Pension Schemes Bill

Baroness Neville-Rolfe Excerpts

Consideration of Commons amendments and / or reasons
Monday 20th April 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

My Lords, I thank the Minister for her introduction and her helpful remarks relating to Motion D, which is mostly what I will speak to in my remarks.

The Government say that allowing small pots to be moved without member consent after just 12 months is essential because, otherwise, any longer period would be detrimental to scheme members. I do not think that would stand up to market scrutiny. This is about providers not wanting to have to administer small pots, the economics of which they find rather challenging. As to the idea that if people with small pots move somewhere else or are moved somewhere else, that will lead to lower fees being charged by the pension providers, I think the providers simply making higher profits is the far more likely outcome.

It will not particularly be detrimental to most members, but for those whose money is moved, without their consent and potentially without their knowledge, I have concerns that allowing just 12 months and then shipping the money off elsewhere to another scheme, which could be worse and could perform worse but just happens to be an approved scheme under the regulator’s supervision, would be a rather dangerous thing to approve after such a short space of time. Members may have paused their contributions temporarily, and I point out to the Minister that members who have decided to opt out of auto-enrolment, who will then be re-enrolled after three years, may decide not to opt out but the money that they previously put into the scheme will have gone somewhere else. This to me suggests that the policy needs to be reconsidered.

Yes, of course, we need to look at the economics of auto-enrolment but we have to also balance fairness to members who have paused temporarily, whether it is for unpaid carers’ leave—perhaps a relative who is terminally ill and it has gone on for slightly over the one year, but their money may have been moved before they get back to their employer—with the costs to providers of administering small pots. I do not believe 12 months is the right balance. It is too short.

I just ask noble Lords whether they feel we should allow a bank to move somebody’s money in their account to a different bank because they have not got a lot in there and the bank cannot make any profit on keeping that current account. I do not think we would feel the same—that after just 12 months, without member consent, their money could be shipped off to another bank.

I agree that we have to find some way of administering small pots. I hope that, when the noble Baroness points out that there is a minimum of 12 months being provided for in the Bill and that regulations will set the required time period, after further consultation there is a chance that we will perhaps have a longer period than the current 12 months. On that basis, I hope that the situation for small pots will turn out to be better after regulations than it currently would seem. I will not press my amendment tonight.

Very briefly on Motion K1 in the name of noble Viscount, Lord Thurso, I too am extremely concerned about the problem of the AEAT pension scheme members. I feel that there is an obligation in some way on government to look more carefully and to take careful consideration of the findings of the various inquiries that have happened more recently. I hope that, when the meeting takes place, those of us who are particularly interested in the AEAT situation will be able to have a proper discussion with the Ministers on that issue. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, Motion J1 reintroduces my proposal for a review of the long-term affordability, intergenerational unfairness, fiscal sustainability and accounting treatment of public service pension schemes. I am trying to help the Government to fill a lacuna in their important work on pensions, so I was taken aback by the Commons’ reason for rejecting it—namely,

“that it is not necessary to duplicate existing information regarding public sector pension schemes”.

The presentation of the liability represented by public sector pensions is widely seen as inadequate, and the PAC itself has expressed concerns—in particular that pension liabilities are not being presented in a way that allows Parliament properly to understand their real costs in the long term.

I will highlight four reasons why a review is needed. First, the cost is huge. As we have heard repeatedly, unfunded pension liabilities represent the second-largest government liability after gilts. Currently, we commit future taxpayers to about £60 billion of new expenditure every year, in the form of a stream of index-linked new expenditure. According to the OBR, the long-term liability is £1.4 trillion, but it may be more as a lot depends on the assumptions made.

Secondly, it is an unfunded pay-as-you-go scheme. The problem with that is that the current generation of older and former public sector workers are taking money from younger generations of workers already weighed down by trying to finance housing, young families and, in some cases, repaying student loans. This is unfair, and it is why I put intergenerational unfairness at the heart of the review.

Thirdly, the coalition did well to reform some public sector pensions following the Hutton review, as the Minister acknowledged, but the new arrangements have turned out to be more costly than expected. Sadly, growth, which helps to ease things, has been modest. Moreover, substantial increases in the pay and size of the public sector make things look better in the short term, as employer and employee contributions increase. However, this is a mirage, as it stores up even more trouble for the future, as greater payouts on higher salaries will be needed as those people in the system retire.

Fourthly, there are serious accounting issues, as we know from the PAC. The scale of liabilities is not clearly visible from the public accounts. Moreover, as I have learned from my unique experience as a civil servant and a Cabinet Office Minister, the costs of future pensions are not properly taken into account in decision-making across the public sector—for example, on restructuring or adding to the workforce. In conclusion, there is a real need to establish whether the system is fair and sustainable, and whether anything could be done to improve things.

I emphasise that I support the work of public sector workers and that I am not making any recommendations. That is for the experts, who would look at the whole area objectively, and it is for the Government to decide what, if anything, needs to be done.

[Lord Vaux of Harrowden (CB)]

My Lords, I want very quickly to ask the Minister a question on Motions D and D1. I say at the outset that I agree with almost every word that the noble Baroness, Lady Altmann, said. I entirely agree that one year is too short. I have at least two pensions that have not been touched for that long, which would fall into the dormant category; I would not consider them dormant, but there we go.

My concern is that if we start moving people’s small pots around, potentially without their knowledge, we increase the problem of lost pots. The answer to that is the pension dashboard. So my question to the Minister is: will we have the pension dashboard in place, as a method of being able to retrace a lost pot, before we start moving people’s pots around?

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

Leave out from “House” to end and insert “do insist on its Amendments 77 and 85 to which the Commons have disagreed for their Reason 85A.”

[Baroness Neville-Rolfe (Con)]

My Lords, I beg to move Motion J1.