Pension Schemes Bill

Manuela Perteghella Excerpts

Wednesday 3rd December 2025 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I rise in support of the Government’s new clauses, particularly those that relate to the pre-1997 pensionable service indexation where scheme rules allow. That will mean that pensioners whose pension schemes became insolvent through no fault of their own and that have failed to keep pace with inflation will have that rectified. As I mentioned yesterday in my speech on the Budget, that will benefit more than 250,000 Pension Protection Fund and financial assistance scheme members.

I pay particular credit to the Pension Action Group, the PAG. It was formed in 2003 following the collapse of the Allied Steel and Wire pension scheme, which left thousands of workers without employment or their promised occupational pension. They are not covered by the Pension Protection Fund, which was introduced by the Pensions Act 2004 for members of defined benefit schemes whose employer went bust after 6 April 2005. The Pensions Action Group campaigned first for the financial assistance scheme to be set up for members of schemes that went bust, then for improvements to FAS benefits to bring them into line with those of PPF members.

In the last Parliament, members of the Pensions Action Group gave evidence to the Work and Pensions Committee on the hardship experienced due to the policy of not indexing pre-1997 benefits. As a relatively new Select Committee Chair, I remember hearing from them at a separate meeting, and it was so moving. Within weeks, unfortunately, different members were dying because of their age. Benefits were not going to their families, and they were not going to have the benefits that we see rightly being given to this group.

FAS members did most of their service before 1997, and most were in schemes that provided for indexation on all members’ pensionable service. Non-indexation of FAS compensation meant that the average award—about £2,700—was progressively lower than the amount expected from the original pension schemes. Terry Monk told the Committee that

“people should get what they paid for—end of story.”

Richard Nicholl said that

“people paid extra effectively, for full indexation…it is only fair that it goes to those who have paid for it.”

I pay credit to the Deprived Pensioners Association, which gave evidence to the Committee about the impact of the non-indexation of pre-1997 on PPF members. Having heard their evidence, the Committee recommended that the Government legislate to allow both compensation schemes, FAS and PPF, to provide indexation on pre-1997 benefits where scheme rules allowed.

I am incredibly grateful to the Pensions Minister for listening and to the Secretary of State for Work and Pensions, who came to the Committee a couple of weeks ago and listened to concerns from members, including the hon. Member for Torbay (Steve Darling). What has happened is right, and I reiterate my thanks.

[Manuela Perteghella (Stratford-on-Avon) (LD)]

I rise to speak to two new clauses that stand in my name. The first is new clause 3, which concerns the use of the special rules for end of life form to ease the burden on people with a terminal illness seeking support from the Pension Protection Fund or the financial assistance scheme; the second is new clause 19, which deals with fossil fuels and climate risk. Those issues are very different in nature, but they share a common thread: both seek to improve the governance, fairness and long-term resilience of our pension system. I will also speak in support of new clause 11, as it seeks to remedy HSBC’s unjust clawback policy that the Midland Clawback Campaign has been fighting against.

New clause 3 concerns terminal illness and the use of the special rules for end of life form, or SR1. This amendment was born out of the experience of one of my constituents, Nigel. Nigel was diagnosed with incurable stage 4 pancreatic cancer. He told me about the issues he faced in providing several forms, applications and other bits of paper to providers just to demonstrate eligibility and his terminal illness. He told me his story and about the hurdles he encountered following his diagnosis, at what was a very stressful time.

[Jim Shannon (Strangford) (DUP)]

I have been contacted by some Members of the Northern Ireland Assembly about this issue—the thresholds in cases where a death occurs unexpectedly or suddenly, or when an illness comes on very quickly. When the Minister sums up at the end, I hope he will address that issue, for the sake of those Northern Ireland Assembly Members who asked me to raise that very question today. The hon. Lady is right; well done to her for highlighting this issue.

--- Later in debate ---

[Manuela Perteghella]

I thank the hon. Member for his intervention. When people get terminal illnesses, it is a time full of grief and stress, so new clause 3 aims to address the bureaucratic barriers those people face in accessing compensation or assistance from the Pension Protection Fund or the financial assistance scheme. At a moment when time is precious and stress is already immense, too many people are forced to navigate repeated administrative hurdles simply to demonstrate what another arm of the state has already accepted.

The new clause would require the Secretary of State to set out a clear, fair and straightforward process for demonstrating terminal illness—one that places the least possible administrative burden on the individual. Critically, where the Department for Work and Pensions already holds a valid SR1 form confirming a terminal diagnosis, that form must be shared with the PPF or the FAS; the person should not have to start again from scratch and provide several forms or applications again. Once the necessary information has been received, the PPF and the FAS should be required to make payments within a defined timeframe.

These are not abstract procedural improvements: they would materially affect the quality of the precious time a terminally ill person has left. New clause 3 reflects the explanatory statement’s intent to allow a valid SR1 form to serve as sufficient proof of terminal illness for these purposes, reducing duplication and speeding up support. It is a modest, humane and pragmatic change, and I hope the Minister will consider it in his concluding remarks.

I turn now to new clause 19, which deals with fossil fuels and climate risk. The new clause would require the Secretary of State to make regulations that would require specific schemes to exit investments in firms that are significantly exposed to thermal coal, and thereafter to review whether that restriction should extend to oil and gas expansion. This is a financial risk measure as much as it is a climate one. Despite the welcome climate reporting requirements in the Pension Schemes Act 2021, schemes remain heavily invested in the most damaging fossil fuels. These investments are doubly harmful. They risk becoming stranded as technology and policy move on, and they depress returns across the rest of the portfolio by contributing to climate damage that ultimately, as we have already heard, drags down the entire global economy.

--- Later in debate ---

[Manuela Perteghella]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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