Pension Schemes Bill

Viscount Thurso Excerpts

Committee stage
Wednesday 14th January 2026 Grand Committee

[Baroness Altmann (Non-Afl)]

Perhaps I could assist the Committee. These amendments are asking for a publicly available report that clarifies and sets out all this information on a basis that council tax payers, for example, whose money is being used, can see with clarity: it is provided to them. With all due respect, they will not read the actuarial report, but having a properly set-out review that explains all this clearly, in language that people can understand, would have huge value.

[Viscount Thurso (LD)]

My Lords, I am sure that my noble friend on the Front Bench will give our view on the generality of these amendments. I have one small question that I want to put to the noble Viscount in respect of Amendment 16.

Broadly, I am in favour of clarity of investment function, and I suggest that any well-run fund has a very clear statement of its objectives that everybody can see. My question is simply about the use of the phrase “risk elimination” in subsection 3(a) of the proposed new clause. This goes to the heart of one of the problems of discussing surpluses and everything else: it seems to me that anybody making investments who is seeking to eliminate risk is in the wrong industry. They really ought to be doing something else, because you cannot have any reward without risk. I humbly suggest that it should refer to “risk appetite”. It is perfectly correct for any set of investing trustees or any fund to have clarity as to the risk appetite that they wish to have to achieve the investment objectives that their pension fund has; I just question the use of the word “elimination”.

--- Later in debate ---

[Viscount Thurso (LD)]

May I ask one point of clarification from the noble Viscount, Lord Younger, when he comes to wind up at the end of this debate, again on risk? I read this amendment as being about the risk register—the list of risks faced by the organisation and how they are dealt with—rather than the level of risk that is taken in investing assets, which will determine the return level. I wonder whether he could give us clarity on that.

[Lord Katz (Lab)]

My Lords, I am grateful to the noble Viscount, Lord Younger, for tabling these amendments and, as the noble Lord, Lord Fuller, said, for giving us this short but sweet opportunity to discuss the management of the schemes.

I join the noble Lord, Lord Fuller, in using this opportunity to pay tribute to all those who are involved in the work of running the LGPS. He is absolutely right that it is a thankless and hard task; this is an opportunity for me to put on record that I am in complete agreement with him on that matter, although I say gently, as we are on the last group for today, that his definition of “sexy” differs from mine somewhat—but each to their own.

I recognise that the intention behind these amendments is to ensure the robust management of funds and assets in the LGPS. The Government share this aim and are taking steps to ensure that the reforms are implemented soundly. I am happy to confirm to the noble Viscount, Lord Younger, that “management”, as established in Clause 8, is not a narrow administrative concept but a comprehensive responsibility encompassing governance, oversight and compliance. The Government are clear that administering authorities and asset pool companies must regard adherence to all applicable laws and regulatory requirements as a core, non-negotiable element of their management duties.

This expectation reflects the principle that robust compliance is fundamental to safeguarding assets, maintaining public confidence and ensuring accountability throughout the system. In particular, under the provisions of this Bill, all investment management activity beyond setting high-level investment strategy will be delegated to the asset pool company, which will be required to seek authorisation from the Financial Conduct Authority. FCA authorisation and supervision will provide vital assurance to members and employers that very large pools of capital will be managed properly, including ensuring that robust procedures for identifying and managing risk are in place. The Government have written to the asset pools to set out the new requirements in Clause 1 and are engaging closely with pool company leaders to monitor progress on meeting them in good time. In addition, subject to the passage of the Bill, the Secretary of State intends to make regulations and issue guidance on asset pooling and fund governance, which will set out the expectations on LGPS funds and pools.

On strengthening fund governance, administering authorities will continue to be responsible for holding pools to account on their performance, including on how risks are managed. To strengthen governance and accountability further, regulations will require administering authorities to appoint the new positions of “senior officer” and “independent person”, subject to the outcome of the consultation. Senior officers will take the leading role in representing their funds in the governance of the asset pool in which they participate, and independent persons will offer professional expertise to support pensions committees on investment strategy, governance and administration—including holding the pool to account.

Administering authorities will be better able to manage risk and ensure compliance as a result of the new powers relating to independent governance reviews set out in Clause 5. Independent governance reviews will ensure that administering authorities review their governance and their compliance with the legislation, supported by independent scrutiny, to provide assurance to members and employers. In response to the question from the noble Viscount, Lord Younger, on whether we are attempting to constrain the concept of management, the answer is that we are not. The list provided is an inclusive one, not an exhaustive one. As I have said, compliance with laws and regulations and effective risk management are assumed in the Bill, as they are in existing LGPS legislation, with the latter also provided in the requirement for asset pools to be regulated by the Financial Conduct Authority.

The provisions in this Bill are already adequate to ensure that asset pool companies and administering authorities are compliant with the law and have adequate controls in place with regard to the identification and management of risks. Given that, as well as my explanations, I hope that I have satisfied the noble Viscount, Lord Younger, and provided the assurances that he sought. I respectfully ask him to withdraw his amendment.