Pension Schemes Bill

Debate between Baroness Altmann and Baroness Stedman-Scott

Report stage
Monday 23rd March 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

My Lords, briefly, I support Amendment 120, in the name of the noble Lord, Lord Palmer. It is important to look at the issues he rightly raised that relate to the market. Indeed, Amendment 165 is particularly important, given that the injustices, some of which we will come on to in later groups, seem to have few redress routes. For a good pensions system, it is incumbent on us to have a better system to identify and remedy occupational pension injustices.

I will briefly speak to my Amendment 160, which would require a review to ensure that data in pension schemes must be accurate. Currently, there is no legal requirement to ensure that the amounts of money being paid into pension schemes for auto-enrolment workers or anyone else—I am particularly concerned about auto-enrolment—are correct. The Pensions Regulator has to make sure that pension contributions are being paid, but there is no requirement to make sure that this money is the correct amount.

I suggest amending the Pensions Act 2008 so that the section on “quality requirements” includes something that confirms regular checking of pension contributions; the regulations in Section 33 on “deduction of contributions”

“must require employers to obtain confirmation from the trustees or managers … that the amounts … paid into a scheme … are regularly checked … recorded and corrected as quickly as possible”;

and Section 60 on “requirement to keep records” would require schemes to provide confirmation that regular data accuracy checks and contribution verification, including for tax relief and national insurance relief, are correctly reported.

I have so often seen pension scheme records riddled with errors. It is surprising that there are no requirements in the legislation to make sure that the amounts of money going in are correct. I am interested to hear the Minister’s comments on the Government’s thinking as to whether they would consider this.

[Baroness Stedman-Scott (Con)]

My Lords, I will speak broadly in support of these amendments. They reflect a thoughtful and welcome focus from across the House on some of the most important structural issues in our pension system. In particular, I welcome the attention given by noble Lords to the effects of consolidation on competition and market entry, and to the importance of robust data accuracy checks. A market that consolidates without sufficient scrutiny risks reducing innovation and choice, while poor data integrity undermines trust at its very foundation. These are therefore welcome points of focus, and I thank the noble Lord, Lord Palmer, and the noble Baroness, Lady Altmann, for raising them.

However, I will speak primarily to Amendment 169 in my name and that of my noble friend. This amendment would require a review of pension communications and financial promotion rules, examining whether the current framework unduly restricts providers from communicating clearly with members, particularly in relation to risks, guidance and comparative information. This is, I believe, a profoundly important issue. The reality is this: pensions are complex, technical and often opaque. For many people, they are also distant—something to be thought about later rather than now—but that distance is illusory. The decisions made or not made today will shape financial security decades into the future. Knowledge in this area is power, yet too often, individuals lack both the information and the confidence to engage meaningfully with their pensions. Communications can be overly cautious, overly technical or constrained in ways that make it difficult for providers to present information in a way that is clear, comparative and genuinely useful.

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[Baroness Altmann (Non-Afl)]

My Lords, I have added my name to this amendment, and I thank the noble Viscount, Lord Thurso, for the excellent explanation he has given. I agree completely with what the noble Lord, Lord Davies, said. This is clearly an injustice that has gone under the radar for far too long. Indeed, I have spent the last 20 years of my life trying to help people in this kind of position, where their pensions have been taken away from them, reduced or in some way impacted by problems that were not of their own making.

This is probably the worst example I have seen of instances where people were misled into moving their money into something that was totally different from what they were led to believe. For example, the members asked the Government Actuary’s Department, which reassured them before they moved their money that the scheme they were moving it into was pretty much the same as the one they left, without any mention of the risk that they could lose the whole thing. Indeed, in 1996 there was no Pension Protection Fund, and they could have lost the whole of their accrued benefit that was transferred over.

They asked:

“Did the GAD document state anywhere that the AEAT pension fund was at greater risk than the UKAEA pension fund?”—


the private fund that they transferred to. In the written reply, the Government Actuary’s Department said it did not. In the private sector, how many people have paid a fortune for mis-selling for much less lack of risk warning than that? In Parliament, Ministers at the time gave assurances, such as that from Richard Page MP in debate on the Atomic Energy Authority Bill, which did the privatisation. He said:

“I have made it absolutely clear that the Government have no intention whatever of selling employees short. Their terms and conditions and pension rights will be fully protected”.—[Official Report, Commons, 2/5/1995: col. 210.]


That is just not what has happened.

I do not think it was an intentional outcome, but it is a real outcome to the members who are trying to survive on so much less than they should have. The Pensions Ombudsman could not investigate this because the scheme was privatised in 1996 and failed in 2012. The statute of limitations expires after 15 years, but the company did not fail until 16 years later. The Parliamentary Ombudsman office could not investigate because it is involved with public sector pensions, but the ombudsman felt so strongly that this was an injustice that they helped to draft a Private Member’s Bill for the noble Lord, Lord Vaizey—he is not in his place and I had hoped he might make it; I think he is coming later—to try in that way to achieve proper justice for the AEAT members. We are talking about fewer than 1,000 people in the closed section who transferred their entire public sector pension accrual over into this new private scheme with a new company. The amendment tabled by the noble Lord, Lord Palmer, in the first group concerned a lacuna in protection. If this is not a huge lacuna in protection, I am not quite sure what is.

I remind noble Lords that in 2024 the Government allocated £1.5 billion to enhance by 32% the pensions of 112,000 former mineworkers. I am not criticising the Government for doing that. They also, in the last Budget in 2025, allocated £2.3 billion of taxpayers’ money to enhance coal staff pensions, even though that money would have come back to the public purse in 2029. That was given to those mineworkers. Again, I am not criticising the Government for that. However, I cannot help wondering whether the shortfall for 2029 that would arise as a result of this may have driven in some regard the £2,000 national insurance salary sacrifice cap, which will, perhaps coincidentally, kick in in 2029.

What I am saying is that, if this country can afford to enhance those pensions at taxpayers’ expense, how much more worthy and important is it for us as a country to honour the accrued rights of workers who in good faith transferred their pensions on the advice, as we have heard from the noble Viscount, Lord Thurso, of the Government Actuary’s Department? They believed they were doing the right thing and have ended up losing so much as a result.

I hope that the Minister and the Government might think carefully about the speeches that we have heard this evening and give serious consideration to addressing this injustice.

[Baroness Stedman-Scott (Con)]

My Lords, this is a thoughtful amendment from the noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, and I am grateful to them for bringing it before the House. Where there is a credible concern that individuals have suffered material pension losses, it is right that those concerns are properly examined. This amendment seeks to ensure that the facts are established, the extent of any losses is understood, the causes are examined, and any lessons for policy, protection or redress are fully considered. That seems to us a measured and sensible approach. If the losses suffered by former employees of AEA Technology are indeed material, it makes sense that this issue should be looked into carefully, independently and transparently.

We will therefore listen closely to the Minister’s response, particularly on whether the Government believe that the existing framework is sufficient to address these concerns, or whether there is merit in undertaking the kind of review proposed in the amendment.

Pension Schemes Bill

Debate between Baroness Altmann and Baroness Stedman-Scott

Committee stage
Thursday 5th February 2026 Grand Committee

[Baroness Altmann (Non-Afl)]

Good. I now have it and I want to check that everyone else has it too. That is my first question dealt with.

In speaking to this amendment, the aim is to enable members of pension schemes that have gone into the PPF after their assessment period to be extracted, with regulations laid that will govern the terms on which they can be extracted. This is particularly relevant to the AEAT scheme: I know that we will come to this in later groups, with a requirement for a review of the situation. My amendment is trying to facilitate a practical resolution to the problems faced by the Atomic Energy Authority scheme. There are parallels with the Atomic Weapons Establishment or AWE scheme: employees originally had a scheme similar to and in fact derived from that of the UK AEA.

The AWE staff and their pensions were transferred to the private sector, and in 2022 the Government granted a Crown guarantee to the private company scheme. However, members of the AEA scheme were told that the scheme that they were encouraged to transfer to in 1996 would be as secure as that provided by the Atomic Energy Authority public sector scheme. This was not the case, though, because it was not offered a Treasury guarantee. It would appear that the Government Actuary’s Department failed to carry out a proper risk assessment of the various options offered to those members in 1996. Indeed, they were apparently specifically told not to worry about the security of the scheme to which they transferred all their accrued benefits. Of course, all these accrued benefits are pre-1997.

What happened after that is that they went into a private sector scheme. It was a closed section of that scheme, only for the members who transferred their public sector rights into it. The public sector rights had full inflation protection for pre-1997 and members paid an extra 30% or so contribution into that private sector scheme in order to conserve the inflation protection. However, as part of that, the pension they were saving for, the base pension, was lower than the one for those members in the open scheme who had joined not from the public sector. They were working on the principle that that their scheme was secure and that they would be getting the uplifts of inflation. When it failed—the private sector company went bust in 2012—and they went into the PPF in 2016, they suddenly discovered that they had paid 30% more for inflation protection, which was gone. And because they had paid 30% more for that protection and were accruing a lower pension, a 180th instead of a 160th scheme, their whole compensation was lower than that of everybody else who had not had any assurances from the Government that transferring their previous rights into a private sector scheme would generate these kinds of losses.

This is probably the worst example I have seen of government reassurance and failed recognition of the risks of transferring from a guaranteed public sector scheme into a private sector scheme. This amendment seeks to require the Government to lay regulations that would transfer members out of the PPF, those members of the closed scheme, if they wish to. I am not forcing anyone to do so within this amendment. You have to offer them the option of going or staying if they are satisfied with the PPF. Also, a sum of money may need to be paid to the PPF, which would take away the liability and thereby reduce PPF liabilities, but also sets up an alternative scheme that could be along the lines of the AWE arrangements, for example. That would potentially be another option. On privatisation, the Government received a substantial sum of money from the sale of that company, the private sector takeover of the commercial arm of the Atomic Energy Authority. That delivered less money than was paid to the private sector scheme to take over the liabilities. Therefore, the Government have money to pay with, which they have never really acknowledged.

I hope that this amendment is a potentially direct way to help the AEAT scheme, if the Government are minded to consider it. It builds on a provision that is already in the Pensions Act 2004, which talks about situations whereby there is a discharge of liabilities in respect of the compensation, which this amendment would be doing. It prescribes the way in which subsection (2)(d) of Section 169 of the Pensions Act 2004 could be used to help the AEAT scheme.

I have also been approached by a private sector employer whose scheme failed and went into the PPF. At the time, the employer did not have sufficient resources to buy out more than the Pension Protection Fund benefits for his staff. He now is in a position to do that and would like to do so but, at the moment, he cannot get his scheme extracted. He is willing to pay an extra premium to do that, in pursuance of a moral duty to try to give his past staff better-than-PPF benefits. That is what this amendment is designed to achieve. It is built on the connection between AEAT and AWE, but could also help other private sector schemes if the employer feels—it would normally involve smaller schemes—that there is a moral obligation that they can now meet, financially, to recompense members at a level better than the PPF, once the assessment period is over and the resources have gone in, and to take it back out again.

[Baroness Stedman-Scott (Con)]

My Lords, this group concerns the proposed transfer of the AWE pension scheme into a new public sector pension arrangement, as set out after Clause 110 in government Amendments 194 to 202, with the associated measures on extent and commencement in government Amendments 223 and 224.

At first glance, these new clauses are presented as technical and perhaps little more than an exercise in administrative tidying up, reflecting the fact that AWE plc is now a wholly government-owned company. However, on closer inspection, several questions come to mind. This represents a material transfer of long-term pension risk and does so in a way that raises serious questions around principle, process and precedent.

On an IAS 19 accounting basis, AWE plc reported a defined benefit pension deficit of £97 million as at 31 March 2025. The company has already made significant one-off contributions: £30 million in March 2024, following an earlier £34.4 million in March 2022. These payments form part of a recovery plan agreed with the trustee and the Ministry of Defence, and the position is subject to ongoing review. This is an active funding challenge, one that should be considered carefully.

The provisions before us establish a bespoke statutory framework for a single named company. They provide for the creation of a new public sector pension scheme, the transfer of assets and liabilities, the protection of accrued rights, specific tax treatment, information-sharing powers, consultation requirements and arrangements for parliamentary scrutiny. All of this is meticulously itemised and carefully drafted.

Yet my concern lies not with the drafting but with the policy and constitutional choice that sit beneath it. We are told repeatedly that members’ rights will be preserved; that phrase carries considerable weight. The question is a simple one: which rights precisely are being preserved? Are we referring solely to rights accrued through past service or does that protection extend to future accrual as well? Does it encompass accrual rates, indexation arrangements, retirement age and survivor benefits or are members’ entitlements merely frozen as a snapshot at the point of transfer? What happens if the rules of the receiving public sector scheme change in future? These questions go to the heart of both member security and parliamentary responsibility. They deserve answers in the Bill, not assurances in principle or reliance on mechanisms that may evolve long after this Committee has given its consent.

There are also practical questions that remain unanswered. How exactly will trustees be formally discharged of their responsibilities? Additionally, does this change relate to DC members? Will each defined contribution pot be automatically converted or will past defined contribution rights be crystallised, with future accrual taking place under a defined benefit structure? For scheme members, these questions go to the very heart of retirement security.

I also question the decision to legislate company by company. This new clause is not objectionable because it concerns pensions; it is objectionable because it concerns one named corporate identity. Primary legislation should set rules of general application.

If the policy rationale here is sound, and if it is right that the pension schemes of wholly owned government companies should be transferred into the public sector on certain terms, that principle should be capable of being expressed generally and should not be hard-coded for AWE alone. Otherwise, we will face an unhappy choice in the future: if AWE’s status changes again, Ministers must either live with an outdated statute on the books or return to Parliament with yet another Bill to amend it. Neither outcome represents good lawmaking.

There are also practical questions that I hope the Minister will address. Will members receive individualised benefits statements, comparing their position before and after the transfer in clear, comprehensible terms? What support will be made available for members who need independent guidance, rather than reassurance from the scheme sponsor itself? Will there be formal consultation with scheme members and recognised unions, and will the responses to that consultation be published?

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[Baroness Altmann (Non-Afl)]

My Lords, I have added my name to these amendments. I very much support the aims of the noble Baroness, Lady Bowles, to ensure there is proper flexibility in the levy paid by companies to the PPF. The PPF can then use its discretion to decide which companies should pay more than others and which companies are more secure than others in terms of their pension schemes. The current requirement is based on circumstances that have fundamentally changed over the past 20 years or so, since the whole system was first thought of.

The PPF is one of our incredible success stories in terms of protecting people’s pensions by successfully investing money that it has taken in. It has worked far better than anyone would have anticipated at the time, and we need to pay tribute to those who have been running the PPF; they have done an extraordinarily good job in the face of sometimes very difficult circumstances. I hope that the Government will think favourably about the possibility of allowing the PPF this kind of flexibility, given that the situation with pension schemes, surpluses and funding levels has changed so fundamentally.

[Baroness Stedman-Scott (Con)]

My Lords, the amendments in this group in the name of the noble Baroness, Lady Bowles, are thoughtful and proportionate. They raise genuinely important questions about how we can future-proof the operation of the Pension Protection Fund.

Clause 113 amends the provisions requiring the PPF board to collect a levy that enables the board to decide whether a levy should be collected at all. It removes the restriction that prevents the board reducing the levy to zero or a low amount and then raising it again within a reasonable timeframe. We welcome this change. It was discussed when the statutory instrument passed through the House, at which point we asked a number of questions and engaged constructively with the Government.

The amendments tabled by the noble Baroness would go further; once again, the arguments she advances are compelling. Amendment 203A in particular seems to offer a sensible way to shape behaviour without micromanaging it—a lesson on which the Government may wish to reflect more broadly, especially in relation to the mandation policy. If schemes know that the levy will always be raised in one rigid way, behaviour adapts, and not always in a good way. In contrast, with greater flexibility, employers retain incentives to keep schemes well funded, trustees are rewarded for reducing risk and the levy system does not quietly encourage reckless behaviour on the assumption that everyone pays anyway.

This amendment matters because it would ensure that, if the PPF needed to raise additional funds, it could do so in the least damaging and fairest way possible at the relevant time. I fully appreciate that the PPF is a complex area but, as the market has changed and is changing, and as the pensions landscape continues to evolve, the PPF must be involved in that journey. These are precisely the kinds of questions that should be examined now, not after rigidity has caused unintended harm.

I turn briefly to Amendment 203C. We are open to finding ways to prevent the levy framework becoming overly rigid, which is precisely why we supported the statutory instrument when it came before the House. Instead of hardwiring an 80% risk-based levy requirement into law, this amendment would place trust in the Pension Protection Fund to raise money in the fairest and least destabilising way, given the conditions of the year. Flexibility may well be the way forward. I have a simple question for the Minister: have the Government considered these proposals? If the answer is yes, why have they chosen not to proceed? If it is no, will they commit to considering these proposals between now and Report? I believe that that would be a constructive and proportionate next step.

Pension Schemes Bill

Debate between Baroness Altmann and Baroness Stedman-Scott

Committee stage
Monday 19th January 2026 Grand Committee

[Baroness Altmann (Non-Afl)]

My Lords, I have enormous sympathy with the thoughts behind the amendment of the noble Lord, Lord Sikka. However, I share the concerns expressed by the noble Baroness, Lady Noakes, in that it is not clear how that would work, because this would then need to be a contingent payment or some kind of conditional payment which can be recouped, and that would impact creditors or debt holders of the company as well. Does the noble Lord feel that if, as a consequence of the surplus payment, members also got enhanced benefits, that would in some ways compensate for the future eventuality of what he is concerned about?

Finally, in the days before we had a Pension Protection Fund, I was very much in favour of increasing the status of the unsecured creditor position of a pension scheme. But in the current environment, where there is a Pension Protection Fund, and where the Bill will be improving the protections provided by it, it is much less important to increase the status on insolvency of the pension scheme itself than it would have been in past times. I certainly agree with the noble Lord, Lord Palmer, that if there were to be any such provision, it should be a lot less than 10 years.

[Baroness Stedman-Scott (Con)]

My Lords, I am grateful to the noble Lord, Lord Sikka, for tabling this amendment, which is clearly motivated by a desire to protect scheme members and guard against the risk that pension surpluses are extracted prematurely, only for employers to fail some years later. I suspect that there is broad sympathy with this objective across the Committee. However, I have a number of questions about how this proposal would operate in practice and whether it strikes the right balance between member protection, regulatory oversight and the wider framework of insolvency law. My noble friend Lady Noakes, the noble Lord, Lord Palmer of Childs Hill, and the noble Baroness, Lady Altmann, have all raised points connected to this amendment. I hope I am not duplicating their questions, but I will ask mine.

First, can the noble Lord say more about how this amendment would interact with the existing hierarchy of creditors under the Insolvency Act 1986? As drafted, it appears to require pension schemes to be paid ahead of all other creditors, including secured creditors and those with statutory preferential status? Does the noble Lord envisage this as a complete reordering of creditor priorities in these cases? If so, what thought has he given to the potential consequences for lending decisions, access to capital or the cost of borrowing for employers that sponsor defined benefit schemes?

Secondly, I would be grateful for further clarity on the choice of a 10-year clawback period, which other noble Lords have raised. As has been said, 10 years is a very long time in corporate and economic terms, and insolvency occurring at that point may bear little or no causal connection to a surplus payment made many years earlier, perhaps in very different market conditions. What is the rationale for that specific timeframe, and how does the noble Lord respond to concerns that this could introduce long-tail uncertainty for employers and their directors when making decisions in good faith?

Thirdly, how does the amendment sit alongside the existing powers of the Pensions Regulator? At present, trustees must be satisfied that member benefits are secure before any surplus is paid, and the regulator already has moral hazard powers to intervene where it believes scheme funding or employer behaviour to be inappropriate. Does the noble Lord consider those tools insufficient and, if so, can he point to evidence of systemic failure that would justify addressing this issue through restructuring insolvency priorities rather than through pension regulations?

I am also interested in the practical operation of this provision. Proposed new subsection (2) would allow amendments to both the Insolvency Act 1986 and the Enterprise Act 2002 to achieve the intended outcome. That is a very broad power, even acknowledging the use of the affirmative procedure. Has any thought been given to how this would operate in complex insolvencies; for example, where surplus has been paid to a parent company, where assets are held across a corporate group or where insolvency proceedings involve cross-border elements?

Finally, although I understand the protective instinct behind this amendment, I wonder whether there is a risk of unintended consequences. Might the creation of a potential super-priority for pension schemes discourage legitimate surplus extraction, even where schemes are demonstrably well funded, trustees are content and regulatory requirements have been met? If that were to occur, could it inadvertently weaken employer covenant strength over time rather than strengthen it?

None of these questions is intended to diminish the importance of member protection or suggest that concerns about surplus extraction are misplaced. Rather, they are offered in the spirit of probing whether this amendment is the most proportionate and effective way of addressing those concerns, or whether there may be alternative approaches, perhaps within the existing regulatory framework, that could achieve similar objectives with fewer systemic risks. I look forward to hearing the noble Lord’s response and the Minister’s comments.