Thursday 11th September 2025
(1 day, 17 hours ago)
Public Bill CommitteesPension Schemes Bill 2024-26 View all Pension Schemes Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 September 2025 - (11 Sep 2025)
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 3 / Noes: 8 - Question accordingly negatived.
The Chair
I remind the Committee that with this we are discussing the following:
New clause 40—Targeted Advice Access for Under-Saving Cohorts—
“(1) The Secretary of State must make regulations to provide enhanced access to pension advice or guidance for cohorts identified as under-saving for retirement.
(2) Regulations may make provision for—
(a) identifying under-saving groups, including but not limited to—
(i) women,
(ii) ethnic minority groups, and
(iii) others affected by long-term pay or pension gaps;
(b) mechanisms to fund and deliver targeted support;
(c) reporting and evaluation requirements to assess take-up and effectiveness.
(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
This new clause allows for the creation of targeted pension advice or guidance interventions for groups at risk of under-saving for retirement.
New clause 41—Cap on cost of advice for pension holders—
“(1) The Secretary of State may by regulations introduce a cap on the cost recoverable for providing pension advice per pension holder under any scheme operating free or subsidised advice.
(2) The cap may vary depending on—
(a) the value of the pension pot;
(b) the type of pension scheme;
(c) the complexity of advice required.
(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
This new clause enables the introduction of a cost ceiling for advice provision to members of pension schemes.
New clause 43—Auto-Enrolment into Pension Wise Guidance Sessions—
“(1) The Secretary of State must make regulations requiring that individuals reaching prescribed ages are auto-enrolled into Pension Wise guidance appointments.
(2) The regulations may provide for—
(a) opt-out procedures;
(b) the prescribed ages or pension milestones at which auto-enrolment occurs;
(c) the means by which schemes notify members and facilitate appointments.
(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
This new clause aims to increase engagement with Pension Wise by auto-enrolling members into guidance sessions at key decision points, with the ability to opt out.
David Pinto-Duschinsky (Hendon) (Lab)
After hearing the untrammelled cynicism of the Opposition, I thought there would be nothing better than to bring some fresh-faced optimism to the debate. I am very grateful to be called, Ms Lewell. I have a couple of brief points to make.
As we heard in the interventions made just before the break, there is unanimity on the need to tackle the incredibly important issue of advice. As the shadow Minister pointed out, levels of advice to pension holders have collapsed, which has profound consequences, particularly for those who need help the most. There is real consensus on the need to address this issue, and the Government are making huge strides to do so, whether that be the introduction of the dashboard or the now renamed Money Wise. As the hon. Member for Horsham mentioned, the Work and Pensions Committee has also looked at this issue, the lesson from which is that this is a horses for courses problem—a complex problem that requires complex, nuanced and sophisticated solutions that target different types of group and use different approaches. That lies at the heart of why I am asking some questions about the new clause.
First, exactly because what we need is a quite sophisticated, multi-pronged and varied policy response, using a quite basic, one-size-fits-all response in statute feels like the wrong way to address the problem. Secondly, as the shadow Minister highlighted, I am somewhat worried about the law of unintended consequences. There is the simple issue of cost. My quick consultation of Google suggests that 378,000 people turn 40 each year and the most basic advice normally costs several thousand pounds, so the bill will not be insubstantial. We may have had a conversation earlier about that, but how the cost might be covered has not really been addressed.
As important is the broader question of capacity. The shadow Minister made an excellent point about how the capacity for retail advice was changed unintentionally by a well-meant measure. If we start looking at what capacity would be needed to offer even a basic standard of advice to over 300,000 more people each year than we are seeing now, we begin to see a problem. We need to do a lot more work on modelling how that advice would actually be provided, what the market would look like and what the second-order effects would be.
John Grady (Glasgow East) (Lab)
My hon. Friend makes a very good point, at the heart of which is the question of what work needs to be done to introduce anything along these lines. One would have to look at what the Financial Conduct Authority is doing, the existing service provisions, the costs, and how we smooth out implementation. There are a lot of practical issues with implementing something like this, are there not?
David Pinto-Duschinsky
As ever, my hon. Friend is absolutely right and his intervention goes to a third point: this also feels a bit premature.
As my hon. Friend mentioned, we are in the midst of the incredibly important advice and guidance boundary review. For many of the groups that we want to help, advice might not actually be the right solution, but guidance might be, and we are in the midst of re-tooling that. Similarly, we are in the midst of rolling out dashboards, which will transform the landscape but not fix the problems on their own; we may need to layer new policy initiatives on top. It seems that we are at risk of putting the cart before the horse.
I also add that when I read new clause 1 in detail, I saw that it refers to “advice”. On my reading, that would constrict potential policy responses and force the Government to go down the advice route, rather than provide other services that might be on offer through the advice and guidance boundary review.
The intention is good. I think there is huge consensus on the need to tackle the problem, but the right way to do it is through sophisticated and proper policy making, rather than the blunt instrument of amending primary legislation. For those reasons, I oppose this new clause.
The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)
I thank the proposers of these new clauses. I will take them in the way they were intended—to spark debate.
We have had quite a wide debate and I think there is consensus on the subject, but I want to put a slightly different spin on the problem statement we are talking about. We have come at a lot of the discussion on the new clause as if there is too little advice. I would slightly reframe the question when it comes to pensions, which is that there is too much complexity, and too little advice or guidance. I think that is the right way to think about the problem that we are confronting with the system as a whole.
I will broadly outline our approach to try to tackle that problem statement. The task is to reduce the complexity as well as to increase the guidance and the advice that are available. Having watched the pensions debate over the past 15 years, I have observed that we have too often made pensions more complicated, and then said, “If we only had this advice, it would all be fine.” I do not think that is the right answer. That is a mistake about the nature of the system that we are delivering.
Our job is to reduce the complexity, or to reduce the consequences of it being difficult for people to deal with. That is obviously what a lot of the Bill is trying to do. With small pots, the aim is obviously to reduce complexity. That is what the value for money measures are designed to do. Seen through that lens, they are also aimed at reducing the costs of that complexity. The value for money regime is there to reduce the consequences of it being difficult to engage with and members not choosing their own provider.
Mark Garnier (Wyre Forest) (Con)
The Minister raises an interesting point. We have talked about a lot of different bits and pieces with complexity and all the rest of it. We have not spoken about when we educate people about money.
In the olden days, when I was a newly elected MP, I was one of the chairs of the all-party parliamentary group for financial education for young people. That was about getting financial education into the curriculum. It is probably now more important than ever that we teach people of school age about the importance of financial planning, including pensions. Can the Minister assure the Committee that he will take up with his colleagues in the Department for Education the changes that could be made to bring this type of education into the curriculum for kids, who are all going to be adults soon?
Torsten Bell
I shall take that up directly with the new Economic Secretary to the Treasury, who I am sure will talk to her colleagues in the Department for Education. I can offer the hon. Member some entirely anecdotal optimism on that issue. Whenever I now do school events in Swansea, I am seeing very high levels of financial engagement. After I have given a very worthy speech, most of the questions are not about how to reduce inequality but instead are about personal financial advice. I think the youth of today are all over it—that is my lived experience.
I have mentioned small pots and value for money. I want to flag two other areas. Dashboards have been mentioned, and they are a very large part of how we provide support. The default pensions solutions are crucial to reducing complexity, and that is probably the biggest measure in the Bill. The need to provide more advice or guidance for people to access their defined-contribution pots is reduced significantly because of the existence of default solutions. We definitely still want people to have access to advice and the ability to opt out of those defaults, but default solutions help significantly. That is why the communication of those default pension solutions, which we discussed quite extensively, is so important for people. That is why that is in the Bill.
We have touched on making more support available. We have universal access for people of any age to free impartial support through MoneyHelper—that is what the Money and Pensions Service is providing—and we have a specific focus on support for over-50s in Pension Wise. Several hon. Members have said, absolutely rightly, that access to financial advice fell in the aftermath of the reforms over a decade ago, but there is some better news on Pension Wise. The 2024 Financial Lives survey showed that of those who accessed a defined-contribution pot within the last four years, 40% had accessed Pension Wise. I think that is probably more than most hon. Members in this debate would expect, though it may not be enough. However, those people had used Pension Wise when heading towards access; they had not used it as a mid-life MOT product, which is a different thing. That 40% was up from 34% in 2020, so some things have gone in the right direction. I am gently noting that, not claiming any credit for it because it predates the election. There is a lot of overlap between what those systems of advice are providing and the measures in new clause 1.
Regarding new clause 40, I absolutely agree on how we think about under-saved groups. The groups identified in the new clause are more or less the same groups of people experiencing financial wellbeing challenges whom MaPS targets, so that is a point of consensus, but I am absolutely open to suggestions of what more we can do to make sure that we are tackling that issue. The Pensions Commission is considering the wider question of adequacy, which is why we are looking at not just average adequacy but the fairness of the system.
Kirsty Blackman (Aberdeen North) (SNP)
Will the Minister give a commitment that the commission will specifically look at groups that are less likely to have a sufficient pension, rather than just looking at an average and increasing that average?
Torsten Bell
I can absolutely give that guarantee, because that is in the terms of reference of the Pensions Commission. I will come back to the wider question of the commission in one second. I will not go into detail, but targeted support is a large part of providing more guidance, and we expect the roll-out of that early next year. There is more coming in that space; we are not relying solely on MaPS.
How should we think about the interaction of dashboards and bigger DC pots? At the moment, for lots of people entering their retirement, their DC pot may be a smaller part of their overall pension income, but as we move forward, it will become the large majority of their income. That will be very visible because of dashboards. One of the reasons MaPS has been reluctant —although I do not want to say “reluctant”—to promise to deliver the kind of automatic enrolment that is being discussed by the Committee is that a lot of planning work is under way to make sure that when dashboards come online, MaPS is ready and set up to deal with the significant increase in demand for help and in engagement that may come from that. The experience of some pension schemes in Australia is that as pension pots become bigger, there is much more demand for support and guidance. We should expect that demand to grow in the years ahead with or without dashboards, but definitely with dashboards and the other measures together.
Kirsty Blackman
When dashboards increase engagement, as we all expect they will, will the Minister report back to the House, or encourage someone to report back to the House, on how much engagement has increased by, so that we all have an awareness of it, rather than it being in stats kept in the background that we do not know about?
Torsten Bell
Absolutely. I think we will want to look at the impact across a range of measures of engagement. Do dashboards help consolidation of pots? Do they encourage people to save more? We also need to be aware of riskier behaviours that dashboards could trigger. We are currently engaged in significant user testing of the system to make sure that we have done what we can to make sure that when people have visibility of their pension pots, they do not adopt behaviours that we do not want.
On the question about the Pensions Commission from the angle of the advice and guidance sector, it is an independent commission so I cannot speak for it. However, I think the commission will have heard the focus of that question, and the length of this debate in Committee.
Turning to the specific question put by the hon. Member for Horsham on what he said was the purpose of this group of new clauses, I assure him that my mind has been entirely focused by him on this issue, and that I will continue to talk to MaPS about what further lessons there are to learn.
John Milne (Horsham) (LD)
I thank the Minister for his reply. I take his comments about trying to reduce complexity. That is a wholly good thing for all concerned, not least us. Other contributors asked, how necessary is this? Are there not services already out there, or is this not the direction of travel? Do we really need to take this action now? In answering that, I will turn the Minister’s argument about mandation back at him: if it were not necessary, it would have happened already. That is very much the case. People are not taking advice, and sadly, they are reaching retirement very inadequately prepared for it.
That, indeed, is the other half of this question. This is not just about giving advice on the best way to make use of one’s pension through auto-enrolment or whatever; it is about alerting people at a young enough age—40 or whatever—to the fact that what they have is not going to cut the mustard in any way. It is not going to deliver the standard of lifestyle they want. They still have time at 40 to do something about it, whereas at 50 or 60, they have what they have. I am 65, so my fate is sealed. That needs to be part of any solution.
On underserved cohorts, WASPI women are the classic example—a group of people who were tragically under-informed, who received inadequate letters from the Department for Work and Pensions and so on. That led to terrible distress and is a problem to this day.
Kirsty Blackman
Does the hon. Gentleman share my concern, and will he suggest to the Minister, that although it is important for those who will have great big DC pots at some point in the future, because of auto-enrolment, it is also important for people to get advice if they have a mixture of DB and DC pots, or if they have small DC pots that have built up as a result of auto-enrolment? It is not just a future problem, but a problem for people who reach pension age between now and when those big DC pots are the norm.
John Milne
That is a very fair comment—I will not repeat it. Overall, we would like to press new clause 1 to a vote, in order to put it on the record, without necessarily expecting victory.
Question put, That the clause be read a Second time.
Steve Darling (Torbay) (LD)
I beg to move, That the clause be read a Second time.
New clause 2 is about market consolidation, and ensuring that the Minister undertakes to report back so we can see how it is progressing. Clearly, market consolidation will have positive impacts, but there is a law of unforeseen consequences, so it is important to ensure that there is a regular health check on what is happening in the market. It is not only about that law of unintended consequences, but about checking out the opportunity for new entrants to come into the system, and making sure that there are no unexpected barriers. To our mind, it is good practice that one would hope would be undertaken.
The new clause is a probing amendment; we will not be pressing it to a vote, but I look forward to reassurances from the Minister. We are keen to get on the public record what he says in this area, because we know from conversations with the industry that there is some interest in the matter.
Kirsty Blackman
I highlight again that the Regulatory Policy Committee considered the monitoring and evaluation plan in the impact assessment to be weak. It said that although everything would be reviewed around 2030, there were not many other points that the Government had committed to reviewing.
In the new clause, I probably would not have picked a timescale of 12 months after Royal Assent, given the length of the road map and the timings for the introduction of a significant number of things. I appreciate that as the new clause is crafted, it can pick up on problems before they occur. If things are moving towards consolidation in advance of the timelines, the Government should be able to analyse where the prospective issues are. However, the Minister could commit to providing Parliament with a review, and either giving information to the Work and Pensions Committee or making information and statistics publicly available.
Rachel Blake (Cities of London and Westminster) (Lab/Co-op)
The hon. Member has spoken passionately about local government schemes, and I have quite a lot of experience of them. Does she agree that they have many regulations that would meet some of the proposals in new clause 2? That might allay some of her concerns and mean that we do not need a Division on the new clause.
Kirsty Blackman
I agree that there is a particularly high level of transparency in regulations around local government pension schemes that is not available in any of the other pension schemes that we are discussing. Because major primary pensions legislation does not happen often—we have a lot of secondary legislation around pensions—this is a real opportunity to ensure that the changes that are made have the desired and intended effect.
I have asked various Governments about post-implementation reviews of legislation, and I have had some interesting responses from Government Departments that did not know which pieces of legislation required a post-implementation review, nor whether they had been done. Part of my concern is that no matter whether the Government change, if there is a change of personnel, there does not appear to be any tracking process in Departments to say when post-implementation reviews will take place or whether they have been done, and there is no feedback process in place either.
Bill Committees that consider legislation have no right to an update on whether that legislation worked, and that makes no sense. If the Government say that a certain tax will take in £10 million over the next three years but nobody tells us whether that worked, how can the Government then expect us to believe that tweaking that tax will take in another £10 million when they cannot tell us how much it took in in the first place? My concern is that post-implementation review processes are not strong enough; there is not enough checking in Government to ensure that reviews take place.
I appreciate that the Minister wants this to work. He wants consolidation to happen and to have the desired positive effects. He does not want the negative effects. This is about commitment to a level of transparency so that we can all see what has and has not worked. It is not a criticism, because we all largely agree on a good chunk of this legislation; it is about all of us understanding what things in the legislation have been more positive or more negative than expected.
John Grady
Is it possible to identify any particular gaps in the competition regime? Chapters 1 and 2 of the Competition Act 1998 cover things like exclusivity arrangements, and so on. There is a regime for market studies, which would also enable this issue to be addressed, and, manifestly, this would be of serious consumer interest under the competition regime. I just wonder what gap new clause 2 addresses in the current regulatory regime.
Kirsty Blackman
My understanding is that new clause 2 calls for a report. It addresses transparency. It is all well and good that stuff on competition regulations is published—I have no idea where it is published. We are asking for a report to the House, which we would all be able to access. I did not write the new clause, but it would be helpful if the Minister agreed to transparency and to review this in good time so that we can make better decisions on future legislation.
Torsten Bell
The first thing to say is that this is focused on scale. We appreciate that the Bill would lead to major changes to the pensions market—the hon. Member for Torbay is absolutely right—and we want to understand and monitor the consolidation and scale process over the coming years. To state the obvious, market changes such the scale measures we are talking about take time, and many of the measures in the Bill will not even be implemented within the 12 months. On that basis, I hope that the hon. Gentleman will not push the amendment to a vote.
I agree on the wider point about the Bill as a whole and the need for strong monitoring and evaluation. I would probably take a slightly different approach from the hon. Member for Aberdeen North. The Bill contains a large number of measures, and the right way to monitor their implementation will be different for different parts of the Bill. When it comes to the questions of scale, which are the focus of this amendment, the monitoring—[Interruption.] That is not the response I was looking for. The monitoring is slightly more visible because we are talking about the number of workplace schemes, or at least workplace defaults, that exist.
Let me lay out a bit of what we have in place to monitor. We will be able to monitor scale, charges and, because of the interaction with the value for money regime, returns and asset allocation. Lots of the key success metrics that are meant to come with the scale changes, as well as the delivery of scale itself, will be visible. My honest view is that it is on all of us—obviously, it is particularly on the Government—to pay attention to that as we go.
On the wider question of whether we will consider further, I have already committed to do that and to come back and reflect on Report on how we do that. I put on the record my view that that is a reasonable thing to do, and I will do it, but we need to think about it differently for different parts of the Bill.
Steve Darling
I thank the Minister for putting his thoughts on the record. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 5
Report on fiduciary duty and discretionary indexation of pre-1997 benefits
“(1) The Secretary of State must, within 12 months of the passing of this Act, publish a report on whether the fiduciary duties of trustees of occupational pension schemes should be amended to permit discretionary indexation of pre-1997 accrued rights, where scheme funding allows.
(2) The report must consider—
(a) the impact of current fiduciary obligations on trustees’ ability to award discretionary increases to pre-1997 pension benefits;
(b) the potential benefits of permitting such discretionary indexation for affected pensioners;
(c) the funding conditions and thresholds under which discretionary indexation could be considered sustainable;
(d) the appropriate level of regulatory oversight and guidance required to ensure that discretionary increases are granted in a fair, transparent, and financially responsible manner;
(e) international approaches to indexation of legacy pension benefits;
(f) the legal and actuarial implications of amending fiduciary duties in this context.
(3) In preparing the report, the Secretary of State must consult—
(a) the Pensions Regulator,
(b) the Financial Conduct Authority,
(c) representatives of pension scheme trustees, members, and sponsoring employers, and
(d) such other experts or bodies as the Secretary of State considers appropriate.
(4) The Secretary of State must lay a copy of the report before both Houses of Parliament.”—(Steve Darling.)
This new clause requires the Secretary of State to report on whether the fiduciary duties of trustees of occupational pension schemes should be amended to permit discretionary indexation of pre-1997 accrued rights, where scheme funding allows.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 18—Indexation of pre-1997 benefits—
“(1) Schedule 7 (pension compensation provisions) of the Pensions Act 2004 is amended as follows.
(2) In paragraph 28(3) leave out ‘so much of’ and ‘as is attributable to post-1997 service’ in each place they occur.
(3) Leave out paragraphs 28(5)(b) and (d), 28(5A) and 28(7).
(4) In paragraph 28(6) leave out definitions of ‘post-1997 service’ and ‘pre-1997 service’.”
This new clause would make indexation of compensation provided through the Financial Assistance Scheme and Personal Protection Funds applicable to both pre-1997 and post-1997 service.
New clause 19—Indexation of pre-1997 benefits for Financial Assistance Scheme members—
“(1) Schedule 2 (determination of annual and initial payments) of the Financial Assistance Scheme Regulations 2005 is amended as follows.
(2) In paragraph 9(2) leave out the first occurrence of ‘so much of the expected pension as is attributable to post-1997 service’ and insert ‘the expected pension’.
(3) In paragraph 9(2) leave out the second occurrence of ‘so much of the expected pension as is, proportionately, attributable to post-1997 service’ and insert ‘the expected pension’.
(4) In paragraph 9(2) leave out the definition of ‘post-1997 service’.
(5) Leave out paragraph 9(3) and insert—
‘Where the qualifying member has pensionable service prior to 6th April 1997 which has not been included in the underlying rate but which their scheme provided for, the scheme manager must determine the annual increase attributable to that service for each year since the date on which the annual payment was first payable and, if that increase has not been paid to the member, reimburse the member for that amount.’”
This new clause would make indexation of compensation provided through the Financial Assistance Scheme applicable to pre-1997 service and reimburse members for the annual increases in payments they should have received in light of this change.
Steve Darling
[Interruption.] I am not quite used to getting interrupted by thunder. Perhaps I should get used to it, with Jennie winning Westminster Dog of the Year, or at least the popular vote. Clearly, it was rigged—I jest.
On a more serious note, we are looking at a cohort of pensioners, the pre-’97 pensioners, who have been left behind without indexation. We heard moving evidence from two gentlemen who shared the challenges that many of those pensioners face, living in higher levels of poverty because of the failure to index.
Our proposal is to ensure that there is a responsibility to explore the possibility of amending the fiduciary duties—something I was not even aware of until I started exploring the Bill—to support the possibility of indexation. I am aware that a more prescriptive new clause has also been tabled. As Liberal Democrats, we sympathise with the aims, but we feel that we need to have confidence that the system has the capacity to pay out. Our proposal is a steady hand on the tiller approach. It is about sense checking and ensuring that there is an ability to support the appropriate levels of indexation. I hope that the Minister will look kindly upon the proposal, as it is the more level-headed approach, with all due respect to Plaid and the SNP.
Kirsty Blackman
I rise to speak in support of the new clause tabled by the Liberal Democrats and new clauses 18 and 19, which were tabled by my wonderful colleague from Plaid, the hon. Member for Caerfyrddin (Ann Davies).
The witnesses who came before us last week to speak about the lack of indexation for pre-1997 pensions made an incredibly passionate and powerful case for changing the system. We mentioned earlier the Work and Pensions Committee’s report, which suggested that the Government need to look at this issue seriously. I was quite disappointed by the Government’s response, which did not actually say very much. All it said was that changing the system would have an impact on the Government’s balance sheet. Well, yes, it might have an impact on the Government’s balance sheet, but it would have a significant impact for people who are in this situation through absolutely no fault of their own. They did the right thing all the way along, but the company they were with collapsed and the Pension Protection Fund or the financial assistance scheme has not given them the uplift.
The group of people we are talking about are getting older. They are not young any more. We know that older pensioners are the most likely to be in fuel poverty and to be struggling with the cost of living crisis. They are the ones making the choice about whether to switch on the heating. Given the rate of inflation that we have had in recent years, there is a real argument for utilising a small amount of the PPF’s surplus to provide a level of indexation. The cut-off is very arbitrary; it is just a date that happened to be put in legislation at that time. Were the Government setting up the PPF today, and the compensation schemes for people who lost their pension through no fault of their own, I do not think they would be arguing for not indexing pensions accrued before 1997. That would not be a justifiable position for today’s Government to take.
I am not sure whether the Bill is the right place to do this, but my understanding is that it needs to be done in primary legislation; it cannot be done in secondary legislation. Given what I mentioned earlier about the significant length of time between pieces of primary pension legislation, if the Government do not use the Pension Schemes Bill to address this problem today, on Report or in the House of Lords, when will they? How many more of the pensioners who are suffering from the lack of indexation will have passed away or be pushed into further financial hardship by the time the Government make a decision on this, if they ever intend to?
As I have said, I cannot see a justification for not providing the indexation. We know the PPF levy changes have been put in place because of that surplus, and there is recognition that the surplus exists and has not been invented—the money is there. I understand that the situation is different for the two funds, but particularly with the PPF, I do not understand how any Member of this House, let alone the Government, could argue against making this change to protect pensioners.
It may have an impact on the Government’s balance sheet, but it does not have an impact on the Government’s income, outgoings and ability to spend today. The PPF money cannot be used for anything other than reducing the levy or paying pensions. It is very unusual to have such ringfenced, hypothecated money within the Government’s balance sheet, but this money is ringfenced. The Government cannot decide to spend it on building a new school or funding the NHS. It can be used only for paying the pensions of people whose companies have gone under.
I very much appreciate the hard work of my colleagues in Plaid Cymru on this issue in supporting their constituents, as well as people such as Terry Monk, who gave evidence to us last week along with Mr Sainsbury. Now is the time for the Government to change this to ensure fairness and drag some pensioners out of poverty, so that they have enough money to live on right now during this cost of living crisis.
Mark Garnier
I want to follow on from the two powerful speeches by the Liberal Democrat and SNP spokespeople, the hon. Members for Torbay and for Aberdeen North, in highlighting the fact that this problem is—dare I say it—disappearing over time. This feels slightly similar to the ongoing contaminated blood debate, and it is a similar type of thing. The people who would be compensated for the contaminated blood are, for tragic reasons, disappearing. Indeed, I think there are now 86,000 pensioners who were caught up in this particular problem, and the longer this is kicked down the road, the smaller the problem will become, for obvious reasons.
The principle behind this is absolutely right. It is incredibly important that we as a country, society and community look after all these people. Where people have done the right thing and put money into their pension, but it has not followed through, that is a big problem.
One thing does bother me: I do not want to be too political, but the Government have dug themselves a freshly made £30 billion black hole in the last year. Although the SNP spokesperson is absolutely right that the £12 billion in the PPF is available to spend only on pensions, the problem is that because it appears on the country’s balance sheet, if the money to pay the price for this—I think it is £1.8 billion—came out of that, there would be a £1.8 billion increase on the country’s collective balance sheet. The argument would go that it would then reduce it. At some level, fiscal prudence has to come in to make sure we are not creating a deeper black hole. Because of the change of accounting at the back end of last year, this could turn the Government’s £30 billion fiscal black hole into a £32 billion one, even though that money is earmarked only for pensions.
I would like to hear from the Minister how the Government will resolve that. I would like him to make an undertaking that we will hear something about it on 26 November, and that there will be something in the Budget to resolve this fiscal conundrum. We need to know where the money will come from, and that the Government have set it aside. This is a perfect opportunity to deal with a problem that has been going on since 1997, and that becomes more profound every time the Office for National Statistics announces the rate of inflation. If the Minister gave us that assurance, I would trust him—being an honourable and decent man—that he could make his current boss get something done about this on 26 November.
Torsten Bell
Despite the hon. Member’s kind invitation, and as he well knows, I am not about to start commenting on the Budget—something I have heard him say himself many times over the years in his previous roles.
More seriously, the last 50 years tell us that the question of pension uprating is a big deal and very important. By “uprating”, I mean how pensions keep pace with earnings or prices. Obviously, on the state pension we tend to talk in terms of earnings. It is a big issue. The lesson of the 1980s and 1990s was about rising pensioner poverty at a time when the state pension was not earnings indexed but earnings were growing significantly. That is why we ended up with 30% or 40% pensioner poverty during those years. History tells us that those things are important. History aside, they are also obviously important for individuals, as we heard at the evidence session.
Luke Murphy (Basingstoke) (Lab)
I want to add my voice and the calls of my constituents for that issue to be addressed and tackled. I have been contacted by several constituents, one of whom has lost up to 70% of the value of their occupational pension. I add my voice to those calling for the Government to do what they can to address this issue, which I know the Minister recognises is having a huge impact on many people’s lives.
Roger Sainsbury, among others, raised the issue in the evidence session. He said that he had confidence that the Government would come up to the mark and find a way through the perceived difficulties. I seek reassurance from the Minister on behalf of my constituents that the Government will do all they can to ensure that that is the case.
Torsten Bell
I thank my hon. Friend for his questions. Let me come to the two halves; two different issues are actually being raised in these amendments and I want to make sure that we deal with them separately.
New clause 5 deals with discretionary increases for schemes that have not fallen into the PPF—those with solvent employers. Here, as I said in the surplus discussion, the changes on surplus provide a new route for trustees who do not have the power to make those discretionary increases off their own bat to discuss with employers discretionary increases on pre-1997 pension accruals. It is also clear that we need to understand this issue well. The Pensions Regulator has been engaging in surveys on this issue for exactly that reason and will continue to do so. Overall, my argument is that, for those schemes still operating, we are not going to be in the business of legislating to overwrite scheme rules when it comes to whether schemes had indexation in them pre-1997.
Questions of the PPF and FAS represent an important debate, as we heard last Tuesday—I answered questions about that then, and I will not pain everyone by repeating my answers.
New clauses 18 and 19 would not work. The new clauses as drafted would apply to subsets of the PPF population. Some pensioners would receive indexation, and some would not. The same flaws in the new clauses apply to FAS. We will definitely be opposing the new clauses, but that is without regard to the wider questions, which, as I said, I commented on last Tuesday.
Steve Darling
I beg to move, That the clause be read a Second time.
I am afraid I have a difficulty, Ms Lewell: I am appearing soon in a Westminster Hall debate as a spokesperson, so I will have to go part-way through this debate—accept my sincere apologies for that.
New clause 7 is the beginning of a series of new clauses on pensions injustices. It is intended to probe. I know from fellow MPs that there are significant amounts of casework about people who fall short of being acknowledged as receiving benefits from pensions, such as spouses or partners of different descriptions.
Our world is complicated. I am adopted, and went from having one sibling to nine siblings in total; I have a complicated family. We all have complicated families. Equally, historically, pensions may not have taken account of how people’s lives might have become more complicated, such as with partners and the way that life moves on. We ask the Minister to reflect on that, and see how he may be able to tackle this injustice. I apologise for leaving before we complete the debate on the new clause, Ms Lewell.
Kirsty Blackman
If the new clause is pressed to a vote, I will not take part because it does not impact pensions in Scotland. However, I want to relay to the Committee and the Minister that I have heard a number of heartbreaking stories on this subject; I am aware that it is not the Minister’s fault that such situations have occurred. What has most impacted me is when I have heard the stories of people having to choose not to live with their partners if they are to continue to receive pensions.
Someone’s deceased police officer partner may have died a significant time ago. Finding happiness in a new relationship is a lovely thing, but that person might have to choose between getting the survivor’s pension and living with their new partner. That is a horrific decision that nobody should ever have to make. It would be great if the Minister recognised the issue: that people are being pushed into making difficult choices because of how the schemes have been written. I do not necessarily want the Minister to commit to changing the legislation, as I do not know whether it is within his gift to fix this, but will he recognise that the current situation is unfair? I think that would be a step in the right direction.
John Milne
Further to the remarks made by my hon. Friend the Member for Torbay on the new clauses, and as the hon. Member for Aberdeen North commented earlier, pension Bills come along once in a generation, so we are taking this opportunity to bring a number of long-standing issues under scrutiny, hopefully for comment.
Torsten Bell
I thank the hon. Member for Torbay, who has just left us, for moving new clause 7. To clarify, it would require the Secretary of State to commission an independent review into the police pension scheme on these particular issues. I know this will be a matter of cross-party consensus, but the most important thing is to stress the value placed on the contribution of police officers across the country. I see them every day, particularly in the centre of Swansea, and they play a really important role.
The rules providing for the cessation of survivor benefits, where a survivor remarries or cohabits, are typically features of legacy public service pension schemes, and we are discussing the 1987 police pension scheme in this case. Reformed public service pension schemes do not include these challenges, as we have moved away from a system with significant inheritable rights. The same also applies to the new state pension system introduced under the coalition Government, which does not include the same degree of inheritability as the basic state pension did.
I want to take a similar approach to the many issues that will be raised in such calls for reviews. It is really important for me to be clear about why we do not support reviews into these schemes—particularly in this case, where it closed 20 years ago—as I do not want to raise expectations that will not be met. That would be deeply unhelpful to people who have been campaigning on this issue for many years.
In this particular case, there is the principle that we will not retrospectively legislate to change the terms of pensions far in the past, around 20 years ago. I am saying this very gently, but the reality is that my position is shared by most parties in this House. If the coalition Government, made up of a Liberal Democrat Pensions Minister and other Conservative Ministers, had wanted to resolve these issues and take an approach different from the one I am setting out today, they would have done it in a previous Parliament.
The last thing I want to do is give false expectations to people who often face consequences from the terms of these pension schemes—terms I do not support, but that is why they have ceased to be part of modern pension schemes. I do not want to give false certainty that we will start reopening public service pension schemes from decades ago. That would lead to false expectations, and that is the last thing we should be doing.
On that basis, we will not be supporting the new clause, but I understand the case that people have made and why people are raising it in this place. As I say, that is our approach to this issue.
John Milne
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 8
Independent review into pension losses incurred by former employees of AEA Technology
“(1) The Secretary of State must, within three months of the passing of this Act, commission an independent review into the pension losses incurred by former employees of AEA Technology who—
(a) transferred their accrued pension benefits out of the UK Atomic Energy Authority (UKAEA) public service scheme to AEA Technology (AEAT) on privatisation in 1996, and
(b) suffered financial losses when AEA Technology went into administration in 2012 and the pension scheme entered the Pension Protection Fund (PPF).
(2) The review must examine—
(a) the extent and causes of pension losses incurred by affected individuals,
(b) the role of Government policy and representations in the transfer of pensions during the privatisation of AEA Technology,
(c) the findings of the Public Accounts Committee and the Work and Pensions Select Committee,
(d) the adequacy of safeguards provided at the time of privatisation,
(e) potential mechanisms for redress or compensation, and
(f) the estimated financial cost of any such mechanisms.
(3) The review must be—
(a) conducted by an independent panel appointed by the Secretary of State, with relevant expertise in pensions, public policy, and administrative justice, and
(b) transparent and consultative, including engagement with affected pensioners and their representatives.
(4) The panel must report its findings and recommendations to the Secretary of State and lay a copy of its final report before Parliament within 12 months of its establishment.
(5) The Secretary of State must, within 6 months of the publication of the report under subsection (4), lay before both Houses of Parliament a statement setting out the Secretary of State’s response to that outcome.”—(John Milne.)
This new clause would require the Secretary of State to commission an independent review into the pension losses incurred by former employees of AEA Technology.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a Second time.
The new clause would require the Secretary of State to commission an independent review into pension losses suffered by former employees of AEA Technology. It focuses on employees who transferred benefits from the UK Atomic Energy Authority to AEA on privatisation in 1996, and who later suffered losses when the company went into administration. Many former employees experienced significant losses due to circumstances beyond their control, and this review would ensure a transparent, evidence-based assessment of what went wrong. It would also hopefully provide a structured way to explore redress or compensation options for affected pensions.
To summarise, the new clause would ensure that lessons were learned and safeguards were strengthened for future privatisations and pension transfers. We move it in the hope that the Minister will put his thoughts on the record, so that campaigners can at least see them—like them or not, they will know where he stands.
Torsten Bell
I reiterate my overall approach to the issues being raised in relation to historical cases, but we all recognise the difficult position that members of this particular scheme found themselves in. Many scheme members who move into the PPF receive a lower pension than they were otherwise expecting, and I think we are all sympathetic.
The hon. Member will be aware that there have been many reviews of this case, including by the Public Accounts Committee, the Work and Pensions Committee and, obviously, the Pensions Ombudsman. The coalition did not act on this particular case, and I do not want to raise expectations that we are going to reopen it now, given the number of reviews that have already taken place.
However, I can offer slightly more reassurance to the hon. Member going forward. He will be aware of changes in policy that mean that, when there are privatisations of the kind that sits behind this challenging case, workers will remain in public service pension schemes. They would not be moved across into another scheme. That is obviously what sits behind anxieties about the transparency of the advice provided in this case. I hope that that offers the hon. Member the kind of reflection that he asked for, but we are not in a position to support the new clause.
John Milne
I thank the Minister for his observations, and I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 9
Independent review into state deduction in defined benefit pension schemes
“(1) The Secretary of State must, within three months of the passing of this Act, commission an independent review into the application and impact of state deduction mechanisms in occupational defined benefit pension schemes.
(2) The review must consider—
(a) the origin, rationale and implementation of state deduction in the Midland Bank Staff Pension Scheme,
(b) the clarity and adequacy of member communications regarding state deduction from inception to present,
(c) the differential impact of state deduction on pensioners with varying salary histories, including an assessment of any disproportionate effects on—
(i) lower-paid staff, and
(ii) women,
(d) comparisons with other occupational pension schemes in the banking and public sectors, and
(e) the legal, administrative, and financial feasibility of modifying or removing state deduction provisions, including potential mechanisms for redress.
(3) The Secretary of State must ensure that the person or body appointed to conduct the review—
(a) is independent of HSBC Bank plc and its associated pension schemes;
(b) possesses relevant expertise in pensions law, occupational pension scheme administration, and equality and fairness in retirement income; and
(c) undertakes appropriate consultation with—
(i) affected scheme members,
(ii) employee representatives,
(iii) pension experts, and
(iv) stakeholder organisations.
(4) The person or body conducting the review must—
(a) submit a report on its findings to the Secretary of State within 12 months of the date the review is commissioned; and
(b) the Secretary of State must lay a copy of the report before Parliament and publish the report in full.
(5) Within three months of laying the report before Parliament, the Secretary of State must publish a written response setting out the Government’s proposed actions, if any, in response to the report’s findings and recommendations.
(6) For the purposes of this section—
‘state deduction’ means any provision within a defined benefit occupational pension scheme that reduces pension entitlements by reference to the member reaching state pension age or by reference to any state pension entitlement;
‘defined benefit pension scheme’ has the meaning given in section 181 of the Pension Schemes Act 1993;
‘Midland Bank Staff Pension Scheme’ includes all associated legacy arrangements and any successor schemes administered by HSBC Bank Pension Trust (UK) Ltd.” —(John Milne.)
This new clause would require the Secretary of State to commission an independent review into clawback provisions in occupational defined benefit pension schemes, in particular, the Midland Bank staff pension scheme.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a Second time.
New clause 9 would require the Secretary of State to commission an independent review into the application and impact of state deduction mechanisms in occupational defined benefit pension schemes. It focuses specifically on clawback provisions in the Midland bank staff pension scheme and associated legacy arrangements.
We believe that a review is needed because state deduction provisions can reduce members’ pension entitlements, sometimes in ways that are complex or unclear. There are concerns about fairness, transparency and disproportionate impact, particularly on lower-paid staff and women. A review would ensure that members, regulators and Parliament had clarity about the origin, rationale and effect of such provisions.
The review would examine the history and rationale for the deductions, assess the clarity and adequacy of member communications over time, analyse differential impact on pensioners with varying salary histories, and compare state deduction practices with other occupational schemes in banking and the public sectors. It would also consider the legal, administrative and financial feasibility of modifying or removing state deduction provisions. Finally, it would be an independent and consultative process. The clause would ensure transparency and fairness, and it would provide Parliament and Members with clear, evidence-based guidance on the way forward.
Torsten Bell
I am conscious that there was a debate in the main Chamber on this issue before the summer recess, when we were able to go into the issue in much more depth. The debate related to integrated pensions, but in that context people are usually referring to the HSBC historical pension scheme in particular. Without rehearsing everything I have said about our not being in the business of promising to change pension scheme rules, schemes have wide discretion about the nature of their rules and the entitlements that scheme members accrue. It is not for the Government to change those.
The law is very clear that the Government require transparency, just as the hon. Member for Horsham called for, and that includes clear communication of what the entitlement from any given pension scheme is, including issues to do with what is referred to as integrated pensions or clawback pensions. People do have to have received communication that spells that out. The role of the Pensions Ombudsman is to check that that has happened. That is where people can go if they feel that they have not received clear communication about what their scheme entitlements were.
I think we can all understand that if anybody started to receive a pension and was shocked to see a deduction in it when they went over the state pension age, that would be very significant for them. It is the job of the Pension Ombudsman to investigate cases such as that.
John Milne
I thank the Minister and beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 10
Use of electronic mail for direct marketing purposes relating to pensions
“(1) Section 22(3) of the Privacy and Electronic Communications (EC Directive) Regulations 2003 is deemed to apply to unsolicited electronic communications relating to pensions when the sender is—
(a) a firm authorised to provide Targeted Support under Article 55A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 issuing a Targeted Support communication, or
(b) a qualifying pension scheme, as defined in section 16(1) of the Pensions Act 2008.
(2) Subsection (1) applies when the recipient is—
(a) a customer of the firm under subsection (1)(a), or
(b) a member of the pension scheme under subsection (1)(b).” —(John Milne.)
This new clause would require that the provisions relating to the use of electronic mail for direct marketing purposes under the Privacy and Electronic Communications *(EC Directive) Regulations 2003 would apply to communications from firms providing targeted support on pensions or from qualifying pension schemes.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a Second time.
New clause 10 would require that provisions relating to the use of electronic mail for direct marketing purposes would apply to communications from firms providing targeted support on pensions or from qualifying pension schemes. That matters because pension savers deserve protection from unwanted or misleading marketing, especially when they may be vulnerable to scams. I used to work in direct marketing, so I feel a little bit guilty.
John Milne
Obviously, all mine were absolutely above board. Currently, the privacy and electronic communications regulations do not clearly cover pension-related marketing from schemes or targeted support firms. This new clause seeks to close that loophole. People should be able to trust that communications from their scheme or adviser are genuine and not just spam dressed up as guidance. We would position this as a balance, so that legitimate communications to scheme members remain possible, but only within clear safeguards. In summary, it is a simple consumer protection measure that would protect savers from nuisance emails and potential mis-selling.
Kirsty Blackman
I have a brief comment on the direct marketing purposes. An increasing number of people rely on email communication to get updates on their pension, rather than paper updates. I am aware of a significant number of people of younger generations who are not keen on opening letters that come through their door. They may also not be keen on opening emails, but at least they will be able to search for them, because they will not delete them, and will be able to find out what is in them.
I spoke to somebody the other day who was quite surprised at the low percentage of people who had signed up to use the app for the National Employment Savings Trust. Most of the providers and individuals I have spoken to have seen an increase in the number of people who are keen to use apps or communicate only via electronic communication. The point made by the hon. Member for Horsham is incredibly important. We need to ensure that a balance is in place and that people are provided with the correct and actual updates in a way that they want to receive them, but that they are protected from scams.
David Pinto-Duschinsky
I do not disagree with the hon. Lady, but does she agree that this might be a tiny bit premature, given that there is currently a consultation going on about making changes to these rules? The objective of the new clause is valuable, but maybe putting it in statute is not the right way to go.
Kirsty Blackman
Mr Speaker and previous Speakers have encouraged us as Members not to worry about repetition. Generally, the more we can talk about and highlight issues the better. Part of the point of the new clause is to ensure that the Minister recognises and says from the Front Bench that this is an important issue. Whether or not there is an actual consultation taking place, if we can have that commitment—we will probably ask him for that commitment again and again, given the nature of this place—we would be very happy to receive it.
I agree with the hon. Member for Horsham that the balance is really important. When it comes to guided retirement products, it is key that companies do not worry that the privacy and electronic communications regulations, or any legislation, is going to get in the way of proper communications, but that people are also protected from potential scam communications, and that we are able to crack down on anyone undertaking scams and looking to take significant amounts of money—these are the largest amounts of savings that the vast majority of us will ever have in our lives.
Rebecca Smith (South West Devon) (Con)
I have a query off the back of the comments of the hon. Member for Aberdeen North.
We heard in the evidence sessions that there is a danger that overdoing the requirements for marketing will get in the way of providing guidance. That came up directly in the response to some of our questions, I think specifically from Legal and General and Aviva. Companies are already in a position where, if they are not careful, offering guidance is considered marketing. Therefore, they do have their hands tied by existing legislation.
I am slightly intrigued why this new clause has been tabled, given that Liberal Democrat colleagues will have also heard that evidence. More work is needed on this issue than just adding a new clause to the Bill; I heard from the hon. Member for Hendon that there is a consultation.
Although I understand the point about protecting vulnerable customers from scamming, I feel the evidence we heard demonstrates that more work is needed, work that is not included in the Bill, to make sure that pension companies are able to advertise in such a way that they can play their part in the guidance process that we have debated at length, and in how people get that financial education.
I understand the premise of the new clause, but we have many more questions to answer on this. If anything, I think we need to be making it easier for pension companies, the legitimate people in the room, to be able to communicate. There could be unintended consequential issues; we are trying to deal with scammers, but we might inadvertently stop people accessing information that we are trying to help them to receive.
Torsten Bell
Let me attempt to offer some words of clarification and then come to what the Government are doing on this issue.
To clarify, pension schemes are covered by the rules on direct marketing already. I think the new clause as drafted would probably have the opposite effect to what the hon. Member for Horsham intends, by carving out pension schemes from the limitations on direct marketing. That would be a loosening of the direct marketing restrictions for pension schemes. There are people in the industry that have been calling for exactly that, so that may be where the new clause is coming from, but I clarify that they are covered; the direct marketing rules prevent pension schemes from behaving in those kinds of ways.
What is the context here? We are obviously aware of concerns that the existing direct marketing rules, which apply to pension schemes, may limit providers’ ability to deliver the new targeted support regime that is being developed by the Government, exactly as the hon. Member for South West Devon has just set out. Under targeted support, FCA-authorised firms will be able to proactively suggest appropriate products or courses of action to customers. That could help people to make decisions about access to their pension, but it obviously needs to be done in the right way.
We have heard the feedback from stakeholders on the interaction between that wish for targeted support and direct marketing rules, which is where most of the debate on this area has been. Because targeted support involves recommending specific courses of action, it could be considered direct marketing. That is the cause of the tension.
There are particular issues for pension providers who administer auto-enrolled members, where the individual has not chosen the pension scheme or engaged with them. As a result of that, they cannot generally satisfy the requirements of what is called the soft opt-in, because the provider has not collected the information from the individual at the point at which they were enrolled—it has gone through the employer.
What are we doing about that? We are examining quite a range of policy options at the moment. That includes legislative change, which can probably be done via secondary legislation. I think that is the right way for us to proceed. When we do that, we need to get the balance between enabling targeted support and making sure that we do not have inappropriate direct marketing within the pension space. I definitely would not want to see a carve-out from all direct marketing rules for the pension sector as a whole, as there are risks that come with that. I hope that gives Members some clarity and an explanation of what the Government are doing to take this issue forward.
John Milne
I thank the Minister for his clarification, and I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Kirsty Blackman
On a point of order, Ms Lewell, I am aware that I cannot make a speech at this point, but will the Minister write to me on whether he is planning to do anything about pre-1997 indexation of the PPF and FAS? If he writes to me about that, I will be happy not to push new clause 18 to a vote.
Torsten Bell
I suspect that I have already written to the hon. Lady, because she has raised some constituency cases with me, but she can receive another one of those letters.
New Clause 33
Report of defined benefit schemes impact on productivity
“(1) The Secretary of State must, within 12 months of the passing of this Act, publish a report on the impact on corporate productivity of defined benefit schemes.
(2) The report must include an assessment of—
(a) investment strategies of defined benefit funds,
(b) the returns on investment of defined benefit funds, and
(c) the impact of investment strategies and returns on productivity.
(3) The Secretary of State must lay a copy of the report before both Houses of Parliament.”—(Mark Garnier.)
This new clause would require the Government to commission a report on the impact on corporate productivity of defined benefit schemes.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 34—Recognition rules for Defined Benefit scheme deficits—
“(1) The Secretary of State must by regulations revise the balance sheet recognition rules for Defined Benefit pension scheme deficits.
(2) Revision of the balance sheet recognition rules under subsection (1) may include allowing the deferment or partial deferment of deficits to future financial years when calculating the balance sheet.”
This new clause would require the Secretary of State to revise the balance sheet recognition rules for Defined Benefit pension scheme deficits.
New clause 35—Alternative disclosure for long-term deficits—
“(1) When a Defined Benefit pension scheme has a long-term deficit, it shall be permitted to disclose the deficit on an alternative basis, rather than recognising the full deficit as an immediate liability, if a formal recovery plan has been agreed.
(2) For subsection (1) to apply, a formal recovery plan must have been—
(a) agreed by the scheme trustees, and
(b) approved by The Pensions Regulator.
(3) The Pensions Regulator shall issue guidance on the format and content of the alternative disclosure specified in subsection (1).”
This new clause permits DB schemes to disclose a long-term deficit on an alternative basis.
Mark Garnier
When we look at the thrust of the Bill, the mandation measure is all about trying to get pension funds to help to create greater productivity within the UK economy. A couple of days ago, in a very helpful intervention on a speech made by my hon. Friend the Member for Mid Leicestershire, the hon. Member for Hendon made the point that, while we are standing against mandation, we must ask: what are we standing in favour of? How are we trying to get behind the grain of the Bill? These three new clauses respond to that question of what we are doing to ensure that the Bill actually can use pension fund money to promote economic growth, invest into the UK and get better returns for the pensioners.
One of the problems facing defined-benefit pension schemes is that, in response to the outrage over Maxwell and Mirror Group Newspapers pinching money from pension schemes back in the 1980s and 1990s, rules were introduced that were basically designed to ensure that it would not happen again. They were introduced in such a way to ensure that, if a defined-benefit pension scheme were to go into deficit, the deficit would be reflected on the balance sheet of the host company.
We still see that today in some larger companies; I think the British Telecom pension scheme currently has a deficit of £7 billion, and that appears on British Telecom’s balance sheet. That does two fundamental things. First, if a company has a deficit on its balance sheet, that restricts its ability to raise equity or debt to invest into its business, so the host business cannot expand because it has a defined-benefit pension scheme with a deficit attached to it.
A second problem then comes as a result of the Maxwell rules: the trustees of a defined-benefit scheme with a host company will be reluctant to invest that into high-volatility assets. We know that, over a long period of time, the equity market will perform far better than the bond market. The problem is that we can have volatile markets in the short term, which could introduce a deficit in the defined-benefit pension scheme that translates to a deficit on the balance sheet.
For example, if we look at stock market performances from the 1980s to now, we will see a very steady rise in the stock markets over time, which have done particularly well. However, if we go back to 1987 or various other times, such as 2000-01, we will see big stock market crashes that will have appeared on the balance sheets of those defined-benefit pension scheme host companies. As a result, these pension schemes are missing out on the long-term growth to push away the short-term volatility that hits the host company. With these three new clauses, we are trying to get that out of the way so that defined-benefit pension schemes feel more comfortable about investing in higher-growth and therefore higher-volatility assets.
Torsten Bell
I am grateful to the hon. Member for Wyre Forest for tabling the new clauses, and for his impressive consistency; he has spoken to this issue many times not only in this Committee, but elsewhere, and I have heard him. I agree on some of the wider issues he is raising, particularly his reflections on some of the impacts of decisions taken in the late 1990s. Before I come to the more technical responses to the new clauses, the hon. Member’s objective is to see different investment approaches taken by defined-benefit schemes. Many issues that were historically the case have been removed by the passing of time, because they are now closed schemes whose investments are now changing for other reasons, not because of the questions of regulatory pressure in the 1990s and so on. I leave that as an aside.
To give the hon. Member a bit more optimism, based on the Bill, I already have schemes saying to me that they may take different approaches on investments because of the option of a surplus release. That gives a different incentive structure for employers about what they wish to see their pension schemes doing, and for trustees, if there is a sharing of the benefits of upside risk that comes with that. I have had several large employer’s pension schemes raising that issue with me in the recent past. That is to give him some case for optimism to set against the long-term pessimism.
I will turn to the details of the new clauses. New clause 33 would require the Government to produce and lay a report before both Houses of Parliament, with an assessment of the investment strategies of defined-benefit pension schemes and their impact on productivity.
There is already a requirement for defined-benefit schemes to produce much of that information in their triennial valuation and to submit key documents to the Pensions Regulator, including information on investments and changes in asset allocations over time, so the regulator has much of the information already. In addition, multiple reports are already produced annually on defined-benefit schemes and their investments. The purple book is the most obvious example; it is produced by the Pension Protection Fund. I know that everybody here will be an avid reader of it; I promise people that it is reasonably widely read, including in the City.
New clause 34 seeks to change the arrangements for reporting defined-benefit pension scheme liabilities in the employer’s accounts. I am impressed by the wish of the hon. Member for Wyre Forest for us to engage in a Brexit from international financial reporting standards, but he will be unsurprised to learn that the Government are not about to do that. These are globally recognised financial reporting frameworks that allow comparability, and we are not in the business of changing them.
New clause 35 would require the Secretary of State to introduce an alternative basis to disclose schemes’ funding deficits. The Pensions Act 2004 put in place the current regime for valuations. Our view is that that approach has taken some time to implement but it is now well understood and well established, so leaving it in place is by far the best thing that we can do, while also considering in more detail the consequences of other things that drive the choices of pension schemes. On that basis, I encourage the hon. Member for Wyre Forest to withdraw the new clause, and I certainly do not expect to see my hon. Friend the Member for Hendon support it.
Mark Garnier
I am partially reassured by the Minister’s comments, but it really comes down to the kindness of my heart—I would not want the hon. Member for Hendon to be pulled off the Committee and put in an awkward situation. It would be unfortunate to force him to fall out with the Whips so early in his parliamentary career, so I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 37
Review of impact of this Act
“(1) Within five years of the passing of this Act, the Secretary of State must carry out a review of the impact of the provisions of this Act on actual and projected retirement incomes.
(2) The review must consider—
(a) the impact of the provisions of this Act on actual and projected retirement incomes, and
(b) whether further measures are needed to ensure that pension scheme members receive an adequate income in retirement.
(3) The Secretary of State must prepare a report of the review and lay a copy of that report before Parliament.”—(Mark Garnier.)
This new clause would require the Secretary of State to prepare a report on the impact of this Act within 5 years of its passing.
Brought up, and read the First time.
Mark Garnier
I beg to move, That the clause be read a Second time.
Under new clause 37, the review of the impact of the Act would focus on pensions adequacy. The current Government plan to delay the comprehensive consideration of pensions adequacy to future phases of the pensions review. Any resulting reforms from those future evaluations are projected to take several years to develop and implement, and there is widespread concern that without a mandated regular review process, inadequate pension outcomes will persist. Millions of people in the UK therefore risk having insufficient retirement income, particularly lower earners, ethnic minorities, the self-employed and those with interrupted careers.
Automatic enrolment has expanded workplace pension participation and now covers over 88% of eligible employees, but significant savings shortfalls remain. Recent forecasts and analysis warn of a retirement crisis, with many future pensioners expected to have less income than today’s retirees unless action is taken. The Government’s renewed Pensions Commission is due to report in 2027, focusing on the adequacy, fairness and sustainability of the retirement framework, but that report will only come in 2027.
The new clause would create a statutory obligation for the Secretary of State to conduct a full review within five years of the Bill’s passage, focusing on its impact on actual and projected retirement incomes. It would require an assessment of whether current policies and contribution levels are sufficient to ensure adequate retirement incomes. The Secretary of State would have to report the findings to Parliament, increasing accountability and transparency. That would formalise an ongoing review cycle to monitor pension adequacy regularly, preventing the consideration of the issue being indefinitely postponed.
As we all know, pension adequacy is vital to preventing poverty in later life and to ensuring quality of life for retirees. Despite expanded coverage through auto-enrolment, however, many people are still on track to fail to meet retirement income targets. Financial resilience frameworks show disparities in adequacy among lower earners, women and other vulnerable groups, and current retirement income depends on a number of variables, including contribution, sufficiency, investment returns, longevity and state pension level.
The new clause would ensure that the Government take responsibility to monitor and report regularly on pension adequacy outcomes. It would mandate a formal review mechanism, enhancing policy responsiveness and parliamentary oversight. Ultimately, it aims to safeguard millions of future retirees from inadequate incomes, and support a sustainable and fair retirement system.
Torsten Bell
We have now had a few discussions about the case for monitoring and evaluating the Bill and what is going on in the pension landscape more generally. I do not want to repeat everything I have said previously, so I will just address whether this is the right approach or whether it should be done through the Pensions Commission that is under way and looking at most of these issues. My view is that the Pensions Commission is focused on the headline issues that the hon. Member for Wyre Forest has just mentioned. I do not want to confuse that work by having another process consider the same issues at the same time. It is also valuable to have the independence of the commission when doing that.
My main message is that we do not have to wait long, because the Pensions Commission will report in 2027, which is earlier than the five years that we would have to wait for the Secretary of State’s inevitably excellent report as a result of this new clause. We should have faith in Baroness Drake, Ian Cheshire and Nick Pearce to deliver that.
Kirsty Blackman
I am not as au fait with the terms of reference of the review as the Minister. Is it possible that it will say, “We recommend that another review is undertaken in five, 10 or 15 years?” Will it look at whether the review is all we need at this point in time or whether we will need another review in future?
Torsten Bell
I do not want to speak for the commissioners because that would be to prejudge their work. I can tell the hon. Lady what the terms of reference require and they definitely rule out long-grassing in that they require actual recommendations for change to deliver a fair, adequate and sustainable pension system. It would certainly be open to them to say, “Do these things, and we also think that monitoring should be x and y.” That would be for them to say, and as it is an independent commission, I do not want to prejudge that. It definitely cannot be just that; it would have to include recommendations for change.
Mark Garnier
We tabled new clause 37 partly to try to get some reassurance from the Minister. Two years is still quite a long time, as is five, but it is incredibly important that we are on top of what is going on in the pension industry, not least because we do not want any of our constituents to end up with miserable retirements. However, I am marginally reassured by the Minister’s comments. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 38
Guidance on the roles of the Financial Conduct Authority and the Pensions Regulator
“(1) The Secretary of State must establish a joint protocol outlining the roles and responsibilities of the Financial Conduct Authority and the Pensions Regulator regarding their regulatory responsibility of the pension industry.
(2) A protocol established under subsection (1) must include—
(a) an overview of the coordination mechanisms between the two bodies;
(b) a published framework for oversight of hybrid or work-based personal pension schemes;
(c) a requirement for regular joint communications from both bodies to clarify regulatory boundaries for industry stakeholders.”—(Mark Garnier.)
Brought up, and read the First time.
Mark Garnier
I beg to move, That the clause be read a Second time.
This will be the last new clause I will be talking to. It looks at the guidance on the roles of the Financial Conduct Authority and the Pensions Regulator. In preparing for this Bill, we spent a lot of time engaging with the industry just a mile and a half up the road. Among the industry there is persistent confusion regarding the division of regulatory responsibility between the Financial Conduct Authority and the Pensions Regulator.
The FCA regulates contract-based pension schemes—personal pensions, group personal pensions and stakeholder pensions—focusing on firm authorisation, conduct and consumer financial advice. TPR regulates trust-based occupational schemes, including defined-benefit and defined-contribution trust schemes, and it targets schemes, governance and employer duties. Overlapping interests exist in hybrid or workplace pension schemes, but unclear boundaries and differing enforcement powers can create regulatory gaps and inconsistencies. That ambiguity causes compliance difficulties for employers, trustees and industry stakeholders, and may ultimately affect pension savers.
The new clause would require the Government to establish a statutory joint protocol between the FCA and TPR, clearly defining and publishing their respective roles and responsibilities. The protocol must outline formal co-ordination mechanisms between the FCA and TPR, include a published framework specifically addressing oversight of hybrid and workplace personal schemes where regulatory remit overlaps, and include a requirement for regular joint communications from both regulators to guide industry and clarify regulatory boundaries. That matters because collaboration between the FCA and TPR ensures comprehensive consumer protection across all pension products.
With pension system complexity increasing—with mega schemes, master trusts and hybrid arrangements—co-ordinated regulation is critical. That will enable both regulators to leverage their strengths—the FCA in consumer conduct and financial advice, and TPR in governance and compliance enforcement. That will help trustees, employers, firms and savers to better understand which regulator to engage to resolve issues and access support.
Industry feedback consistently calls for more precise demarcation to avoid confusion and compliance risks. The Government’s wider reforms and digitisation initiatives, such as pension dashboards, further heighten the need for co-ordination. The new clause would promote regulatory clarity and efficiency through mandated guidance, protecting pension consumers and enabling robust governance across the sector. Clear regulatory pathways will better support pension savers by ensuring consistent standards and enforcement across all types of pension schemes.
Kirsty Blackman
I asked questions earlier about the consultation processes that DWP and the FCA are undertaking and about ensuring consistency in that consultation. This is a similar issue. I like the way that the new clause has been written to ensure that there are protocols so that everybody knows what side of the line they fall on. That can be a particular issue for organisations that have responsibility for both trust-based and contract-based pensions. They may be trying to scale or make efficiencies through investing or having similar default products, even though we are talking about two different types of scheme.
It would be helpful if the Government would commit to ensuring that, where those issues arise, and people are having conversations with the FCA and the Pensions Regulator about what side of the divide they fall on, the Government are keeping a watching brief. If there is regular confusion, the Government should ensure that they clarify the guidance so that people know which side they fall on. Those schemes that are either hybrid or have some sort of umbrella that encapsulates both trust-based and contract-based regulation will then know which side they fall on. They will be able to comply with both regulators, if that is the requirement, or with one of them.
As we said earlier, it is incredibly important that scheme members—current pensioners and prospective pensioners—get an excellent level of service. The vast majority of people do not know, and do not care, whether they are in a trust-based or contract-based pension scheme; all they want is to get as good a pension as possible when they hit retirement. Anything that the Minister can do to ensure that companies have a huge amount of clarity about where they fall, and that scheme members get the best outcomes when they hit retirement, would be helpful.
Torsten Bell
We all agree that we want providers and, most importantly, consumers to operate in this landscape as easily as possible. Particularly in the case of consumers, we do not want them to know the difference between the two. I have been very clear with both regulators that that is the objective, and I have been very clear with both Departments that oversee them that that is what we are doing.
Delivering that in practice requires thinking about how we legislate, and that is what we have done with the Bill to make sure that we are providing exactly the same outcomes through both markets. It is about Government providing clarity to regulators—we are absolutely providing that—and then about how the regulators themselves behave.
I am very alive to the issue that is being raised. There is some good news about the existing arrangements, which need to continue, because they are examples of effective co-ordination between the FCA and TPR. I have seen that through joint working groups, consultations, shared strategies and guidance, and regular joint engagement with stakeholders. The value for money measures in the Bill are probably the most high-profile recent experience of entirely joint working between the FCA, TPR and DWP.
The wider collaboration is underpinned by what is called the joint regulatory strategy and a formal memorandum of understanding that sets out how the two regulators should co-operate, share information and manage areas of overlap. I think that that basically achieves the objectives that the hon. Member for Wyre Forest set out, even if it is provided not by the Secretary of State but by a memorandum of understanding between the two organisations. I can absolutely reassure him and the hon. Member for Aberdeen North that I am very focused on this issue.
Mark Garnier
I am highly reassured by the Minister’s words. The important point is to ensure that if the bodies are to work together and do this, we need to keep them held to account on it. The Financial Conduct Authority was set up as an independent regulator and reports back to such things as the Treasury Committee. Presumably, TPR reports back to the Work and Pensions Committee. Already we can see a potential problem there, because separate Select Committees are doing the investigation. That is an important point, but I am confident that the Minister and his civil servants are aware of the problem and will be resolutely super sharp-focused on this issue to ensure that we have regulatory clarity. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 39
Section 38: commencement
“(1) The provisions in section 38 shall not come into force except in accordance with regulations made by the Secretary of State.
(2) A statutory instrument containing regulations under subsection (1) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”—(John Milne.)
This new clause would require that the provisions in clause 38 could only be enacted once agreed through secondary legislation.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a Second time.
Overall, this Bill has wide cross-party support, as evidenced by the fact that we have been rattling through it at such a pace. However, the power of mandation is undoubtedly the most controversial aspect. To be briefly Shakespearean: to mandate or not to mandate, that is the question.
The new clause would require that the provisions in clause 38—the mandation powers—be enacted only through secondary legislation. It is an attempt to square the circle between two competing views. The Liberal Democrats have concerns about the implications of mandation, frankly, as has much of the pensions industry. For example, Pensions UK, which is a signatory of the Mansion House accords, has stated:
“We believe that the best way of ensuring good returns for members is for investments to be undertaken on a voluntary, not a mandatory basis. We also note powers being taken to specify required investment capability for schemes, and to direct LGPS funds to merge with specific pools. All of these powers will require careful scrutiny.”
Similarly, the Society of Pension Professionals has said:
“The SPP does not support the reserve power to mandate investment in private market assets and recommends its removal from the legislation. The mandation power creates significant uncertainty, including questions about legal accountability for investment underperformance and how eligible assets will be defined. The threat of mandation risks distorting market pricing and could reduce public trust in pensions, as savers may fear that financial returns are no longer the top priority.”
The Minister has stated on a number of occasions that mandation should not be necessary, that he does not expect to have to use it and that the Mansion House accord demonstrates the industry’s willingness to act voluntarily. The obvious response is that if that really is the case, and that UK private markets truly offer the best option for pension savers while meeting the fiduciary duties, the industry should not need any prodding and mandation will not be required. The Minister’s response on previous occasions, and no doubt today, has been to observe the history and point out that thus far, the industry has been slow to make that change.
We recognise that the Minister is wholly committed to the path of giving himself mandation powers, whatever we or anyone else says. Indeed, he sees it as core to the legislation. For that reason, we have proposed the new clause as a halfway house. The power would be put on the books, but it would require secondary legislation to be enacted. It would give the Minister the ability to have access to mandation powers at short notice if he deemed it necessary, without needing primary legislation, but in the meantime, it does not hang over the industry like a sword of Damocles. It may seem just a psychological difference, but psychology matters, and there are other advantages.
Somewhat counterintuitively, sometimes having too much of a stick can be a problem in itself. The Minister would be under pressure to use the stick for the sake of consistency in every case where any company went slightly over the limit or was under the limit, even when he might prefer to take a softer, more conciliatory approach. We therefore see this new clause as a way to help the Minister exercise the powers he needs, but without stepping too heavily on industry’s toes. As he has said, he does not believe that he will ever need to exercise the power, so let us keep it at arm’s length.
Torsten Bell
I will resist the temptation to relitigate the entire argument about clause 38, which we discussed at some length on Tuesday. I entirely agree with the thrust of the new clause, which is that there should be scrutiny of the use of any such powers—that includes the scale measures, not just asset allocation.
I can offer the hon. Member for Horsham some reassurance, because the Bill already provides that all significant regulations made under clause 38, including the ones he is referring to, are always subject to the affirmative parliamentary procedure. That is the effect of the changes made to section 143 of the Pensions Act 2008 by clause 38(15). That should give him a lot of reassurance. It is true that the new clause could put a further vote in the system, but the effect is the same. I have bad news about Governments with majorities: whether they are asked to vote once or twice, the outcome will look quite similar.
For the sake of transparency, I should flag that there are some much less significant measures in clause 38 that are subject to the negative resolution procedure. I will spell them out: regulations made that require regulatory authorities to report information relating to asset allocation to the Secretary of State, regulations made in respect of new information provisions, and regulations made in respect of the regulator’s power to issue a risk notice. The negative procedure is never used for the major aspects of clause 38, which, as the hon. Gentleman set out, is a central part of the Bill. I hope that reassures him that Parliament would have to support any measures to bring in the regulations that will underpin clause 38. As I have said ad nauseam, we intend to bring into effect the scale parts of clause 38, but do not anticipate the need to use the reserve power elements.
John Milne
I thank the Minister for his clarification. I emphasise that the new clause is as much for industry’s comfort as Parliament’s; nevertheless, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 44
Administration levy
“(1) The Pensions Act 2004 is amended as follows.
(2) In section 116 (grants), leave out from ‘expenses’ to end of section.
(3) Omit section 117 (administration levy).
(4) In section 173(3) (Pension Protection Fund), before subsection (3)(a) insert—
‘(aa) any sums required to meet expenses incurred by the Board in connection with the operation or discontinuance of the Pension Protection Fund,’
(5) In section 188(3) (Fraud Compensation Fund), before subsection (3)(a) insert—
‘(aa) sums required to meet expenses incurred by the Board in connection with the operation or discontinuance of the Fraud Compensation Fund,’.” —(John Milne.)
This new clause abolishes the administration levy and provides for the expenses of the PPF and the FCF to be met out of their general funds. It would enable FCF expenses to be covered by the FCF levy.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a second time.
This new clause would abolish the administration levy, which allows the Pension Protection Fund and Fraud Compensation Fund to meet their expenses from their respective general funds. PPF administration costs could instead be recovered from the wider protection fund, while FCF administration costs could be met from the FCF fund, funded through the FCF levy. The levy has in any case been suspended from 2023 to 2025. Many in the industry expected that this would lead to full abolition, especially given the clear recommendation from the DWP review in 2022.
The Society of Pension Professionals, which originally composed this amendment, remains a strong supporter, and its view is widely shared across the pension sector. Discussions with the PPF indicate that it has no objection to this proposal and would be content for its administration costs to be met from general reserves. Given industry support and PPF agreement, we feel that the Government should implement this change without any further delay.
The levy raises only a relatively small amount, but it adds unnecessary complexity and confusion to scheme finances and risks undermining broader reforms, especially efforts to reduce the risk-based levy to zero, which have been widely welcomed.
Overall, this amendment provides the Government with the necessary powers to eliminate an outdated levy, which would streamline pension scheme funding. It is a small but meaningful reform that aligns with wider pension reforms that are all aimed at reducing red tape, simplifying funding and ensuring efficient use of scheme resources.
Torsten Bell
I am grateful to the hon. Member for the new clause. I acknowledge the concerns surrounding the abolition of the Pension Protection Fund admin levy. This is not a new issue; it has obviously been raised significantly by parts of the industry. I broadly support the intent of the new clause. It provides for the expenses of the PPF board and the Fraud Compensation Fund to be met by the PPF levy and the Fraud Compensation Fund levy, instead of the PPF administrative levy. The amendment to section 116 of the Pensions Act 2004 is unworkable as it is currently drafted, but more importantly, I give the hon. Member our assurance that we intend to lay amendments at a later stage that will achieve the same aim. On that basis, I hope that the hon. Member will withdraw the new clause.
John Milne
I thank the Minister for his reply. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 45
Transfer of British Coal Staff Superannuation Scheme investment reserve to members
“(1) Within 3 months of the passing of this Act, the Secretary of State must by regulations make provision for the transfer of the British Coal Staff Superannuation Scheme investment reserve to members of the scheme.
(2) Those regulations must include—
(a) a timetable for transferring the total of the investment reserve to members of the scheme, and
(b) plans for commissioning an independent review into how future surplus will be shared.
(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”—(Kirsty Blackman.)
This new clause would require the Secretary of State to set out in regulations a timetable for transferring the whole of the BCSSS investment reserve to members and committing to review how future surplus will be shared.
Brought up, and read the First time.
Kirsty Blackman
I beg to move, That the clause be read a Second time.
New clause 45 is about the transfer of the British Coal staff superannuation schemes’ investment reserves to members. I am aware of what the Minister said earlier about the various schemes where there have been unfairnesses and the fact that the Government generally do not make commitments about trying to overcome some of the unfairnesses in historical schemes. However, exactly those kinds of changes were made to miners’ scheme in the autumn Budget last year—the investment reserves were transferred to members and changes were made in relation to the future surplus—yet that has not happened for those who were in the British Coal staff superannuation scheme.
I will not push the new clause to a vote, although my Plaid Cymru colleagues might do so on Report. It would be helpful if the Minister confirmed that he is aware that although the miners’ scheme has been changed, there is still an issue with the British Coal staff superannuation scheme, and that the Government are keeping that under review and considering what they can do to ensure that the surplus is transferred to members.
John Milne
Any changes to the BCSSS pension scheme rules require Government action; trustees can only act within their current rules.
I pay tribute to my hon. Friends the Members for Brecon, Radnor and Cwm Tawe (David Chadwick), who has been working hard to raise his constituents’ voices in relation to this urgent issue, and for North East Fife (Wendy Chamberlain). This is another one of those cases where time is not on the side of the claimants. We believe that six members are dying every day in relation to illnesses contracted from mining. Time is literally running out for members, so this is an urgent issue.
Torsten Bell
I am grateful for this new clause, which was tabled by one of my neighbours in south Wales, the hon. Member for Caerfyrddin (Ann Davies). It is obviously an important issue for many ex-mineworkers and for families across Great Britain. It is basically straightforward: I want to reassure the Committee that the Government have been discussing the transfer with the scheme trustees for many months. Those discussions are actively under way. We expect to be able to make an announcement about the way forward in reasonably short order.
I am glad that the new clause will not be pushed to a vote—because if anything, it would risk slowing down the implementation of an agreed outcome—and I totally appreciate the point that the hon. Member for Aberdeen North has made. Any proposal for change will need to be consulted on with the scheme’s trustees on behalf of their members, but that will be coming forward. I hope that provides the Committee with the reassurance it is looking for.
Kirsty Blackman
I appreciate the reassurances that the Minister has given me. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 46
Trustees: independence
“(1) The Pensions Act 1995 is amended as follows.
(2) In section 29 (Persons disqualified for being trustees), after subsection (d) insert—
‘(da) he has a personal or financial interest in the pension scheme, except for member nominated trustees.’”—(John Milne.)
This new clause makes pension scheme trustees truly independent of the sponsoring companies so that they can protect scheme members’ interests without any conflict of interest.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a Second time.
The new clause would have the effect of making pension scheme trustees truly independent of the sponsoring companies so that they can protect scheme members’ interests without any conflict of interest. Trustees should act solely in the best interests of their members, not those of the sponsoring employer.
Currently, conflicts of interest can arise where company-appointed trustees also have personal or financial ties to the scheme sponsor. The new clause seeks to strengthen independence, excluding conflicting trustees while still allowing member-nominated trustees. Members deserve trustees who are free to challenge employers and prioritise pensions over corporate interests. Having strong, independent trustees means stronger protection for savers’ retirement security.
Torsten Bell
I will remark briefly on the new clause. To state the obvious, the quality and independence of trustees is an integral part of our trust-based pensions system. It is very important, and it is right for the hon. Member to highlight it. Within those schemes, there are a range of trustee models. I would not want to put a blanket regime in place within the currently varied landscape. I want to give the hon. Member some different reassurance on this point. We are committed to strengthening scheme governance, including for some of the issues that he has raised. I have already announced my intention to consult later this autumn on measures to improve the governance of trust-based schemes. That work will consider again some of the exact issues that he raises. That is the right way forward, because there are lots of strengths to our current system. The quality of our trustees, their independence and everything they bring to their role are all valuable, but it is important that we maintain that as the best it can possibly be. I hope that the hon. Member will enjoy the consultation later this year.
John Milne
I thank the Minister for his encouragement. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 47
Report on Pension Scheme Eligibility and Access
“(1) The Secretary of State shall, within 12 months of the passing of this Act, lay before Parliament a report into the operation of occupational pension schemes where certain categories of employees have been excluded on the basis of job classification or employment start date.
(2) The report must examine the case of employees and former employees of Fife Joinery Manufacturing (a subsidiary of Velux), including—
(a) whether affected workers were provided with opportunity to join existing pension schemes,
(b) the adequacy of record-keeping and employer accountability, and
(c) potential remedies to ensure equal access to workplace pensions.”—(John Milne.)
This new clause would require the Secretary of State to report on the Velux Pensions case.
Brought up, and read the First time.
John Milne
I beg to move, That the clause be read a Second time.
The new clause would require the Secretary of State to report on the Velux pensions case. It would require him to report within 12 months on how occupational pension schemes exclude certain employees based on job classification or their start date. The report would specifically
“examine…employees and former employees of Fife Joinery Manufacturing (a subsidiary of Velux)”.
It would review whether affected workers were genuinely offered the chance to join the pension scheme. The report would assess
“the adequacy of record-keeping and employer accountability”
and explore possible
“remedies to ensure equal access to workplace pensions.”
The measure addresses concerns from shop-floor employees who joined before 1998 and were denied pension access despite repeatedly asking for it. The workers dispute claims that they declined pension membership and say they were told that they were not eligible. Attempts to engage Fife Joinery Manufacturing management have been unsuccessful. Workers have been advised to consider approaching the ombudsman, although none has done so yet. The new clause would hold the Government accountable to investigate and push for fairness and transparency. It is supported by my hon. Friend the Member for North East Fife and my Liberal Democrat colleagues.
To summarise, the new clause is a key step to ensure fairness and equality in workplace pension access and to prevent similar exclusions in the future.
Torsten Bell
I am grateful to the hon. Member, as always, for raising those specific issues in this debate. It has been a good opportunity to raise such cases, as he regularly does.
The hon. Member will be totally unsurprised that the Government cannot support the new clause, because it is the Pensions Regulator’s role to regulate occupational pension schemes and, as he mentioned, it is the Pensions Ombudsman’s job to investigate individual complaints from members. We do not want the Government to step over the top of those organisations. I encourage those who think that they have a case to approach the ombudsman, if they have not already—given the hon. Member’s remarks, it sounds like they have not done so. I should add that I am not aware of the details of that individual case.
To be clear, if individuals have concerns about their workplace pension scheme that relate to their employer and the running of the scheme, they should take the issue to the Pensions Regulator, which will investigate. Individuals who think that they should have been a member of a pension scheme can also go to the Pensions Ombudsman, if that makes sense. Depending on the nature of an individual’s complaint, two routes are available. I ask the hon. Member to withdraw his new clause.
John Milne
I thank the Minister for his words. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Clause 98
Regulations: general
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 99 stand part.
Government amendment 241.
Clause 100 stand part.
Torsten Bell
Clause 98 is a standard provision setting out how regulation-making powers in the Bill may be used. It confirms that all regulations will be made by statutory instrument and allows them to be tailored to different situations and scheme types. The clause ensures that the Bill can work effectively in practice.
Clause 99 sets out how regulations under the Bill will be scrutinised by Parliament, using either the affirmative or negative procedures—we were discussing a particular case relating to clause 38 just now. The clause also allows that regulations that would otherwise be subject to the negative procedure can be made as part of a joint package of regulations under the affirmative procedure.
Government amendment 241 is a technical amendment. The new provisions in chapter 1 of part 4 about changes to Northern Ireland salary-related, contracted-out pension schemes apply specifically to schemes in Northern Ireland. The rest of the provisions in chapter 1 apply to schemes in England, Wales and Scotland. Clause 100 is a standard legislative provision confirming the territorial extent of the measures in the Bill.
Question put and agreed to.
Clause 98 accordingly ordered to stand part of the Bill.
Clause 99 ordered to stand part of the Bill.
Clause 100
Extent
Amendment made: 241, in clause 100, page 98, leave out line 10 and insert—
“( ) Subject as follows, this Act extends to England and Wales and Scotland only.
(1A) Sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1 etc : Northern Ireland) extend to Northern Ireland only.”—(Torsten Bell.)
This amendment secures that the new clauses inserted by NC28 to NC30 extend to Northern Ireland only. Northern Ireland has its own pensions legislation, but in view of the retrospective provisions in those new Clauses it is considered appropriate to include material in the Bill for Northern Ireland corresponding to the new clauses inserted by NC23 to NC26.
Clause 100, as amended, ordered to stand part of the Bill.
Clause 101
Commencement
Mark Garnier
I beg to move amendment 255, in clause 101, page 98, line 22, leave out “Chapters 1 and 2” and insert “Chapter 1”.
The Chair
With this it will be convenient to discuss the following:
Amendment 256, in clause 101, page 98, line 23, at end insert—
“(aa) Chapter 2 comes into force six months after Chapter 4 comes into force.”
Government amendments 225 to 228, 242 and 243.
Amendment 263, in clause 101, page 99, line 5, at end insert—
“(d) section [Administration levy] comes into force on 1 April 2026.”
This amendment is consequential on NC44 and would ensure the amendment to abolish the PPF administration levy should come into force on 1 April 2026 (at the start of the 2026/27 levy year).
Clause stand part.
Clause 102 stand part.
Mark Garnier
Amendments 255 and 256 relate to the value-for-money framework timeline that we discussed when we considered clause 41 on Tuesday and are related to Conservative amendment 257, which was withdrawn. When we considered amendment 278, which was tabled by the hon. Member for Tamworth, the Minister committed to consider the matter on Report, so I will not press those amendments today.
This is, however, because I think it is the last time that I will speak in this Committee—or I hope it will be—a good opportunity to thank everyone. I say a huge thank you to everyone who has worked incredibly hard: the Clerks; you, Ms Lewell, and your fellow Chairs; and all the DWP officials who have supported the Minister who, frankly, with his not inconsiderable inexperience and youth, has done a magnificent job of working in his first Bill Committee. I think we can all agree that he has a terrific future in front of him as an individual who can get stuck into really quite dry, anodyne Bills. Of course, I also thank the members of my office staff, who have worked extraordinarily hard. I had not quite realised how difficult it is to be in opposition and up against the might of the Government, but my office staff have done very well, so I thank them all very much indeed.
Kirsty Blackman
I would similarly like to offer thanks, particularly to Hansard colleagues and the other House staff who have had to put up with us. This has been a particularly well-natured Bill Committee. I appreciate that the Whip had to change during it, and I do appreciate the fact that both Government Whips had to carry the Committee a little to make sure that everything worked. I am not going to agree with how young the Minister is, although I do agree that all the Front Benchers who have spoken, as well as all the Back Benchers who have spoken, have done an excellent job. It is nice to be part of a Committee that is cross-party in that we agree on a lot of positives in the Bill, and we have also disagreed very agreeably throughout.
Unfortunately, I do not have much in the way of staff members to thank, because this has been a one-woman band. However, I very much appreciate the hard work that everybody has put in to make sure that we can ask the Government lots of questions on the Bill so that the Government can do their best to answer us, even if we do disagree with the answer sometimes.
John Milne
I feel I ought also to thank everyone, and the Minister especially for a superb performance. I think we can all agree that this is a very good Bill, with lots of really good things in it. I am particularly interested in the investment side of it, with the greater resources to invest in UK plc, which we certainly do need.
Sadly, I expect the Bill will not receive the publicity that many do—it has not been in the headlines so far—and that is a pity. Much more trivial and ephemeral stuff, frankly, gets all the headlines, while something that is interesting and dynamic, like the measures in this Bill, will probably be displaced by the latest resignation.
Torsten Bell
I thank all Opposition Members for those reflections. I will come to my own after I have dealt with the remaining clauses and amendments—we must finish the job.
On the Opposition amendments, I am grateful to the hon. Member for Wyre Forest for his words. I am firmly committed to writing to both him and my hon. Friend the Member for Tamworth, which I shall do before Report. I am glad that the hon. Member will not press his amendments on that basis.
Amendments 225, 227 and 228 address the timing of the implementation of the provisions introduced by clause 38. Amendments 225 and 227 make it clear that the relevant master trusts and GPPs will not have to comply with the scale requirement until 2030. That is a point of clarification. In response to industry concerns, elements of the provision, such as the transition pathway, can be commenced and become operable prior to the scale requirement itself being active. We are responding to those concerns, and the amendment achieves exactly that. Amendment 228 provides clarification on the asset allocation elements of clause 38 by making it clear that those requirements will fall away if not brought into force by the end of 2035. Amendment 226 provides for the commencement of new chapter 3A, which will be inserted by new clauses 12 to 17.
On amendment 263, we have just discussed the PPF admin levy question. Given what we have just discussed about new clause 44, I ask the hon. Member for Torbay not to press the amendment.
Government amendment 242 introduces a commencement provision for the new chapter 1 of part 4 of the Bill on the validity of certain alterations to salary-related contracted-out pension schemes for both Great Britain and Northern Ireland. This measure means that two months after the Bill receives Royal Assent, effective pension schemes will be able to use a confirmation from their actuary obtained under this part of the Bill to validate a previous change to benefits—this is the Virgin Media discussion we had earlier today. Two months after the Bill becomes law, a previous change to benefits under an effective pension scheme will be considered valid if the scheme actually confirms that it met the legal requirements at the time of the change. This measure means that this part of the Bill will come into force two months after the Act receives Royal Assent and is a necessary accompaniment to new clauses 23 to 30.
Turning to the clauses, clause 101 is a standard commencement provision that details the timetable for bringing the Bill’s measures into operation and allowing transitional and saving provisions to ensure orderly implementation. Clause 102 is crucial, because it gives the Bill its short title. I commend those clauses to the Committee.
I will finish by adding my support to the comments made by all hon. Members about the proceedings of this Committee. I thank all hon. Members from all parties for their support—broadly—and also for their scrutiny, which is an important part of everything we do in this place. The Bill is important, but the debate around it is also important, both so that the legislation can be improved and in its own right. Such debate makes sure that issues are brought to the attention of the House and are on the record. I also thank this Chair, as well as several others, including those who have stood in at short notice at various phases of the Bill’s consideration. I am particularly grateful to one individual, and I am also grateful to the Clerks for all their work.
Most of all, I put on record my thanks to all the civil servants in the Department for Work and Pensions, His Majesty’s Treasury, the Financial Conduct Authority and the Pensions Regulator. Many of them have been working on the content of this Bill for many years, far longer than I have been Pensions Minister and, as many hon. Members have kindly reminded me, far longer than I may end up being the Pensions Minister, given the high attrition rate over the past 15 years in modern British politics. I thank them for the warning, and will take it in the way it was hopefully intended.
To be slightly worthy at the end of my speech, it is probably true that pensions legislation does not get the attention it deserves, but looking back over the 20th century, nothing was more important to the progress that this country and others made in delivering leisure in retirement. That very big win was delivered not only by productivity growth, but by Government decisions and collective decisions made by unions and their employers. The Bill goes further in that regard and, on that basis, it deserves all the coverage it gets.
Mark Garnier
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: 225, in clause 101, page 98, line 24, leave out “after 31 December 2029”.
This amendment, together with Amendment 227, means that relevant Master Trusts and group personal pensions will not have to comply with the scale requirement until after 2030, but that Chapter 3 of Part 2 (including provision relating to the scale requirement, such as the application can otherwise be brought into force at any time in accordance with regulations.
Amendment 226, in clause 101, page 98, line 25, at end insert—
“(ba) Chapter 3A comes into force on such day as the Secretary of State and the Treasury jointly may by regulations appoint;”.
This amendment provides for commencement by regulations of the new Chapter referred to in the explanatory statement to NC15.
Amendment 227, in clause 101, page 98, line 30, leave out subsection (5) and insert—
“(5) Regulations under subsection (4)(b) may not provide for the following to come into force before 1 January 2030—
(a) section 38(4), in respect of the insertion of Condition 1 in section 20(1A) of the Pensions Act 2008 (Master Trusts to be subject to scale requirement);
(b) section 38(8), in respect of the insertion of section 26(7A) of that Act (group personal pension schemes to be subject to scale requirement)
(but nothing in this subsection prevents section 38 from being brought into force before that date in respect of the insertion in that Act of other provision related to that mentioned in paragraph (a) or (b)).”
This amendment ensures that schemes will not be legally subject to the scale requirement before 1 January 2030. It allows, however, for provision relating to that requirement (e.g., provision around applications for approval) to be commenced before that date in anticipation of the requirement itself taking effect.
Amendment 228, in clause 101, page 98, line 34, at end insert—
“(5A) If section 38 has not been brought into force before the end of 2035 in respect of the insertion of—
(a) Condition 2 in section 20(1A) of the Pensions Act 2008 (asset allocation requirement: Master Trusts), and
(b) subsection (7B) in section 26 of the Pensions Act 2008 (asset allocation requirement: group personal pension schemes),
section 38 is repealed at the end of that year in respect of the insertion of those provisions.”
This amendment transposes and clarifies the provision currently in clause 38(16). It provides for the key provisions imposing the asset allocation requirement to fall away if they are not brought into force before the end of 2035.
Amendment 242, in clause 101, page 98, line 37, at beginning insert—
“( ) Chapter 1 of Part 4 comes into force at the end of the period of two months beginning with the day on which this Act is passed.
( ) Chapter 2 of”.
This amendment provides for the commencement of the new Chapter relating to the consequences of the Virgin Media case .
Amendment 243, in clause 101, page 99, line 5, after “section 96” insert
“and (Information to be given to pension schemes by employers)”.—(Torsten Bell.)
This amendment provides for the commencement of NC20.
Clause 101, as amended, ordered to stand part of the Bill.
Clause 102 ordered to stand part of the Bill.
The Chair
I also thank all hon. Members, Committee Clerks and officials, and our Doorkeeper team.
Bill, as amended, to be reported.