Pension Schemes Bill (Seventh sitting)

Mark Garnier Excerpts

Committee stage
Thursday 11th September 2025 Public Bill Committees

[Mark Garnier (Wyre Forest) (Con)]

The Opposition support the clauses and welcome the action to legislate formally for defined-benefit superfunds. Securing this in a legislative framework will give trustees and sponsors greater confidence when considering this new consolidation option for defined-benefit schemes. The measures build on the consultation conducted under the previous Government, as well as the intention that the former Chancellor of the Exchequer, my right hon. Friend the Member for Godalming and Ash (Sir Jeremy Hunt), laid out in his 2023 Mansion House speech.

Superfunds are capital-backed consolidators that allow defined-benefit schemes to shift liabilities away from the sponsoring employer, thereby enhancing the security of members’ benefits. By transferring pension obligations to a superfund, companies can reduce long-term liabilities and refocus on core operations, while maintaining strong protection for retirees. Superfunds offer a new endgame strategy for DB schemes unable to secure an insurance buy-out, helping to safeguard member benefits in underfunded or marginal schemes. These measures all seem reasonable, and as I said, this work started under the previous Government, so we wholeheartedly support it.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clauses 52 to 56 ordered to stand part of the Bill.

Clause 57

Prohibition of unapproved superfund transfers

Question proposed, That the clause stand part of the Bill.

[Torsten Bell]

Chapter 3 sets out the criteria for approving superfund transfers. The clause protects the integrity of the superfund regime that we are aiming to put in place through the Bill by making it clear that the penalty for committing an unauthorised superfund transfer may be a fine, imprisonment for up to two years, or both. I commend the clause to the Committee.

Question put and agreed to.

Clause 57 accordingly ordered to stand part of the Bill.

Clause 58

Approval of superfund transfers

--- Later in debate ---

[Torsten Bell]

Before a 2022 High Court ruling, it was widely accepted that the Pensions Ombudsman had the status of a competent court, so that a Pensions Ombudsman determination alone would be sufficient for a pension scheme to recoup an overpayment from a member’s pension. The ruling called that into question. Clause 93 simply reinstates the original policy intent that the ombudsman’s determination in pension overpayment dispute cases is sufficient. That is what was debated in Parliament when the ombudsman was established in 1931. Without this legislation, a large additional burden would be imposed on an already stretched county court system.

Turning to clause 94, being diagnosed with life-limiting illness can cause unimaginable suffering for a person and their loved ones. Those nearing the end of their life should be able to access the financial support that they need at that difficult time. I am pleased that we are now able to introduce this clause to amend the definition of terminal illness in the Pension Protection Fund and financial assistance scheme legislation.

Terminal illness is currently defined as where a member’s death from a progressive disease can be reasonably expected within six months. Clause 94 extends that to within 12 months. These new arrangements may enable a few more affected members to claim a payment, but they will mostly enable members to receive payments at an earlier stage of their illness. That small change could make a big impact for affected members at a very difficult time.

Clause 95 covers another aspect of the Pension Protection Fund: its levy. Improved scheme funding of the PPF means that it is far less reliant on the levy than it was previously. For the 2025-26 financial year, the levy has been set at £45 million, its lowest rate. However, the current legislation restricts the PPF board from increasing the levy by more than 25% of the previous year’s levy. That has made it risky for the PPF to reduce the levy significantly, even when it is not needed, because it could take several years to restore it to the previous levels if required. Clause 95 gives the board greater flexibility to adjust the levy by amending the safeguard. The new safeguard will be to prevent the board from charging a levy that is more than the sum of the previous year’s levy and 25% of the previous year’s levy ceiling.

Clause 96 focuses on pensions dashboards. Current legislation does not allow the PPF to provide to pensions dashboards information about the compensation that people can expect, or for the display of that information. The clause expands the scope of pensions dashboards to include information relating to compensation from the PPF and financial assistance from the financial assistance scheme, and it could benefit around 140,000 people. I commend clauses 93 to 96 to the Committee.

[Mark Garnier]

I will be incredibly brief. We have heard a number of details from the Minister. Clauses 93 to 96 contain what we believe are sensible and welcome amendments that reflect current market and scheme conditions. In particular, the changes related to the Pension Protection Fund are positive. With a strong funding position in many defined benefit schemes recently and the PPF’s healthy reserves exceeding £14 billion, these legislative changes are timely. The industry strongly supports the option for a zero levy, which reduces financial pressure on well-funded schemes. The Opposition wholeheartedly support these clauses.

[Steve Darling (Torbay) (LD)]

The Liberal Democrats welcome the direction of travel. As the shadow Minister identified, the industry has demanded some elements of the clauses, but they are mostly about supporting consumers. The end users of these services should be a key element of what the Bill is about.

--- Later in debate ---

[John Milne]

This is really about trying to place the Minister’s attention on this important issue—we will not press the new clause to a vote. It is about focusing the Minister’s mind on the task at hand. The undersaving groups include, but are not limited to, women, ethnic minority groups and others affected by long-term pay or pension gaps. The new clause would provide mechanisms to fund and deliver targeted support.

New clause 41 is designed to put a cap or ceiling on the amount of free advice accessed by any individual saver. It is a subset of new clause 1. Some individuals have very complicated financial affairs, which threaten to take a disproportionate amount of effort to decipher, in the event that we were to provide free advice. Those individuals will tend to be much better off and with multiple pension pots, which is precisely why they will end up needing more advice. Placing a ceiling on the advice available would ensure that the free advice was targeted only at those who needed it most.

New clause 43 is a potential solution to the information deficit that we are trying to address. It would enable auto-enrolment into Pension Wise as the vehicle for giving advice. We tabled it as a probing amendment to provoke the Minister’s consideration. The purpose of the new clause is to help people properly understand and engage with their pension by auto-enrolment into Pension Wise advice at key stages, with the freedom to opt out. Pension Wise guidance is free, impartial and has very high satisfaction rates—94%—among those who have used it, yet uptake remains strangely low, which is an excellent illustration of exactly why the whole advice area needs urgent attention.

Government data shows that of those who have accessed defined-contribution pension pots, only 14% have done so after receiving Pension Wise advice. That is despite various efforts, including a stronger nudge to encourage taking guidance before pots are accessed. Wake-up packs and other communications have shown limited effectiveness, and the evidence shows that savers will need more than passive information; they need action-oriented support.

If anything, the situation is getting worse. The proportion of pensions accessed after receiving guidance or advice has reduced by around 9 percentage points since 2021-22. Evidence from the DWP’s 2022 research shows that although most people start saving for retirement in their 20s and 30s, many do not start planning for retirement until their 50s. Auto-enrolment into guidance would therefore significantly increase take-up and improve retirement outcomes for many. Defined-contribution scheme members, in particular, often lack clear information about their options; Pension Wise would help fill that gap.

New clause 43 leaves flexibility for the Secretary of State to determine the appropriate ages, processes and notification methods. We recognise that it would be a significant move, and that there would be technical issues to solve. That is why we have tabled it only as a probing new clause, to explore whether the Government will look at trials or further measures to boost guidance uptake. Auto-enrolment into a pension scheme has been a great success, so perhaps the next logical step is auto-enrolment into advice. Why not try it?

[Mark Garnier]

I am keen to speak to these Liberal Democrat new clauses, because we have a fundamental problem. Research by Pensions UK shows that more than 50% of savers will fail to reach their retirement income targets set by the 2005 Pensions Commission, and closing the gap between what people are saving and what they will need must be a pressing concern of any Government. So, we need the second part of the pensions review to be fast-tracked, with a laser-like focus on pensions adequacy.

This takes me back to when I first became a Member of Parliament some 14 or 15 years ago. The big issue at the time in the independent financial advisers market was the retail distribution review. My hon. Friend the Member for West Worcestershire (Dame Harriett Baldwin) and I held our first Backbench Business debate on the retail distribution review, and it is recorded in Hansard that we predicted this would be a problem as a result—fewer independent financial advisers being available to give advice.

There were three key elements of the retail distribution review. They were very well-intended, and let us not beat about the bush: there were reasons why they were brought about. One of them was intended to raise the professional standards of independent financial advisers, and I think we would all agree that that has to be a good thing. The advisers complained at the time because they did not want to take exams. If they had been in the business for 40 years, why would they feel that they needed to take an exam? But why should they not improve their standards? There were issues to do with lifetime liability—advisers’ taking responsibility beyond seven years for advice that they had given, which was very contentious. Also there was clarity on the models of advice being given.

However, the key element that caused the problems was where independent financial advisers, prior to that moment, were being paid a commission on the product that was being sold, which potentially led to product bias. If a commission was being paid at 2.5% on one product and 1% on another, the independent financial adviser would have a material interest in selling that higher-commission product, even if it was a worse product. That could have been dealt with by having a maximum commission rate on all the products; it could have been set at 100 or 150 basis points, which would have dealt with that problem. We saw this issue in the London stock exchange until 1986, when there were fixed rates of commission, so nobody could undercut another broker by providing cheaper dealing measures. We therefore knew it could work.

The direct result of all this was that when the retail distribution review was brought in by the FCA in January 2013, we saw a massive drop in the 35,000 independent financial advisers. That has since recovered, and we now have around 36,000 advisers. The important point is that a financial adviser who goes out to persuade somebody to take advice on their pension now needs to charge a fee. Before that, to the person receiving the advice, the financial adviser would appear to be doing it for nothing. There would be an agreement, so it would be transparent and they would know exactly what was going on.

However, the point is that now, if I am being asked to put money into a pension fund and I know I am paying the 1.5%, the fact that the commission is coming out of the money going in feels much less restrictive than being sent a bill for £1,500 or £2,000. That is much more difficult to meet, even though it comes to the same point in the end. The result of this is that, whereas about 50% of people used to put money into pensions and receive financial advice, the number is now 9%.

There are an awful lot of newly elected Members of Parliament here. After 10 or 15 years, they will find themselves in a Bill Committee making these points and saying, “We told you this would be a problem. We told you so, yet here we are trying to resolve a problem that we knew was going to happen, and we allowed it to.” I am very cynical about Parliament sometimes, as all Members will be eventually. The important point is that the Liberal Democrat new clauses are an attempt to deal with the problems that we knew would come about. Auto-enrolment is brilliant—we really like auto-enrolment—but there are various things coming in under this Bill. We have to be careful that the things we bring in with the best intentions do not end up creating bigger problems due to unforeseen circumstances.

If the Liberal Democrats pressed new clause 1, we would happily support it, as it is a good amendment. It will be interesting to see if that comes through, but this is something we have to get right. People need to get advice because far too many people are going to go barrelling into their 67th birthday, or whatever it is, and suddenly discover that they have run out of money, and that is not a good place to be.