Pension Schemes Bill

Baroness Hayman Excerpts

Report stage
Monday 23rd March 2026 Lords Chamber

These amendments strengthen trustee confidence, enhance governance and modernise the interpretive framework that underpins pension savings. I beg to move.

[Baroness Hayman (CB)]

My Lords, when I came into the Chamber today, a Cross-Bench colleague congratulated me on the way in which my amendment has been handled; it is an absolutely perfect example of how the House of Lords should operate. We are all very aware, I think, that sometimes we are not operating at our best at the moment. In this case, an amendment was put forward on a cross-party basis and negotiations went on with the Minister; we managed to thrash out an amendment—and we did not get everything that we wanted, but we certainly got the legislative basis on which guidance could be issued. That guidance has been asked for by trustees and the industry and considered by working groups. I first got involved with the issue and knew that there was a request for clarity some five or six years ago, when we had another Pension Schemes Bill.

I am seriously disappointed that what I thought was a consensus that this was a good way forward has not been accepted across the House. I am particularly distressed that, as I understand, the Liberal Democrat Benches will not be supporting the government amendment today. My understanding up to this morning was that the concerns that existed there related to the fact that my amendment had in some way been watered down and was less tough, putting less into statute and giving more reassurance to those who were concerned about overinvolvement. The Minister set out very clearly that this was not a case of overinvolvement; it is certainly not a case of mandation. I was once told that a Secretary of State in a previous Government said that he did not worry at all about “have regard” amendments, because they could be ignored if there was a basis for so doing.

So I am, as I say, very upset. I will not go through all the arguments as to why this would be valuable—I did it at Second Reading and in Committee and the Minister has done it for me today. I am no expert, and I accept that there are experts in the Chamber, but pension investments are the ultimate long-term investments—the ultimate investments in which long-term, systemic risks should be taken into account. The anxiety that some pension fund trustees had about taking those into account was holding those funds back from acting in the best interests of their pensioners. That, quite simply, was what we were trying to put right in this amendment. The Minister has made a compelling case for this amendment, which she and her officials have taken infinite care over, and I still hope, even at this late stage, that those who are thinking of not supporting it will reconsider and support it strongly, as I do.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I shall make a few brief remarks in support of the Government. I declare an interest as chairman of the Financial Markets Law Committee, which issued a paper about two years ago now to try to explain the very complicated problems. This would be an easy matter to solve if lawyers were not paid at the extortionate rates at which they are paid, because each bunch of trustees could take their own legal advice, but unfortunately we live in a world where lawyers are grossly over-remunerated, and it is not practicable for trustees of pension schemes to take legal advice. It is therefore necessary to provide some guidance in relation to fiduciary duties.

These are complicated, partly because they have a very ancient history, albeit one that has worked well, and partly because the Law Commission issued a paper some years ago which was not entirely clear. The paper that the Financial Markets Law Committee issued, although it was agreed unanimously by the committee, is not entirely easy to follow. Therefore, what was needed was something that ordinary trustees could look at and be guided by in the exercise of their fiduciary duties. As the Minister has explained, and as my understanding is, the guidance is going to be prepared by an independent group. Having had to see some of those who have been involved, “independent” is a correct description of them. Pension lawyers are tough people and I have no doubt whatever that they will produce independent advice and will not be cowed by any Minister into providing something that does not accord with the law—what they will be doing is giving guidance on the law.

There is one point upon which I disagree with the Minister. She says that the guidance will be authoritative. Yes, in one sense, but not authoritative in the sense in which it is popularly understood. They cannot give advice that changes the law in any way whatever, because that would be ultra vires what they are intending to do, and if they did, one could go to the court and say, “The Secretary of State’s guidance does not represent the law”. Therefore, the argument that this is in some sense changing the law is totally misconceived, maybe because some have not read the amendment very closely. This is simply guidance.

When we look at fiduciary duties and at the 2005 pension regulations, as amended in 2018, there are phrases that are not easy to understand. Therefore, what the Secretary of State is going to do seems to me entirely sensible. She is going to get a group of independent people—and jolly independent they are too—presided over by Sir Robin Knowles, who is fiercely independent, and all they will be doing is trying to explain the law to people, without the people concerned having to pay the fees of lawyers.

I cannot understand how anyone could possibly oppose this. If there is something in the wording that is not quite right, it would be wonderful if someone could say what it is; no doubt it could be corrected in time for Third Reading. To deprive pension trustees of advice and force them into the hands of lawyers is quite wrong. Who pays the fees of the lawyers? The pension funds. This is a good piece of legislation, and we ought to support His Majesty’s Government.

--- Later in debate ---

Tabled by

[Baroness Hayman]

167: After Clause 117, insert the following new Clause—
“Clarification of pension scheme investment duties(1) In section 36 of the Pensions Act 1995 (choosing investments), after subsection (9) insert—“(10) In complying with requirements imposed by this section and regulations, a trustee or manager must have regard to guidance prepared from time to time by the Secretary of State.”(2) The Secretary of State must, within six months of the day on which this Act is passed, issue and thereafter maintain statutory guidance for trustees of trust schemes in relation to the discharge of their investment duties.(3) The statutory guidance must set out (amongst other matters) the ways in which trustees may, when investing the assets in the best interests of members and beneficiaries, take into account—(a) the risks and opportunities provided by matters such as climate change, environmental and social factors, and(b) members’ and beneficiaries’ standards of living.(4) The Secretary of State must issue and thereafter maintain corresponding guidance within the same six-month period for the Local Government Pension Scheme.(5) The Financial Conduct Authority must issue and thereafter maintain corresponding guidance within the same six-month period for providers of pension schemes to which Part 7A of the Financial Services and Markets Act 2000 (as inserted by section 48 of this Act) applies.(6) Before publishing the statutory guidance for the first time, the Secretary of State must lay the draft guidance before Parliament.(7) The Secretary of State must withdraw the draft guidance if, before the end of the 40-day period, either House of Parliament resolves not to approve it.”Member’s explanatory statement
This new clause seeks to ensures that statutory guidance, to which trustees must have regard, is issued within six months of Royal Assent to clarify investment duties of occupational pension schemes, including a range of risks and opportunities and beneficiaries’ standards of living. It also requires the FCA and Secretary of State for Housing, Communities and Local Government to issue corresponding guidance for workplace personal pension schemes and the Local Government Pension Scheme.

[Baroness Hayman (CB)]

Tempting though it is to reinitiate the earlier debate, I will not move Amendment 167.

Amendment 167 not moved.

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to join a distinguished cross-party group, signing and speaking to Amendment 170. Like the noble Lord, Lord Sharkey, I want to reflect back to what was said in Committee, when the Minister said that she shared the cross-party concern about pension scheme investment in thermal coal, that she recognised the high financial and climate risks, and that she welcomed some industry-led reductions in exposure. She said that the Government would

“support and challenge the sector in rising to that task”

and that the levers to do that included

“better data and better transparency”.—[Official Report, 23/2/26; col. GC 291.]

That is what this amendment aims to deliver, because the transparency is just not there now.

Transition plans are often cited as a solution to this. These were a manifesto commitment in July 2024, to meet Paris alignment transition plans, but 18 months into this Parliament, there has not been a response to a consultation which took a year to emerge, and more or less asked, “Should we do all of this?” Recently, the Pensions Minister, Torsten Bell, said that transition plans for pension schemes were not a priority, which is reinforced by the fact that the Government are not taking powers in this Bill. There have been suggestions that consolidation will fix all this, but an analysis by Corporate Adviser Intelligence shows that the DC multi-employer schemes most commonly used for automatic enrolment are in fact the largest of them and more invested in thermal coal, and that the mid-sized schemes that would be consolidated are less exposed.

It is also worth stressing that there is a precedent for Ministers writing directly to the largest pension schemes to understand their responsible investment practices and for the Government setting non-statutory expectations about pension schemes’ investment practices. Those on the Front Bench in front of me will probably not thank me for pointing out that when they were in government, they set out a non-statutory expectation in the 2019 green finance strategy that pension schemes and others would disclose climate risks in line with the Task Force on Climate-related Financial Disclosures by 2022. Later, the then Pensions Minister, Guy Opperman, wrote to the 50 largest pension schemes to request their policies and understand their climate investment strategies. That is what the previous Government were doing—surely this Government do not want to be behind that.

It is clear that there is actually a latent appetite to go further. Two-thirds of the audience, mostly representatives of pension funds, at the recent Pensions UK conference debate between Caroline Lucas, my former honourable friend, and the noble Lord, Lord Gove, agreed that pension funds were not now doing enough to tackle the climate change risks. These are, as I said in Committee, financial as well as climate risks. We simply are not taking the steps that are needed. This amendment would provide the way forward that the Minister suggested in Committee that she wanted to see. Here it is, so I hope to hear positive news from the Government on this amendment.

[Baroness Hayman (CB)]

My Lords, I have added my name to this amendment. Given the quality of the speeches that have explained exactly what it would do and its very limited but important purpose—simply to allow the Government to have a proper handle on the data and a proper understanding of the exposure that pension schemes have to thermal coal investment—I think it would be a valuable step forward, one that I hope will get support from all around the House. In Committee, the Minister rightly acknowledged the high financial and climate risks associated with thermal coal investment and indicated that it was the Government’s expectation that industry will do more to reduce levels of coal investment, but we need to understand exactly what those levels are and to monitor them. For that reason, I support the amendment.

[Baroness Stedman-Scott (Con)]

My Lords, I am grateful to the noble Lord, Lord Sharkey, and the noble Baronesses, Lady Hayman, Lady Griffin and Lady Bennett, for this amendment, and I fully recognise the principle that underpins it. However, we have some reservations about the approach taken here. In particular, we are concerned that it would impose an additional compliance burden on schemes, including the Local Government Pension Scheme. The LGPS should be focused on delivering the best possible outcomes for its members, and where there is surplus within the system, that should be directed towards supporting members’ interests, rather than being absorbed by additional reporting requirements.

More broadly, while this amendment is framed around thermal coal, it raises a wider question: introducing a requirement for annual reporting on specific categories of investment risks setting a precedent which could, over time, expand into a much broader set of ESG-related reporting obligations that, in our view, risk creating a cumulative regulatory burden which may not ultimately serve members as well as it intends. So, while we understand and respect the intent behind this amendment, we are not persuaded that this is the right way to proceed.