Health-related Benefits Assessments

Baroness Sherlock Excerpts

Monday 8th June 2026 Lords Chamber

[Baroness Maclean of Redditch]

To ask His Majesty’s Government what assessment they have made of the value of mandating that (1) all, or (2) more, health-related benefits assessments be conducted in person.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, face-to-face assessments are an important part of our multichannel approach. For some individuals, they are the best way for us to understand the impacts of their health condition or disability, and they can help boost public confidence in the health assessment system. This Government are committed to increasing the number of face-to-face assessments while acknowledging that remote assessments also have a role.

[Baroness Maclean of Redditch (Con)]

I thank the Minister for her Answer. She will know that the number of young people on health-related benefits has risen by more than 50% over the last five years and that four out of five of them are claiming for mental health or neurodiversity conditions. Yet these assessments, I understand, are largely carried out over the phone, when surely people would need to be seen face to face to assess what is wrong with them. Why is the Government’s ambition, as set out in the Timms review, to raise the assessments to 30% so low? Why not make it 100%?

[Baroness Sherlock (Lab)]

My Lords, I agree with the noble Baroness about the challenge that we face with the number of young people not in employment, education or training. That is why the Government commissioned the Milburn review, and why we welcome that report, and that is why we have action clearly going on in this space. The Government are committed to increasing the number of assessments. There is a range of reasons why it is taking time. The noble Baroness may not be aware that, for example, before Covid, assessments were pretty much all done face to face. They collapsed in Covid and the numbers have barely come back up since. In 2023, about a year before the general election, the previous Government signed long-term contracts, making sure that most assessors could work from home. I understand why that would be attractive—because they can be anywhere in the country—and so it is a bit of a challenge trying to get face-to-face assessments in the right parts of the country. We are working with contractors and driving up face-to-face assessments. We will do the right thing and we are attacking this problem.

[Lord Palmer of Childs Hill (LD)]

My Lords, can the department cope with more face-to-face assessments? How long will it take to put that into effect? Has the department come up with any other suggestions of how assessments can be made, particularly for people suffering from health issues which may make face-to-face assessments quite difficult?

[Baroness Sherlock (Lab)]

The noble Lord raises an important point and I am grateful to him. There have traditionally been different ways of doing assessments: some are face to face, some are on the telephone and some are video assessments. The starting point is that the health professional must look at and assess all the written evidence—from the GP and the hospital, and evidence provided by the claimant—and then make a decision. There are some cases where, clearly, face to face is right, for reasons of identity verification, wanting to get details they cannot easily get online, where there is a physical examination and so on. There are other cases where people may have a particular reasonable adjustment that they need—it may be difficult for them to get to a centre—and for them a face-to-face assessment is not appropriate. We want to maintain all those things but drive up the proportion of face-to-face assessments to get the right results for individuals and for the taxpayer.

[Lord Watts (Lab)]

My Lords, I want to be clear that this is a policy that was introduced by the last Government, who had no policies whatever to address the problem. It has been left to this Government to come forward with policies that will address the problem. Is that correct?

[Baroness Sherlock (Lab)]

That is so often correct, I have to say to my noble friend. In this case, we are in a situation where we are doing all we can to drive up face-to-face assessments. The most important question is that we get everyone into work who possibly can work. The biggest crisis of our time is in relation to young people. That is where the Secretary of State has put his focus; he has prioritised addressing the million young people we have not in employment, education or training. That is why we are investing in the youth guarantee, in support for employers, in subsidies for wages and in making sure we go out there to find the challenges and get people into work. This Government are doing something about that problem.

[Baroness Finlay of Llandaff (CB)]

How many long-term claimants with severe long-term disabilities, who will never have a life devoid of dependence on disability benefits, has it been agreed will not be recalled to assessment—assessments which proved to be futile and quite damaging to their whole persona as they feel they are not being believed? These are often people who have got severe brain damage or ongoing congenital abnormalities and genetic difficulties.

[Baroness Sherlock (Lab)]

I am grateful to the noble Baroness for raising such an important point and for her work and expertise in this area. Our job is to make sure that we assess the right people at the right time. There is always a danger when debating this that we forget the significant number of people who are absolutely dependent on sickness and disability benefits; frankly, most of them would give anything to not be dependent on those benefits and to not have had the condition, injury or accident that transformed their lives for ever.

Our job is to make sure that those who need our support get it. We have been looking at the way we review things, so that we are reviewing the right people to make sure they get the right level of award. If it gives the noble Baroness some reassurance, there will be cases where the health assessor can clearly make a judgment based on the medical evidence alone. In those cases, they will not necessarily need to see somebody face to face or call them to an assessment. Where there is any doubt, however, we need to make sure that people get the right support if they are entitled to it and give confidence to the public that we are doing those assessments in the right way.

[Lord Hayward (Con)]

My Lords, I was interested by the answer the Minister gave to my noble friend in relation to the signed contracts for work being undertaken virtually. Could she clarify whether there is an expiration date, or a time limit in some form or another, for these contracts in order that you can bring people back to a face-to-face arrangement quickly?

[Baroness Sherlock (Lab)]

These were long-term contracts and were signed only in late 2023 and took effect shortly after, but we are not simply taking that as meaning that we cannot do anything. We are in close negotiations with all the contractors to look at how we can drive up the proportion of face-to-face assessments. It will take time because, having started with so many being home-based, we have to make sure we can get the numbers back up in time. There are limited numbers and assessors have to be either a registered doctor, a nurse, an occupational therapist or a physiotherapist; they have to be trained in disability assessment medicine; and they have to engage in continuous professional development. We need to make sure they are properly qualified to make those assessments, but we are working to get the numbers up as fast as we can.

[Baroness Nargund (Lab)]

My Lords, I thank the Minister for reassuring us that face-to-face appointments will be increased with trained professionals. I welcome the DWP initiative to reform the fit note system. There are millions of women who are absent from work due to women’s health problems and nearly 60,000 women are leaving work every year due to menopausal symptoms. What conversations has my noble friend the Minister had to ensure workplace adjustments will be made to get these women back to work or into new employment?

--- Later in debate ---

[Baroness Sherlock (Lab)]

My noble friend raises a very important point—and one that I suspect at least maybe half of the House could empathise with in some way. I reassure my noble friend that the Government take menopause support seriously. We have been doing work specifically on this, having appointed a menopause champion, and are looking at women who are experiencing severe menopausal and perimenopausal symptoms and how that impacts their work.

This ties in with our reform of fit notes—we are piloting new ways to make the fit note system work better—and, crucially, the work we are doing with employers. We know that employers want to support their staff to keep them in work. We do not want women falling out of work unnecessarily when they hit the menopause for either lack of preparation or support on their part or from their doctors, or because employers do not understand and cannot make appropriate adjustments. I am really grateful to my noble friend for raising this.

[Baroness Stedman-Scott (Con)]

My Lords, between July 2024 and July 2025, 1.1 million assessments were carried out remotely. Three-quarters of those were conducted by telephone and just 3% were conducted by video link. Notwithstanding the answers the Minister has given us already, how can a DWP assessor properly judge whether someone has significant difficulty with daily living or mobility as a result of their condition when the assessment is conducted by telephone and the assessor can hear but cannot see the person concerned?

[Baroness Sherlock (Lab)]

I will not dwell on the point that the challenge we are facing is the challenge the previous Government faced, and we did not invent telephone assessments.

The noble Baroness raises an important point. The truth is that it depends on the case. The job of the health professional is to begin by looking at all the written evidence. As I said previously, sometimes that will mean that a case can be absolutely ruled in, or indeed ruled out, but there may be circumstances in which more information is needed. Video assessments can be effective in that, so can face-to-face assessments, but it depends on the nature of the question. There are questions that can be addressed in a telephone assessment. The same core assessment process is used across the piece to gather evidence and ask the right questions, so the health professional can justify their decision. At any point, if they need a different kind of assessment, then it is their job to request it. We want to make sure we have more face-to-face appointments available, but we want to make sure we get people into the most appropriate assessment, so we can get through assessments as fast as possible, get people who need help the right help, and get people who should not be getting help into work.

Reforming the Child Maintenance Service (Public Services Committee Report)

Baroness Sherlock Excerpts

Monday 8th June 2026 Grand Committee

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to all noble Lords who have spoken and to the Public Services Committee, especially the former chair, my noble friend Lady Morris of Yardley, for her serious work on this. I am also grateful for the detailed and constructive report and express my thanks to the clerks who worked on it and the witnesses who informed it.

The Government share the committee’s focus on two priorities: helping children in separated families to avoid poverty and ensuring that both parents contribute their fair share. As was observed by various noble Lords, children do not choose for their parents to break up, and partners may leave each other, but they do not leave their children. The CMS plays a vital role in improving outcomes for children in separated families.

My noble friend Lady Morris said that I summarised at the end of my appearance—I apologise for what was clearly a long waffle beforehand—that the CMS’s job is

“to get money to kids”.

That is absolutely its job, and it does it: through both family-based arrangements and those made by the CMS, an estimated £2.9 billion is transferred each year to children in separated families, keeping around 120,000 children out of poverty. For clarity, “poverty” here means relative low income after housing costs. As has been pointed out, tackling child poverty is at the heart of this Government’s mission to break down barriers to opportunity. We estimate that the child poverty strategy that has been brought out will lift 550,000 children out of poverty in the final year of this Parliament.

But the committee is right: too many children still do not receive the support that they are due. So this Government have set out ambitions for the CMS to help change this. We want to deliver a fair and trustworthy service that is more accessible to parents, particularly those who are vulnerable, and we want to tackle non-compliance head on by moving to a single, streamlined service, where we can quickly identify and tackle missed payments.

I will try to cover the very range of things I have done in 20 minutes. When I fail, I will write to pick up those questions that I do not manage to answer. Even at the speed I speak, I do not think I will get through them all, but I will try to slow down so that Hansard can pick it up—if not passing dogs.

I say at the start that we all need to be realistic about this. I was struck by the fact that eight of us have spoken, of whom three either are or have been Ministers with responsibility for the Child Maintenance Service, either directly or from a more exalted standpoint. Successive Governments have brought in reforms of different kinds, yet we keep hearing about problems. Our job is to recognise that, when we are dealing with something as challenging as a service that faces parents at probably the worst point in their lives—when their lives have fallen apart and things are incredibly tense—the state needs to step in, as my noble friend Lady Morris said. But we must also recognise that the state cannot solve that problem, so it has to do all it can to encourage and enable parents to support their kids. We will keep pursuing continuous improvement, but I do not want to raise the idea that there is a single silver bullet. If there was, previous Governments would have found it, and the Ministers around this table would certainly have fired it—I have no doubt about that. I will do my best.

Let us talk about the removal of Direct Pay. It absolutely remains our complete and firm intention to legislate to remove Direct Pay, which we estimate could result in around 20,000 fewer children living in poverty. Moving to a single service, where the CMS monitors and transfers payments, will address the long-standing issues highlighted by our research into Direct Pay, including hidden non-compliance and the burden on parents having to chase payments themselves. It will also reduce unwanted contact between parents.

I realise that I have failed completely to persuade the noble Baroness, Lady Coffey, of the case for doing this. I will have a brief go, but I listened carefully to her comments. At the heart of this is the fact that, under the current Direct Pay model, the CMS cannot routinely monitor payments. That means that non-compliance can go undetected unless a parent reports an issue. Our research on this is interesting. It suggests clearly that only 60% of receiving parents report receiving the full amount due and that only 40% get it on time. Direct Pay is not performing brilliantly, and there are problems in Collect and Pay. We now know that Direct Pay is hiding significant amounts of non-compliance, so moving into a single service will enable routine monitoring, allowing earlier identification of missed payments and intervention.

Let us face it: Collect and Pay is made up of previously ineffective Direct Pay cases. Under the previous reforms, you can get into Collect and Pay only if you fail in Direct Pay, so Collect and Pay involves the people who did not manage to make it work in Direct Pay. Collect and Pay shows that, when payment behaviour is visible and enforceable, just over half of parents are fully compliant and a further quarter are partially compliant. Given that those are the difficult cases, that is something we need to hold on to.

Under those reforms, well-functioning Direct Pay cases should carry on. If things are working, there is no reason to assume that they cannot continue in a family-based arrangement, as long as we provide support with the calculation. If they are not working, they come into the main system. That will help compliance, and it will benefit victims and survivors of domestic abuse by removing the need for parents to chase missed payments or engage with each other. We will work closely with domestic abuse organisations to ensure that communications and support are safe, targeted and effective. The reality is that, when Direct Pay is removed, the level of non-compliance we anticipate being revealed could indeed put a bump in the statistics on non-compliant cases. But all that would be doing is surfacing hidden non-compliance in Direct Pay, not creating new levels of non-compliance.

Noble Lords are understandably keen to find out about the timing. As I have said, our firm intention is to remove Direct Pay, but we will have to wait to get primary legislation to do so. I want to make the changes as soon as possible, but the Committee will understand that the Government have a crowded legislative agenda and we have to take our place in that alongside the many other vital reforms that departments are pursuing. We are continuing to develop legislation on a range of matters related to welfare reform and I remain determined to legislate on this and other important matters as soon as parliamentary time allows. In the meantime, we are taking action to make it easier for parents to switch to the Collect and Pay service through our improvements to the change to service type process and being clear in our communication about what support is available for victims and survivors of domestic abuse.

On the additional workload—I have totally failed to persuade the noble Baroness, Lady Coffey, on this, too; my track record is not excellent here, but let me try again—I reassure the Committee that compliant Direct Pay cases require the same amount of work and caseworker resource as compliant cases in Collect and Pay. The main extra cost to DWP as a result of these reforms will be administering previously unidentified non-compliant cases. If the workload goes up, it will get in money from cases that at the moment are simply hidden.

There are also benefits in two other areas. First, some compliant cases will move to family-based arrangements and will not require the CMS to intervene at all. Secondly, the removal of the process of changing them from one to the other accounts for around 1,000 cases a month, and the resources released by ending that burden will be redirected where they are most needed, supporting the increased volume of cases that need support from the CMS.

The noble Lord, Lord Farmer, and others raised domestic abuse. The CMS has substantially strengthened its processes, due in no small part to the work of his supporter, Samantha Callan. I am very grateful for that work, which the department has read and benefited greatly from. We have certainly improved caseworker training and signposting resources, with a dedicated domestic abuse plan for caseworkers to follow in supporting victims. I think the noble Baroness, Lady Coffey, mentioned the Domestic Abuse Act. We know from our research that most victims and survivors of domestic abuse are unlikely to have enough evidence to pass the tests we would have to apply were we to introduce the provisions of that Act. The Act requires the Secretary of State to set out evidence requirements for domestic abuse in regulations. My latest and best advice from officials looking at this in detail is that that evidence would have to be court-based. That is because it would need to be verifiable and, when it is provided, could not be disputed by the other party because it has already been litigated. Someone could try to JR it, but if it has been through the courts that gets more difficult.

For victims and survivors who have enough evidence, we know it can be traumatic for them to relive the abuse by having to produce it and go through it again. We want to avoid that wherever possible. Our priority has to be making the CMS more effective at supporting all victims and survivors engaging directly with the service. However, I want to reassure the Committee that we are not closing the door on this; we will continue to explore evidence-based ways that could allow us to commence the Act in future, should it be needed as part of a broader package.

I turn to the calculation, which my noble friend Lady Morris and many others commented on. We looked carefully at the committee’s recommendations. We recognise that, to secure voluntary compliance, parents need to have faith that the amounts are fair and understand how they are calculated. That is why we conducted a review of the child maintenance calculation, focusing on ensuring that it strikes the right balance between both parents to encourage compliance and secure money for kids.

For the record, I will say what we will and will not be doing on this. Following the review, I am pleased to advise the Committee that we plan to reduce the income tolerance from 25% to 15% so that changes to income are captured more quickly and assessments remain fair to both parents. I hope that makes my noble friend Lady Morris happier. She spoke about things such as rental income; we will include unearned income within the standard calculation, which will ensure that liabilities more accurately reflect parents’ full financial circumstances. Those reforms will help ensure that the system better reflects how families earn and receive income today, helping deliver more consistent support for children.

We looked carefully at the committee’s recommendations on how child maintenance is calculated. While we agree with the spirit of many of them, we will not be adopting them, which I know will be disappointing. For example, we know from the experience of before the child support system was introduced that the family court approach added complexity, created delays and reduced the number of children able to benefit from maintenance. We are determined to avoid that. I take the points made by the noble Baroness, Lady Deech, whose expertise obviously far exceeds mine in this area. However, having looked at the problems created—this was the reason the administrative system was introduced in the first place—we do not feel that that is the way forward.

I will say that there are ways in which the court can do things. Parents are not obliged to use the CMS. They can, if they both choose, make their own arrangements or seek an order through the courts if they agree. Once a court order for child maintenance is in place, after 12 months someone can choose to come to the CMS. The courts also play a role where receiving parents want top-up above the threshold for the Commons, but we think that, fundamentally, for the bulk of parents an administrative system is the way forward.

We looked at whether more significant changes to the calculation, including changes to the rates and thresholds, would deliver the improvements in fairness and compliance that we wanted. As part of this, we undertook extensive research with users of the service, which has now been published, to understand how parents’ behaviours may be impacted by potential changes. Having carefully considered that research and other evidence through the review, it is clear that the case for proceeding with such large-scale change is currently not sufficiently strong. We will therefore not be moving to reform rates and thresholds at this time.

We are confident that the current approach, which uses HMRC income information to assess liabilities, provides stability and certainty for parents, subject to the changes that I have mentioned about the sensitivity threshold and types of unearned income. It gives us the flexibility to reflect a parent’s current income in the calculation where appropriate, which we can verify using real-time information for PAYE-paying parents. Alongside that, the variation process plays a crucial role; it allows parents to ask us to consider income or expenses falling outside the standard calculation, so that works better.

I am conscious of time, but I shall say another word on that. The judgment was in the end that the sharp end of the calculation is essentially a zero-sum game. If the amount of money due for one parent goes up, that received by the other parent goes down. That means that any reform affects the whole case load in extraordinarily different ways, and makes it very difficult to target any changes that would reliably ease affordability for the right parents without substantially reducing liability for many parents who are only just managing to support their children at existing levels.

The evidence that we have found does not demonstrate that the reform of rates of thresholds would deliver a meaningful improvement in the amount of maintenance paid. For example, we looked at making a change in the form of a hypothetical increase to the flat rate. Both receiving and paying parents felt that the change would have limited impact: receiving parents genuinely viewed modest increases as not enough to make a meaningful difference; paying parents felt that even a small increase would add to financial strain and be difficult to manage. In the end, we felt that this was not the time to do it. Changing liabilities during a period of continued cost of living pressures could inadvertently risk destabilising existing arrangements and result in lower compliance. I recognise that that is a disappointment to the Committee, but I wanted to be clear about opposition on that.

I turn to another favourite subject, implementing administrative liability orders. Work is still under way to implement ALOs. As the Committee knows, while child maintenance is reserved, enforcement in Scotland has to be carried out through the Scottish judicial system, which is devolved. We are working very closely with His Majesty’s Courts and Tribunals Service and the Scottish Government to get ALOs operating across Great Britain, and we will introduce the necessary legislation as soon as possible.

Just to be clear, it is the Scottish judicial system through which we would have to implement this, but there are complexities there. It turns out that uncoupling the liability order from the rather complex Scottish judicial process while retaining the ability to exercise the full range of enforcement measures through Scottish courts has proven significantly more challenging than I assume was envisaged when work began on commencing the powers in the 2023 Act by the noble Baroness, Lady Coffey. My department is working closely with the Office of the Advocate General and other key powers in the Scottish judicial system to find a solution that works that for everyone. I have personally spoken with the Advocate-General to make sure that we have her full support.

In response to the noble Baroness, Lady Coffey, I looked at commencing the powers in different parts of the UK at different times but, as it turns out, that simply creates different legal problems and operational challenges, as well as meaning that not everyone benefits. Nobody wants this to be implemented quickly more than I do; as soon as it possibly can be, it will be.

I want to clarify one thing on enforcement. The idea that there is no enforcement if you pay anything at all is simply not true. Stats are collected on those who pay anything to show compliance. There are technical reasons for not using stats showing 100% compliance or not, which I think we explained to the committee at times—but essentially I can write and explain that in detail, if it is helpful. There are technical reasons why parents who are in fact paying what we tell them may not show as paying 100% compliance, which both my predecessors as Ministers will understand. I should be happy to write if it was helpful to pursue that.

Also on enforcement, I am absolutely with the noble Baroness, Lady Stedman-Scott: I, too, have been shocked by the extent to which some people will go to avoid paying for their children. Having said that, I want to say that most parents want to do the right thing: they want to pay for their children and pay up, and our job is to help them to do it—but where they do not, it is right to go after them. Like the noble Baroness, I have been so impressed by the colleagues that I have met. I have visited child maintenance offices and our enforcement colleagues are doing everything that they can: they are brilliant, and I am grateful to the noble Baroness for saying that. The CMS has lots of fantastic staff and brilliant leadership, determined to keep driving for improvement, and it is really nice to hear that said, because otherwise they hear all the criticisms, as if we do not know the really good work that they do and how hard they work. There is not much more that I can say on that in the short term.

Let me try to rattle through things in my remaining four minutes. The noble Lord, Lord Farmer, and the noble Baronesses, Lady Pidgeon and Lady Stedman-Scott, asked some excellent questions about supporting parents. Noble Lords may be interested to know that we are looking at a range of new tools and guidance to support separated families, to help them make informed financial decisions and to help them choose the best option for them. These include enhancing the online calculator, by aligning it more closely with the statutory application to strengthen confidence in the estimates, and providing better ongoing support for family-based arrangements. When the reforms to abolish Direct Pay go ahead, parents will be given information to help them judge the suitability of a family-based operation, as well as on how to go ahead with the CMS if that is the way that they want to go. We are also working across government with the Ministry of Justice to look at how it is developing digital tools for post-separation contact and to make sure that it can align with what the CMS is doing, in order to support parents in making safe and sustainable family-based arrangements.

The noble Baroness, Lady Pidgeon, and the noble Lord, Lord Farmer, mentioned family hubs. The family hub presence should offer universal materials and information about how to book on to services for separated families, including signposting parents to the Child Maintenance Service. The hubs are deliberately designed to be a gateway to the full range of support that families need, so every hub will connect families to debt advice, welfare support, housing support and support with the cost of living. Child maintenance officials are working really closely with DfE colleagues to identify all the opportunities to share information about the CMS through the family hubs, so that they can do that. This is a really great opportunity. Obviously, because it is for everybody, we hope that it will also reach those parents; we are really working on that.

The noble Lord, Lord Farmer, also asked what we are doing to increase confidence in the CMS. There are two things here. First, despite what we have heard here today, we need to be clear that, although there are hard cases that test the service, overall, the service is much better than it used to be and most people’s cases run reasonably smoothly. People are still applying in large numbers. In fact, there has been an increase: as of last December, we are at almost 800,000 cases, up from 640,000 just three years earlier. So large numbers of people are coming and using the service and, within that, compliance has been going up.

We are not complacent, but I do work really hard to reach out. I run surgeries for MPs. We engage with stakeholder organisations. We go out there and talk. We are doing a lot. The CMS’s modernisation programme is also doing a lot to communicate with parents and to make it easier for them to find information. It is running targeted social media campaigns, including signposting people to tools and trying to move things along. We need to get the word out there: “The CMS is there for you, and it works”.

I may have to write on the mediation voucher but, again, I am really pleased with how it is going; I am grateful to the noble Lord for acknowledging that. The scheme is working well and has been heavily promoted.

I have only 15 seconds left. The noble Baroness, Lady Coffey, mentioned back-to-work employment. The Government are committed to supporting people into work; I will not go through all of that, but we are doing a huge amount there. However, survey evidence and CMS calculations suggest that the majority of paying parents are in work, so our job is to support them in this.

I am running out of time; I have only 10 seconds left. Let me simply say how grateful I am to the committee for its work and how determined I am to make this service work. The noble Baroness, Lady Morris, started by saying that I care about this issue; I am grateful to the noble Baroness, Lady Pidgeon, for acknowledging that. I absolutely do care, and I know that my whole department and the leadership of the CMS do too. We are determined to make this service the best it possibly can be; children and parents need it, and we will make it work.

Pension Schemes Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments and / or reasons
Tuesday 28th April 2026 Lords Chamber

Moved by

[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.

88Y: Clause 40, page 46, leave out lines 3 to 16 and insert—
“(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).”

--- Later in debate ---

88Z8: Clause 40, page 51, leave out lines 14 to 16

[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.

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[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.

Motion A agreed.

Pension Schemes Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments and / or reasons
Monday 27th April 2026 Lords Chamber

Moved by

[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 88A, 88C, 88E to 88P and 88R to 88W 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.

88R: Clause 40, page 38, line 28, at end insert “See also section 28G (suspension of asset allocation requirement: savers’ interest test) for provision about circumstances in which the asset allocation requirement is suspended.”

--- Later in debate ---

88W: Clause 40, page 51, line 11, at end insert—
“(ca) must require the Authority to provide reasons for any determination not to approve an application;”

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, the other place has once again considered this House’s amendments and has once again disagreed with them, tabling further amendments in lieu. I will set out in a moment what those amendments contain, but I want first to say something about where we now find ourselves.

The elected House has now voted on the reserve power three times. On each occasion it has supported the Government’s position, by large majorities. This House has every right to scrutinise what is before it, and the quality of that scrutiny has improved the Bill. But we need to be clear about the context in which we are operating: these exchanges have gone on for some time, and the Government have moved a considerable distance.

Let me trace that distance briefly. In the first round, the Government wrote the Mansion House Accord targets into primary legislation—the 10% and 5% caps—and introduced the asset class neutrality requirement. In the second round, we went further: the sunset was brought forward to 2032; the power was restricted to a single use; the application was limited to main default funds; and we provided for the full repeal of the entire asset allocation framework at the end of 2035. This was not just the enabling power, but every associated provision—the approval requirements, the penalty regime, the review obligation, and any requirements that had been brought into force—removed from the statute book entirely.

Today, the other place agreed a third set of amendments. These address the savers’ interest test—the mechanism at Section 28G by which schemes can apply for an exemption from any asset allocation requirement. I know that the operation of this test has been a source of concern in this House, touching as it does on issues around trustees’ fiduciary responsibilities to savers. The Government have listened carefully to what has been said, while explaining the reason for their own position, which is, in essence, that these fiduciary duties have not to date been sufficient to overcome the distortion of asset allocation decisions by commercial pressures.

When we debated things last Wednesday, the noble Baronesses, Lady Altmann and Lady Bowles, described our position as believing a market failure to exist, and that is a fair characterisation. The Opposition argue that decisive government action to correct this market failure is not justified. We simply disagree. We believe that it is the Government’s duty to take the steps needed to further savers’ interests.

Our first new amendment, Amendment 88U, lowers the threshold for an exemption. The Bill, as drafted, would have allowed regulations to require a scheme to demonstrate that compliance would cause material financial detriment. That language attracted close scrutiny in this House. The noble Baroness, Lady Bowles, among others, questioned whether it set the bar too high, requiring proof of certainty. The threshold is now would “be likely to” cause. A scheme will need to show that detriment is the probable consequence of compliance, not that it is certain.

The second amendment, Amendment 88T, confirms in the Bill that where the threshold is met, the regulator must grant the exemption. The Government always intended the test to work that way. The Bill now states it clearly.

The third amendment, Amendment 88V, expressly requires the regulator to have due regard to the scheme’s own assessment of why compliance will be likely to cause material financial detriment. Schemes applying for an exemption must set out their reasoning, and the regulator will be under a statutory obligation to engage with it properly.

Noble Lords have argued that trustees and scheme managers are best placed to understand the circumstances of their members and that the regulator should give proper weight to their analysis. “Due regard” is established statutory language. It carries real legal weight, and it means the regulator cannot receive a scheme’s assessment and pass over it without proper consideration. I am aware that this type of language finds favour in a number of places in the House. I hope that noble Lords will recognise that the Government have engaged with the substance of what has been asked for.

The fourth amendment, Amendment 88W, requires the regulator to provide reasons for any decision to refuse an application. The Bill already provides for a right of appeal to the Upper Tribunal. This ensures that schemes have what they need to exercise that right—a right that is meaningful only if applicants know why they were turned down.

Let me set out what the reserve power now looks like, taken as a whole. It is capped at the accord targets. Regulations cannot concentrate requirements in a single asset class. The power applies only to main default funds. The percentage can be set only once. The power lapses if not used by the end of 2032. Even if used, the whole framework is repealed at the end of 2035. It remains subject to the affirmative procedure and to statutory reporting requirements before and after any use. The savers’ interest test now provides a lower threshold, certainty that an exemption will be granted where it is met, a statutory requirement for the regulator to give due regard to the scheme’s own reasoning and transparency about decisions if the application fails.

I understand the position of noble Lords who believe that this power should not exist at all. I have listened to those arguments with care throughout the passage of the Bill, but the Government’s view remains that the risk of inaction, of allowing the collective action problem to persist while pension savers bear the cost, is the greater risk. The Government have now brought forward three successive rounds of concessions, each responding to arguments made in this House, each written into primary legislation. The power that is now before noble Lords bears the imprint of this House’s scrutiny at every turn. Given all that, I ask noble Lords not to insist on their amendments and to agree the amendments proposed by the other place in lieu. I beg to move.

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[Baroness Sherlock (Lab)]

My Lords, my speech says, “I would like to thank all noble Lords who have spoken in today’s debate”—but that will not take long.

I will not hold us here for a long time, tempting though it is to go over the arguments in considerable detail, but I will say a couple of things. We need to remember that the whole purpose of the Pension Schemes Bill is to improve outcomes for savers. Where are savers in all of this? It is their interests that are there. The reason the Government are doing this is that the evidence is clear internationally that pension funds which have a small holding in private assets as part of a diversified portfolio bring better returns.

If there were a situation where that would not be in the interests of a particular scheme, that is the point of the savers’ interest test. This does not cut across fiduciary duty because, in fact, nothing in the Bill overrides that core principle of fiduciary duty. If trustees believe it not to be in their interests, not only can they make an application for an exemption under the savers’ interest test but we would expect their fiduciary duty to guide them to make that application. That really is the beginning and end of it.

I will simply say this. The whole point of the Bill is to make pensions better. This whole Bill will transform our pensions landscape. Pensions are the promise we make to millions of people that years of hard work will be rewarded with security and dignity in retirement. Bigger, better pension schemes will drive better returns, as well as tackling inefficiencies. We need to find a way to get the Bill agreed. Industry wants to get on with implementing the reforms and our pensioners want to start benefiting. The other place has expressed its view clearly, repeatedly and by substantial margins. I hope that noble Lords will reflect on whether it is right to ask the elected House to vote for a fourth time on a question to which it has given the same answer on every occasion. I ask noble Lords not to insist on their amendments and to agree the amendments proposed in lieu in the other place.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the arguments have been well rehearsed. I am not convinced that this coercion is as innocent as has been made out and I therefore wish to test the opinion of the House.

Chemicals (Health and Safety) (Amendment, Consequential and Transitional Provision) Regulations 2026

Baroness Sherlock Excerpts

Monday 27th April 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the draft Regulations laid before the House on 24 February be approved.

Relevant document: 55th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I will come to the amendment from the noble Baroness, Lady Bennett, in a moment, but first, let me introduce the regulations. The measures in this instrument form an important part of the Government’s programme to ensure that Great Britain’s post-EU exit chemical supply regime is robust, proportionate and fit for the long term.

The regulations amend three pieces of assimilated EU chemicals legislation, rectifying issues that could not be addressed at the point of EU exit due to the limited powers available under the European Union (Withdrawal) Act 2018. I am satisfied that these regulations are compatible with the European Convention on Human Rights. They reflect the Government’s commitment to maintaining high standards of protection for human health and the environment, while ensuring that regulatory systems work efficiently for businesses and support sustainable economic growth.

In combination with the commitment from the Health and Safety Executive—HSE—to remain aligned with EU regulatory decisions other than in exceptional circumstances, the regulations create a framework by which EU chemical hazard classifications can be adopted more quickly in Great Britain. This supports the objective shared across chemical stakeholder groups to remain as aligned as possible with the EU to facilitate trade and to ensure that we maintain the high standards of protection we inherited from our closest trading partners.

The measures strike an important balance. They will introduce more certainty, flexibility and proportionality for suppliers of chemicals and the regulator while upholding a system that protects our natural environment from the risk of chemical pollution; protect those who use and work with hazardous chemical substances; and ensure that society can continue to benefit from the use of important biocides, such as those used to provide clean drinking water across Great Britain.

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for their thoughtful contributions. Although we are having this debate in the Chamber rather than in Grand Committee, it is always good to have the opportunity to scrutinise things. The noble Baroness, Lady Grender, made an important point. These things should not go through without any consideration. They are too important for that, and the chance to have the conversation is welcome.

The regulations introduce necessary changes to a highly technical set of regulatory regimes, but the changes preserve the high standards of protection we inherited from our time in the EU and ensure we can continue to recognise decisions made by the European Chemicals Agency, which remains highly respected. I will try to go through the points raised. I will not get to them all and I will have to write, for which I apologise. I will start with the list from the noble Baroness, Lady Bennett, as she tabled the amendment.

First, the noble Baroness asked about adding the EU’s SVHCs to our list. The Government intend to make secondary legislation by June 2027, providing for the incorporation of the six EU hazard classes in GB CLP. The noble Baroness, Lady Grender, also asked about that. The work on developing that is already under way, and the HSE is currently engaging with stakeholders to understand the potential impacts of aligning with the EU on CLP measures, including its hazard classes. It has issued a stakeholder impact survey for exactly that purpose.

The work has been progressed separately from the SI, as I explained, due to constraints in the REUL Act that prevent an overall increase in regulatory burdens. The Government have made it clear that reaching a negotiated SPS agreement with the EU is a key priority. Negotiations are ongoing but we are committed to reaching an agreement by the end of this year. Broadly, it is expected that the areas in scope will dynamically align with the relevant EU legislation. I hope that reassures noble Lords on that front.

To be clear, we will continue engaging with the EU and other international partners at the UN GHS to consider the scientific basis for the six EU hazard classes. As the noble Baroness, Lady Bennett, knows, discussions at the UN GHS have not yet concluded, so the outcomes of those discussions have not been determined. The UK will take into account the EU’s intended action in response to the outcomes of the UN GHS work when formulating our own position on the conclusions of the UN GHS consideration. I underscore that we intend to make legislation by June 2027 that provides for the incorporation of the six EU hazard classes in GB CLP, and that is being done separately for reasons I have just explained.

The noble Baronesses, Lady Stedman-Scott and Lady Bennett, raised questions about the resourcing of the HSE and its size. The HSE’s funding and its priorities and progress are monitored by the Government. DWP is the sponsor department for the HSE, and a delight it is. It is important work, much of which is at the centre of what we do. To be clear, the fundamental scientific judgments are not changing as part of our changing the regime here. The HSE’s business plan for this year confirms its continued commitment to concentrating on the most serious risks and to targeting industries with the greatest hazards and sectors with the worst risk management record.

In response to the noble Baroness, Lady Stedman-Scott, I note that the HSE significantly increased its resources to deal with the extra workload after leaving the EU. For example, on 1 January 2021 there were 262 technical staff in the HSE’s chemicals regulation division, working across the six chemical supply and use regimes. Today that division has approximately 440 staff—so where it is necessary to respond, additional resource is put into those areas.

The noble Baroness, Lady Bennett, raised the issue of the regulatory approach and the noble Lord, Lord Redwood, pulled it from the opposite direction. The HSE’s regulatory approach is aligned with the requirements of the growth duty, but its job is to achieve the right regulatory balance between supporting safe business practice and protecting workers and the public. Proportionate health and safety regulations facilitate economic growth, but the key is that they have to be proportionate. The noble Lord, Lord Redwood, is quite right. This is not about taking risks or cutting corners on safety; it is about making appropriate, proportionate decisions. There is no point in leaving regulatory requirements in place if they serve no purpose and do nothing to make anybody safer but simply make things more difficult for business.

I should make a correction. Apparently, when I was talking about how biocides actually have a useful role in controlling harmful organisms, I said, “harmful organisations”. If I did, I was not dissing anyone’s organisation, just the organisms, so apologies for that.

The noble Baroness, Lady Bennett, asked about the jurisdiction question. We can already consider a jurisdiction from anywhere—this is about speeding it up—but I reassure the noble Baroness that qualification for the fast-track evaluation process has to be subject to the criteria set out in the SI. The only jurisdiction that meets them now is the EU; no other jurisdiction adopts GHS in the same way as the UK, apart from the EU, and no other jurisdiction apart from the EU has an open and transparent classification system based on public consultation, as we do. Other jurisdictions can submit proposals, but they will be part of the normal-track evaluation process, and any proposals to add jurisdictions which are considered to meet the criteria will be included in the HSE work plan, subject to consultation as part of the work plan, and decisions are taken by Ministers. However, the bottom line is that they have to meet the criteria—that is the safety net.

The noble Baroness, Lady Bennett, asked about removing the special reference identification number. She mentioned cutting red tape. Cutting red tape can sometimes be good. Special reference identification numbers are not a requirement of the Rotterdam convention. They were introduced for use in an EU IT system to which we no longer have any access, so they serve no useful purpose. Therefore, removing the requirement of the companies to obtain a special reference identification number for small quantities of chemicals being exported solely for research or analysis removes a completely unnecessary burden on businesses and on the HSE as the PIC-designated authority. They simply do not have a function.

The noble Baroness asked about the disbanding of the Defra stakeholder event. Regular stakeholder engagement is really important in this area, as in others, but it can take many forms. I am advised that Defra will continue to engage closely with a range of stakeholders to gather their input, harness their expertise and share Defra’s thinking. It does not plan to organise any further CSF meetings but its engagement remains strong through its monthly chemicals NGO forum and the industry chemicals policy communication forum, as well as through relevant events. With regard to any HSE materials that were discussed in that context, I want to say really clearly that the HSE is happy to engage and consult with stakeholders at any time. If there are concerns about the HSE, I encourage the noble Baroness to get in touch with me and we can take that forward from there.

The noble Lord, Lord Teverson, asked about the exceptional circumstances. Just to be clear, these reforms do not allow exceptional circumstances to be used to weaken protections. Divergence will occur only in exceptional circumstances and only on scientific and technical grounds, not on economic grounds. Government priorities explicitly emphasise maintaining high standards of health and environmental protection, and leaning into alignment with EU decisions unless scientifically justified otherwise. That could, for example, be the fact that more information may have come to light after an EU opinion had been issued, but it is scientific.

I am assured that the HSE’s commitment to align with EU discussions has been welcomed across all chemical stakeholder groups—although, I acknowledge, possibly not by the noble Lord, Lord Redwood. That reflects a strong commitment across a number of priorities, including reducing trade barriers that arise from divergent standards, which will support trading goods with our biggest trading partner, and protecting the UK internal market by ensuring that different regulatory requirements do not apply in Northern Ireland, significantly reducing the risk of supplies of chemical products no longer supporting the market in Northern Ireland.

I say to the noble Lord, Lord Redwood, that this process is not about banning other products in Northern Ireland. One of the things that closely aligning where possible does is to protect Northern Ireland’s supply chain by making sure that the company will still be able to supply and will want to supply. The extent of agreement or divergence with EU classification proposals or decisions will be identified and reported in the HSE work plan. I hope that answers the question he asked about that.

I think somebody asked whether extending expiry dates would reduce risk protection. Just to be clear, these are substances that have previously been evaluated under the GB BPR, meaning that the risks are understood and they have already been approved for use. Postponing the expiry dates allows the HSE’s regulatory resources to be focused on higher priority evaluations, including first-time approvals where the risk is less well understood, and a limited number of high hazard renewals. I hope that makes a difference. It will mean that critical biocides remain on the GP market that in themselves would cause issues if they were not available. Nothing in the regulations allows new biocidal products which are not already on the market—rather, the purpose is continuity to ensure that essential products, such as those critical for aviation safety and safe drinking water, are not lost.

The noble Baroness, Lady Stedman-Scott, raised the GB CLP notification database. In the absence of that, GB CLP suppliers can use other resources, such as the European Chemicals Agency’s analogous database, which may encourage agreement between EU and GB suppliers on hazard classifications of their chemicals, otherwise known as self-classifications. Duty holders also still have a legal obligation to self-classify. Substances that pose higher risks are already regulated under frameworks such as REACH, the GB BPR and the GB Plant Protection Products Regulations, or other downstream legislation such as the UK cosmetics regulation or the Control of Substances Hazardous to Health Regulations. This ensures ongoing oversight of relevant hazards and associated risks.

I may be running out of things I can usefully say. I hope I have answered the things that are critical to today’s vote. I can assure the House that I will look carefully at Hansard and write to noble Lords with questions that I have not been able to answer.

Although I am grateful for the scrutiny, I stand by the case I have set out for these regulations. This instrument is practical, proportionate and urgent. It keeps essential biocides available, safeguarding public health and critical infrastructure, while preserving the ability to respond quickly to emerging risks. It speeds up our regulatory decision-making so that it is more transparent and better targeted to GB needs, enabling us to align more quickly with EU classification decisions and prioritise chemical hazard evaluations of greatest importance to the GB market, and it simplifies export requirements under GB PIC while ensuring that we continue to meet our international obligations. These are measured improvements to ensure that the system works for Great Britain as intended, supports our chemicals industry, protects people and the environment, and allows the HSE to regulate where it delivers the greatest value.

I hope that the noble Baroness, Lady Bennett, has been reassured and will not push her amendment to decline these regulations. If she does, I urge the House not to vote for it.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I thank all noble Lords who have taken part in this quite short but important debate—perhaps shorter than we expected due to the absence of our Northern Ireland colleagues.

I particularly thank the Minister for a comprehensive, careful and clear response. I think there will be significant reassurance in what she said to the campaigners with whom I have been working. For all noble Lords who might be thinking about their dinner, I give advance notice that I am not intending to put this to a vote, having heard the debate.

However, I will say a couple of things. I particularly thank the noble Baroness, Lady Grender, for a very clear explanation of the importance of this debate and for the important point that relaxing time limits is not a mere detail but potentially a matter of great safety and health concerns.

In responding to the noble Lord, Lord Redwood, I have to say first that he spoke with some glee about strong disinfectants killing germs. I would love to have a chat with him about antimicrobial resistance and where that interacts with what he said. I also think he suggested that this is some kind of Brexit freedom. I point to the fact that, on substances of very high concern, zero for us and 44 for the EU is not some kind of freedom—I do not think anyone could reasonably call it that.

I was pleased to hear from the noble Baroness, Lady Stedman-Scott—indeed, from the Tory Front Bench—about the concerns about HSE capacity. The Minister pointed out that additional resources were being put into chemical regulation. Of course, unless the overall resources increase, that means that resources are being taken away from other places. I note in passing silicosis, which I have done a lot of work on and which is associated with machine worktops, and the issues around that.

I may have misunderstood the Minister’s introduction, which is undoubtedly my fault. I was pleased to hear about the EU’s six classes and that the Government intend to lay a statutory instrument on that by June 2027. I think I misunderstood that, thinking that that was talking about primary legislation in 2027. I therefore ask the Minister to write to me about what the Government’s framework is for primary legislation, because both the Secondary Legislation Scrutiny Committee and the HSE itself say that primary legislation is absolutely necessary to enable us to keep up to date with the secondary legislation.

I will conclude with one final thought on what kind of chemicals we are talking about here. There is a class of chemicals known as second generation anticoagulant rodenticides. Many Members of your Lordships’ House and of the other place have been asking the Government questions about this, including my honourable friend Ellie Chowns. She was told that the Government were considering monitoring residues of these very dangerous chemicals in red kites, buzzards, sparrowhawks, peregrine falcons, red foxes, otters and hedgehogs. That gives a sense of the way in which we are contaminating our environment, our natural world, with some very dangerous substances. That is something I urge your Lordships’ House to keep a very close eye on. However, in the meantime, I beg leave to withdraw my amendment.

Pension Schemes Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments and / or reasons
Wednesday 22nd April 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the Commons amendments now be considered forthwith.

Motion agreed.

Moved by

[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 88A, 88C and 88E to 88P 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.

88E: Clause 40, page 45, line 36, after “in” insert “main”

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88P: Clause 122, page 154, line 11, leave out “2035” and insert “2032”

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I do not get to say “forthwith” often enough. That is a great start to the day. I thank all noble Lords for their continued scrutiny of this important Bill. We are now looking today at the remaining areas of disagreement.

Let me start with the reserve power. Amendment 15 and those connected with it sought to remove the reserve power on asset allocation from the Bill. Noble Lords will be aware—indeed, we just heard—that the other place has considered this House’s amendments and has once again disagreed with the amendments that would remove the reserve power from the Bill. In doing so it has tabled further amendments in lieu, and I will come to those in a moment. However, I want first to acknowledge the level of interest in the House on this issue.

Noble Lords have engaged with these provisions with great care, and I am genuinely grateful for the quality of scrutiny that has been brought to bear at every stage from Committee through Report and to our exchanges between the two Houses. I know that many noble Lords remain concerned about the reserve power and I do not dismiss those concerns out of hand, but I must also be candid with the House about where we stand. The elected House has now considered the case for the reserve power on two occasions, and on both occasions it has concluded that the power should remain in the Bill. However, the Government have not simply dug in; they have responded to the concerns raised in this House with substantive changes to the legislation. In a moment, I will set out what those changes now amount to, because the cumulative picture is important.

I will briefly restate the case. There is a well-evidenced collective action problem in the defined contribution market. The industry itself has been clear that a key barrier to delivering on its commitments are market dynamics that continue to focus on minimising cost rather than maximising long-term value for savers. The industry wants to diversify in its savers’ interests but risks being undercut by competitors which see a commercial opportunity. The reserve power exists to address that problem, and that problem alone.

In the first round of these exchanges, the Government tabled three amendments in lieu, delivering two concessions that responded directly to arguments made in this House. The first, which had been pressed by the noble Viscount, Lord Younger of Leckie, and the noble Baronesses, Lady Stedman-Scott and Lady McIntosh of Pickering, was the statutory cap. Regulations may not require more than 10% of default fund assets to be qualifying assets or more than 5% to be of a UK-specific description. That writes the Mansion House Accord targets into primary legislation so that no future Government can use the power to go further.

The second, responding to the type of concern raised by the noble Baroness, Lady Bowles, and other noble Lords about the breadth of the power, was the asset class neutrality requirement, which ensures that regulations must cover each of the named private market categories and cannot concentrate requirements in any one class. Those amendments represent meaningful constraints on the reserve power, of a kind for which this House has previously signalled strong support. I stand by them.

Today, the Government, with the support of the other place, propose to go further, in three ways. First, we have tabled an amendment to bring forward the existing sunset date for the reserve power from 2035 to 2032. The Mansion House Accord commits the industry to reaching its targets by 2030. Bringing the sunset forward aligns the power more closely with that timeline. If the power has not been exercised by the end of 2032, it falls away entirely, and if it has been exercised, the percentage requirements set under it may not be raised after that date.

The second amendment ensures that the power to set the headline percentage may be exercised only once. Combined with the statutory caps, this means that any future Government have at most a single opportunity to set the asset allocation requirement, and only up to the levels to which the industry itself has committed under the accord.

Thirdly—I ask the House to consider carefully the significance of this step—the other place has agreed an amendment providing for the full repeal of the asset allocation regime at the end of 2035. I want to be precise about what that means, because it goes beyond the sunset of the enabling power. Even if the power has been exercised and requirements are in force, the entire framework—the approval requirements under Section 28C, the savers’ interest test, the associated penalty and review provisions and any asset allocation requirements which have been brought into effect—is repealed from the statute book at the end of 2035. I therefore hope that noble Lords who have expressed objections to this power being a permanent feature of our pensions legislation will recognise that the Government have listened to them.

I will set out what the reserve power now looks like taken in the round. It is capped at the accord targets; it cannot be used to compel investment in a single hand-picked asset class; the headline percentage can be set only once; the power lapses in 2032 if not used; and, if it were ever used, the entire regime is repealed at the end of 2035—every element of it removed from the statute book.

On top of all that, it remains subject to the savers’ interest test, statutory reporting requirements both before and after any regulations are made, and the affirmative procedure. This power has been meaningfully altered and constrained by the scrutiny of this House, and I hope noble Lords will recognise the collective significance of those safeguards. Industry has welcomed our amendments to constrain the power. By way of one example, this morning, Aviva said:

“We welcome the government’s amendments to constrain the reserve mandation power so that it can only be used to support delivery of the Mansion House Accord … We hope this is enough to build the consensus needed for the Bill to be passed in this Parliamentary session”.


I understand the position of those who believe the power should not exist at all. The noble Baroness, Lady Bowles, has made that case with clarity and rigour, and I respect it. But the Government’s view is that the risk of inaction, of allowing the collective action problem to persist to the detriment of pension savers, is the greater risk. The power as it now stands is a carefully circumscribed instrument, designed for a single purpose and limited in every dimension.

This House has done its job as a revising Chamber. The Government have engaged in good faith with the concerns raised and responded with changes to primary legislation—not undertakings, not assurances, but amendments to the Bill. I hope this demonstrates the seriousness with which we have taken this House’s scrutiny and I ask noble Lords not to insist on their amendments and to agree the amendments proposed by the other place in lieu.

I turn now to Lords Amendment 35B, which would require the Secretary of State when making regulations across the scale measures and those for default arrangements to

“have regard to the benefits of competition among providers of pension schemes”.

The Government absolutely support a competitive market; that is evident through all the scale measures. However, we believe that in designing regulations, a range of factors must be taken into account. Our focus always has to be on delivering the best outcomes for members.

Noble Lords have stressed the importance of competition as the market moves towards scale. The Government agree: we have always considered it to have a central role in the policy. The new entrant pathway is designed to drive this, as is the freedom schemes will have to open new default arrangements which will support competition. However, we have listened carefully to the arguments that have been made during debates, especially by the noble Baroness, Lady Noakes, and we recognise the desire to see that commitment feature in the Bill. We have therefore tabled amendments in lieu to set out that regulations, both those in respect of the scale measures and those relating to default arrangements, must have regard to the importance of competition and innovation.

However, under the Government’s Amendments 35C and 35D, regulations will also need to have regard to additional factors: the importance of scale, improving member outcomes and effective governance. It is clearly right that we place members at the heart of this policy—I am sure there can be no disagreement that their needs are just as important as those of the market that serves them. Members’ interests come first and this amendment recognises that.

The noble Baroness, Lady Noakes, has asked me to confirm two matters in relation to this amendment: first, how the Government will meet the new duty in relation to the different factors set out. Under our amendments, when making regulations, the Government will need to have regard not just to the need to reach an appropriate scale but to the importance of competition and innovation in the design and operation of schemes, to effective governance and to the vital objective of improving outcomes for members. This amendment captures the basic but important principle that the Government’s approach to making regulations must be holistic, taking account of many relevant factors. The Explanatory Notes will also make this clear.

Secondly, the noble Baroness asked me to confirm why new Section 28J does not appear in the list of provisions in this amendment, and I am very happy to do so. This is because new Section 28J will allow the Treasury to make regulations that switch on the FCA’s enforcement powers in relation to Chapter 3. This is primarily a question of whether these powers should be available to the FCA, so the matters listed in the amendment are therefore not applicable to that question in the same way they are to the powers that allow the Government to construct key elements of the scale framework. I hope that explains things to her satisfaction.

Lords Amendments 37B and 37C set out the ability for a regulator to exempt a scheme on the basis of an innovative offering or where consolidation may not improve member outcomes. We debated this amendment this week and I will not restate the arguments in the interests of time. The Government have long been clear about our intention to adopt reforms to ensure that workplace pension schemes take advantage of consolidation and scale to deliver better returns for UK savers, and that is what we are doing in the Bill.

While I recognise that this policy may have an effect on some schemes in the market, we must prioritise the need to deliver on this commitment to members. Our priority is to serve those who have begun to save through auto-enrolment and who work hard to save for retirement: we want to ensure that they are saving into schemes that deliver better outcomes. However, we have heard concerns expressed, in this House and in the other place, that the benefits that innovation can bring should not be lost in the process of consolidation. We agree. We have therefore tabled Amendments 37D and 37E in lieu to require the Secretary of State, in conjunction with the regulators, to publish a report about the effects of pension scheme consolidation, and the extent to which innovative product designs are adopted or maintained following consolidation activity, as well as any barriers that may exist to preserving these features. This report will be published within 12 months of the Bill becoming an Act. The timing of the report will ensure that the Government are then able to take action, as needed, in advance of the scale measures being commenced in 2030.

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[Baroness Stedman-Scott (Con)]

My Lords, since we have only one group of Motions today, I shall address our three key areas—scale and competition, public sector pensions and mandation—together.

First, on scale and competition, I am grateful to the Minister for bringing forward these amendments in lieu. The government response does two important things. First, it places a clear duty on the Secretary of State, when making regulations under key pension powers, to have regard to a set of core principles: innovation in scheme design and operation, competition between providers, the need to improve outcomes for members, the achievement of appropriate scale and effective governance. Secondly, it applies a similar discipline to the appropriate authority when making regulations under Clauses 42 and 44 requiring regard to innovation, competition, member outcomes and governance. Together, therefore, this amendment establishes a statutory framework that must guide the making of these regulations. It ensures that scale is pursued not at all costs but alongside innovation, competition and, above all, better outcomes for savers.

We also welcome the amendment in lieu from the Government, which would require the Secretary of State to publish a report into the effects of consolidation on innovation in the design and operation of relevant master trusts. These are welcome changes to the Bill following our long-fought Conservative campaign. They reflect in a meaningful way the concerns we have consistently raised about the balance between scale and innovation. On that basis, we are content to accept these amendments, and I thank the Minister for her constructive engagement in bringing this forward. This is the change in emphasis that we wanted to see, and we are glad that the Government have moved on this.

Turning to public sector pensions, I pay tribute to my noble friend Lady Neville-Rolfe for her sterling work in pressing this important issue. This is a fundamentally important matter. We are talking about vast sums of public money—indeed, one of the largest government liabilities behind gilts. I am pleased that the Government have recognised the important point that my noble friend has been making and have brought forward this amendment in lieu. We shall of course await publication by the Government to ensure that it receives full and proper scrutiny once it is released, but we thank them for their recognition of this point.

Finally, I come to mandation. We have had some small movement from the Government in their amendments in lieu, which is welcome to some extent, but the Government should not have this power at all—a view that we share with both industry and the public.

The Government want greater investment in private markets. The reason why that is not happening as fast as they would want has many causes—which could in turn have many solutions, not limited to increasing consumer visibility, strengthening employer-side incentives, addressing the role of intermediaries and promoting co-ordination through voluntary alignment. Indeed, we already have several in motion, such as the Mansion House Accord, a voluntary, industry-led framework that was agreed less than a year ago and designed to address precisely these issues through alignment, not coercion.

Yet before the approach has even had time to take root, the Government are reaching for the most extreme lever available: the power to direct private investment into assets of their choosing. That was, contrary to some claims, not in the Government’s manifesto. The noble Baroness, Lady Bowles, is right to oppose this in the strongest possible terms.

Mandation is a profound mistake. It cuts across the fundamental principle of fiduciary duty and the obligation to act in the best interests of savers, not Ministers. It sets the deeply troubling precedent that, where markets do not move quickly enough in the Government’s opinion, the Government will simply override them. The Government are trading partnership for pressure and replacing trust with the threat of intervention. This is not how you build a strong, dynamic investment market; it is precisely how you undermine it.

This power is not just unnecessary: it is dangerous and it should not stand. We entirely support the Motion from the noble Baroness, Lady Bowles, to insist on her amendment and we will support her if she chooses to test the opinion of the House on this question.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords who have spoken. I thank them for being very constructive in their engagements—possibly more so offstage than onstage, but I am always grateful for and will take whatever I can find. I thank in particular the noble Baronesses, Lady Neville-Rolfe and Lady Noakes. I am glad that the noble Baroness, Lady Noakes, knows now that I really was listening all the way through Committee and Report, even if there may have been times when—I am sorry—it looked like I was not; I shall work better on my nodding in future. I am really glad that she and the noble Baroness, Lady Neville-Rolfe, are happy with where we have got to.

I will try to pick up on a few points. We have gone over them many times in debate, so I will not hold the House back in order to redo them all over again, tempting though that is. I turn first to the noble Lord, Lord Vaux. I think the problem is that we have started in the middle of the argument. The diversification of portfolios is critical to reducing risk. There is clear international evidence that a small investment in productive finance, in the context of a diversified portfolio, brings better returns. That is demonstrable. We have to admit that most mass-market DC schemes have little or no private markets in their default funds, and that is very much in contrast to the position in many other countries. So the starting point is that it is reasonable to assume, as the evidence would suggest, that it is better for savers for that to happen.

However, we do want safeguards around this, and what the noble Lord described is one of the safeguards. If this power were ever to be used—it is a reserve power, so the Government do not expect it to be used—a report would have to be commissioned to look at the impact of doing so on savers as well as the broader economy, to establish what would happen. Then, despite all that, if trustees believed, knowing their savers and membership, that it would not be in their interests because of some reason—for example, even if it might broadly be in their interests but it would not be in their savers’ interests—not only can they make an application for an exemption under the savers’ interest test but we would expect the fiduciary duty to drive them to do so. The test is designed to be capable of being passed, not just failed. I understand the noble Lord’s position, but that is the Government’s position.

The noble Baroness, Lady Bowles, asked about the timing: why should it not stop in this Parliament? We have talked about the power stopping in 2032, but the Mansion House Accord has until 2030 to happen, and this Parliament, I am sorry to say, is due to finish before that. Would that it could continue—no, I will not go in that direction; it will get badly reported. We think, that if the power were ever used, there would have to be enough time to see its impact before bringing it to an end. The sunset date of 2032 seems a reasonable starting point and that, I hope, is something that she can appreciate.

A question was asked about collective action, which we have been around several times. The Government have set out the arguments that the view on collective action failure in the market is not just ours; the industry has made this really clear. When the Mansion House compact—the predecessor to the Mansion House Accord—published its collective assessment of progress two years into its assessment, it identified this dynamic of competitive pressure focusing the market on minimising cost as the single biggest barrier to delivering on its own commitments. We have been here before; it has been tried on a voluntary measure and failed, and industry identified this as the single biggest barrier. That is why we are addressing this and that is the reason for doing it.

I can reassure my noble friend Lord Davies that the OBR will continue to produce long-term forecasts of the economy, which will provide a context for the figures that are being made. I am grateful to him for asking about it.

Finally, to describe the changes the Government have made as small is unreasonable. I remind the House what this now is: this provision, the reserve power, is now capped at the same rate as the accord. It cannot be used to compel investment in a single, hand-picked asset class. The headline percentage can be set only once. The power lapses in 2032 if not used and, if it were ever used, the entire regime is repealed at the end of 2035—every element is taken off the statute book. Those are significant movements. The Government have listened. The Commons has twice sent this back; it wants this in the Bill, so we should give it to the Commons. I urge the House to agree.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I thank all those who have contributed. As the Minister said, we have been around the arguments many times, so I will be brief. This was sold as a backstop to the accord, so it is not a case for celebration when something that bit off a lot more than the accord is brought a bit more closely into alignment with it. The fact is that the reserve power is coercive—that is what it is there for and what it is meant to do. It is not without effect, yet it was not consulted on. It was sprung on us suddenly and snuck into the Bill, and we have had to deal with it.

I was interested in the tax advantage point raised by the noble Lord, Lord Davies, but these are the least well-off pensioners who are going to be asked to put more into risky assets. Should they not get an extra slice of tax relief, then? All the people who are in safe, defined benefit schemes and those kinds of things where they are not at risk get a tax advantage too. It is not a runner.

I come back to the basic point, which relates to fiduciary duty and the best interests of pensioners in what is their money. Bear in mind that the point has been raised—I am not sure whether it has ever been answered—about the human rights aspect of diverting some of the pensions. We could go on a lot longer— I hope we do not—but I regret that I must test the opinion of the House.

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 37B and 37C, and do agree with the Commons in their Amendments 37D and 37E in lieu.

37D: Clause 40, page 53, line 18, at end insert—
“28K Report about effects of pension scheme consolidation
(1) The Secretary of State must prepare and publish a report about the effects of consolidation on innovation in the design and operation of relevant Master Trusts and group personal pension schemes.
(2) The report may in particular include information about—
(a) the extent to which consolidated schemes adopt or maintain innovative product designs of constituent schemes;
(b) barriers to consolidated schemes adopting or maintaining such innovative product designs.
(3) The Pensions Regulator and the FCA must provide such information and assistance as the Secretary of State may require for the purposes of the report.
(4) The report under this section must be published before the end of the period of 12 months beginning with the day on which this section comes into force.
(5) In this section “consolidation” means the consolidation of a relevant Master Trust or group personal pension scheme with one or more other schemes.”

37E: Clause 122, page 153, line 29, leave out from “force” to end of line 30 and insert “as follows—
(i) section 40, in respect of the insertion of section 28K of the Pensions Act 2008 (report about effects of pension scheme consolidation), comes into force on the day on which this Act is passed;
(ii) the remaining provisions of Chapter 3 come into force on such day as the Secretary of State may by regulations appoint;”

[Baroness Sherlock (Lab)]

My Lords, I have already spoken to Motions B to D. I beg to move.

Motion B agreed.

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendment 35B, and do agree with the Commons in their Amendments 35C and 35D in lieu.

35C: Clause 40, page 53, line 18, at end insert—
“28K Regulations about quality requirements
In making regulations under section 20(1A) or (1C), 26(7A), 28A, 28B, 28E or 28F, the Secretary of State must have regard to the importance of—
(a) innovation in the design and operation of relevant Master Trusts and group personal pension schemes;
(b) competition among relevant Master Trusts and group personal pension schemes;
(c) improving outcomes for members of relevant Master Trusts and group personal pension schemes;
(d) relevant Master Trusts and group personal pension schemes achieving an appropriate scale;
(e) relevant Master Trusts and group personal pension schemes having effective governance.”

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 77 and 85, and do agree with the Commons in their Amendments 85C to 85E in lieu.

85C: Page 152, line 11, at end insert the following new Clause—
“Public service pension schemes
(1) The Government Actuary must, before the end of the period of 12 months beginning with the day on which this section comes into force—
(a) prepare and publish a document setting out cash flow projections for each of the next 50 years that cover the public service pension schemes within subsection (4);
(b) provide the document to the Treasury and the Office for Budget Responsibility.
(2) The Treasury must lay the document before Parliament.
(3) For the purposes of this section “cash flow” means—
(a) expenditure on benefits, and
(b) income from member contributions.
(4) The following public service pension schemes are within this subsection—
(a) any scheme under section 1 of the Public Service Pensions Act 2013 (schemes for persons in public service) which—
(i) is a defined benefits scheme (within the meaning of that Act), and
(ii) is not a scheme for local government workers (within the meaning of that Act);
(b) any scheme under section 1 of the Public Service Pensions Act (Northern Ireland) 2014 (schemes for persons in public service) which—
(i) is a defined benefits scheme (within the meaning of that Act), and
(ii) is not a scheme for local government workers (within the meaning of that Act).”

Pension Schemes Bill

Baroness Sherlock Excerpts

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

Moved by

[Lord Katz]

That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.

1A: Because the Commons consider that it is not necessary to include the asset and location provisions mentioned in the amendment.

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Moved by

[Lord Katz]

That this House do not insist on its Amendment 5, to which the Commons have disagreed for their Reason 5A.

5A: Because the Commons consider that it is not appropriate to impose the publication requirements mentioned in the amendment; given that the next report under section 13 of the Public Service Pensions Act 2013 will be prepared in the near future.

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Moved by

[Lord Katz]

That this House do not insist on its Amendment 6, to which the Commons have disagreed for their Reason 6A.

6A: Because the Commons consider that it is not necessary to include the interim review provisions mentioned in the amendment; and the Government has committed to carrying out a consultation on this topic.

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendment 13, to which the Commons have disagreed for their Reason 13A.

13A: Because the Commons consider that it is not appropriate to increase the length of the dormancy period as this would be detrimental to members of pension schemes.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I shall speak also to Motions J, J1, K, K1 and L.

As I have previously outlined, we cannot accept Lords Amendment 13 on small pots or Amendment 13B within Motion D1, tabled by the noble Baroness, Lady Altmann, which would extend the dormancy period for automatic consolidation from 12 months to 36 months or 24 months respectively. Extending the threshold would materially lengthen the period for which a pot remained dormant. This would be detrimental both to individual members, who would incur multiple sets of charges for longer, and to the wider scheme membership, which, in effect, subsidises the small deferred pots, which are uneconomic for schemes to administer. We estimate that extending the dormancy period from 12 to 24 months would generate additional industry costs of around £25 million a year, which would most likely simply be passed on to members.

The Government did not invent this scheme. The 12-month timeframe formed part of the proposal that was consulted on in 2023 with stakeholders across the pension industry and consumer representative bodies, and it reflects a supported middle ground. The previous Government concluded that a period of 12 months struck the appropriate balance, allowing eligible pots to be identified for consolidation while seeking to avoid certain situations; for example, where individuals who, for a range of reasons, may have temporarily ceased pension contributions but remain with their existing employer and are likely to return to pension saving. The 12-month figure was not plucked out of thin air; it was a judgment underpinned by consultation and evidence, not speculation. It is supported by a strong set of safeguards, most notably the individual’s right to opt out of consolidation.

Throughout the development of this policy, my department has engaged with a range of stakeholders, including consumer representative bodies. For example, Which? was part of our small pots delivery group, and it welcomed the safeguards that we have put in place, which it agrees are sufficient.

I understand from previous debates that noble Lords, including the noble Baroness, Lady Altmann, have concerns that 12 months might be too short for certain individuals, particularly those who take career breaks, say, for maternity leave or caring responsibilities, and experience fluctuating earnings. But the 12 month dormancy period is triggered only where no contributions have been made for a full year. Periods of paid maternity leave, for example, would see contributions continue, and a pot would become dormant only after 12 months of unpaid leave.

Currently, only pots worth £1,000 or less will be eligible for consolidation. For context, a full-time worker on the national living wage would typically exceed that threshold after nine months of saving. That means that individuals with longer periods of continuous employment are unlikely to have pots that fall into scope. It cannot be a common occurrence that someone who has saved less than £1,000 and then had no contributions for at least 12 months would recommence saving with the same employer once it had entered dormancy. Nevertheless, we recognise that such circumstances could occur. That is why we have built strong safeguards into the policy. Most importantly, every member will receive a transfer notice ahead of any consolidation, giving them a clear opportunity to opt out if they judge that consolidation is not in their best interests.

Finally and crucially, the Bill already requires regulations to set a minimum 12 month period for a pot to be classified as dormant. That threshold could be set at a longer period or extended in future through secondary legislation if the evidence justified such a change.

I think we all agree on the need to consolidate small pots to protect savers and all other members from multiple years of charges on multiple pots eating away at their savings. I hope that the noble Baroness, Lady Altmann, can see that extending the dormancy period would harm the vast majority of members in a known and avoidable way to add further protection for a very small number of hypothetical cases. The best way to protect those cases is through building full and proper safeguards into the policy, which is what this Bill does. After that compelling argument, I hope that she will be willing not to press her amendment, when we come to that point.

Lords Amendment 77 would require the Secretary of State for Work and Pensions to conduct and publish a review of the long-term affordability of public service pension schemes. The Government cannot accept the amendment as it is unnecessary and technically defective. It is unnecessary, as detailed information about the cost of the unfunded public service pension schemes is already publicly available. The OBR undertakes analysis of both the near-term and long-term cost of the schemes, including the Treasury’s central measure of affordability: 50-year projections of pension payments as a proportion of GDP. Contrary to suggestions made in Committee and on Report, the cost of the schemes is forecasted to fall under this measure, from 1.9% to 1.4% of GDP.

On Report, we heard suggestions that savings arising from the Hutton reforms had not and would not materialise. That is simply incorrect. The coalition Government forecasted savings of around £400 billion by 2065 as a result of the substantial reforms made to the schemes in 2014-15, but implementation of the reforms was, in effect, set back because the courts found that the way in which the coalition Government had introduced them was discriminatory on grounds of age. That incurred costs of around £17 billion, but crucially, it will not impact the savings going forward. Those are the key drivers behind the fall in costs over the long-term.

Every four years, detailed actuarial valuations of each of the schemes are undertaken and published. They set out the cost of providing benefits to current staff and the cost of meeting all accrued liabilities. The valuations test the cost of the schemes against the cost control mechanism, introduced by the coalition Government as part of the Hutton reforms, and they provide for benefits to be adjusted if those have deviated from target levels. Pension costs are also set out in the financial accounts for each of the schemes and collectively in the whole of government accounts. This information is produced in accordance with international accounting standards.

The amendment is not necessary because the risks arising from changes to longevity are already managed in the design of the schemes. This came up on Report. The retirement age in the schemes, except those for police, firefighters and the Armed Forces, is the state pension age. In any case, the cost control mechanism would be triggered if costs rose due to longevity improvements that were not managed by changes to state pension age.

The suggestion made on Report was that the fact that some of the public service schemes are operated on a pay-as-you-go basis means that they must be unaffordable, but “unfunded” does not mean “unaffordable”. In general, the Government do not pre-fund future liabilities by holding assets at all. Details of the Government’s policy on whether to hold assets in relation to specific liabilities is set out clearly in Annex 4.16 of Managing Public Money, should anyone want to look it up.

There is clearly an opportunity cost to holding assets in a fund, which are invested with the sole objective of having enough returns to meet future liabilities. Holding funds can create technically allocative inefficiencies across the public sector. The liability can clearly be more efficiently managed in the round with other unfunded liabilities, met out of general taxation as they fall due.

The amendment would not work, because it would require the Secretary of State for Work and Pensions to undertake a review on a matter that does not fall within their responsibilities and for which statutory responsibility sits elsewhere, including with the devolved Administrations.

Comprehensive information is already available, published and regularly updated on the cost of public service pensions. There is demonstrably already transparency on all the points raised by noble Lords during the debates, and the amendment is, in the Government’s view, therefore unnecessary. We will continue to ensure that public service pensions are properly costed, transparently reported and kept under review through existing mechanisms. So, I hope that the noble Baroness will not press her amendment.

I turn to Amendments 78 and 86. These amendments engage Commons financial privilege. The House of Commons has therefore disagreed with the amendment and has not offered any further reason. As noble Lords will know, it is a long-standing convention that this House does not insist on amendments which the other place has rejected on grounds of financial privilege. But I will briefly explain why the Government do not agree with the policy intent. These amendments would not do what I suspect the movers hoped they would, which is to enable the PPF to pay lump sum payments to its members on top of the periodic compensation it provides.

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[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Altmann, my noble friend Lady Neville-Rolfe and the noble Viscount, Lord Thurso, for their Motions in this group. In the interest of brevity, I shall focus my remarks only on Motion J1.

My noble friend Lady Neville-Rolfe is fundamentally asking the important question of whether we are being sufficiently clear about the long-term sustainability and transparency of the system as it currently stands. The central concern is this: unlike funded schemes, these pensions are not backed by accumulated assets. They are paid out of current taxation, and that means that the cost is not contained within a fund but passed forward, year by year, to future taxpayers. As the number of public sector employees grows, and as people live longer, those obligations grow with them.

There is also a question of incentives. Decisions about expanding the public sector workforce or adjusting pay inevitably carry pension implications that stretch decades into the future, yet those costs are often diffuse, uncertain and ultimately borne by the Exchequer. Without a clear and accessible understanding of the long-term consequences, it is difficult, if not impossible, for decision-makers to weigh those trade-offs properly. A review would allow us to bring together the evidence, to test the assumptions and to ensure that policy is being made on the basis of a clear and realistic understanding of the facts.

For those reasons, including the four key reasons outlined by my noble friend, I believe that there is a strong case for the review proposed, and I am very pleased to support this Motion.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for their questions and comments. I spoke at some length at the start, and I think I answered most of the questions pre-emptively—or tried to—so I will not dwell on them.

On a couple of specifics, and to reassure the noble Baroness, Lady Altmann, and the noble Lord, Lord Palmer, as I stressed, the Bill says a minimum of 12 months simply because we want to be able to respond to any changes. If there is evidence that we need to make it longer, we can; if there is evidence we need to extend it later, we can do so in secondary legislation. It is set up to do that, and I can give her that assurance.

I am not going to get into America. For me, as parallels go, whether we have one or two years’ opt-out and who is the ambassador to the United States are probably slightly separate categories of decisions. Noble Lords will forgive me if I do not go there.

In response to the noble Lord, Lord Vaux, the two policies operate independently but the intention is that dashboards will be available before the small pot consolidation. I reassure the noble Lord, with the small pots he has scattered around, that he will be written to and given the opportunity to opt out, so that they will not be consolidated without his knowledge or against his will. I hope he will look out for that in due course and can then make appropriate decisions.

The noble Baroness, Lady Neville-Rolfe, asked about the presentation of information. The Treasury is exploring options to present pension liabilities on a constant basis. It is important to be clear that any such presentation would be supplementary. It would not affect the underlying liability, as the noble Baroness knows well, or the way they are presented in financial statements, but it would help to add an extra level of clarity to those who are reading them. I think I have made all the arguments around affordability and the nature of them.

I have one final word for the noble Viscount, Lord Younger, who feels there is no way for decision-makers to make appropriate judgments about the affordability of pension schemes without a review such as this. I think he should have more confidence. The coalition Government, of which his party was the leading member, reformed almost all the public service pension schemes and created a new system, and that is what we now have. A lot of work was done then and is being done now. The measures of affordability that I have described are such that the schemes have that corrective factor straight in them. The fact that the information is out there and published will, I hope, be enough. I therefore urge noble Lords not to press their Motions.

[Baroness Altmann (Non-Afl)]

My Lords, I thank all noble Lords who have spoken. As I said, I will not press Motion D1 to a Division. I beg leave to withdraw the Motion.

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Moved by

[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 88A to 88C 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.

88A: Clause 40, page 46, line 16, at end insert—
“(5A) Regulations under subsection (4) must secure that a description of asset is prescribed under that subsection in respect of each example mentioned in subsection (5)(a) to (d).”

88C: Clause 40, page 46, leave out lines 31 and 32

[Baroness Sherlock (Lab)]

My Lords, in moving Motion E, 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 its Amendments 88A to 88C, I will speak also to Motions F, F1, G, G1 and H.

Motion E deals with Amendment 15 and those connected with it, which sought to remove the reserve power on asset allocation from the Bill. The case for removing the power was pressed firmly in Committee and on Report, led by the noble Baroness, Lady Bowles, and supported by a number of other noble Lords. The Government have always taken those arguments seriously, and I hope our response demonstrates that. However, the Government continue to believe that the reserve power is necessary.

The collective action problem in the defined contribution market, where competitive pressure on costs discourages providers from diversifying even when they recognise it would benefit their members, is well-evidenced and has been acknowledged by the industry itself. The Mansion House Accord represents a welcome voluntary commitment, but the risk is real that individual providers defer action until others move first. The reserve power exists to underpin those commitments, giving each provider confidence that the rest of the market will move too.

This collective action problem is not simply a theoretical concern or a government preoccupation. Last autumn, signatories to the Mansion House compact—a predecessor agreement on private markets investment, negotiated under the previous Government—published their own progress update. What was the single biggest barrier to delivering on their commitments? In their words,

“market dynamics continue to focus on minimising cost instead of maximising long-term value”,

and that without intervention to shift that culture,

“‘too much focus on cost’ remains the key barrier”.

That is the collective action problem in a nutshell: providers recognise that greater diversification can benefit their members but competitive dynamics hold them back from acting on it.

However, I gave undertakings during the passage of the Bill to reflect on the concerns raised by noble Lords, and I have done so. The amendments in lieu before the House today respond directly to those concerns in two important respects. First, the Government have placed a cap in the Bill so that regulations may require not more than 10% of default fund assets to be held in qualifying assets overall or more than 5% to be of a UK-specific description. This is a significant step. The Government have always been clear that the power is a backstop to the Mansion House Accord, which applies those specific targets to DC providers’ main default funds and no more.

I heard the argument—pressed particularly by the noble Viscount, Lord Younger of Leckie, and the noble Baroness, Lady Stedman-Scott, in amendments that they tabled, with the support of others—that that commitment should be written into primary legislation rather than resting on ministerial assurance alone. This amendment does exactly that. It gives the industry and savers alike the confidence that no Government can use these powers to go beyond the accord’s percentage commitments.

Secondly, the Government have established a principle of neutrality between asset classes. These amendments remove the ability for regulations, should they try to do so, to weight the requirement towards any single category of private asset, and require that qualifying asset descriptions are prescribed across each of the private market categories set out in the Bill—so the Government could not, for example, concentrate the entire requirement in infrastructure, still less direct it into a particular sector or company. This responds to a type of concern expressed by noble Lords during the Bill’s passage about the breadth of the power and the risk that a future Government might use it for purposes unrelated to the accord. The neutrality requirement, taken together with the established principles of public law to which any secondary legislation must conform, provides a robust constraint against such misuse.

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[Lord Lucas (Con)]

My Lords, it is utterly ridiculous that only 5% of UK pension funds are invested in the UK. The figure was 50% when I was a pension fund manager. The difference is entirely down to us as politicians. The solution is not to compel financial managers to do things; it is to understand what we did to make this happen and undo at least some of it. If the Government want quick access to priorities, they should turn to the members. The members believe in this country. Their interest is in it being a prosperous country, with lots of investment coming into it. Give them more influence over what pension funds do. They should not go for this government mandation; it is a dead end and, at its heart, poisonous.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for their comments. Having spoken at some length at the start, I will not respond at length. I shall just pick up a few points.

On the question on fiduciary duty, nothing in the Bill disapplies trustees’ existing duties of loyalty, prudence and acting in members’ best interests. Those continue to apply in full. Were this power ever to be used—I repeat, the Government do not expect to use it—and the asset allocation requirements were in place, the savers’ interest test allows a scheme to seek an exemption if it can show that compliance would cause material financial detriment to members. Not only would they be enabled to do that but we would expect the fiduciary duty to require the trustees to make such an application to the regulator. Trustees are not directed to invest in any specific asset or project, and if they believe that the requirements are not in the members’ best interests, again, they should apply for an exemption.

The neutrality amendments provide a meaningful constraint. The Government must prescribe qualifying asset descriptions across each of the private market categories in the Bill, so they could not load an entire requirement into a single asset class, let alone a pet project or specific investment. Any future Government who attempted to define qualifying assets in a way designed to serve their own policies or a pet project, rather than savers’ interests, would clearly be vulnerable to legal challenge on rationality grounds.

I am not going to debate this at length since the noble Lords have made clear their intention to test the opinion of the House irrespective of whatever I say. I have just two other comments, on scale. I take the point made by the noble Baroness, Lady Stedman-Scott, that the Government should be pragmatic. I completely agree. My problem with her amendment is that it is not practical, so I cannot be pragmatic in trying to apply an amendment that is really clear in the matter of scale but would simply be too difficult to apply, because it is not clear what the nature of the test would be and it would end up getting bogged down in the courts for years, giving the regulator an impossible job. That simply does not work.

I have made the point about competition in our previous, long debate, and I do not doubt we will return to it again should the Bill not all disappear tonight. In the light of that, I hope that noble Lords feel able not to press their amendments.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, we have heard continued disagreement with mandation and coercion from across the House. As the Minister has said, we do not need to re-rehearse all the things that we have already said, but something that stuck in my mind from a previous stage was when the Minister said that if we did not have mandation, it would rest on good faith alone. That is the whole point: I think there is good faith in the City to deliver on this, and not to trust it, exactly as the noble Lord, Lord Remnant, has said, damages relationships and any good faith and trust in government. This is therefore doubly, trebly and quadruply a bad thing for the Government to have suggested, and I hope they will have a change of mind. I wish to test the opinion of the House.

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 26 and 37, to which the Commons have disagreed for their Reason 37A.

37A: Because the Commons consider that there are significant benefits to members of pension schemes from the existing scale requirements in the Bill.

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendment 35, to which the Commons have disagreed for their Reason 35A.

35A: Because the Commons consider that it is not necessary to impose further requirements relating to innovation and competition.

[Baroness Sherlock (Lab)]

I beg to move Motion G.

Motion G1 (as an amendment to Motion G)

Moved by

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendment 43, to which the Commons have disagreed for their Reason 43A.

43A: Because the Commons consider that it is not necessary to impose further requirements relating to innovation and competition.

[Baroness Sherlock (Lab)]

My Lords, I have already spoken to Motion H. I beg to move.

Motion H agreed.

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 77 and 85, to which the Commons have disagreed for their Reason 85A.

85A: Because the Commons consider that it is not necessary to duplicate existing information regarding public sector pension schemes.

[Baroness Sherlock (Lab)]

My Lords, I have already spoken to Motion J. I beg to move.

Motion J1 (as an amendment to Motion J)

Moved by

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 78 and 86, to which the Commons have disagreed for their Reason 86A.

86A: Because it would alter the financial arrangements made by the Commons, and the Commons do not offer any further reason, trusting that this Reason may be deemed sufficient.

[Baroness Sherlock (Lab)]

My Lords, I have already spoken to Motion K. I beg to move.

Motion K1 (as an amendment to Motion K) not moved.

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 79 and 87, to which the Commons have disagreed for their Reason 87A.

87A: Because the Commons consider that it is not necessary to carry out a review of existing legislation relating to pension communications and financial promotion rules.

[Baroness Sherlock (Lab)]

My Lords, I have already spoken to Motion L. I beg to move.

Motion L agreed.

National Employment Savings Trust (Amendment) Order 2026

Baroness Sherlock Excerpts

Thursday 16th April 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the draft Order laid before the House on 26 February be approved.

Relevant document: 54th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 13 April.

Motion agreed.

National Employment Savings Trust (Amendment) Order 2026

Baroness Sherlock Excerpts

Monday 13th April 2026 Grand Committee

Moved by

[Baroness Sherlock]

That the Grand Committee do consider the National Employment Savings Trust (Amendment) Order 2026.

Relevant document: 54th Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, this statutory instrument was laid before the House on 26 February. Automatic enrolment has been widely recognised as a major policy success, significantly increasing participation in workplace pension saving. The National Employment Savings Trust—Nest—has been central to that achievement and will continue to play a key role in supporting the system. Nest now serves nearly 14 million members, around one-third of the working-age population, providing a low-cost, accessible pension scheme for employers and workers across the UK.

Subject to parliamentary approval, this instrument will amend the Nest order 2010, which provides the legislative framework under which Nest operates. The instrument will enable Nest to extend its suite of retirement options to include flexi-access drawdown, a retirement income option that allows individuals with a defined contribution, or DC, pension to withdraw any amount from their pension pot while keeping the remaining funds invested. The instrument will also enable Nest to offer a scheme pension—an income payable to a member either directly by the scheme administrator or through an insurance company appointed by the administrator. This provision allows Nest the flexibility to offer the same range of benefits which can be provided by other comparable pension schemes.

In addition, the instrument will provide Nest with the authority, in the event of a member’s death, to enable the trustee to offer either a dependants’ scheme pension or a drawdown pension to eligible individuals including dependants, nominees or successors. This provision will ensure flexibility in benefit options after death and again aligns Nest with broader industry practice and capabilities.

Overall, this amendment will allow Nest to expand the retirement offer for its members, aligning it to the same range of benefits that other pensions schemes can offer and supporting it to comply with the guided retirement requirements recently debated during the passage of the Pension Schemes Bill.

We know that retirement today is not a linear experience and that circumstances change over retirement. Life events—including decisions to work part-time, health conditions and bereavement—all factor in and have an impact on household incomes. Gathering insight and feedback from members is crucial to designing well-structured and flexible pension plans. These changes reflect the needs and preferences of Nest members. This instrument will support the important role Nest plays in the pensions market by enabling it to provide appropriate retirement solutions for Nest members.

Automatic enrolment has encouraged more people to save for their retirement and has made saving normal for most people in work. But getting people saving is just the start and, as we know, people need support when they come to use their savings to provide an income in retirement. Currently, Nest members can use their pension savings to buy an annuity, make use of the uncrystallised funds pensions lump sum facility, take the savings as cash or transfer out to another scheme. However, since Nest’s inception, retirement options have expanded across the pensions market, particularly following the introduction of the pension freedoms in 2015. These flexibilities are not fully available to Nest, which remains constrained by the terms of its original order.

As noble Lords will know, the Pension Schemes Bill contains specific measures around guided retirement. A consultation document, Helping Savers Understand Their Pension Choices: Supporting Individuals at the Point of Access, was published in July 2023 under the previous Government. This asked a specific question about whether Nest should provide default pensions to its members. There was broad support from the 46 industry and member groups that responded, recognising Nest’s unique role and the importance of ensuring fair treatment in line with other schemes, while being clear that Nest should not gain any commercial advantage.

Since that consultation, the Government have continued to engage extensively with Nest and the pensions industry to ensure that that principle of fairness, both to Nest members and to the wider market, has been upheld. Industry players have been active in developing solutions ahead of the guided retirement requirements. For example, in June 2022, the PLSA, now Pensions UK, published Retirement Choices: the Evolution of Products and Support, which set out its framework to support complex decision-making.

Without this change, Nest, the largest master trust, will not be able to offer flexi-access drawdown, nor will it be able to meet fully the expectations of guided retirement—to provide savers with the option of a simple, dependable default income in later life—and Nest savers would therefore miss out on a secure default pension option. With cost of living pressures rising, I am sure the Committee can agree that having a dependable retirement choice is more important than ever. I commend this statutory instrument to the Committee.

[Lord Davies of Brixton (Lab)]

I welcome the Government’s decision to bring in this draft order. As my noble friend the Minister has made clear, it builds on the clear success of automatic enrolment and Nest as the public service vehicle for automatic enrolment contributions. It is a crucial element in achieving the Government’s aim, set out in the pensions road map, of ensuring that people get as much out of their savings as possible. In other words, structure is as important as adequacy. Enabling Nest to offer flexi-access drawdown and a scheme pension to its members is an important step, and it brings Nest in line with what other occupational defined contribution schemes have been able to offer.

I want to explore what the order does not necessarily make clear and ask the Minister whether the Government have considered whether more might be done. I will focus on the potential role for Nest in providing collective defined contribution pension schemes. Put simply, as noble Lords know, CDC arrangements pool the risks involved in providing pensions rather than leaving each individual to manage that risk alone. The issue I wish to raise is whether Nest, under the powers conferred by this order, would be legally enabled to offer CDC-type benefits as part of its retirement income proposition.

The order amends Article 32 of the National Employment Savings Trust Order 2010, so that in addition to lump sums and lifetime annuities, the trustee may pay drawdown pensions and scheme pensions. The term “Scheme pension” is defined by reference to paragraph 2 of Schedule 28 to the Finance Act 2004. That definition is broad. It encompasses a pension payable by the scheme administrator directly, without the interposition of an insurance company. That is significant. A CDC scheme under which the trustee pays a pension directly to members from a pooled fund, applying mortality credits as members of the pool die and their share is redistributed to survivors, would appear to fall within the concept of a scheme pension as defined in the regulations and the Act. I ask the Minister to confirm that interpretation.

This is not a fanciful proposition; Nest contemplated precisely such an arrangement in its 2015 blueprint document, The Future of Retirement. That document set out a three-phase retirement income strategy. The third phase, for members aged 85 and beyond, was to be funded through what the document called a

“later life protected income building block”.

Crucially, the document explicitly considered the operation of this building block through a collective uninsured mortality pool—members pooling their longevity risk with the trustee distributing income proportional to the premiums paid in, supported by mortality credits as the cohort reduces. This is, in effect, a collective defined contribution scheme for decumulation. In other words, Nest was ahead of the curve in 2015. The question is whether this order now places the legal architecture beneath those ambitions.

Concurrent with these regulations, Nest is undertaking a consultation of the changes to its rules it will be able to make in line with the order. That consultation focuses principally on the mechanics of flexi-access drawdown, the drawdown account and the relationship between the pension account and drawdown account, the transfer provisions and the death benefit arrangements. That is all necessary and commendable work, but the consultation is candid on the fact that there are no immediate plans to offer a scheme pension. The relevant rule amendment provides only that

“if and to the extent that the Trustee determines to provide the option”,

a scheme pension may be made available.

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[Viscount Younger of Leckie (Con)]

My Lords, the Opposition broadly welcome this order. I thank the Minister for her clear outlining of the measures and the detail that she put forward.

This seems a straightforward and genuinely important modernisation of Nest; we are glad to see it being brought forward. Allowing Nest members to access drawdown pensions and scheme pensions—as well as extending broader and more flexible death benefit options to their dependants, nominees and successors—has to be a good thing. However, it also marks a significant shift in responsibility from the system to the individual, which makes the questions of guidance and support all the more important.

At the heart of this change is a principle that we support: people should have genuine control over how they access and use their own money. The pension freedoms introduced in 2015 were built on exactly that principle. Members should not be forced into products that do not suit their circumstances. They should be able to keep their funds invested, draw income at a pace that works for them and pass on what remains to those whom they love. Nest members deserve no less than that, so this order rightly brings them into line with the wider market—so far, so good. However, regardless of that, we have some questions for the Minister; she has touched on some of them.

It is clear to me that greater choice is genuinely valuable only if people are equipped to exercise it wisely. Drawdown is more complex as a product than annuity. It requires members to make judgments on investment risk, longevity and income sustainability—judgments that are not straightforward and which have real, lasting consequences if they go wrong. The introduction of these options for Nest members brings with it, therefore, a serious obligation on the part of the Government.

First, on financial education and support, Nest serves a membership that is, by design, composed largely of lower and moderate earners—people who were auto-enrolled, often for the first time, and who may have had little prior engagement with pension saving. These, in the main, are not members who have financial advisers; the Minister will know that, of course. They are precisely the people for whom the difference between a well-informed and a poorly informed decision at retirement is the most consequential. The Minister covered a number of my queries in her opening remarks, but can she tell us what specific steps the Government are taking to ensure that Nest members are properly supported in understanding these new options? That is more a question of communication. What guidance will Nest itself be required to provide? How will Pension Wise and MoneyHelper be resourced and promoted to reach this membership? What assessment have the Government made of the adequacy of the current financial guidance provision for those who are approaching retirement through auto-enrolment schemes?

Secondly, I know that the Minister spent some time on dependants in her opening remarks, but I want to say this: although the extension of drawdown and flexible death benefit options to dependants, nominees and successors is welcome, it creates its own complexities. A surviving spouse or dependant who suddenly becomes responsible for managing an inherited drawdown pot is in a very different position to someone who has spent years building up their own retirement savings. They may be grieving; they may have little or no experience of investment decisions. Can the Minister give some further information on what support will be available to those who inherit benefits under Nest in these circumstances? What obligations will Nest have to contact, inform and guide beneficiaries at the point when they come into an inherited pension? As the Minister will know, this is not a small matter; for many families, this will represent one of the most significant financial decisions that they have ever had to make.

Thirdly—I make no apology for raising this—this order does not exist in isolation. It has been made against the backdrop of the Pension Schemes Bill currently before the House and the two must therefore be read together. The principle that runs through this order is one of member choice and autonomy. People should be able to access their money in the way that best suits them. We agree with that principle unreservedly, but it is directly and fundamentally in conflict with the mandation provisions that the Government are seeking to introduce in the Pension Schemes Bill. We have made this point in Committee and on Report, and we make it again today.

You cannot, on one hand, expand member choice through instruments such as this and, on the other hand, propose to compel members through mandation into investment in particular outcomes or products not of their own choosing. The two positions are inconsistent. If the Government genuinely believe, as this order suggests, that members should be empowered to make decisions about their own retirement savings, they must abandon the mandation provisions in the Pension Schemes Bill. We will continue to press that case.

I close by raising a point that was highlighted by the Secondary Legislation Scrutiny Committee in respect of this order, which is that a call for evidence was announced in 2022 around these measures. However, they have only just been laid before Parliament. Can the Minister please confirm that she is confident that the evidence submitted is still relevant to the instrument that we are discussing today? Has any additional evidence been sought on this particular question since?

It is right that Nest members have the same freedoms that others in the market have long enjoyed. We are glad to see that that parity is being extended. However, the value of that freedom depends entirely on the quality of support and guidance that surrounds it and on the Government applying the same principle of member autonomy consistently across their wider pensions policy.

We look forward to the Minister’s response on all the points that I have raised. I have also noted all the points that the noble Lord, Lord Davies, raised on CDCs, which were interesting. We will be watching the progress of the Pension Schemes Bill with close attention, with Commons consideration of Lords amendments on Wednesday; I know that the noble Baroness herself will be doing the same.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for their questions and I will try to answer most of them if I can. I will respond first to my noble friend Lord Davies and thank him for his support for this order and its aims. In relation to CDC, this order is obviously focused on certain benefits that Nest will be able to offer; principally, that is flexi-access drawdown. However, the Government are exploring how retirement CDC schemes could broaden options available to trustees and managers of pension schemes when developing default pension plans. It would be the responsibility of Nest trustees, like other schemes, to consider the needs of their members and to provide appropriate default plans. For Nest to offer CDC, the scheme would of course need to meet the relevant authorisation.

More broadly, we have been clear that CDC or retirement CDC could be used by schemes to meet their guided retirement duties but, again, it would be for the scheme trustees to consider the needs of their membership to determine appropriate retirement solutions, including the option of CDC. I may come back to my noble friend if anything else occurs to me.

The noble Viscount, Lord Younger, asked an important question about the particular composition of the Nest saver population. Many of these are low-income savers who would not otherwise have previously been involved in saving. Of course, one great advantage of these changes is that Nest is able to offer a wider range of choice and, crucially, through that, to meet its requirements under guided retirement. As he knows from our debates on the Pension Schemes Bill, guided retirement is the means by which the Government can make sure that schemes offer a default option to people, without them having to make complex decisions, which has an income element into retirement. That is the greatest source of the protection there.

It is also a protection against people simply making the choice to take cash, which may not be the right thing for them to do. Nest set out its blueprint about what its default option would look like, which was in different sections. There were the options of different pots: a drawdown pot, a cash pot and an income in later life. That is therefore the direction in which one would expect them to move. I do not think that there is anything else I can say at this stage, but I will go through Hansard and, if there is anything specific that I have not responded to, I would be very happy to do so.

The amendment that this instrument makes to the Nest order is crucial to the Government’s wider ambition to strengthen and modernise the pensions system, making it simpler and more attuned to the needs of today’s workforce. Obviously, I completely reject the case made by the noble Viscount, Lord Younger, that anything the Government are doing here contradicts anything in the Pension Schemes Bill, but since we have had many conversations about that subject and many more joyfully beckon to us, I may leave that for another day if he will permit me to do so.

Before I wind up entirely, another thought occurs to me. I was asked whether the Government have engaged with Nest. The Government hold regular meetings with Nest in relation to guided retirement and CDC provision. As with other workplace trust-based schemes, in terms of offering CDC it would be for the trustees to determine suitable retirement options for members, consistent with guided retirement. As I said, the Government are exploring how retirement CDC schemes can broaden the options available to trustees. If I have anything further on the timing of the regulations that would be needed in that direction for deaccumulation-only CDC schemes, I will come back to my noble friend.

By delivering this instrument, the Government are ensuring that 14 million people, many of them lower-income workers, can access an enhanced range of products to support them in retirement, giving them greater confidence and a clearer pathway towards financial security in later life. I commend this instrument to the Committee and I beg to move.

Motion agreed.

Pension Schemes Bill

Baroness Sherlock Excerpts

3rd reading
Thursday 26th March 2026 Lords Chamber

[Viscount Thurso (LD)]

My Lords, my Amendment 6 is entirely consequential on the amendment your Lordships agreed to. I am very grateful to the Public Bill Office for its advice in helping me to correct this, and I will move it formally when the moment comes.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, the amendments here are minor and technical following Report, and the Government will not oppose them today. Amendment 4 in my name is also minor and technical. This amendment was tabled to correct an error concerning Amendment 178, which was moved by mistake on Report on Monday 23 March. As the noble Baroness, Lady Hayman, said, that amendment relates to the commencement of Amendment 156 on investment duties guidance, which was disagreed by the House. The amendment now removes the commencement clause to honour the usual channels’ agreement on the package, as it was a missed consequential amendment.

In response to the questions from the noble Baroness, Lady Hayman—I commend her on her work on this important issue—the Government introduced their amendments to this House to honour the commitment given by my honourable friend the Minister for Pensions in the other place. Since the House disagreed with those amendments, obviously that cannot proceed. They were removed from the Bill in this House. Therefore, the other place will not get to consider them again. However, she is right that the need for guidance and clarity does not go away.

The Government remain committed to improving clarity around trustees’ existing investment duties, including how schemes consider long-term and financially material factors such as climate and systemic risks, while maintaining their core duty to act in members’ best interests. We will press ahead with this important work. We are currently reviewing next step options to ensure this objective continues to be progressed in the most important way in the light of the decision of the House on this matter.

The technical working group, which was discussed at some length in our proceedings, bringing together legal, actuarial and investment experts, will continue to play a central role in helping government develop high-quality guidance and ensuring it is workable, proportionate and valuable to schemes. Further updates will be provided in due course. I hope that gives enough information; it is all I am able to say at the moment. In the meantime, Amendment 4 is a necessary step, and I hope the House will support it.

Amendment 1 agreed.

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Moved by

[Baroness Sherlock]

4: Clause 137, page 156, line 33, leave out paragraph (f)
Member’s explanatory statement
This amendment corrects a mistake.

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Moved by

[Baroness Sherlock]

That the Bill do now pass.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the House for its scrutiny of the Pension Schemes Bill. The Bill will make a real difference for people saving for their retirement. It will help their money to work harder by improving how pension schemes operate, reducing unnecessary costs and enabling larger, better-governed schemes to secure stronger long-term returns. It will also make pensions easier to follow by tackling the growth of small dormant pots, and it will give people clearer and more dependable support when they come to draw their pension so they can make choices that meet their needs. For those in defined benefit schemes, the Bill strengthens long-term security through a well-regulated superfund regime. It brings clarity to areas that have caused uncertainty for savers, including historic scheme alterations and support for those facing a terminal illness.

Taken together, these reforms help build a system that is easier to navigate, better run and more supportive of people as they move towards retirement. During the passage of the Bill, the House voted for amendments that the Government did not support. I can assure the House that we will reflect carefully on these as the Bill moves to the other place.

I thank noble Lords who have contributed to the debates. I thank the noble Baroness, Lady Stedman-Scott, the noble Viscount, Lord Younger, and the noble Lord, Lord Palmer, for their engagement throughout proceedings. I thank my noble friend Lord Katz, my Whip, for doing so much work on the Bill and being such a great source of support.

I am also grateful to all those who worked so hard on the legislation, including the excellent Bill managers, Jo and Amanda, for advice, encouragement and the provision of excellent cupcakes; our officials, Sam, Rob and Anna, and their brilliant teams; and my private office, especially Hussein and Ollie, who have worked incredibly hard and kept me upright, well briefed and organised as time has gone on. I beg to move.

[Lord Davies of Brixton (Lab)]

I am pleased that the Bill is to pass. It is a good and welcome Bill because it deals with administrative and bureaucratic complexities in the present system. I have to admit that it is not quite as good as it would have been if it had adopted some of the amendments I tabled in relation to people who were denied pre-1997 pension increases, and the release of surplus, but we have to accept that. I am therefore pleased that on Report my noble friend the Minister gave an assurance that the Government will closely monitor how the powers of surplus release will be used and will keep that very much under review. This was reinforced in the House of Commons Adjournment debate last Thursday, when the Minister for Pensions made clear the extent to which they will closely monitor how the Bill will be operated in the context of surplus release.