Pension Schemes Bill

Baroness Noakes Excerpts

Thursday 19th March 2026 Lords Chamber

Moved by

[Baroness Noakes]

55: Clause 40, page 38, line 34, at end insert—
“(c) able to demonstrate that they deliver investment performance which exceeds that achieved by the average of all Master Trusts which hold an approval under section 28A in respect of a main scale default arrangement.”Member’s explanatory statement
This amendment allows Master Trusts which deliver good investment performance to be excluded from the scale requirements.

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[Baroness Noakes (Con)]

My Lords, Amendment 55 is in my name and those of my noble friends Lady Stedman-Scott and Lady Neville-Rolfe, and the noble Baroness, Lady Altmann. I will also speak to Amendments 60 and 94 in this group.

This group of amendments concerns the so-called scale requirement in Clause 40. In practice, the Government’s proposals concentrate only on size, with a vision of the DC pensions provision landscape comprising 20 or so schemes with assets of over £25 billion. I have no quarrel with the proposition that the current pensions landscape is too fragmented, which may well have contributed to investment returns for some pension savers that have not been good enough. It is, however, a massive and unwarranted logical leap to move from that proposition to the proposals in the Bill, which mean that virtually all schemes with below £25 billion of assets will cease to exist in a few years’ time. The plain fact is that investment returns do not correlate with the size of assets under management.

When the Government produced their report on pension fund investment and the UK economy in November 2024, it was disarmingly honest. It said:

“The evidence linking pension provider scale and gross investment returns is mixed … Across the AUM spectrum, there are examples of small, medium and large-sized schemes with both high and low gross returns”.


It also said that studies suggested broadly a wide range of benefits of around £25 billion to £50 billion, in particular the ability to invest in certain asset classes. But it did not claim, as it should not, that that amounted to a guarantee of superior returns.

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This has been a useful debate, but I hope that my explanations are enough to persuade noble Lords, and especially the noble Baroness, Lady Noakes—I live in hope—not to press their amendments and to support the government amendments.

[Baroness Noakes (Con)]

I am going to disappoint the Minister. There is just a fundamental disagreement: the Government think that size is the most important thing and most of the rest of us think that the judgment on which schemes should be allowed to survive the initial cull that consolidation will require should be much more nuanced and based on what is good for savers. If schemes are delivering for savers and have the capacity to deliver for savers, they ought to be allowed to stay within the population of pension schemes that will continue.

The Government seem not to trust their own value-for-money test, which should deliver over time. If schemes that are allowed through at the moment disappoint over time, the value-for-money test would deal with that. We think that taking scale out will, with the value-for-money test, in the long term produce exactly what the Minister requires, which should be good returns for pension savers.

I said that I would not move my amendment because my noble friend on the Front Bench will be moving his Amendment 77. On that basis, I beg leave to withdraw.

Amendment 55 withdrawn.

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Moved by

[Baroness Noakes]

105A: Clause 40, page 54, line 16, after “regulations)” insert—
“(a) after subsection 1, insert—“(1A) In making regulations under section 20(1A), 20(1C), 26(7A), 28A, 28B, 28E, 28F and 28J the Secretary of State must have regard to—(a) the encouragement of innovation in the design and operation of pension schemes, and(b) the benefits of competition among providers of pension schemes.”;”Member’s explanatory statement
This amendment would require regulations concerning the operation of the scale provisions in clause 40 to have regard to innovation and competition.

[Baroness Noakes (Con)]

My Lords—

[The Earl of Kinnoull (CB)]

My Lords, the noble Baroness, Lady Noakes, has graciously allowed me to intervene briefly. Earlier today during Question Time there were two Questions which involved insurance. I forgot to mention my insurance interests in the register. I would like to update the House’s record for that.

[Baroness Noakes (Con)]

My Lords, I am sorry for forgetting having agreed to that intervention.

In moving Amendment 105A, I will also speak to Amendments 114 and 115 in this group. I thank my noble friends Lady Stedman-Scott and Lady Neville-Rolfe for adding their names. In the previous group, we concentrated on size not being everything when determining which pension schemes will be allowed to live on after the consolidation enforced by the scale requirements. My noble friend’s Amendment 77, which the House has just agreed to, has modified the size test. However, even with that important change, the scale requirements will represent a major market intervention by the Government. It is the DC schemes market that I am addressing with these amendments.

My amendments focus on the role of competition and innovation. The one thing that we really need in the long term is a market that will continue to evolve and work for the interests of pension savers. The one thing that we do not need is a mature market consisting of a limited number of large players untroubled by the potential for market disruption. Mature markets can still be competitive and there would be incentives to innovation within a mature market, but that innovation tends to focus on incremental and often process-based improvement. The plain fact is that factors such as incumbent inertia and investment in legacy systems act as counterweights. Disruptive innovation is typically associated with new entrants that spot underserved markets, structural rigidities and the opportunities to harness technological breakthroughs. They do not all succeed but often end up reshaping mature markets, such as is happening with fintechs.

The rules that the Bill sets out for pension schemes must ensure that the benefits of competition and innovation, which ultimately deliver better returns for pension savers, are kept alive and well in the new pension scheme universe that the Bill will deliver. My Amendments 105A and 115 focus on the regulation-making powers surrounding the new scale requirements in Clause 40, and the new entrant and consolidation powers in Clauses 42 and 44. They would both require those making the regulations to have regard to

“the encouragement of innovation in the design and operation of pension schemes, and … the benefits of competition among providers of pension schemes”.

These regulation-making powers will be operated in part by the Secretary of State and in part by the FCA and the Pensions Regulator. The important thing is that, when deciding on the regulations, the person making them must keep competition and innovation in mind as relevant factors for shaping how the detailed rules are framed and will affect how the market develops over time. This is especially important in relation to the Pensions Regulator, whose statutory responsibilities are very narrowly drawn and do not extend to the pension provision market as such.

My other amendment in this group, Amendment 114, would add competition and innovation to the matters to be addressed by the review of non-scale default arrangements as required by Clause 43. I am currently minded to test the opinion of the House on the two amendments seeking to affect the regulation-making powers—Amendments 105A and 115. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I support Amendment 105A and the proposed new clause in the name of my noble friend Lady Noakes, to which I added my name. It is essential, in my view, to require the regulations to be pro-innovation and pro-competition rather than over-exclusionary. The £25 billion minimum provided for in the Government’s reforms seems set to deter innovation. My noble friend Lady Noakes has explained the case and the reach of our proposal very well, so I will not speak at length.

I was a trustee of the pension fund at Tesco, which at the time was worth less than £25 billion. We were innovative: we invested in private equity, including US private equity, when others did not, and we had part of our portfolio in housing—just the sort of innovation that the Chancellor is seeking to encourage. However, today that would not be seen as innovation. I am sure that my successors are looking at today’s innovative investments: fintech, quantum, space, rare earths, new types of weapons and other types of disruptive innovation. I have also been struck by the arrival in the pensions market of online-only operators. They started small, made good returns and are a growing part of the market.

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[Baroness Sherlock (Lab)]

My Lords, there is, of course, an innovation pathway; innovation therefore clearly has to be in that. The innovation pathway is the innovation pathway, so it clearly is in that. I have set out on the record my expectation of what will be considered in the review and the fact that the regulations will have to take account of what the review says. I hope that satisfies the noble Baroness.

The needs of members should be paramount. It is right that the Government are acting to protect them and to drive schemes to have the capability and capacity to deliver better outcomes. I hope that the noble Baroness, Lady Noakes, can see that we share the same overall objectives and that the Bill as drafted accommodates the intent of her amendments. I hope she feels able to withdraw the amendment.

[Baroness Noakes (Con)]

My Lords, the Minister, as usual, talks a good story on competition and innovation. Our concern is that the Bill as drafted makes it difficult to see that the virtues of innovation and competition are in fact reflected throughout it. In particular, there is no mention of innovation or competition in the regulations restricting the creation of new non-scale default arrangements in Clause 42. That would be addressed by my Amendment 115.

Those who are exercising the extensive powers in the Bill to circumscribe the way in which the markets are allowed to develop need to have competition and innovation absolutely in their focus, but the Bill does not achieve that. The Minister could cite only the innovation pathway, but the Bill is much more than that. That is why I believe we need to make changes to the Bill. As I mentioned, I will seek to press both my amendments, but I will start by begging to move Amendment 105A.

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Moved by

[Baroness Noakes]

115: After Clause 44, insert the following new Clause—
“Innovation and competitionIn making regulations under sections 42 and 44 the appropriate authority must have regard to—(a) the encouragement of innovation in the design and operation of pension schemes, and(b) the benefits of competition among providers of pension schemes.”Member's explanatory statement
This amendment would require regulations dealing with non-scale default arrangements to have regard to innovation and competition.

[Baroness Noakes (Con)]

Amendment 115 is a mirror to Amendment 105A which I moved successfully earlier. I move this amendment formally.