions at Second Reading and touched on this topic. We should also remember that the cost control mechanism should be considered within the wider context within which the Bill should be considered.

I hope that my subsequent letters on this topic have proved informative on progress being made in this area. I am happy to be able to expand on some of those key areas during this debate, but obviously there are some questions that need answers arising from this particular debate, and I will do my best to answer them.

First, on the subject of letters, I deposited a letter in the Library last week to bring to the Committee’s attention the fact that, on 7 October, the Treasury published amending directions that will allow schemes to complete the cost control element of the 2016 valuation process. As previously announced, these amending directions confirm that the McCloud remedy will be captured as a member cost in the completion of the 2016 valuations. This is right, given that addressing the discrimination identified in the McCloud and Sergeant judgments, giving members a choice of scheme benefits for the remedy period, involves increasing the value of schemes to members.

This matter led to a couple of questions being raised, first by the noble Lord, Lord Davies, who made the point that he thought that it was not appropriate for members to pay the costs of remedy. Separately, the noble Lord, Lord Ponsonby, raised the question of the inclusion of remedy in the 2016 valuations. Indeed, he questioned the role of the Treasury and government.

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Baroness Janke Portrait Baroness Janke (LD)
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My Lords, this amendment calls for a review of the fairness and just treatment of some of the issues that have already been raised, particularly with regard to disbenefits to members of current schemes. We have heard of those today; the pensions trap was already described in detail by the noble Lords, Lord Davies and Lord Ponsonby. Women police officers are also being unfairly treated in the Bill, in that those who have taken time off for caring responsibilities can make up the time they had lost under the police pension scheme, but under the new scheme, which is based on age, they have to work longer. That is an example of some of the issues caused by the Bill that may not be addressed by some of the amendments we have put forward.

Gender in pensions is not a new issue. The gender pension gap is a serious matter; the average pension pot for a woman aged 65 is one-fifth of that for a 65 year-old man. Women receive £29,000 less state pension than men, over 20 years. This deficit is set to continue, closing by only 3% by 2060. This amendment seeks to highlight the importance of this issue and the need for urgent measures to address it, so we are raising specific disbenefits in the new scheme, particularly in relation to women and the gender pension gap. I look forward to the Minister’s response.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I will speak briefly on this matter, but I acknowledge its importance and I thank the noble Baroness, Lady Janke, for raising it. The amendment touches on a number of key issues that we have debated today: the long-term oversight of the Bill and its impact; fairness, particularly the consequences for women and part-time workers; and the need for decent, accessible information for workers on the value of their pensions. We have seen what happens when the effects of pensions legislation are not fully taken into account or monitored. It results in the Bill in front of us and all the related complex consequences we see here today.

On the gender pension gap, during the course of today, we raised specific concerns about the different impact some changes will have on women, who are more likely to have been part-time workers or to have taken time out of their careers for caring responsibilities, leaving them with interrupted contributions and interrupted years of service. The noble Baroness made this point all too clearly. What is particularly shocking about the gender pension gap is how little it is commonly talked about and recognised. I hope that this Committee stage will slightly raise the profile of the issue, but I know that the noble Baroness, Lady Janke, as well as my noble friend Lady Drake and others, has consistently raised it across the House and brought it to the Government’s attention at every opportunity.

The cross-party Women and Work All-Party Group has called on the Government to “take urgent action” to close the gap which, as it points out, has persistently

“remained at about 40% for the last five years”.

The recommendations of the all-party group include that:

“The Government should publish guidance directed at women on how to adequately prepare for retirement and encourage employers to calculate their gender pension contributions gap in order to compare this to their gender pay gap data.”


There is cross-party understanding of this issue and cross-party support for it has been raised in other forums. What is needed to tackle it adequately is political will. I look forward to the Minister’s reply.

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Moved by
34: Schedule 1, page 85, line 11, leave out “75” and insert “72”
Member’s explanatory statement
This would set the judicial retirement age in the Judicial Pensions Act 1959 to 72, rather than 75. This is a probing amendment to raise the issue of the appropriate retirement age for the judiciary.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, we now move to a different aspect of the Bill: the retirement age of members of the judiciary. I thank noble and learned Lords who have sat through the past couple of hours of quite detailed discussion of other aspects of the Bill. This amendment has one great merit, which is that it is easy to understand. I remind the Committee that I sit as a magistrate in London.

I raised this subject at Second Reading, as did other noble Lords, and I received a letter from the Minister in which he set out the Government’s view that 75 is a more appropriate age for the retirement of members of the judiciary than 72. He did that based on responses to a public consultation run last year. The letter prays in aid some statistics based on the response to the consultation and some representative bodies, which basically backed 75 over 72. As I made clear in my Second Reading speech, there are other representative bodies which back 72 over 75. Just to repeat what I said in the Second Reading debate, the Lord Chief Justice of England and Wales, the Lord Chief Justice of Northern Ireland, the President of the Supreme Court, the Lord President of Scotland, the Magistrates’ Leadership Executive, the Chief Coroner of England and Wales and the President of Tribunals favoured 72, not 75.

As somebody who took part in the consultation, I say that the questions in the consultation were not put in the context of whether the increase in the retirement age promotes inclusion and diversity in the magistracy, which is of primary importance—it is superior to other considerations when considering the retirement age—and whether the appraisal system is adequate properly to appraise older colleagues. Here I have to speak frankly, and as somebody who regularly appraises magistrates. There is a prospect of mental decline, which accelerates as one grows older. Although one has to be robust when carrying out appraisals, it can be difficult to say to a long-standing colleague that they should reflect on whether they should continue in their current judicial role. I think it is more likely that those difficult conversations will have to be had if the retirement age is set at 75 rather than 72.

In the Minister’s letter, he gave the proportion of BAME members in different arms of the judiciary: 13% for magistrates, 10% for judges and 17% for non-legal tribunal members. Clearly, there is an aspiration within the Government—and, I know, within the judiciary as a whole—to increase and improve these figures. One of the central points of the Lammy report which I think the Government have accepted is the importance of increasing diversity. I would argue that increasing diversity within the judiciary is more important than, and trumps, increasing the judiciary’s retirement age. Indeed, increasing the judicial retirement age militates against greater diversity. Because there is only a limited administrative resource, the administrative effort should focus on the recruitment of younger people as a whole but particularly from minority groups within our society.

I have put forward my amendment—to have 72 rather than 75—in a constructive way. It is the way to enable colleagues to continue for another two years but also to focus on what I see as the overwhelming importance of increasing diversity in our wider judicial family. I beg to move.

Lord Etherton Portrait Lord Etherton (CB)
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I thank the Minister for his full letter, following Second Reading, and his suggestion of a further meeting. I am very grateful for both of those. I support everything that the noble Lord, Lord Ponsonby, has said and it is a great pleasure to follow him.

I join in on this amendment and support it because of the adverse impact of the increase in the maximum retirement age to 75, rather than 72, on diversity in our most senior courts, especially the Supreme Court and the Court of Appeal. While all salaried judges are critical to the administration of justice, the most senior courts are those that tend to send the clearest message to our nation, and indeed to other countries, of whether or not we value diversity within the judiciary. At present, we lack a sufficiently diverse senior judiciary. While some progress has been made, particularly in the last 10 years, on the recruitment of women—still inadequate—there is a notorious lack of people from a minority ethnic background. Indeed, in the just over four years that I was Master of the Rolls, it was sometimes extremely embarrassing not to have on the panel of judges in the Court of Appeal anybody from such a minority background.

To increase diversity, there must be sufficient opportunities for appointment to the senior courts. This requires existing judges to retire. The increase in the maximum retirement age to 75, rather than to 72, will in effect freeze the opportunity for the advancement of underrepresented groups and the throughput of more diversity within the judiciary. As the noble Lord, Lord Ponsonby, said, all the most senior judges in England and Wales were in favour of an increase in the judicial MRA to 72 rather than 75. The adverse impact of raising the MRA to 75 in a single stride is plain: the average age of judges in the Court of Appeal is just under 64. This means, potentially, that if the MRA is raised to 75 there will be very few vacancies for a further 11 years.

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I hope I have reassured the Committee that the Government have given full consideration to this matter. In deciding the appropriate retirement age, we seek to strike a balance—and it is a balance—between the benefits that increasing the retirement age will bring against its impacts. I appreciate the concerns that the Committee might have about inhibiting the flow of new judicial appointments and age-related capability, but we consider that these are outweighed by the significant benefits for recruitment and retention at a time when some of our courts and tribunals need more judicial resource to support the timely delivery of justice. I thank again all noble Lords who have taken part in this debate and ask the noble Lord, Lord Ponsonby, to withdraw his amendment if he feels able to.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I certainly support 100% the new recruitment programme for magistrates. When I first became a magistrate 14 years ago, there were 30,000 magistrates; there are now 12,000, so it is high time that there was a large recruitment process to address the deficit of BAME magistrates.

The noble and learned Lord, Lord Etherton, kindly supported my amendment and spoke eloquently about the different aspects of the senior judiciary. I say to the noble and learned Lord that I am many things but I am not learned in the context of this Committee. Nevertheless, I am grateful for his support. The noble and learned Baroness, Lady Hallett, spoke with great authority and I hope that the Minister will listen to one particular phrase she used: that the public demand change. It really is not good enough that BAME people are so unrepresented in all levels of the judiciary.

One of the things I do is to sit in Highbury youth court, where a very large proportion of the defendants we see are from BAME communities. However, it needs to be said that the victims are from those communities as well. The defence lawyers are from those communities, as are the prosecuting lawyers and the legal advisers. Obviously, the youths are under 18 but all the professionals I am talking about are in their 20s, 30s and early 40s. There is a large cohort of expertise coming through the system. When I sit there as a magistrate, I am very frequently older than the grandparents of the youths I am dealing with. The way that we as magistrates are represented when we hear those cases is not right and it needs to change.

I will say a few words about the noble and learned Lord, Lord Woolf —my noble and learned friend, if I may say so. He spoke about the frustrations of trying to recruit women to roles as senior judges but did not address any of the issues about recruiting BAME judges at all levels. That is really the central issue; for me, it trumps all other considerations when we are considering magistrates’ retirement age. Having said all that, I beg leave to withdraw my amendment.

Amendment 34 withdrawn.

Public Service Pensions and Judicial Offices Bill [HL] Debate

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Lord Ponsonby of Shulbrede

Main Page: Lord Ponsonby of Shulbrede (Labour - Life peer)

Public Service Pensions and Judicial Offices Bill [HL]

Lord Ponsonby of Shulbrede Excerpts
Baroness Janke Portrait Baroness Janke (LD)
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I too thank the Minister for his time and for the engagement he has provided throughout the Bill, particularly regarding these amendments. Considering the scale, complexity and magnitude of the Bill, together with the millions who will be affected by it, I understand that these amendments try to cover a variety of contexts and circumstances to provide a comprehensive remedy to the previous discrimination. I recognise that the whole range of contexts and circumstances means that many will require fine detail. I hope these will, in many ways, support the millions of public sector workers who have suffered discrimination as a result of earlier circumstances.

We will see later some of the specific issues we raised in Committee. I hope the Minister can assure us that these amendments have taken account of those. We will explore that later.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I thank the Minister for his explanation of this extensive group of amendments. I too thank him and his Bill team for engaging with me and my noble friend Lord Davies leading up to Report and for the explanation of the late additions to the Bill. The Minister recognised that it is unusual to bring forward such a large number of amendments at such a late stage. However—and this is unusual on our part—we are content that he has done so. As my noble friend said, we understand that there may be further amendments when the Bill goes to the other place.

We have no objection to the amendments. They are largely technical and clarifying in nature. For example, they would ensure that the Bill operates as intended when a member of one of the affected pension schemes dies. I also accept that adding these amendments now will ensure that the Bill will start its scrutiny in the House of Commons with these points clarified, which we welcome. For these reasons, we are content with this group.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, I will make a few very short closing remarks. I thank the noble Lords, Lord Davies and Lord Ponsonby, and the noble Baroness, Lady Janke, for their brief remarks. In particular, I thank the noble Lord, Lord Ponsonby, for his supportive remarks and his understanding—there is probably a better word to use—of what we needed to do for this group of amendments and the next one. I appreciate it.

As I said in my opening remarks, the Bill deals with a complex and unprecedented issue. These amendments reflect the several months of continued work with the schemes, stakeholders and departments to check and recheck the Bill to ensure that it will offer a complete and effective remedy for members affected by the discrimination identified by the Court of Appeal.

The noble Lord, Lord Davies, raised a good point about what might happen next with potential amendments in the Commons, but I reassure him that, as I outlined, this is a highly complex area and the Government are committed to ensuring that members in all relevant schemes receive an effective remedy. We will continue to work closely with stakeholders, including the pension schemes in scope, to consider whether any areas of the Bill require further clarification to ensure legal operability.

I also took note of the points raised by the noble Lord, Lord Davies, concerning additional voluntary contributions and the cost control mechanism. The noble Baroness, Lady Janke, alluded to the fact that we will be addressing them in subsequent groups. I think it probably makes sense to do that, but I have taken note of the noble Lord’s questions, and I am sure he will raise these matters as the afternoon goes on.

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Baroness Janke Portrait Baroness Janke (LD)
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My Lords, I thank the Minister for responding to many of the issues that arose in Committee and welcome the additional flexibility with regard to the voluntary contributions and the period when remedial contributions can be made.

I would like to question the eligibility for voluntary contributions. One of the areas we discussed was about people—for example, with caring responsibilities—who would wish to make up their pension and in their legacy scheme would have been able to do that. Examples include women who have taken time out to look after children or people with caring responsibilities who have done the same. Will these members have the chance to make these remedial contributions to augment their pensions, as they would have been able to within the legacy scheme? Perhaps the Minister could clear that up for me.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, once again I thank the Minister for his explanation of this group. We are content for these changes to be made to the Bill. I particularly welcome the provisions on voluntary contributions, which will now allow for a member to make voluntary contributions where they would have done, but did not due to the pension changes that led to the arising discrimination. This responds to a concern raised by pension schemes and by my noble friend Lord Davies in Committee, which was recognised by the Minister. I wonder whether the Minister can give us an assurance that more information will be forthcoming, over the Bill’s passage through the Commons, on how this will be provided for in practice.

I also welcome the provision providing flexibility for judges over their election period and that every member must be provided with an information statement by the scheme before their election period starts. At later stages this afternoon we will come back to this question of how information and guidance are provided to members and how they will access support. That is in an amendment to be moved by the noble Baroness, Lady Janke. I am glad to see that this has been recognised, at least to some extent, in this group. We are happy to support these amendments.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, once again, my closing remarks will be relatively brief. I thank the noble Baroness, Lady Janke, and the noble Lord, Lord Ponsonby, for their broad support for these amendments. As one or two questions were raised, I will give some more information on additional voluntary contributions, which may be helpful, particularly with regard to the question on eligibility raised by the noble Baroness.

The proposed new clauses provide that scheme regulations may not permit a member to enter into such arrangements after one year from the day on which the member is provided with their remediable service statement, or their information statement in the case of the judiciary, or such later time as the scheme manager considers reasonable. The proposed new clauses will be subject to Treasury directions, which I understand we will be speaking about in a later group—under Clause 24 for Chapter 1 schemes and under Clause 58 for judicial schemes. This is set out in Amendments 45 and 90, and is consistent with the similar powers in Part 1 of the Bill. These directions will help to ensure that scheme regulations take a consistent approach, which is very important in providing members with remedial voluntary contribution arrangements.

I hope that this offers some explanation but, again, bearing in mind the technical nature of the noble Baroness’s question, I will be keen to read Hansard and will write if further information is required.

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Baroness Janke Portrait Baroness Janke (LD)
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I thank the noble Lord, Lord Davies, for his explanation of the amendment. I know we had quite a lot of discussion about this in Committee. My understanding of it in this specific case is how it affects members of the Police Superintendents’ Association. Previously, a number of years’ service entitled them to their pensions whereas the new scheme is age-related. As the noble Lord, Lord Davies, said, that prevents them being able either to retire early and still have their pension, as was guaranteed, or work later to augment their pension.

This is an important issue, particularly in terms of public services such as the police, where undertakings were given and promises made. These were parts of agreements about pay levels and general conditions of service. So I believe the Government have some obligations here, and I very much hope that this can be looked at further as the scheme progresses and that it can be evaluated and solutions found. I hope the Minister can give us some clarification on that. I certainly support the spirit of the amendment and hope that we can resolve this in future.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, my noble friend Lord Davies has given a thorough explanation of this issue, which will impact members of certain public service pension schemes. I simply echo the hope that the Government will look carefully at this issue before the Bill goes into its Commons stages.

To reinforce the point made by the noble Baroness, Lady Janke, the Police Superintendents’ Association has reported that this issue is one of the most-raised questions in sessions that it is holding with its members, and it is trying to talk through the possible remedies and related pension issues as they affect police superintendents. This is an unintended consequence that has arisen due to the current complexities, rather than an intentional outcome of what the Government are seeking to do.

With that in mind, could the Minister inform us, first, whether the Government have considered ways to remedy this issue, in which certain members will be caught, and, secondly, what ongoing consultation and engagement are the Government undertaking with those who are affected? I will be interested to hear the Minister’s response.

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Baroness Janke Portrait Baroness Janke (LD)
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My Lords, I again thank the noble Lord, Lord Davies, for his explanation and for raising these issues, as he did in Committee. I listened again with interest to the noble Lord, Lord Hodgson, as he has intervened in two Bills on the issue of secondary legislation. I am sure that many Members of this House would support his view that there is inadequate scrutiny of secondary legislation and that the House’s powers are so severely curtailed that it requires us to ask whether we adequately exercise our scrutiny of subsequent legislation as we do with primary legislation.

As for the cost cap mechanism, I know that there was great criticism, both from the Public Accounts Committee and the National Audit Office, about the costs of the remedy and how they would be paid for by the members, whereas it was an error by government and it was certainly felt, as the noble Lord, Lord Davies, said, that it should be faced by government. However, the Government have certainly produced a more satisfactory cost cap mechanism, with a number of concessions relating to the future costs of the pensions. We welcome the new arrangements for payments for any breach of the cost cap or floor, which were to be paid for by the members of the new scheme, as we do the widening of the margin for material breach of the ceiling or floor. We also appreciated the new application of the economic test should the cost floor be breached. We feel that the Government have made some attempt to address criticisms of the cost cap mechanism and will follow with interest how that operates in future.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I again pay tribute to my noble friend Lord Davies for his contribution and for setting out the range of concerns surrounding the cost-control mechanism and the inclusion of the remedy as a member cost. I recognise that this question is subject to ongoing legal action and once again put on record that we welcome the provisions in Clause 80, although, as the Minister is only too aware, it does not deal with the wider question of plans for the cost-control mechanism.

Members of the House are not the first to raise questions over the Government’s plans. The cross-party Public Accounts Committee said:

“HM Treasury should have foreseen the age discrimination issue that gave rise to the 2018 McCloud judgment, and putting things right will take many decades to resolve. HM Treasury wants members to pay to put this right—at an estimated cost of £17 billion—despite this being its own mistake.”


That point was repeated by my noble friend Lord Davies and the noble Baroness, Lady Janke.

I look forward to the Minister’s response on this issue but, before I finish, I want to echo one specific question. Am I right that there will be a number of members who will not benefit from the remedy but will be impacted by it if it is included as a member cost?

I listened with interest to the noble Lord, Lord Hodgson of Astley Abbotts, on Parliament being subject to the creeping control of the Executive—I think that is the way he put it. He talked about examples of secondary legislation and indeed gave this as an example of tertiary legislation. I think a lot of us will have sympathy with what he said.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, an amendment has been put forward to Clause 80 by the noble Lord, Lord Davies of Brixton, which concerns the employer cost cap. The noble Lord seeks to amend this clause to prevent the increase in value of schemes associated with the McCloud remedy being accounted for in the cost-control element of the 2016 valuations. I thank the noble Lord for bringing this to the attention of the House and am grateful to him for his prior engagement on the policy.

I can confirm that the Government have received pre-action protocol letters on behalf of some trade unions which have indicated that they may issue judicial review proceedings to challenge the Government’s decision to include the costs of remedy in the cost-control mechanism at the 2016 valuations. As the House will expect, and as the noble Lord, Lord Ponsonby, acknowledged, I cannot comment on the specifics of live or threatened litigation.

I acknowledge and appreciate the support the noble Baroness, Lady Janke, has given in general to the changes we have made to the cost-control mechanism—but there is more I want to say. I will talk through the general background, to reassure the noble Lord, Lord Davies, of the reasons for the Government’s decision. I will start by commenting on the policy rationale, starting with amending directions.

In Grand Committee, I brought to your Lordships’ attention that the Treasury had published amending directions on 7 October 2021 that will allow schemes to complete the cost-control element of the 2016 valuation process. These amending directions confirm that the increase in value of schemes associated with the McCloud remedy will be taken into account in the completion of the cost-control element of the 2016 valuations. The Government believe this is right, given that addressing the discrimination identified in the Court of Appeal’s judgment by giving members a choice of scheme benefits for the remedy period involves increasing the value of members’ pensions.

The cost-control mechanism was designed to assess costs arising from a change in value of schemes to members. Failure to capture the value of the remedy could have meant that members’ benefits may have changed going forwards, based on an incomplete and inaccurate assessment of the value of these pension schemes. This would represent an unacceptable risk to taxpayers, contrary to the objectives of the mechanism.

Turning to some specific detail on ceiling breaches, the Government have previously announced their intention to waive any ceiling breaches that arise from the 2016 valuations, and this is implemented by the current version of Clause 80. However, any floor breaches that occur will be honoured. This means that no member will see a reduction to their benefits as a result of the 2016 valuations. This decision, and the completion of the 2016 valuations, should provide certainty to scheme members over their benefits.

I will attempt at this stage to answer the point raised by my noble friend Lord Hodgson of Astley Abbotts and the noble Lord, Lord Ponsonby, about the use of directions. The Government acknowledge the key interest of the House in the scrutiny of secondary and tertiary legislation. The DPRRC considered this Bill and chose not to bring forward any comments for the attention of the House. The Government have powers under Section 12 of the PSPA 2013 to set out in Her Majesty’s Treasury’s directions what costs must be taken into account as part of the cost-control valuations. More broadly, I acknowledge the points my noble friend made; I have no doubt that Hansard will be read and I will say simply that his points are noted.

I will now say a few words about the amendment itself. The amendment seeks to amend the Treasury’s powers, set out in Section 12 of the Public Service Pensions Act 2013, to make directions which set the employer cost cap. Section 12 grants the Treasury a wide power to specify in directions which costs should be taken into account as part of the cost-control mechanism.

The amendment put forward by the noble Lord seeks to amend subsection (4) by omitting paragraph (c). I understand that the noble Lord’s intention is to remove the Treasury’s power to specify that the costs of remedy, or any other costs associated with the legacy schemes, should be accounted for in the mechanism.

This amendment may not have what I understand to be the noble Lord’s intended effect of preventing the increased value associated with the McCloud remedy from being included in the mechanism at the 2016 valuations. Subsection (4) sets out the type of costs that Treasury directions may specify for inclusion in the cost-control mechanism, but it is not intended to be an exhaustive list; rather, it provides some illustrative examples of how the wide power in subsection (3) may be exercised. I also note that the 2021 amending directions came into effect on 8 October 2021, as I mentioned earlier, under the existing powers. The noble Lord’s amendment as drafted would have no effect on the 2021 amending directions.

I want to attempt to answer some questions that were raised by the noble Lord, Lord Davies, supported, I think, by the noble Baroness, Lady Janke. There was some debate about why members are being made to pay for, as they put it, mistakes made by the Government. When the cost-control mechanism was established, it was agreed that it would consider only costs that affect the value of a scheme to members. Addressing the discrimination identified in the McCloud and Sargeant judgments by giving members a choice of scheme benefits for the remedy period involves increasing the value of schemes to members. The costs associated with this should therefore be taken into account as part of the cost-control element of the 2016 valuations process. However, any ceiling breaches that occur will be waived, no member will see a reduction in benefits as a result of the 2016 valuations, and any floor breaches that occur will be honoured.

The noble Lord, Lord Davies, asked when we will introduce amendments to reform the cost-control mechanism. I hope I can provide some reassurance by saying that the Government published our response to the consultation on the CCM on 4 October, we are currently working through our options and we will legislate for changes to the mechanism when parliamentary time allows. While a precise date has not been set—I am sorry I cannot give that date—the aim is to implement any changes in time for the 2020 valuations. As should now be clear, the Government have no intention of tabling an amendment in the House of Lords to implement these reforms. Instead, the package of amendments being introduced in this House are technical amendments that ensure the consistent application and legal operability of measures in the Bill.

I hope that, with these explanations, I have provided the noble Lord, Lord Davies, in particular, with some helpful reassurances on the policy rationale and the powers used, and I ask him to withdraw his amendment.

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Lord Hope of Craighead Portrait Lord Hope of Craighead (CB)
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My Lords, I support this amendment. I raised the issue in my speech at Second Reading because I look back with gratitude to the guidance I received shortly before I retired as to the choices I had to make under the judicial pension schemes. I think my position was relatively simple compared with the position we have now, because there were two clearly expressed schemes, the guidance I was given was intelligible and I was happy to follow it. Of course, I was aware—as I am sure everybody would be under this new arrangement—that the choice I made was going to be irrevocable, and I had to be very careful to make the correct choice.

I cannot claim to have studied the impact of this Bill—and, indeed, all the amendments that have just come to the House today—but my impression is that the situation is a good deal more complicated than the one I had to deal with when I was on the point of retirement. There is a great deal of force in this amendment, and I am delighted that it has been brought back on Report so that we can have a full response from the Minister.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I pay tribute to the noble Baroness, Lady Janke, for tabling and introducing this amendment, to which I have added my name. I also thank the noble and learned Lord, Lord Hope, for giving it his support.

This is the issue which I think is really at the centre of deliberations on this Bill and planning for the introduction of the remedy: how information and advice are going to be provided to members. In Committee, the Minister agreed with the importance of this issue. He said:

“The Government recognise the importance of providing members with clear, accessible and accurate information.”—[Official Report, 11/10/21; col. 357GC.]


The Bill provides for remedial statements to be provided to all members, which in itself is welcome. Before the Bill reaches the House of Commons, I ask the Minister to consider carefully what practical, accessible and time-sensitive help there will be for a member who is struggling to understand the statement and the complex background which precedes it. As I asked in Committee, if a person has no idea what their statement means, how their pension has been affected and when they are likely to be required to make a decision, who do they call? Where do they go for practical advice?

The amendment also raises the question of compensation. The Bill provides for applications to be made for compensation, but what information will be circulated to ensure that impacted members are aware that they are eligible to apply?

These are the questions we have to get right to ensure that members can confidently navigate the remedy, which, not to remind the Minister of this too often, was due to a government error. I hope that the Minister can give a commitment to take this away and to look at what more could be done in the Bill to ensure that members are given first-class accessible support in navigating this complex issue.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, I am very pleased to be able to debate this important matter. As the noble and learned Lord, Lord Hope, and the noble Lord, Lord Ponsonby, said, these matters must be covered and the Government must be sure that enough information is given to pensioners to make the necessary decisions. I hope my remarks will give the reassurances on this.

As I set out in Grand Committee, providing sufficient guidance for members to make informed decisions regarding their pensions is, of course, of utmost importance. Indeed, this Bill implements a deferred choice for members so that they know what their pension options are at the time they make their decision. I acknowledge the point that the noble and learned Lord, Lord Hope, made about the complexity of this. I hope he will agree that we have taken this into account.

There are a number of problems with the approach proposed in the amendment, which would require the Government to publish guidance within six months of the Bill being passed. There are a significant number of schemes within the Bill’s scope, and scheme regulations will need to be developed, consulted on and implemented in each scheme. The Bill provides that the remedy must be implemented by October 2023, but that is just the beginning of the process. Decisions will be taken in relation to pensioner and deceased members from that time, but active and deferred members will be making their deferred choice over many years into the future. It would not be possible to produce guidance within six months in relation to regulations that may not have been made, nor useful to report on the effectiveness of such guidance before the remedy is implemented. Leaving aside the detail of the amendment, allow me to explain why the Government do not consider the amendment necessary.

On the question raised by the noble Lord, Lord Ponsonby, on the support that will be given to members, I assure him that members will be provided with information about their choice and will be able to understand the options available to them. In most cases it will be straightforward for a member to determine which benefits they wish to receive, but I also reassure noble Lords that schemes are developing tools to support members in planning for their retirement. Members will have access to up-to-date information about their benefits and be able to understand what each option will be worth at their planned retirement age.

Turning to the detail, as I set out in Grand Committee, the Bill already provides that scheme regulations must provide for each member to be provided with remediable service statements containing personalised information about the benefits available to them. That information will include details of the benefits currently available to them under the legacy scheme, and the benefits available to them if they elect to receive new scheme benefits or to opt for a period of opted-out service to be reinstated.

For active members, statements will be provided on an annual basis, enabling members to see how the two sets of benefits compare throughout their career. For deferred members, a one-off statement will be provided initially, with up to one further statement per year on request. For pensioner members, and in respect of deceased members, a one-off statement will be provided for such members or their relations to make an immediate choice.

However, remediable service statements are only part of the information and support that the schemes provide to members. The Public Service Pensions Act 2013 will continue to require schemes to provide members with information about their pension benefits, not just those relating to remediable service. In due course, members will also see information about their pensions through the pensions dashboard, which the House will be familiar with. Schemes already provide members with a wealth of guidance, support and information, and existing legislation already requires them to inform members about changes to pension schemes.

The noble Baroness makes an important point about members planning for retirement, and legacy and reformed schemes often have different retirement ages attached to them. The schemes have implemented significant changes before and are experience and adept at providing their members with support and guidance. The fact is that, across their careers, members will often have a range of different pension entitlements, with different rules and benefits payable at different ages. Therefore, these complexities are not unique to the remedy under the Bill, and the schemes already provide members with tools and support to help them to understand their options and plan for their retirement.

The Government Actuary’s Department is developing tools that will allow members to see exactly how their entitlements change, depending on when they access their benefits. Again, this is not specific to the remedy, but such tools will help members to understand how decisions about when to retire interact with their scheme benefits.

The amendment introduced would also require members to be notified if they are entitled to compensation, but it is already the Government’s intention that, in most cases, compensation will be automatic—for example, in relation to overpaid tax. In all cases, schemes will set out the process for claiming compensation in scheme regulations and inform members of this.

On tax guidance, schemes are already required to provide members, where appropriate, with the relevant information to complete their tax return, and this information will be updated and provided to the member, where their tax position changes. However, where there is an interaction with the tax system, the Government recognise that there will need to be further guidance to complement existing HMRC guidance and scheme processes that already provide the required information to complete a self-assessment return.

That was a rather long-winded response, but I hope that I have reassured the House once again that the Bill, existing legislation, the schemes’ existing processes and the Government’s intentions for implementing the remedy already combine to provide for all the information required for members to make the necessary informed decisions. With that, I ask the noble Baroness to withdraw her amendment.

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Moved by
126: Clause 107, page 78, line 27, leave out “75” and insert “72”
Member’s explanatory statement
This would set the judicial retirement age to 72, rather than 75 as currently provided in this bill.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I will speak on the group of amendments consequential on Amendment 126. We have been talking about complex matters to do with public sector pensions, but this is a simple amendment that I will seek to explain to the House. I open by thanking the noble and learned Lord, Lord Etherton, and the noble and learned Baroness, Lady Hallett, for supporting this amendment. I look forward to the contribution later from the noble and learned Lord, Lord Etherton.

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I end by noting that legislative consent Motions are being processed in Scotland and Wales, while one has been passed in Northern Ireland, to agree to the UK Government changing the mandatory retirement age to 75. I must stress how important it is, in the Government’s view, that we retain a consistent mandatory retirement age for judicial officeholders in all four nations. These amendments could seriously jeopardise that imperative. With that, I hope that noble Lords will not press their amendments.
Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, let me provide some context to the figures that the noble Viscount has given. He said that there are 12,000 magistrates in England and Wales today, but when I became a magistrate 14 years ago there were 30,000, so there has been a managed decline of the magistracy. I support, of course, the recruitment programme, which is targeting and, as he said, marketing to try to get greater diversity through that process.

The simple point is that you cannot run away from diversity. There is an absolute imperative to increase diversity within the whole of the judiciary. It is not good enough just to wring your hands and say, “It’s all very difficult”. It has been very difficult for decades and the situation has not improved. The maths is very simple; we heard the maths from the noble and learned Lord, Lord Etherton, who also quoted the noble and learned Baroness, Lady Hallett, who is in a particular position to know. There need to be vacancies for people to progress through the system. It is a simple argument, which I do not think a number of noble Lords fully took on board.

When I introduced this debate, I made a simple example of my role as a youth magistrate and how I felt that I was moving further and further away from the youths I was judging. I gave the example that I am older than the grandfathers of nearly all the youths I am judging. Not one noble and learned Lord addressed that point. They addressed points about the difficulties of recruitment and the ins and outs of the pension scheme, but not the central issue that I tried to raise about the judiciary being further away from the people who they are judging. I argue that we need to have some level of connection to reach fair judgments.

My amendment is a modest compromise. It says that 75 is too far and that 72 is a better age to see how it goes. I acknowledge that people are working and living longer—I made those points when I introduced the amendment—but I say to the noble Viscount and to a number of contributors to this important debate that I am not convinced. I wish to test the opinion of the House.

Public Service Pensions and Judicial Offices Bill [HL] Debate

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Lord Ponsonby of Shulbrede

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Baroness Janke Portrait Baroness Janke (LD)
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My Lords, I too thank the Minister; I thank him for the letter I received today, which answered the question that he referred to, as well as for his leadership and his open and engaging approach. He has ensured that we have had opportunities to be fully briefed on the Bill. As others have said, it is a very complex Bill, wide-ranging in scope, and has implications for millions of citizens, particularly public sector workers.

I also thank all noble Lords for their contributions. As the noble Lord, Lord Davies, said, I am sure that we have all learned a great deal from the Bill. I certainly know a lot more about public sector pensions than I did when we started out. I express my appreciation to the Bill team, for its expert help and support and, not least, its patience in explaining some of these complexities.

Noble Lords across the House have made valuable contributions; certainly, the judicial offices part of the Bill saw a very high-quality debate, with issues arising that apply not just to judicial offices but across the board, to public services and the holding of high office. Again, I thank colleagues for their co-operation. I believe that we have worked hard and well on this Bill.

Lastly, I put on record my thanks to Sarah Pughe in the Liberal Democrat Whips’ Office, for her work on the Bill, and for the professional support that she has given me throughout its passage.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I echo what the noble Baroness, Lady Janke, has said. I thank the Minister and his team for their comprehensive support to my noble friend Lord Davies of Brixton and myself. It was a very complicated Bill and I know that, like the noble Baroness, Lady Janke, I needed some guidance through it. This is important legislation for public service pensions. It will guarantee pensions for public servants—something which, of course, we all agree with. We are aware that there may well be further amendments in the other place as well as further legislation given that there are ongoing cases currently in court. My noble friend Lord Davies of Brixton is relatively new to the House and, I have to say, he has started extremely well. It is not often, when taking part in your first Bill, that you manage to influence government policy in the way that he has; my noble friend deserves congratulations.

I was present throughout all the debates and, when we debated the mandatory retirement age, I felt there was a sense of relief because it was an easily understood issue. Many noble and noble and learned Lords took part in that debate with a level of passion not forthcoming in the other more technical parts of the debate. Nevertheless, I thank the Minister for his support as the Bill transitioned through the House.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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I thank all noble Lords who have just spoken for their kind remarks; I am pleased that we have got to this stage.

Public Service Pensions and Judicial Offices Bill [HL] Debate

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Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, I thank the Minister for his presentation, and I shall speak first to Amendment 48, on the cost control mechanism. We agree with the points made by my noble friend Lord Davies of Brixton, reiterated and added to by the noble Baronesses, Lady Kramer and Lady Janke. In the Commons, we raised these concerns over the introduction of what the Government call the “symmetrical economic check” and voted that this particular reform of the mechanism should not be added to the Bill. I will not repeat the background, which has been expertly put forward by my noble friend, but will just echo the concern that this breaks the Treasury’s 25-year guarantee that there would be no further fundamental reforms.

In 2011, the Government’s Paymaster-General said that those reforms represented a settlement for a generation, and they arose out of the 2011 Hutton review. Further, does the Minister recognise our concern that these reforms risk undermining the faith of public service workers in their pension schemes? What does the Minister expect of future reforms? Since the Government are clearly set on pushing ahead with the economic check, what would be most helpful now are answers to the questions put by my noble friend Lord Davies on how that would work in practice.

We raised concerns in the House of Commons that the check was insufficiently transparent and gave too much room for ministerial interpretation. As has been said, the Government’s answer is that discretion will be limited as the check will be linked to objective and independent figures from the OBR, although that particular element is not set out in the Bill. I should be grateful if the Minister confirmed that. I am hopeful that he will be able to provide some more detailed answers on the process that we should expect and how the OBR figures will be used—a point made by my noble friend Lord Davies.

Turning to Amendment 54, it is fair to say that it is an unexpected addition to what is in reality a technical Bill. It causes one to reflect on the Government’s lack of control of their own Back-Benchers in the House of Commons. The Labour Party supports the broad thrust of the new clause but shares concerns over its wide scope and possible unintended consequences. We also agree with the noble Baronesses, Lady Kramer and Lady Janke, that there is a huge element of government overreach here and we are mindful that the amendment represents directions, not guidance.

We in the Labour Party are unequivocal in our opposition to the divisive and discriminatory use of BDS against the State of Israel. We do not believe that such an approach is appropriate or would enhance the prospects of peace through a negotiated settlement to the conflict, based on a two-state solution. However, regrettably, the clause is poorly worded, too broad in scope and, as we have heard, could cause difficulties for local authorities wanting to take a principled stance on, for example, China’s treatment of the Uighurs. Many other examples have been given in the debate. It is clear that the Government have chosen to progress the Bill with this additional clause but also intend to introduce further legislation in the Queen’s Speech that will be more detailed in this area. It would be helpful if the Minister clarified what comes next and how concerns raised in today’s debate will be considered. What ongoing engagement are the Government having with the Local Government Association, which has raised concerns, and many other bodies interested in this area? I understand that a full consultation process is required before any guidance or directions can be issued under the new clause. What will that consultation process look like? Are there plans to launch a consultation, or will that not be entered into until further legislation is brought forward at the Queen’s Speech?

Finally, I repeat a question on Russia asked by a noble Lord. If schemes want to divest quickly, for example because of links to Russia—Gazprom was mentioned—would anything in the directions under this clause of the Bill put that ability to act in jeopardy in the future? Can the Minister talk to this specific point? It is obviously extremely pertinent right now but there may well be similar issues in future.

Just to be clear, if my noble friend were to press his amendment to a vote, we would abstain.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, I am pleased to know that the great majority of the amendments have been well received. I thank all noble Lords for their considered contributions. There was quite a bit to cover and a number of questions. As noble Lords would expect, I will do my best to answer them all, or as many as possible within the timeframe allowed.

As the noble Lord, Lord Davies, said, two key themes have emerged in today’s debate. The first is guidance on investment decisions for the Local Government Pension Scheme, and the second is the economic check element of the cost control mechanism reforms. I will start with the latter and turn first to the CCM, as it is called, and in particular the economic check, as raised specifically by the noble Lord, Lord Davies of Brixton. I will speak to Amendment 48. I understand from the noble Lord’s contribution that his concern is specifically with this check, but it is important to note that the effect of rejecting Commons Amendment 48 would be also to reject the framework for the reformed scheme-only design, which, as the noble Lord will be aware, is widely supported overall.

I turn to why we think the economic check is needed. It will ensure consistency between member benefit or contribution changes and changes in the wider economic outlook, as I addressed in my opening speech. To address the question of whether this is objective, the economic check will be linked to the OBR’s independent and objective measure of expected long-term GDP growth and the long-term earnings assumption. It will operate purely mechanically, with no scope for interference from individuals or groups from within government or outside. It will therefore operate transparently and be linked to an objective and independent measure of expected long-term earnings and GDP growth. Further details on the design and operation of the economic check have been set out in the Government’s consultation response published, as the noble Lord in particular will be aware, in October 2021.

I will go a little further on the clause making reference to different sectors of the economy. The Bill implements the framework for the economic check, which will ensure consistency with member benefit and contribution changes. The Bill will allow Treasury directions to set out how the economic check should operate its scheme valuations, including whether and to what extent the growth in the economy, or any sector of the economy, of the UK or any part of the UK should be taken into account. This will allow the economic check to be based on the OBR’s independent projections of long-term UK GDP growth. I will talk more about directions in just a moment. We believe that these reforms will make the mechanism more stable from the 2020 valuations onwards and allow it to operate more in line with its objectives, giving members greater certainty with respect to their retirement incomes.

I turn to points raised by the noble Lords, Lord Davies and Lord Ponsonby, my noble friend Lady Altmann and others on the 25-year guarantee. I took note of the points raised, but the Government do not believe that these reforms breach the 25-year guarantee. The elements protected by the 25-year guarantee are set out in legislation—namely, Section 22 of the Public Service Pensions Act 2013—and the cost control mechanism is not included.

The Government are making these changes following a thorough and independent review of the mechanism by the Government Actuary and a full and open consultation process. As I have noted, the Government Actuary’s report makes clear that it does not seem possible for the mechanism to be able to protect the taxpayer unless it considers the wider economic outlook. The symmetrical operation of the economic check will also protect members. Furthermore, the reforms will lead to a more stable mechanism, with both benefit reductions and improvements becoming less likely, which aligns with the spirit of the 25-year guarantee.

I turn to the original objectives of the cost control mechanism, on which I will again delve into more detail to try to give noble Lords some reassurance. The noble Lord, Lord Davies, asked for greater clarity on the CCM. As I set out in my opening remarks, the Government asked the Government Actuary to review the mechanism following provisional results from the 2016 valuations. This was the first time the mechanism was tested, and the provisional results indicated floor breaches across all schemes for which results were assessed, leading to concerns that the mechanism was too volatile.

As part of this review, the Government Actuary was asked to assess whether and to what extent the mechanism was working in line with the original policy objectives for the mechanism. These objectives are to protect taxpayers from unforeseen costs, to maintain the value of schemes to members and to provide stability and certainty on benefit levels, so the mechanism should be triggered only by extraordinary, unpredictable events. These objectives have been retained since the mechanism was first introduced in the Public Service Pensions Act 2013.

The mechanism was introduced following the recommendations of the Independent Public Service Pensions Commission in 2011. The commission, as the House will know, was chaired by the noble Lord, Lord Hutton of Furness, and specifically recommended a mechanism to protect the Exchequer from increased costs. However, the final mechanism negotiated between the Government and member representatives is symmetrical and so also maintains the value of pensions to members when costs fall.

Let me now turn to the second theme of BDS, as raised by several noble Lords. I hope I can give some reassurances. It was particularly raised by the noble Lord, Lord Davies, and the noble Baronesses, Lady Sheehan and Lady Kramer. I thought the remarks from the noble Lord, Lord Mann, were interesting, very balanced and very helpful. I hope my remarks chime to a large extent with what he said.

As I set out in opening, Commons Amendment 54 does not put a requirement on schemes to make any immediate decisions regarding their investments. It expands existing powers for the responsible authorities to issue guidance or directions, both of which would be drafted and consulted on. I reiterate that this would involve extensive engagement with the LGPS community over the usual 12-week consultation period, during which time all views and concerns would be considered. Any guidance or directions produced would set the parameters out in detail.

There will be consultation with the LGPS community when framing such parameters to ensure that all views and concerns are considered, including on ESG matters, which were raised by the noble Baroness, Lady Janke. I understand that the contributions made by several noble Lords, including the noble Baroness, were to do with ESG. I hope I can ease concerns by assuring the House that this amendment is strictly in relation to UK foreign and defence policy, as reiterated very strongly by the noble Lord, Lord Mann. Any guidance or directions issued would not seek to restrict decisions that meet the Law Commission’s test for investment decisions influenced by non-financial considerations except in a very narrow area concerned with UK foreign and defence policy.

In all other areas the existing tests would apply, namely that scheme managers must have good reason to think that scheme members would share their particular concern and the decision does not involve a risk of significant financial detriment to the fund. If issued, such guidance would seek to provide protection to LGPS funds by preventing decisions which would otherwise have been subject to challenge under the aforementioned Law Commission tests. To reiterate, this power would not be used to restrict the proper account of ESG matters in investment decisions.

To go a little further, I reiterate that these anti-boycott provisions are not about fossil fuels or climate change. The Government have passed legislation to require pension schemes to state clearly their policy on how they take account of climate change and its risks. Clearly, climate change will have long-term financial consequences. Notwithstanding that, fuels like natural gas will continue to play a vital role in Britain’s energy mix, particularly in the production of hydrogen as we transition to a net-zero economy. We need fossil fuel companies to invest in the new technologies to help deliver what we must do to reach net zero.

I will move on to focus on the use of “directions” as opposed to “guidance”—or just to discuss both—a point raised in particular by the noble Lords, Lord Davies and Lord Ponsonby. Administering authorities must have regard to guidance issued by the responsible authority. Directions allow responsible authorities to direct specific action by a scheme manager. For example, a direction may be considered appropriate if the responsible authority is satisfied that the administering authority is failing to act in accordance with guidance.