Pension Schemes Bill

Neil Duncan-Jordan Excerpts

2nd reading
Monday 7th July 2025 Commons Chamber

[Neil Duncan-Jordan (Poole) (Lab)]

The Bill represents a timely attempt to create a system whereby fewer and bigger pension funds can provide better value for members and do more to support the UK economy. Key to this, though, will be ensuring that pensioners get a decent income in retirement, alongside creating the conditions that allow pension funds to invest in ways that benefit the UK, support good jobs and finance a just transition to a low-carbon economy.

The Bill needs to acknowledge, in the direction it takes, the scale of the task that we face. One in six pensioners today lives in poverty. Only 62% of pensioners receive an occupational pension of any kind, and those who do get an average of just £210 a week. Half of defined-contribution savers—around 14 million people—are not on track for the income they expect, and the 2017 auto-enrolment review recommendations have still not been implemented. Those challenges need to be addressed, along with the unfairness of the current rules around tax relief, which benefit higher earners and need reform.

As has been mentioned this evening, the Bill does not consider the specific issue of adequacy, and how the state pension interacts with defined-benefit and defined-contribution schemes. Given that the aim of a pension is to provide an income in retirement, it is vital that we look at pensions in the round, not just those associated with occupational or private schemes. A statutory review into retirement incomes every five years would give this and future Governments the oversight needed to regularly assess the adequacy of our pension system, including the opportunity to look at contribution rates for employers and employees. I am aware that the second stage of the pensions review will consider those points, but I would be grateful if the Minister gave a little more clarity on when that is likely to begin.

The Bill needs to be strengthened on the issue of climate change and the destruction of nature. UK pension schemes continue to hold around £88 billion in fossil fuel companies, including those involved in new coal, oil and gas exploration, and have investments in companies linked to deforestation around the globe. Over 85% of leading schemes lack a credible climate action plan. Consolidating smaller pension pots into larger megafunds provides the ability to invest in long-term infrastructure projects, but that must not be at the expense of the environment.

[Caroline Voaden (South Devon) (LD)]

Does the hon. Member agree that there is an opportunity here to do something transformational for our local communities by enabling funds, particularly local government pension funds, to invest in much-needed infrastructure like care homes, special schools or even our high streets, which would provide a secure long-term return and could be transformational for local communities that need investment?

[Neil Duncan-Jordan]

I think that what the hon. Member raises is the creativity that we need on this issue, so that we look beyond the obvious investments towards some that perhaps have more social worth. I hope that the Bill will allow for that.

For pension savers to have a secure future, we will need to phase out investments in fossil fuels. As the Chancellor has recognised, all financial sector regulation and legislation should integrate climate and nature. I would be grateful if the Minister could therefore address whether there will be legislative action, not just voluntary commitments, to phase out the destructive environmental investments that pension funds currently make, and to introduce an element of the Bill that acknowledges the connection between green investments, environmental protection and decent pensions.

Turning to the local government pension scheme, governance structures vary widely across the existing pools, and reporting has been inconsistent. Pooling arrangements have not always provided the power to influence investments, which is why the TUC, for example, is calling for a thorough review of the performance of existing pools to identify best practice in the relationship between funds and pools, as well as in governance arrangements, and for the introduction of clear and consistent reporting requirements before any acceleration and further consolidation takes place.

It is also important to point to the democratic deficit that exists within the scheme as a whole. While the role of member representatives within the LGPS is a great strength, they are largely absent from pool governance structures at present, and this legislation does not specify a role for those people. Given that pension funds are the deferred wages of the workforce, we must ensure that there is greater member engagement and democratic oversight by those involved in the scheme. Not only should this stretch to having guaranteed places on boards with full voting rights, but it must ensure that scheme members can have their say as to where their money is invested. There will undoubtedly be occasions when members are concerned about investments in particular industries, or, I would add, in particular countries, and they should have a mechanism by which those views can be expressed.

[Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)]

Does my hon. Friend agree that it is good that, in the local government pension scheme, representatives of both employers and employees can sit on the pension committees, and that we often have trade union representatives on the committees as well?

[Neil Duncan-Jordan]

My hon. Friend is quite right. Trade unions do sit on many of the LGPS committees. I was making the point that it is on the pools where there is less representation for those member voices to be heard, and that is extremely important.

Finally, I want to talk about the pre-1997 pensioners. We know that those who have seen the biggest drop in income are those who built up pensions before 1997. They have not received an annual inflation-linked increase to their pension and, over time, particularly when inflation is high, the value of their pension is eroded. Some 80,000 Pension Protection Fund members, mostly older people and disproportionately women, including some of my constituents, find themselves in this position. I hope the Government will therefore consider legislating to provide inflation protection on pre-1997 benefits, and to give the PPF greater flexibility to use its surplus to give discretionary improvements to members.

In conclusion, the idea that workers’ pension funds can be used to build much-needed social housing and invest in green technology and jobs is something that a progressive Labour Government should be proud of, and I hope we can ensure that the Bill delivers a win for pensioners, a win for our environment and a win for society as a whole.