Tuesday 28th April 2026
(1 day, 11 hours ago)
Lords ChamberPension Schemes Bill 2024-26 View all Pension Schemes Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Message as at 28 April 2026 (issued at 17:55) - large print - (28 Apr 2026)
Baroness Sherlock
That this House do not insist on its Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, and do agree with the Commons in their Amendments 88C, 88E to 88P, 88R, 88S, 88W and 88Y to 88Z8 to the words restored to the Bill by the Commons disagreement to Lords Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88.
“(4) In this section “qualifying asset” means an asset of a prescribed description that is held in a main default fund of a relevant Master Trust or group personal pension scheme.
(5) A description of asset may be prescribed under subsection (4) only if it represents a direct or indirect holding in any of the following asset classes—
(a) private equity;
(b) venture capital;
(c) private credit;
(d) interests in land;
(e) infrastructure;
(f) unlisted equity securities not falling within paragraphs (a) to (e).
In this subsection “unlisted equity securities” means equity securities not listed on a recognised stock exchange within the meaning of the Income Tax Acts (see section 1005 of the Income Tax Act 2007) (including equity securities admitted to trading that are not listed on such an exchange).”
“(5A) Regulations under subsection (4) must secure that a description of asset is prescribed under that subsection in respect of each asset class mentioned in subsection (5)(a) to (f).”
“(za) a joint assessment by the Financial Conduct Authority and the Pensions Regulator of the extent to which there is evidence of competitive conditions restricting relevant Master Trusts and group personal pension schemes from investing in qualifying assets, including in circumstances where such investments may be in the best interests of members of such schemes;
(zb) the Secretary of State’s assessment of the extent to which relevant Master Trusts and group personal pension schemes have made progress towards achieving—
(i) 10% (by value) of scheme assets held in main default funds to be qualifying assets, and
(ii) 5% (by value) of scheme assets so held to be of a UK-specific description (within the meaning of subsection (6A)(b));
(zc) the Secretary of State’s assessment of any barriers to relevant Master Trusts or group personal pension schemes investing in qualifying assets, including in particular where such assets are located in the United Kingdom;
(zd) the steps taken by the Secretary of State or the Authority to address any such barriers;”
“(12A) Before making regulations under subsection (1), the Secretary of State must have regard to the joint assessment of the Financial Conduct Authority and the Pensions Regulator mentioned in subsection (12)(za).”
“(14A) The Secretary of State may not make regulations under subsection (1) before 1 January 2028.”
“(za) may make provision about the form and content of an application, including about the evidence to be provided as part of an application;
(zb) must make provision requiring an application to include a statement—
(i) that the applicant concludes that meeting the asset allocation requirement is likely not to be in the best interests of members of the scheme, and
(ii) setting out the basis on which the applicant reached the conclusion.”
“(a) must make provision requiring the Authority to determine that the applicant is to be treated as mentioned in subsection (1) in cases where—
(i) the application complies with the requirements of regulations made under subsection (1), and
(ii) the Authority is of the view that it is reasonable for the applicant to have reached the conclusion that meeting the asset allocation requirement is likely not to be in the best interests of members of the scheme;”
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
Noble Lords will be aware that we have one outstanding issue on this Bill still in play. Unsurprisingly, it is the reserve power on asset allocation. As this is the fourth time the House has been asked to consider the question, I will spare noble Lords a detailed exposition of the merits of this policy. Let me simply say that the Government’s underlying position has not changed, reflecting our policy intent to ensure that savers’ best interests are secured by bigger and better pension schemes investing in a wide range of assets.
Today, the Government return to their previous amendments, all of which the elected House endorsed. These spell out the intended purpose of the reserve power to underpin the industry’s commitments in the Mansion House Accord and rule out other uses, such as a focus on any specific asset or asset class. Today, we are also bringing forward a final set of changes that aim to respond to points made in this House and the other place, while retaining the policy intent I have set out. These have three elements.
First, there is a new requirement on regulators, in this case the TPR and the FCA, to make an assessment of the extent to which there is evidence for the collective action problem that we have discussed in debates on this Bill. There will be a requirement for this assessment to be incorporated into the production of the ex-ante report that the Bill requires to be published before any use of the reserve power. Our amendments today would also place a duty on the Government to have regard to this regulatory assessment before any use of the power. It was always the Government’s intent to evaluate progress against the Mansion House Accord commitments in terms of the broad direction of travel over a substantial period of time rather than shorter-term movements in private asset exposure. To reinforce this, we also propose to add to the Bill that the power cannot be exercised any earlier than 2028.
Our second set of changes builds on the savers’ interest test to reinforce the central role of trustees and providers. Our amendment in lieu would change the bar required to engage the savers’ interest test. Rather than having to demonstrate that meeting the asset allocation requirements would be likely to cause material financial detriment, a scheme would instead have to show that meeting the requirement is likely not to be in the best interests of members. This reflects language regularly used when considering trustee duties. In addition, we have more tightly specified the regulator’s role, confining it to ensuring that the trustees’ or providers’ assessment of what is in the best interests of members is reasonable, rather than replacing that assessment with its own.
Thirdly, our amendments address worries about differential treatment of particular investment vehicles by allowing for consideration of direct or indirect holdings in the six asset classes named in the Mansion House Accord.
This Bill has its roots in much work that has been under way for some time in government but also in Labour’s commitment to ensure that workplace pension schemes take advantage of scale and invest in a wider range of productive assets. That was why one of the first things the Government did on taking office was to launch a comprehensive review of pensions investment. That review found clear evidence that the DC pensions market is operating with an excessively narrow focus on cost, to the detriment of saver outcomes. That is where the reserve power comes from. It exists because the review found, and the industry itself has told us publicly and privately, that the competitive pressure focused on cost minimisation is the single biggest barrier to diversifying in savers’ long-term interests.
Of course, things can change over time, and a range of other factors may come into play; the changes that we propose today address that worry and others. They require regulators to assess whether these competitive pressures remain a material barrier to more diverse private asset investment before any use of the power. They put trustees’ or providers’ assessments of savers’ best interests centre stage.
I am grateful for engagement across the House with this Bill and for the engagement with the opposition parties particularly in recent times. This House has done its job in revising this Bill, and I commend the government amendments to the House. I beg to move.
Viscount Thurso (LD)
My Lords, I rise for the last time in your Lordships’ House to congratulate the Minister, to thank her for all the hard work that she has done and to say how much I have appreciated my interaction with her. We have arrived at a perfect compromise in that none of us is entirely satisfied—which has always been the definition of a great compromise. We are in a place where the major concerns that many of us had on the mandate part of this Bill have been, if not removed, modified to the point at which they are liveable with. As the Minister said, it is this House at its best.
When I came into this House in 1995, if your Lordships had said to me, “The last time that you speak will be on the fourth ping-pong of a Pension Schemes Bill”, I would have said, “On your bike—not a chance”. However, I have enjoyed the work of being part of this Bill, and I think that both the Government and the Opposition have done their job well. I hope that when this goes on to the statute book, it will deliver for pensioners.
Baroness Altmann (Non-Afl)
My Lords, it is a pleasure to follow the noble Viscount, Lord Thurso. I pay tribute to him. He will be much missed by this House. His work on this Bill and in many other areas has been most welcome and helpful and his demeanour and the manner in which he has co-operated with us and with Ministers has been appreciated by everybody. I declare my interests as far as pensions are concerned. I am an adviser to a master trust and a non-executive director of a pensions administration company.
I will not delay the House too long, but I want to welcome the changes that have been made. I thank the Minister for her patience, her engagement and for listening and working with this House. We have now achieved much safer and better outcomes for members of pension schemes. These will allow trustees and managers to look after the best interests of members so that they do not feel forced to invest in ways that they might not otherwise have chosen to or which are against their best judgment.
There will not be an exclusion of listed investment companies. Again, I thank the Minister and the Government for listening to the serious concerns that were expressed by this House. I also welcome the changes that we have made along the way to the Bill. It is a much better Bill. I thank all colleagues across the House who have co-operated so well.
I must pay tribute to the noble Baroness, Lady Bowles, for all the work that she has put in, and the Front Bench on this side as well, who have worked so hard to make this Bill a better Bill. I wish this Bill well. Hopefully, a lot of pension scheme members will enjoy better retirements in the future—I certainly hope so—as a result of what we are doing now.
Baroness Bowles of Berkhamsted (LD)
My Lords, I am pleased to have reached this stage, where we are now all back on the same side. We have had some exchanges when we have said, once upon a time, that we were all pointing in the same direction, and then we had a little bit of slippage away from that, but now we are back together. I am still no fan of mandation, but we have now got it suitably under control, if I can put it that way. There are reasonable guardrails to make sure that it does not go wrong, that we, I hope, never use it and that we get the additional investments that we all agree in principle are needed.
I thank all noble Lords who have worked on the Bill, because the work, the meetings and so forth have been harmonious. A lot of late-night working, and some early this morning, has resulted in the solutions that we now have. Like others, I thank everyone and hope we can see the rewards that come from the passage of this Bill.
Viscount Younger of Leckie (Con)
My Lords, the amendments brought forward by the Government today, in lieu of those proposed by the noble Baroness, Lady Bowles, go some way towards addressing our more fundamental concerns about the mandation power. In particular, the shift in the test—from requiring schemes to show that compliance
“would be likely to cause material financial detriment”
to demonstrating that it is
“likely not to be in the best interests of members”—
represents a significant and welcome change from the Government’s original position. By placing members’ best interests at the heart of the policy, this reform helps to mitigate the risk that mandation could cut across trustees’ fiduciary duties. It was never acceptable that schemes should have to show a risk of material detriment before securing an exemption, as the Government had proposed in earlier stages. The Government’s recognition of that point is therefore very welcome, albeit somewhat overdue.
I welcome the Government’s commitment to require the regulators to undertake an independent assessment of the purported collective action problem and the extent to which it is inhibiting investment in UK assets. The Government have consistently argued that mandation is necessary to address a collective action problem. They will now need to substantiate that claim with robust independent evidence, with the Secretary of State having regard to this assessment before they make regulations. That too is a welcome step forward, as is the Government’s commitment to remove discrimination in the clause between investment vehicles. Their decision to bring forward the sunset period from 2035 to 2032 is also sensible.
These changes are a direct result of sustained and determined pressure from across this House to address the question of mandation in the Bill. Noble Lords on all sides recognised early on the fundamental flaws in the Government’s original approach—concerns that were not only shared here but held strongly across industry. I pay particular tribute to the noble Baroness, Lady Bowles, who has led that effort with clarity and persistence. She has kept the House focused on what is, without question, the central issue in our consideration of this Bill. I am glad that this has borne fruit in what is a substantial move from the Government’s original position, which was untenable.
I shall not detain the House any further but will just say that we on these Benches are content to accept the amendments that the Government have introduced. I thank the Minister for her earlier remarks. The situation is far from perfect and we remain of the view that the mandation power is wrong in principle, but this settlement, which we might now call mandation-lite, is far better than that in the Bill as originally drafted. That is a direct result of the work done in your Lordships’ House to stand up for businesses and savers in our country.
Finally, as this is my very last contribution from the Front Bench, and in this House, I wish the whole House and all noble Lords the very best of luck for the future. It has been a genuine, huge privilege to serve on the Front Bench almost continuously for 15 years. Of course, I will miss it dreadfully, but I do know that there is a life outside this great House of Lords.
Baroness Sherlock (Lab)
My Lords, I am very grateful to noble Lords for their remarks. I will not detain the House for long. I want to say just a couple of things.
One is that this Bill is about so much more than the reserve power. We should take a moment to think about what we have done. We have done some really significant work which will help to reshape the pensions landscape, to help get better returns for savers, as the noble Baroness, Lady Altmann, said. We have addressed questions of value for money, scale, lost pots, guided retirement, a superfund regime, and an uprating for PPF members. A huge amount has gone into this, and more besides. I am so grateful to the House for its detailed scrutiny. Bills such as this show the value of this House, when we get the time to crawl all over them. I like the characterisation given by the noble Viscount, Lord Thurso, which I think will outlive him: that when we are all a bit unhappy, we may well have landed in a place that we can live with.
I say thank you again to all noble Lords—I will not name them all because there are too many, but obviously they include the noble Baronesses, Lady Bowles, Lady Stedman-Scott and Lady Altmann—for their work on this and their engagement in recent times. I thank the noble Viscount, Lord Thurso, for his kind words about me—and I hope he took from the warmth of the House’s response how much his work is appreciated and how much he will be missed—and for all his years of public service.
Finally, I say to the noble Viscount, Lord Younger, on behalf of the House, that after 15 years on the Front Bench he deserves a break. There is a life outside here—said once more with feeling, as someone who is not far off that. I thank him for all those years of public service, his years as a Minister and his years on the Front Bench, for his courtesy, kindness and engagement, and for all the work that he has done. We wish him a very happy time outside this House. When he discovers the joys to be found beyond here, he may write back and tell us and we will just be very jealous.
In the meantime, with thanks to everybody, I beg to move.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, as we have only just received the English Devolution and Community Empowerment Bill back from the Commons, we will have to adjourn during pleasure until a point, to be announced on the annunciator, when we can recommence on that Bill.