Pension Schemes Bill

Baroness Stedman-Scott Excerpts

3rd reading
Thursday 26th March 2026 Lords Chamber

Moved by

[Baroness Stedman-Scott]

7: Clause 137, page 156, line 34, at end insert—
“(g) section 132 comes into force on the day on which this Act is passed.”Member’s explanatory statement
This amendment makes provision for the commencement of clause 132, which was inserted by an amendment in Baroness Stedman-Scott’s name at report stage.

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[Baroness Stedman-Scott (Con)]

My Lords, I warmly acknowledge the collegiate and genuinely cross-party approach that has characterised the passage of the Bill through your Lordships’ House. I know I also speak for my noble friend Lord Younger of Leckie in expressing our sincere thanks to colleagues across the House for their constructive engagement. It has been a pleasure to work alongside them, and our collective efforts have ensured that this important Bill has been subject to the careful and thorough scrutiny it deserves.

This is a fundamentally important Bill, and I am pleased that we have agreed several amendments to address some of the concerns that together we have identified. I had one amendment on the Marshalled List today, a technical amendment necessary to commence Amendment 169 passed by your Lordships’ House on Report. The Government accepted this amendment today.

I will not rehearse an exhaustive list, but the Government now have an obligation to return with clear answers to the concerns we have raised, including in particular: the Local Government Pension Scheme and whether it is truly fit for purpose for its members; whether the proposed consolidation timetable is workable in practice for ordinary working people; whether the scale requirements risk undermining innovative and high-performing schemes; and the scope, rationale and implications of the mandation power—there was a resounding view that it should be removed entirely.

Many noble Lords have made valuable contributions to our deliberations on this policy through amendments, speeches and constructive engagement both inside and outside the Chamber. It is not possible to thank everyone, but I place on record my particular gratitude to the noble Baronesses, Lady Altmann, Lady Neville-Rolfe, Lady Noakes and Lady Penn, and the noble Lords, Lord Fuller and Lord Lucas. I also extend my thanks to the noble Baroness, Lady Bowles of Berkhamsted, the noble Lords, Lord Palmer and Lord Sharkey, and the noble Viscount, Lord Thurso, from the Liberal Democrat Benches, with whom it has been a genuine pleasure to work. I am grateful to the noble Lord, Lord Vaux of Harrowden, for his thoughtful engagement on the Bill.

Finally, I thank the Minister for her work in steering the Bill through the House, and the noble Lord, Lord Katz, for his support. The Minister has responded to a great many questions, often highly technical and searching ones, and has given considerable time both in Committee and on Report to what is, in many respects, a dense and complex piece of legislation. I thank noble Lords for their engagement, particularly in Committee, which has been helpful and much appreciated.

This Bill contains a number of significant flaws and shortcomings. Your Lordships’ House has offered the Government a clear opportunity to make necessary and timely improvements. I very much hope that we will continue to work together with the Minister and her colleagues in the department to take that opportunity.

Youth Unemployment

Baroness Stedman-Scott Excerpts

Tuesday 24th March 2026 Lords Chamber

I am often asked, ‘So when will you do welfare reform?’ Well, I tell the House that this is welfare reform. Putting work and opportunity at the heart of our system is the best reform we can make. Asking not just, ‘What are you entitled to?’ but ‘How can we help you change your life?’ is the change that the system needs. That view lies behind the changes that I am announcing in this package. I commend the Statement to the House”.

[Baroness Stedman-Scott (Con)]

My Lords, I begin by making it very clear that we on these Benches believe it is vital that young people are supported into work. We wholeheartedly support the announcement about the new opportunities for young people, and we want to see them succeed. The evidence is clear that periods of unemployment at the start of a working life can have long-lasting and deeply damaging consequences. That makes early intervention not just desirable but essential. It is therefore welcome that the Department for Work and Pensions recognises the importance of this issue, but recognition alone is not enough.

The latest figures from the Office for National Statistics give us all, across this House, cause for concern. Youth unemployment among those aged 18 to 24 has risen to 14.5%, the highest level in nearly a decade. That represents a generation being denied opportunity: young people unable to take their first step on the ladder, to build skills or to contribute to the economy. It is no surprise that Helen Dickinson, chief executive at the British Retail Consortium, has said that

“the UK faces the prospect of a jobless generation ... this vital step on the career ladder is cracking under the high costs of employment”.

To be helpful to the noble Baroness, who I know shares my obsession with getting people, especially young people, into work, I just ask that when we turn to the past 14 years, she will not say that we had 14 years to sort this, because our record was not all that bad. Look at the facts. In 2010, the NEET rate stood at 16%, and by 2019 it had fallen to 10.7%. In turn, youth unemployment fell from around 20% in 2010 to 10.7% in 2022. We acknowledge that Covid created immense challenges and that the rates went up, but it was not all that bad on our watch. We did a lot of good, but we undoubtedly could and should have done more. However, youth unemployment has risen in each year under this Government, now reaching nearly 15% among 16 to 24 year-olds. It is against this deeply troubling backdrop that the Government bring forward this policy, with which we are pleased.

What we see from the Government here is part of a worrying pattern. When the economy fails to deliver the outcomes we all desire, the Government do not seem to pause, reflect or correct the course; instead they reach instinctively for an intervention to compel the private sector to behave as they wish. I have no doubt that the private sector would love to be creating jobs and getting young people into their workforce. This is the return of an interventionist doctrine that places political direction above market judgment. Many believed that this approach had been left behind, but it is now clearly back at the heart of government thinking. We see it in attempts to direct pension fund investment, allocating other people’s savings in line with political priorities rather than saver outcomes. We see it again here. Having failed to create the conditions for a strong labour market, the Government’s answer is not to enable growth but to intervene, to manage and to control.

We on these Benches are not merely supporters of employment, we are the party of work. Before the pandemic, employment reached a record high of 76.5%, while economic inactivity fell to a record low of 20.5%. That was not by chance; it was the result of a deliberate approach, one that trusted enterprise, rewarded effort and created the conditions for businesses to grow and hire. Opportunity should not be manufactured by the state, it should be generated by growth, and that is the approach we would like to see from the Government, but it is one that, sadly, they seem to have rejected.

I have several questions off the back of this Statement which I hope the Minister will address. If there are too many, I am very happy for her to write to me. How will participants be selected for these roles? There is always a tendency to go for those people who are easy to help. How will the Government ensure that those furthest from the labour market and in the most difficulty get help? Have private sector employers been driving the development of this policy, or has it come from Whitehall? How are the Government ensuring that employers are at the heart of this intervention? How will the Government measure the success of this policy, and over what timeframe? Will the performance be communicated to the whole House?

What will happen to young people at the end of the six-month placement? Are employers expected to absorb the full costs thereafter, and if so, on what basis? Do the Government already intend to extend the timeline? Does the Minister genuinely believe that short-term placements, particularly ones concentrated in sectors such as hospitality, will address the deep-rooted productivity and skills challenges in our economy? Crucially, what does the Minister believe is driving the current rise in youth unemployment? Is not the uncomfortable truth that the Government have taxed jobs and discouraged hiring, and are now asking taxpayers to subsidise the very employment opportunities that their policies have undermined? The British Retail Consortium is unequivocal, saying that in 2025 alone, the cost of employing a full-time entry-level worker has risen by 10%.

If the Minister is seeking the root cause of today’s labour market difficulties, I suggest that the Government need look no further than their own political record and policies. Businesses across the country point to the same pressures: burdensome employment regulation such as the Employment Rights Act, a sharp increase in wage and minimum wage costs, higher and inflexible business rates and ever-growing compliance obligations.

This debate comes down to a fundamental choice: do we continue down the path of higher taxes, heavier regulation and greater state intervention, or return to a model that genuinely creates opportunity, backs enterprise, rewards work and enables business to grow? That is the model that we used to deliver high, record employment. I am sure that the Minister and the Government are serious about tackling youth unemployment, but they must move beyond treating the symptoms and begin to address the causes. They must stop trying to control outcomes and instead create the conditions in which those outcomes can be achieved. That means easing the burden on those who create jobs, restoring confidence and recognising that sustainable employment is built not by government decree but by economic growth. Until they confront that reality, these policies will do little more than mask failure, at great cost to the taxpayer and even greater cost to the prospects of the next generation.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister very much—she did not repeat the Statement, but we have read it—and the noble Baroness, Lady Stedman-Scott, for raising so many questions the answers to which I look forward to hearing.

We have 739,000 young people aged 16 to 24—nearly 100,000 more than last year—unemployed and sitting on benefits of £338 per month. I make no apologies for repeating this figure, but I give it in numbers and not as a percentage, because percentages are misleading and you cannot really understand what they mean. These unemployed 16 to 24 year-olds are, on average, searching and applying over five months for hundreds of roles, with less than 1% success—so they give up entirely. Yet employers report millions of vacancies remaining unfilled. This is not a shortage of jobs but a failure of matching: the right opportunities for the right candidates remain unsurfaced and undiscovered.

Given that the DWP is already piloting matching technologies at some jobcentres, for which I congratulate it—I know about the one in Leicester—can the Minister set out the department’s timeline for scaling these tools nationally across all jobcentres? Critically, what measurable improvement in time to employment does the department expect from this rollout? Additionally, can the Government explain why they are removing the funding for apprenticeships for management? Will they rethink the impact of the national insurance contribution hike on hospitality, retail and tourism? If we dealt with that, it could substantially help with youth unemployment. This is a big problem and I hope the Minister can answer the few questions I have raised and those raised by the noble Baroness, Lady Stedman-Scott.

Pension Schemes Bill

Baroness Stedman-Scott Excerpts

Report stage
Monday 23rd March 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

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

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

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

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

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

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

[Baroness Stedman-Scott (Con)]

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

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

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[Baroness Stedman-Scott (Con)]

My Lords, we have significant concerns about the direction of travel shown by the Government with their amendments in this group. These amendments risk opening the door to mandation by the backdoor, and that is something we cannot support.

The Government’s Amendment 156 would require the Secretary of State to issue guidance explaining key aspects of pension law, including fundamental concepts such as “financially material considerations” and, crucially, what constitutes the “best interests of members”. If the Government are given the power to define what is in the members’ best interest, what is to prevent that definition shifting over time to reflect political priorities? What is to stop a future Secretary of State asserting that particular forms of investment—perhaps in UK assets of their choosing—are, by definition, in members’ best interests? If that becomes the case, have we not simply created mandation in another form?

Throughout the passage of the Bill, we have been clear that decisions about investment must remain with trustees acting in the interest of their members, and not be directed implicitly or explicitly from the centre. These amendments risk undermining that principle by centralising significant interpretive power in the hands of the Government. When the Government issue guidance to schools, the health service or other areas in their purview, the effect can be to clarify and support operations in a practical sense. The sort of guidance the Government propose to issue on this point goes precisely the wrong way and can serve only to limit the options open for trustees to act in their members’ best interest.

For these reasons, we believe that these amendments represent a step in the wrong direction. They risk politicising what should remain independent fiduciary judgments. Accordingly, I put the House on notice that we will oppose these government amendments when they are called.

[Baroness Sherlock (Lab)]

My Lords, I will start where we just finished. I can only assume that the noble Baroness, Lady Stedman-Scott, did not listen to the words of the noble and learned Lord, Lord Thomas; I hope she would take it from him if not from me. He made it clear that this guidance does not change the law; it simply seeks to explain how the law can be applied. As he pointed out, were any Government—this Government or a subsequent one—to try to make the guidance represent something that the law is not, the courts would very quickly set it aside. Frankly, I find the objections risible. They do not stack up at all.

To be really clear, the amendments require the Secretary of State to issue guidance that explains existing law. The guidance would not instruct trustees how to invest. It would not give Ministers any power to set investment policies or require trustees to invest in any assets. Trustees must consider the guidance, but they can depart from it if they have rational grounds for doing so. Trustees retain full discretion and independent judgment. The amendment does not change trustees’ duties or prescribe investment outcomes. It simply clarifies how the existing duties operate.

The aim of the guidance is to clarify, not control. Trustees and industry stakeholders have asked for clearer, practical explanations of legal concepts, and that is what the guidance will provide. There will be a technical working group, as the noble and learned Lord pointed out. I certainly have no intention of expecting the kind of people in that group to bow to the wishes of this or any other Government, and we will not be disappointed in that respect.

To be really clear: guidance cannot override the law. Trustees must still make investment decisions based solely on what they judge to be in members’ best financial interests. They can depart from the guidance if they explain their reasoning and set it out. Nothing in the guidance allows Ministers to mandate their investment choices.

I regret that I cannot agree to my noble friend Lord Hendy’s request to expand the guidance in the way he described. I clarify that the amendment does not apply to the Local Government Pension Scheme, as I think I made clear in previous stages.

I was disappointed that no one from the Lib Dem Front Bench got up to explain the decision they have taken. I was as surprised as the noble Baroness, Lady Hayman, to find that they did not propose to support what we had all thought was a proper consensus. I pay tribute to the noble Baroness, Lady Hayman, as I think she has done a really good job in putting forward the case of trying to make sure that trustees who want to take appropriate account of long-term factors, such as climate risk, are enabled to do that.

That is what this Government have brought forward. If the House votes it down then so be it, but it would be a major mistake.

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[Baroness Altmann (Non-Afl)]

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

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

They asked:

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


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

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


That is just not what has happened.

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

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

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

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

[Baroness Stedman-Scott (Con)]

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

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

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Viscount, Lord Thurso, for moving his Amendment 161, and for the conversations that we have had on this and other things. I have a lot of respect for him and the way that he approaches issues, and it has been a pleasure to talk. As we heard, the noble Viscount’s Amendment 161 would require the Secretary of State to establish an independent review into the pension losses incurred by former employees when AEAT went into administration and its pension scheme went into the Pension Protection Fund. It also seeks to explore mechanisms for redress or compensation.

The Government’s position was set out by me in Committee and subsequently by the Minister for Pensions during an Adjournment Debate in the other place at the end of February. I regret that I am not in a position to accept the noble Viscount’s amendment. I put on record my sympathy for all those who accrued public sector pensions and transferred their benefits into private sector schemes, only to end up, through no fault of their own, experiencing losses and not getting the full value that they were expecting from their pensions as a result.

In this specific case, AEAT has a very long history. It is not straightforward to turn the clock back 30 years and revisit decisions that were made then or look at the conditions that obtained at the time. Since 2013, through revised Fair Deal guidance, employees who are compulsorily transferred from the public sector into the private sector are offered continued access to a public service pension scheme, so the situation that AEAT members found themselves in could not happen now.

The fact is that these issues have spanned many years and Governments of all colours. AEAT was privatised in 1996 under a Conservative Government; the pension scheme entered the PPF in 2012 under the coalition Government; and, following the pension scheme’s entry into the PPF, AEAT members raised complaints to a number of bodies under successive Governments. There have been opportunities over the years for different Governments, and their Ministers, to provide redress or to address the issue, but, due to the impracticality of trying to go back all that time, none have done so.

One of the bodies that the noble Viscount mentioned as having looked into the matter is the Public Accounts Committee. The first recommendation from the committee’s inquiry was that the Government should consider introducing pre-1997 indexation within the PPF. This Government are taking action on that. We have brought forward legislation to introduce annual increases on compensation from the PPF and FAS that relate to pensions built up before 6 April 1997, where schemes provided for this. I am grateful to the noble Viscount for acknowledging that. Sometimes, when one gives something, it is simply banked, and then everything else is asked on top of it, so I really appreciate his grace in having acknowledged that. I also point out that if previous Governments had made that change sooner, it would have made much more of a difference to AEAT members, who would have found their pensions building up over that time. But we are introducing it now through this Bill, and AEAT members with pre-1997 accruals will benefit.

I recognise that I cannot offer everything that noble Lords want on this and other cases that have been brought to me and the Minister for Pensions. We are offering the concrete changes that we can, and that is all that I can offer. For that reason, I hope that the noble Viscount will withdraw his amendment.

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Moved by

[Baroness Stedman-Scott]

169: After Clause 117, insert the following new Clause—
“Review of pension communications and financial promotion rules(1) The Secretary of State must, within 12 months of the day on which this Act is passed, conduct a review of all legislation, regulation and guidance governing marketing, financial promotion and member communications in relation to occupational and personal pension schemes. (2) The review must consider whether existing rules unduly restrict pension providers from—(a) communicating risks, warnings, and comparative information to scheme members;(b) providing guidance and targeted support on decumulation options, fund choice, consolidation, and value for money;(c) supporting informed member decision-making and actions without constituting regulated financial advice, through either guidance or targeted support.(3) The Secretary of State must lay a report of the review before both Houses of Parliament.”

[Baroness Stedman-Scott (Con)]

I beg to move.

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[Baroness Hayman (CB)]

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

[Baroness Stedman-Scott (Con)]

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

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

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Lord, Lord Sharkey, for moving his Amendment 170. It is good to have the opportunity to discuss again the climate-related risks with which pension schemes—indeed, all investors—are grappling. While I recognise the intent behind the amendment, the Government believe that the existing framework for responsible investment already enables trustees to identify, assess and manage climate-related financial risks. Introducing further reporting duties at this stage risks additional burdens without clear benefit.

Trustees of occupational trust-based schemes are already required to take account of financial and material considerations, including environmental, social and governance factors. Their statement of investment principles must set out their policy on these matters. Larger schemes are also required to publish annual climate-related financial disclosures, including on total greenhouse gas emissions from their portfolios and carbon footprint metrics. These provide trustees with important information to support investment decision-making. Equivalent disclosure requirements apply to FCA-regulated providers, and the LGPS has its own requirements on explaining how ESG factors influence investment decisions. There is evidence that this framework is delivering real progress.

The noble Lord, Lord Sharkey, cited data from the Finance Innovation Lab showing that more than £10.5 billion of UK pension savings remains invested in companies involved in the extraction or burning of thermal coal overseas. I am sure he is aware that that figure is based on just three pension providers and is not necessarily reflective of what members are invested in. Recent corporate adviser data indicates that around 65% of UK occupational schemes now have a net-zero target, including 18 of the 19 major DC master trusts. DC schemes have reduced the carbon footprint of their investment by nearly 20% in the last year. Many schemes are also taking decisive action on thermal coal. For example, USS, Railpen, and Border to Coast exclude companies with significant revenue from thermal coal, while Nest supplies a 10% revenue cap. While this progress is welcome, the Government agree that further data on exposure to thermal coal and other fossil fuels will be helpful. We expect trustees to continue to strengthen their disclosures, particularly around the actions they are taking to reduce such exposures within the existing responsible investment framework.

Complementing these expectations for stronger disclosures, the Pensions Regulator is deepening its supervisory approach by requesting increasingly granular investment data from schemes. The Government are taking significant steps to enhance sustainability reporting more broadly. DBT has published final UK sustainability reporting standards closely aligned to the International Sustainability Standards Board framework. These are available for voluntary adoption and the Government will consult later this year on potential mandatory use. DWP is also reviewing the Task Force on Climate-related Financial Disclosures reporting obligations through a comprehensive evidence-gathering exercise, with conclusions to be published this year.

Pension schemes are already helped by the UK’s Transition Plan Taskforce, established by the previous Government, having published a gold standard framework to help companies produce credible, consistent and decision-useful climate transition plans aligned with net-zero goals. The task force has also released sector-specific guidance, including for metals and mining, to support pension schemes and the companies in which they invest. Future reforms are designed to modernise the sustainability disclosure regime and equip trustees with clearer, more decision-useful information. This will support better-informed decisions on investment, divestment and exclusions, including, where necessary, in relation to thermal coal.

Finally, at this point, I was going to say that the Government are legislating to bring forward statutory guidance on trustee investment duties as a further opportunity to include clear examples of good practice to help schemes strengthen their management of climate-related risks, including those highlighted by this amendment. But—oh, no—we will not be doing it, because the noble Lord and his party voted against it, so it will not be happening.

The existing disclosure framework is already driving greater transparency around schemes’ climate-related risks, and further reforms are strengthening this approach, so the Government do not believe that this amendment is necessary. However, we recognise that improved data on thermal coal and other fossil fuel investments would be helpful. This is an area we will continue to monitor and keep under active review within the existing reporting regime. I therefore hope that the noble Lord will withdraw his amendment.

Pension Schemes Bill

Baroness Stedman-Scott Excerpts

Report stage
Thursday 19th March 2026 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, in a less confrontational way than the noble Lord Fuller, from these Benches, I confirm that we support Amendment 49. The Government should not fail to support this. It is in the name of noble Baroness, Lady Altmann, and it would increase the time before a pot was considered dormant in order to provide greater flexibility for savers such as mothers, those on sabbatical or mature students, who may not add to their pots for one to three years. We have no hesitation on these Benches in supporting amendment in the name of the noble Baroness, but not in quite such confrontational terms as the noble Lord, Lord Fuller.

[Baroness Stedman-Scott (Con)]

My Lords, in continuing the spirit of good grace, I wish our Deputy Chief Whip a very happy birthday today.

I will speak briefly in support of Amendment 49 in the name of the noble Baroness, Lady Altmann, which I was pleased to sign. Fundamentally, the amendment is about ensuring that we do not move too quickly to classify pension pots as dormant and, in doing so, risk making decisions on behalf of savers before they have had a fair opportunity to act for themselves.

By extending the period before a pot was treated as dormant, the amendment would delay when pots became eligible for automatic consolidation. That is important, because it would reduce the risk of pots being moved prematurely, perhaps at a point when an individual was between jobs, was taking a short break, on maternity leave or simply had not yet re-engaged with their savings. It would also give savers more time to re-engage with their pension, to make further contributions and to take an active and informed decision about what they want to do with their savings.

If we are serious about putting savers at the centre of this system, we must ensure that pots are not automatically consolidated after only a short period of inactivity. The new period proposed by the noble Baroness, Lady Altmann, seems to be eminently sensible. I therefore hope that the Minister will give it careful and serious consideration, and I hope she will adopt it. If not, we will be pleased to support the noble Baroness, Lady Altmann, if she chooses to test the opinion of the House on the amendment.

--- Later in debate ---

[Lord Lucas (Con)]

My Lords, we know that a much higher percentage of pension fund assets could happily be invested in UK assets; indeed, that was the case when I was managing pension funds. It is not the case now entirely because of what politicians have done to the system. We should seek to undo that, not fudge it, as the noble Lord, Lord Vaux of Harrowden, said.

My recommendation to the Government is that, rather than giving themselves power, they should give pensioners and investors in pension schemes power. There are structures in the Bill that allow pensioners to express their opinions on what their money is being invested in, but nothing that gives any effect to that. I suspect that most of us receive our annual returns from the pension funds we are part of and put them straight in the bin, because there is nothing we can do with them. We ought to be in a position to do something that would have an effect. I recommend that the Government choose that route rather than the one they have chosen.

[Baroness Stedman-Scott (Con)]

My Lords, of all the amendments we have tabled and discussed on this Bill, for me, this group is the most important. Mandation is, rightly and understandably, the most contentious part of the Bill. I am grateful to all noble Lords who have helped raise awareness of this issue, which, as I am sure the Minister is aware, has garnered a lot of attention—and criticism—outside of this place.

The ABI has written to the Minister in the other place, Torsten Bell, to warn him of its “serious concerns” about the mandation power, saying that it is “not necessary” for the Government to mandate investment. It has asked the Government to withdraw this part of the Bill. Pensions UK has been unambiguous on this point. It too has called on the Government to remove this power from the Bill, warning that it would harm

“free and open market competition aimed at driving better saver outcomes”.

It has said that mandation would

“put those outcomes at risk”.

More recently, Paul Johnson, formerly of the IFS, wrote strongly against mandation in an article in the Times. Just the headline and strapline will give the Minister all the information she needs:

“Telling pension funds where to invest will not end well. The government’s desire to boost UK assets is understandable, but overriding the fiduciary duty of trustees crosses a line”.


The industry is clear, the experts are clear and much of this House is clear that the Government should not be directing private sector investment. It is obvious that this power overrides the fiduciary duty of trustees. This is a radical step, and it establishes the principle that it is appropriate and desirable for Governments to tell schemes how to invest to meet their own political objectives. The Government are right to want investment in UK assets—indeed, I am sure that no one in this Chamber would not welcome more money in UK assets. However, if the picture is not where we want it to be, the question for the Government is: why? Why is the UK not attracting that capital? What barriers exist? What reforms are needed?

Instead of doing that work, the Government have reached for a shortcut, a reserve power that is really a threat to compel investment. This is reckless. It sets a dangerous precedent, and the Government’s central defence—that they do not intend to use the power—raises two unavoidable questions. First, if they never intend to use the power, why are they legislating for it? Secondly, how can the Minister assure us that the power will not be used when they will not be in office for ever? This power is going into law, and I am afraid it will outlast the Minister and indeed all of us. The noble Baroness cannot speak for future Administrations, or indeed political parties such as Reform, God help us, which has signalled a great willingness to direct investment. The Government are handing this power not merely to their own Ministers but to future Ministers.

I will not detain the House any further than to say that this power must be removed. It is a massive overstep from the Government and, despite all the assurances of the Minister, no one is yet convinced that this can remain. Industry rejects it, experts have expressed serious concerns about it, and the Minister must remove it. I am sure she has listened to all noble Lords’ contributions. As my noble friend Lord Wolfson said, we must remove this Robert Maxwell power. We on these Benches, and I am sure others, will support the noble Baroness wholeheartedly if she seeks to divide the House on this matter.

[Baroness Sherlock (Lab)]

My Lords, as we have heard, the combined effect of these amendments would be to remove from the Bill the Government’s reserve power to require certain pension schemes to hold a prescribed percentage of their assets in qualifying assets. As the noble Baroness, Lady Bowles, indicated, we explored this territory in some depth in Committee, and noble Lords made a number of detailed and considered arguments. It has been good to have an opportunity to talk to a number of colleagues since then and to discuss their concerns. The Government have reflected but continue to regard the asset allocation reserve power as a necessary part of the reform package that this Bill introduces, and I will set out why.

The headline case is that there is strong evidence that savers’ interests lie in greater investment diversification than we see today in the DC market, and there is probably broad agreement on that. DC pension providers themselves have recognised this. A small allocation to private markets, as part of a diversified portfolio, offers the potential for better risk-adjusted returns over the long term. But despite that recognition, many providers are not yet acting on it. That is not because diversification is against savers’ interests. It is in significant part because of competitive dynamics, the pressure to keep headline costs as low as possible in order to win and keep new business from employers, and the difficulty of any single provider moving ahead of the market. This is not just the Government’s view. It is what the industry has said repeatedly.

Pension Schemes Bill

Baroness Stedman-Scott Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

[Lord Davies of Brixton (Lab)]

I have three points. First, I profoundly disagree with the noble Lord, Lord Lucas. To pin the blame just on politicians lets everyone else off scot-free. It is more like Murder on the Orient Express—everyone had a hand. My particular favourite is the accountants, who had a big hand; the way they defined accounting for pension costs was pernicious. Let us not blame just the politicians.

Secondly, one cannot not be in favour of value for money. Obviously, we are all in favour of people getting value for money from their pension schemes. However, I think the Government underestimate the difficulty of providing something useful. As the noble Baroness, Lady Altmann, pointed out, there are more than two or three factors to be taken into account. It is particularly difficult when one starts including prospective factors—how are these to be judged? It is very difficult, and it is not just the factors. The pension holders’ circumstances vary so widely. How can there be a simple, straightforward way of assessing whether someone has had value for money when their needs are so different from those of other people who are saving for their pension?

Thirdly, I apologise for not being present in the Chamber to support the amendment in the name of the noble Viscount, Lord Thurso, in the previous group. I realise I am cheating here, but I was elsewhere. I had not realised that one of the groups had disappeared; otherwise, I would have been here and supported his amendment.

[Baroness Stedman-Scott (Con)]

My Lords, I begin by thanking the noble Baroness, Lady Altmann, for her opening remarks, which set the scene effectively on an important part of the Bill. She has done so at the close of what has been a long first day on Report—longer than we would have thought. She has once again brought clarity to a set of issues that are central to the operation of the reforms before us.

The amendments in this group are, in large part, concerned with ensuring that the value-for-money framework works well—both in how it is constructed in legislation and how it is communicated to and understood by those who will ultimately be operating under it. If this framework is to achieve its objective of improving outcomes for savers, it must be both robust in its design and clear in its application.

Amendment 24, in the names of the noble Baronesses, Lady Altmann and Lady Bowles, is both welcome and important. Throughout our discussions today and, indeed, in Committee, we have spoken a great deal about fiduciary duty: the principle that those responsible for managing pension schemes must act in the best interests of their members. Amendment 24 would help ensure that this vital principle is properly reflected within the value-for-money framework. It would require the regulations underpinning the framework to include explicit criteria relating to the quality of service provided to members. It would include matters such as the accuracy of recorded contributions; the reliability of scheme data; the efficiency of administration; the clarity of communication; the provision of guidance and education for members; and the support available to vulnerable members. Thus it recognises that value for money in pensions is a question not simply of investment performance and cost but of how effectively schemes serve the people whose savings they are entrusted to manage.

Amendment 25 has a complementary effect of strengthening transparency. It would require the value-for-money framework to provide separate assessment and reporting for each asset type in which a scheme invests. Rather than relying on a single aggregated measure of performance, schemes would need to report performance by asset class; for example, equities, bonds or infrastructure. This would allow for a clearer and more granular understanding of how investment strategies are performing, and therefore enhance transparency and accountability.

We also welcome the amendments in the name of the noble Baroness, Lady Altmann, which seek to ensure that the language used within the value-for-money framework is both intelligible and meaningful. The framework can succeed only if it is understood by those who are subject to it and by those whose savings it is designed to protect. Replacing more technical or opaque terminology with clearer expressions, such as “good value” and “poor value”, may seem a small change, but it is a practical one that helps ensure that the framework communicates effectively with members and the wider public.

Amendment 32 addresses another important issue: the practical realities facing pension schemes as they adapt to a rapidly changing regulatory landscape. This amendment would ensure that schemes are given time to improve before facing additional regulatory obligations. We have heard considerable concern throughout our debates about the sequencing of reforms in the Bill. Funds are being asked to do a great deal at once and to respond to a system that is evolving significantly under these provisions. Allowing a longer period before additional reporting requirements are triggered therefore seems both sensible and pragmatic. If schemes are to improve performance, they must first be given the time and space to adjust.

Finally, I turn to Amendment 44 in my name and that of my noble friend Lord Younger, which would require the Secretary of State to establish the value-for-money framework within 12 months of the Act being passed. This again speaks to the issue of sequencing: those who operate the system need clarity about the framework within which they are expected to operate. Providing that framework in a timely manner gives funds the greatest possible opportunity to understand its requirements and prepare for implementation. That, in turn, makes compliance more achievable and the reforms themselves more effective.

I thank the Minister for the technical amendments in this group. These drafting corrections help to ensure that the framework is expressed clearly and consistently in legislation, and we welcome that work. Taken together, the amendments before us seek to ensure that the value-for-money framework is clear, transparent and workable. If we are to ask pension schemes to operate within a new regulatory structure, it is only right that we ensure that structure is robust in its design and comprehensible in its operation. These amendments help us to move in that direction.

Pension Schemes Bill

Baroness Stedman-Scott Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

Moved by

[Baroness Stedman-Scott]

9: After Clause 7, insert the following new Clause—
“Benchmarking of Local Government Pension Scheme liabilities(1) For each actuarial valuation relating to a scheme for local government workers which has pension funds, an administering authority must obtain and publish—(a) the primary valuation used for funding purposes, and(b) one or more benchmark valuations of scheme liabilities based on—(i) prevailing bulk annuity pricing, and(ii) a gilt-based discount rate.(2) The valuations published under subsection (1) must be published at the same time as the funding strategy statement, and alongside the employer contribution rates arising from the funding valuation.(3) Where the funding valuation is materially more prudent than the benchmark valuations, the administering authority must publish a statement explaining—(a) the risks being guarded against,(b) why those risks justify a higher degree of prudence than that reflected in insurer pricing, and(c) the impact on employer contribution rates.(4) The funding strategy statement must include appendices explaining the valuation assumptions, benchmarks, and their effect on contribution rates in a form that is reasonably accessible to a person who is not a qualified actuary.(5) The statement must be communicated to the relevant local authority and made publicly available.(6) The documents published under this section must be made available in a manner that enables meaningful consultation by scheme employers and scheme members.(7) In this section—“administering authority” has the same meaning as in Regulation 2 of the Local Government Pension Scheme Regulations 2013 (S.I. 2013/2356);“funding strategy statement” has the same meaning as in Regulation 58 of the Local Government Pension Scheme Regulations 2013 (S.I. 2013/2356).”Member's explanatory statement
This amendment requires Local Government Pension Scheme valuations to be benchmarked against insurer pricing and gilt-based discount rates, with explanations where significantly greater prudence is applied. It also requires those benchmarks, the funding strategy statement, and employer contribution rates to be published together, with accessible explanatory material to support meaningful consultation.

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[Baroness Stedman-Scott (Con)]

My Lords, I move Amendment 9 standing in the names of my noble friend Lord Younger of Leckie and myself. During the passage of this Bill, we on these Benches have had a great many discussions not only in this Chamber but with industry experts, scheme managers, employers and others who will be directly affected by the provisions before us. Those conversations have been extremely valuable and have revealed something that many of us have found increasingly concerning. We have been made aware that, in a number of cases across the Local Government Pension Scheme, employers are being asked to contribute very substantial sums into pension funds; these levels of contribution appear to go well beyond what would be required for those funds to be fully funded, even on a very prudent basis.

Of course, prudence is essential in pension funding, and no one in this House would dispute that. Pension promises stretch decades into the future, and it is right that those responsible for safeguarding them take a cautious and responsible approach when assessing liabilities and setting contribution rates. What we are seeing in some cases, however, appears to move beyond prudence into excessive prudence. When contribution requirements are set significantly above what would be necessary even under extremely cautious valuation assumptions, the consequences are that employers, local authorities, academies, housing associations and others are required to divert even greater sums of money into pension funds.

The money does not come from nowhere; it comes from taxpayers and from public budgets, which might otherwise be used to fund and support local services, improve communities, invest in schools, support vulnerable people and deliver the many things we all want councils and public bodies to be able to do. If those employers are being asked to contribute significantly more than is necessary to secure the pensions of their members, we have to ask whether the balance between prudence and proportionality has shifted too far. That is precisely the issue this amendment seeks to address.

Amendment 9 would introduce an important requirement for transparency, requiring Local Government Pension Scheme valuations to be benchmarked against two widely recognised measures: insurer pricing—specifically, bulk annuity pricing—and evaluation based on gilt discount rates. Those benchmarks would then be published alongside the scheme’s official funding valuation.

Crucially, where the scheme’s official valuation is materially more prudent than those benchmarks, the administrating authority would be required to publish a clear statement explaining three things: first, what risk the scheme was seeking to guard against; secondly, why those risks justified the high level of prudence being applied; and, thirdly, what the impact of that additional prudence would be on employer contribution rates. In other words, the amendment would introduce transparency around the actuarial assumptions being used; it would allow employers, scheme members and the wider public to see how prudence affects contribution cost; and it would give those who are paying into the scheme the ability to understand—and where appropriate, question—the basis on which those cost are being set.

This intention should not be controversial. Indeed, one might reasonably argue that it should be a basic feature of the system. Where decisions are being taken which require significant contributions from public bodies, there should be transparency about how those decisions are reached, there should be honesty about the assumptions being applied and those affected should have the information necessary to exercise agency and scrutiny.

What this amendment seeks to achieve is not to undermine prudence—quite the opposite. Prudence remains vital in pension funding. But prudence must be accompanied by accountability, and when additional prudence is applied, particularly where it carries significant cost implications, it should be clearly explained and justified. The fact that our amendment would require those benchmarks, the funding strategy statement and employer contribution rates to be published together, is another key point. It would allow stakeholders to see the full chain from market comparison to actuarial judgment to the costs ultimately borne by employers.

This amendment therefore strikes a sensible balance. It would preserve the independence of actuaries and the integrity of the valuation process, while ensuring that the consequences of those decisions are visible and understood. For employers, it would provide clarity; for scheme members, it would provide reassurance; and for taxpayers, it would ensure that the significant sums being directed into pension funds are subject to appropriate transparency. For those reasons, this amendment represents a constructive and proportionate improvement to the Bill. It asks only that, where high levels of prudence are applied, they are accompanied by explanation and openness. That seems to me an entirely reasonable expectation, and I will test the opinion of the House when it is called.

[Lord Fuller (Con)]

My Lords, I support Amendment 9 in the names of my noble friends on the Front Bench and place on record that there are some very good behaviours among the Local Government Pension Scheme administering authorities that already follow the path laid out in the amendment, which would then be placed on a statutory basis.

I would not want people to think that none of that best practice happens, or that the numbers are just plucked out of the air—that is not the way it is at all. The purpose is that all schemes reach expectations and assess their liabilities in aggregate, not just for each of the councils—most people without this House would think the LGPS is a scheme for councils—but all the other admitted bodies as well. As I said in the previous group, when I first joined the Norfolk scheme about 20 years ago, there were about 70 admitted bodies; there are now 500, so it is extraordinarily complicated. Nationally, on a whole-of-LGPS basis, there are 6,160 scheduled bodies, 3,639 admitted bodies, 478 designated bodies—I do not know what they are, but I think they might be with the Environment Agency—and 15,049 employers with active members.

The key thing, in support of my noble friend Lady Stedman-Scott, is that when we look at all these contribution rates, it is not just taking the scheme in aggregate; we have to drill down to all the particular liabilities for each employer in the scheme. I am now drifting into the complication we often hear so much about, which is used to obfuscate the scheme. What I really like about this amendment is that it stops people who know about the Local Government Pension Scheme from hiding behind that complexity and obfuscation. It will require members to publish in plain language how the numbers are arrived at and what this amendment seeks to achieve.

Again, to repeat some of my history, when I first joined the Norfolk scheme, which is a good example, it was 79% funded. We shovelled in cash like it was going out of fashion. Now, 20 years later, it is 130% funded. In the last three years it has gone up 25%. These big swings militate against stability and sustainability. Over the years there has been a pessimism bias, which has meant that council tax, councils and admitted bodies have put much more money into the scheme. Partly, there was groupthink from the regulators, which forced us down this path.

However, I want to provide reassurance. When you look at the assumptions that I have been involved in, over five triennial revaluations now, there is a fan of opportunities and scenarios that the actuaries run on the membership of the scheme, sponsoring employers, even the life expectancy of members calibrated by postcode. There are about a thousand different scenarios in the scheme that I have seen. Of course, one of those scenarios is a wipeout. We should not confuse a scenario with a likelihood. With the benefit of hindsight, I think what has happened is that the extreme cases have been taken and split down the middle, whereas if there was more clustering around the middle then we would not have had to put in so much. That is why the amendment looks in a much more focused way at the funding strategy statement. That way, we can take the true costs into account.

On seeing the noble Lord, Lord Davies, again, who is an actuary, I am reminded of an old actuaries’ joke I told in Grand Committee. I am going to repeat it, because it was a small audience then: “We’re all living longer and it’s getting worse”. Some of the assumptions have possibly overcooked life expectancy and undercooked the effects of Covid, and so forth. There is a balance to be struck between overoptimism on one hand and excessive prudence on the other. It is a complicated scheme, but the amendment works out a method by which we can communicate that texture in language that the man in the street can understand, so that taxpayers can be reassured that they are not being overtaxed and members can be reassured that, over the life of the tail liabilities of the whole scheme, they will be paid in full at the right moment. As I said on the previous group, the LGPS is the closest thing we have to a sovereign wealth fund and it is important that we do not take an excessive pessimism bias, as the story of the last 20 years has shown.

--- Later in debate ---

[Lord Katz (Lab)]

I thank the noble Viscount, Lord Younger of Leckie, for the amendment, moved very ably by the noble Baroness, Lady Stedman-Scott. It seeks to improve the transparency of the assumptions and level of prudence applied in LGPS actuarial variations, including through the introduction of additional benchmarks.

The 2025 triennial valuation will conclude on 1 April, and at present we do not have a complete picture of its outcomes across the 87 different funds and more than 20,000 employers in the scheme. The amendment seeks to prescribe remedies before any diagnosis has been made or, indeed, any maladies have been fully understood.

Many of the matters raised will be covered by the Government Actuary’s Department report under Section 13 of the Public Service Pensions Act 2013. The report will assess whether employer contributions have been set at levels appropriate to ensure solvency and long-term cost efficiency, whether funds’ valuations comply with the regulations and the degree of consistency between them. Recommendations will then be taken forward by the Ministry of Housing, Communities and Local Government and the scheme advisory board.

Officials are already engaging with the Government Actuary’s Department, which is targeting a publication date of spring 2027 for its report and recommendations. Your Lordships’ House will be pleased to hear that this is earlier than previous valuations, which I hope demonstrates the seriousness with which we are taking the issues raised by noble Lords in Committee. The Government Actuary’s Department will engage widely with funds, actuaries and advisers to develop a comprehensive understanding of the 2025 valuation.

It is appropriate for different funds and their advisers to use different discount rates, reflecting variations in risk appetite, employer profile and investment mix. It is helpful to understand how these approaches compare across the sector. The Section 13 review uses benchmarks to place local valuations on a comparable footing and may, in the first instance, provide useful insight into funds’ decision-making. There is a delicate balance to be struck. Members’ benefits are guaranteed in statute, but funds must ensure that they hold sufficient resources to pay those benefits over the long term through investment income and contributions.

My noble friend Lord Davies is right in his assertion that actuaries advise and funds decide. I salute, in making these contributions, his forbearance in not arguing for the interests of the national union of actuaries, of which I am sure is a founder member—at least he ought to be, if it does not exist.

We heard a fair amount on prudence, as we did in Committee, from the noble Lord, Lord Fuller, using his experience. In a locally managed scheme, it is for funds to work with their actuarial advisers and employers to set a contribution rate that supports the long-term viability of employers and the fund. The Section 13 report prepared by the GAD will consider questions of prudence—that is, how the discount rate is set and how stability is applied to contribution rates. Were the Government to set correct valuation assumptions, they would risk undermining the principle that funds and expert actuarial advisers are responsible for ensuring the long-term sustainability.

A push for greater intervention at the valuation risks moving from a locally managed scheme to a centrally managed scheme. We heard much about that in the discussion on the previous group of amendments. The implications are real and far reaching, decreasing rather than increasing the role for locally elected representatives.

On transparency, the amendment would require additional detail on assumptions and benchmarks in the funding strategy statements and these to be communicated in a more user-friendly way. I believe we are broadly aligned on the value of valuation reports and supporting material, such as funding strategy statements, being easier to understand for the lay reader. There is already transparency in the process. Administering authorities should consult all employers in the fund on their funding strategy statement. This statement should outline how surpluses and deficits will be managed, outline the approach to contribution stability and summarise the main actuarial assumptions used at the valuation.

To respond to the noble Lord, Lord Fuller, the funding strategy statement is consulted on, and the SAB guidance already says that the purpose of the FSS is to establish a “clear and transparent” strategy that explains how liabilities will be met and

“how the fund balances the interests of different employers”.

We must not jump to conclusions about how the valuation has played out for every fund and employer. There are already examples of good practice, including meaningful employer consultation and capable pension committees with the confidence to interrogate their actuary’s advice to fully understand the proposed contribution rates.

In his evidence to the Committee on the Bill in the other place, Roger Phillips, chair of the LGPS advisory board, said about the treatment of surplus that

“we live in a very volatile situation, and circumstances can change. You have to be careful, because if you reduce contribution rates considerably, that is a great benefit at this moment in time, but if you then turn around and start to increase them again, that can be very difficult for all employers to deal with, including local government”.—[Official Report, Commons, Pension Schemes Bill Committee, 2/9/25; col. 41.]

Until the valuation has concluded, we cannot reach a definitive view on how the interpretation of regulations and guidance and the quality of employer consultation have shaped the results that will apply from 1 April. As part of their review, the Government will ask the Government Actuary’s Department to focus on methods for managing risk and reflecting the long-term funding objectives of the scheme including discount rates, application of stability mechanisms and buffers and the effectiveness of employer engagement. I have committed to additional work with the GAD on how discount rates and the application of stability mechanisms affect contribution rates and whether employer engagement processes are operating effectively.

Following the publication of the Section 13 report, the Ministry of Housing, Communities and Local Government will undertake a review of the regulations and guidance governing the triennial valuation ahead of the 2028 valuation. I appreciate that your Lordships’ House may wish for more immediate action, but we must ensure that we are in possession of the valuation results before we determine the right course of action. I therefore ask the noble Viscount, Lord Younger, or the noble Baroness, Lady Stedman-Scott, to withdraw the amendment.

[Baroness Stedman-Scott (Con)]

Your Lordships have got me.

[Noble Lords]

Hear, hear!

[Baroness Stedman-Scott (Con)]

I did not say it for that to happen—just to clarify matters.

I am grateful to all noble Lords who have contributed to this debate and thank the Minister for his response. It has become clear in our discussion that the issue this amendment raises is not simply a technical question about actuarial methodology or valuation frameworks; it is about the very real pressure being felt by employers across the Local Government Pension Scheme and the consequences of those pressures for local services and for the taxpayers who ultimately fund them. We remain concerned that this is not yet something that appears to be firmly on the Government’s radar, yet the evidence we have heard from employers, advisers and those operating within the system suggests that it is an issue that requires attention.

This is not something that we have plucked out of the air, made up or brought to the Chamber today based on a whim. It is from interviews and meetings that we have had with experts in the system who say that this needs looking at. We were told about one local government pension scheme that is 189% provided for. While we have to be careful, balance things and rely on the experts, that is just a bit out of kilter. Across the country, councils and other employers are facing extremely difficult financial circumstances. Many are asking for emergency support simply to maintain the services on which their communities depend. In that context, it cannot be right that questions about whether pension contributions are being set at excessively prudent levels are simply left to drift until the next review cycle arrives.

For those reasons, we believe this amendment addresses an issue that is real, immediate and important. It introduces transparency where transparency is needed, and it does so in a way that is constructive and proportionate. I therefore seek to test the opinion of the House.

--- Later in debate ---

Much of the detail of how this is going to be implemented depends on regulations, so I have two questions for my noble friend the Minister. First—and I have to admit that it is quite difficult to interpret the Bill—will regulations under Section 10 be made under the affirmative procedure, and hence come before this House and the Commons? Secondly, will there be consultation on those regulations and when will that take place? To be honest, much of what we are asking for in these amendments could be included in regulations. I will certainly be spending time over the coming months and years making sure that the regulations reflect the fact that the Government have a commitment, in my mind, to ensure that members benefit from the release of surpluses as much as employers.

[Baroness Stedman-Scott (Con)]

My Lords, I will speak briefly to some of the amendments in this group. At the outset, I thank all noble Lords who have tabled amendments and contributed to the constructive discussions we have been able to have on these issues. While I will focus my remarks on some of the amendments, we understand the direction of travel intended across this group.

Taken together, these amendments largely seek to ensure that the process of releasing surplus funds from defined benefit schemes is carried out on the basis of sound professional advice, in close communication with scheme members and with their interests properly safeguarded. The group also includes a technical amendment from the Government, which tightens up the drafting of the Bill and which we are content to support.

Amendment 13 in the name of the noble Baroness, Lady Altmann, would introduce a formal decision-making safeguard before schemes even create the legal power to pay surpluses to employers. In practical terms, it would ensure that trustees have received and considered formal actuarial advice before making such a change to the rules of the scheme. That matters because altering the rules of a scheme to enable surplus extraction has potential implications for the long-term funding position of the scheme and for the security of members’ benefits.

Amendment 13 therefore performs two important functions. First, it seeks to ensure that trustees properly understand the impact that surplus distribution could have on scheme funding before rule changes are made. Secondly, it requires them to consider alternative approaches to dealing with surplus that may benefit members instead, such as running the scheme on, transferring to a superfund or securing benefits through annuities. In other words, it ensures that sound professional advice is formally incorporated into the process before it can be completed.

That process is then complemented by Amendment 15, which addresses the next stage of the decision. While Amendment 13 concerns the creation of the power, Amendment 15 would ensure that advice is taken when trustees decide whether to exercise that power and pay surpluses to the employer. Under this amendment, trustees would be required to obtain actuarial advice and to consider the risks and benefits of alternative approaches before distributing surplus. They would therefore need to evaluate options such as reducing or pausing contributions, running the scheme on, transferring to a superfund or buying out liabilities. Ensuring that these risks and alternatives are considered in sufficient depth is critical. It helps to make sure that trustees’ fiduciary duties remain at the centre of the process and that decisions about surplus are taken in a careful, balanced and professionally informed way.

Amendment 17 would retain the existing requirement that trustees must be satisfied that the exercise of the power to pay surplus is in the interest of scheme members. As noble Lords will know, that protection currently exists in the Pensions Act 1995, but the Bill as drafted would remove it. Retaining that test would represent a major governance safeguard. It ensures that trustees continue to place members’ interests at the heart of their decision-making when considering whether surplus should be returned to the employer. That seems to us both sensible and entirely legitimate. The Government should give serious consideration to adopting this change because members’ interests should always remain central to the operation of pension schemes.

The reforms proposed in the Bill potentially open a pathway for surplus to be released from defined benefit schemes. If that pathway is to command confidence, it must be underpinned by strong governance, professional advice and meaningful member engagement. The amendments in this group help to reinforce these principles. We welcome the opportunity we have had to debate and discuss these important issues.

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

My Lords, I am grateful to the noble Baroness, Lady Altmann, my noble friend Lord Davies and the noble Viscount, Lord Thurso, for introducing their amendments. During our various deliberations, many noble Lords have highlighted the fact that the level to which a DB scheme is funded is subject to volatility and to changes in the underpinning assumptions used to ensure that schemes remain able to meet the promised pensions. This is something we take seriously as we all want to ensure that the policy aim here can be achieved: for surplus funds to be used to benefit members and employers, but with the right protections so that every member’s pension can be paid.

As I have outlined previously, the DB funding code and the underpinning legislation require trustees to aim to maintain a strong funding position. Our changes preserve trustee discretion over surplus release. Crucially, trustees must receive actuarial certification that the scheme meets a prudent funding threshold, and members must be notified before surplus is released. Let us not forget that these changes are simply levelling the playing field, as some schemes can already release surplus.

Amendments 16 and 19 would both require a consultation to take place before surplus is released. I understand the wish of noble Lords for the voice of members to be heard when decisions are being taken about releasing surplus. We agree with that observation; that is precisely why the decision to release surplus remains in the hands of trustees, who are there to represent their members. Trustees will consider a range of scheme-specific circumstances, including the employer covenant and wider endgame planning, when discharging their duty to members. It is, however, entirely for trustees to decide whether they may seek broader views before taking a decision to release surplus. It is their decision, not that of the employer.

In our view, a legislative requirement to consult is not proportionate. The existing framework gives trustees scope to seek broader views as required, and the fact remains that, ultimately, trustees must act in the best interests of scheme beneficiaries when taking a decision to release surplus. Furthermore, under our changes, trustees will continue to be subject to a requirement to notify members in advance of any surplus release, maintaining this key protection for scheme members. I can assure my noble friend Lord Davies that we will be monitoring closely how schemes intend to use, and are using, these powers.

Amendment 17 seeks to retain the statutory requirement that trustees be satisfied that it is in the interests of members before agreeing to surplus release. We discussed this in some detail in Committee. Trustees already have a clear overarching duty to act in the interests of scheme beneficiaries. We have had clear feedback from industry-wide stakeholders, including trustees, who have welcomed the repeal of this statutory requirement. Existing legislation is perceived by trustees as a barrier to considering the release of surplus because they are not sure how this additional test is reconciled with their existing overarching duties. This could clearly lead to indecision on whether to release surplus, which may ultimately lead to members losing out. We are making this change to put it beyond doubt for trustees that they are not subject to any additional tests beyond their existing, clear duties of acting in the interests of scheme beneficiaries.

Amendments 14 and 18 cover the consideration of discretionary awards upon the release of surplus. I understand the concerns raised by scheme members whose pensions have not kept pace with inflation. But the Government do not think that these amendments would be helpful to trustees or members. These amendments address only a single element of the matters that trustees must consider when determining whether to release a surplus. In practice, trustees’ overarching duty to act in the interests of all beneficiaries requires them to weigh a broad range of criteria before deciding whether a surplus should be released and, if so, how members might appropriately benefit. This may include the award of discretionary increases but, by narrowing the scope of these considerations, the amendments would risk constraining trustees in the proper discharge of their responsibilities.

The noble Viscount highlighted some matters that we may return to when we discuss his Amendment 22. I will touch on them now—what happens in circumstances where there appears to be a decent surplus and trustees may be minded but employers are reluctant—but, if it is okay with the noble Viscount, I will come back to that in the debate on his Amendment 22 as it is probably more closely focused on that.

The Government therefore believe that it is important that trustees remain in the driving seat. They are best placed to understand the individual circumstance of their scheme, its characteristics and history, and to decide how members may benefit from the release of surplus. By extending the power to return surplus to more trustees, we are levelling that playing field, with strong safeguards in place to protect member benefits. Trustees will be in a better position to negotiate member improvements in return for agreeing to release surplus.

There is clearly an appetite out there for trustees to enable members to benefit from this. Recent industry research shows that over 40% of employers intend to share DB surplus with members. We are confident that there is an appetite. We need to be careful not to create so many new restrictions that the policy aim of allowing more trustees to share surplus is not achieved, because that would prevent surplus delivering real value not just to employers but to members and the wider economy.

I turn to Amendments 13 and 15 in the name of the noble Baroness, Lady Altmann. Amendment 15 would require regulations to include a condition that trustees receive and consider actuarial advice on scheme funding. Amendment 13 would create a legislative requirement for trustees to commission actuarial advice on future benefits and alternative approaches to surplus release before modifying a scheme to allow for payment of surplus to the employer. I am not going to revisit our discussion on TAS 300, which is a particularly delightful memory from Committee, but I understand the concerns raised by the noble Baroness about trustees having appropriate advice to be able to make an informed decision about their endgame choices and whether to release surplus. Trustees will be required to take into account the scheme’s long-term funding objective when making decisions on surplus. This will include the factors that are listed in these amendments. Under the funding code, trustees are already required to set out their funding and investment strategy, describing how they intend to meet members’ benefits over the long term—in other words, their long-term objective. They will already be seeking appropriate advice before determining the long-term objective for their scheme. That objective is reviewed in line with each triennial valuation at a minimum.

Putting in place additional legislative steps that require trustees to commission and receive actuarial advice before releasing surplus could result in additional unnecessary bureaucracy. Hardwiring specific legislative considerations that trustees must take into account will remove their flexibility to gather the most appropriate advice for individual schemes. The Pensions Regulator—TPR—has set out guidance for schemes considering their long-term objective and options, including buyout, superfunds and run-on, which sets out clear expectations of trustees. In particular, the guidance says that trustees

“should regularly review the best way to deliver members’ promised benefits”.

It is not the responsibility of the FRC; it is for TPR to set out the requirements on trustees and monitor them.

Universal Credit (Removal of Two Child Limit) Bill

Baroness Stedman-Scott Excerpts

2nd reading & Committee negatived & 3rd reading
Thursday 12th March 2026 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I too am pleased to contribute to this important debate and look forward to the maiden speeches of the noble Baronesses, Lady Antrobus and Lady Teather, and the noble Lord Walker of Broxton. We welcome these wonderful people to our House and look forward to their contributions.

I feel I must set the scene and set it out very clearly. I say from the outset that we on the Opposition Benches do not support this Bill; in fact, we oppose it. That does not mean in any way that we do not care about children and families—quite the contrary. We believe there are other ways to support them that mean that money can be used differently to achieve the objective of improving their lives. I state publicly that I respect the consistency and tenacity of the Minister and, indeed, the noble Baroness, Lady Lister, in their campaigning in this area. We respect it. We may not agree with it, but we give credit where it is due.

We are far from alone in opposing the Bill. On this question, we stand with a clear majority of the British public. Polling consistently shows that more than 60% of people in this country support retaining the two-child benefit cap, with that support stretching across voters of all major political parties. What this debate increasingly appears to be about is not responsible public policy but political party management. As events over the past year have made clear, this measure is not being brought forward because the public have demanded it. Indeed, they are clearly opposed to it. We should all pause and consider why hard-working taxpayers are being asked to shoulder the financial consequences of the Government’s inability to manage their parliamentary party. That is not responsible government; it is a deeply troubling response from the Government to unrest.

Many across this Chamber will have their own principles and reasons for opposing this policy, but I begin with a simple illustration of what this policy and this debate mean in practice. Let us take the London Borough of Hackney. There, 29% of children live in households affected by the two-child limit without an exemption—the highest proportion anywhere in the country. As of August last year, there were 92 households in Hackney on universal credit with five or more children where the youngest child was born after the 2017 cut-off date. Unless they qualify for one of the limited exemptions, those households fall within the scope of the two-child limit. In other words, they already receive less than the maximum universal credit they would otherwise be entitled to. Yet even with the cap in place, these households receive on average £5,152 per month in universal credit. That is more than the take-home pay of someone earning around £88,000 a year. Across the country, the welfare bill for five-child households within the scope of the cap is already around £720 million per year. That is with the two-child limit still in place.

Set that against the reality faced by many working families. In Hackney and communities across the country, there are parents in work earning far less than that level of take-home pay who would love nothing more than to have a third child. But they sit down at the kitchen table, look at the household finances and make the heartbreaking decision that they simply cannot afford it. At the very same time, their taxes are funding households down the road who receive an income from universal credit that, in effect, exceeds their own. If this cap is removed, those households will not face the same choices about how many children they can afford.

I ask the Minister a simple question: how can that possibly be fair? How can it be right that working people supporting our economy and paying the taxes that fund the system must carefully limit the size of their own families while being asked to fund a system in which those not in work face no such constraint? That is the fundamental question of fairness at the heart of this debate, and it is why a clear majority of the public vehemently support the cap.

There is a wider point about economic development. More than this, what separates us on these Benches from the Minister and her Back Benches is our view that a handout is not the same as a hand up. The evidence is clear that the most effective way to tackle poverty is to provide people with the means and the incentives to provide for themselves. The single biggest factor in a child’s life chances is whether parents work, and removing the cap reduces the incentives to work altogether. That is clearly not a route out of poverty. Of course support should be targeted at those who need it—we have no argument with that—but it should not create a model where households on benefits are rewarded in a way no working family ever would be. That undermines both fairness and the incentive to work. As I have said, work is the only meaningful way that we will solve the problem of child poverty in the medium and long term.

When the incentive in place is to get more on benefits than working, why would you go to work? I am concerned by the view expressed by Labour Back-Benchers and the Government that increasing the generosity of the welfare offer in some way solves the issue of poverty. This approach does nothing but provide a sticking plaster to mask the fact that a dramatically increasing number of people rely solely on the state for their subsistence. This comes at a major and increasing cost to those who work and contribute, as the Spring Statement disturbingly underscored when it revealed that welfare spending will rise by 5.8% this year to an absolutely staggering £330 billion—around 11% of GDP.

My party has been clear. We would reinstate the two-child cap. Only last week my right honourable friend, Kemi Badenoch, the leader of our party, set out why. The savings from this policy could be redirected toward one of the more fundamental responsibilities of any Government—the protection and defence of the realm. Again, I stress that it does not mean that we do not care about children and families, but those savings would allow the recruitment of 20,000 additional soldiers and fund the accommodation, equipment and support they need to do their jobs properly at a time when the demands on our Armed Forces are growing and the world is becoming more uncertain. That is a central priority.

After the extraordinary spectacle of recent weeks, when the world has seen the Government unable and unwilling to defend British sovereign territory, the case for properly funding our Armed Forces has become more urgent than ever. Our defence should not be an afterthought. It should be the first duty of the state.

That is why it is so troubling that money that could be strengthening our national defence is instead being spent to manage the Government’s internal policies and politics. The country is being asked to foot the bill not because the policy case has been won but because the Government and the Chancellor have chosen not to pursue the welfare reforms they themselves once supported because they are too weak to get them past their own MPs. Do His Majesty’s Government have any plans to review the welfare state and to change it to a system that incentivises people to work, rather than live permanently on benefits? The defence of the nation should always come before the management of the governing party but, unfortunately, the policy we are discussing today is a manifestation of just that.

Ultimately, this debate comes down to three simple principles: fairness, responsibility and the Government’s priorities. It is about fairness, because it cannot be right that working families who get up every day, pay their taxes and carefully weigh what they can and cannot afford for their own children, are asked to fund a system in which those same choices do not apply. A welfare system that loses sight of that basic sense of fairness will quickly lose the confidence of the people who sustain it. It is about responsibility, because tackling poverty cannot mean simply writing even larger checks from the state. Real and lasting progress comes from helping people into work, strengthening incentives and ensuring that welfare is a safety net, not a substitute for independence. A system that blurs that distinction ultimately fails the very people it claims to help. It is about priorities, because every £1 spent by the state is a £1 taken from taxpayers and other priorities. At a time of enormous pressure on the public finances and growing threats in the world around us, the Government must be honest about where those resources should go.

This Bill fails on all three counts. It weakens fairness, it risks entrenching dependency rather than tackling its causes and it diverts scarce resources away from the fundamental duties of government. For those reasons, and in the interest of fairness and sound policy, these Benches cannot support the Bill. We urge the Government to keep the cap; it is what the country wants and what the country needs. I know the Benches opposite will not agree with me one little bit—I am under no illusions about that. I remind the whole House that you cannot make a poor man rich by making a rich man poor and you cannot help the wage earner by punishing the wage payer.

--- Later in debate ---

[Baroness Sherlock (Lab)]

Indeed, and that probation officer clearly did a very good job: look where the noble Lord has ended up. Would that they were all that successful. I suppose that that is quite a high bar at which to set them, but I commend it. That is a really great point, and I am now violently agreeing with the noble Lord; but I will move on.

I want the social security system to do its job, and for most people its job is to support them into work, and in work, and to develop them in work. That is very much what this Government are seeking to do.

One of the challenges with universal credit is about assumptions. It was designed to move people into and out of work—to work in and out of work—and when it works it does so very well. All we are doing is making sure that the system works even better than it does. But the assumption that this Government are doing the wrong thing by spending money on tackling child poverty is fundamentally mistaken. My noble friend Lord Walker talked about the need to make sure we tackle NEETs, for example. We have one in eight of our young people not in employment, education or training. They did not start at 16.

[Baroness Stedman-Scott (Con)]

Will the Minister give way?

[Baroness Sherlock (Lab)]

Okay; it is going to be a long day.

[Baroness Stedman-Scott (Con)]

We are not saying that the Government should not spend money. It is about what you spend it on, and how it is spent to get the best outcome from what you are trying to do.

[Baroness Sherlock (Lab)]

My Lords, I understand that, but I have looked at what the last Government spent the money on and at the results, and I do not like them, so we are going to do something different.

My simple view is that if we will the end of tackling child poverty, we have to will the means. We believe that removing this barrier is fundamental. Those young people who were NEETs at 16 did not start at 16: they started without the opportunities, without the education, and without the start in life they should have had. The evidence shows quite clearly that children who grow up in poverty are likely to have poorer mental health, fewer opportunities and less chance to do all those things we want them to do. What we are doing is enabling those people to have opportunities, giving them the start they need. If we can get that in place, the whole country benefits. Instead of supporting people not to work, we are giving them the chance to flourish as individuals and to make the contribution to our society that they will not get the chance to make otherwise.

Before I get myself into any more flights of rhetoric, I should answer some of the questions that have been asked. My noble friend Lady Lister asked about council tax reduction. I think she knows this, but just for the record, local councils are of course responsible for designing and reviewing their own council tax reduction schemes. My department has been working with the MHCLG to communicate the change to local authorities, and they have been encouraged to consider the impact of their schemes in the light of the removal of the two-child limit. In 2029-30 an estimated 560,000 families will see an increase in their universal credit award, with these families gaining, on average, £440 a month. The impact of transitional protection is included in the impact assessment, but not on the numbers of households.

The benefit cap was raised by my noble friend Lady Lister, and by the noble Baronesses, Lady Teather and Lady Bennett, and by my noble friend Lord Davies and a few others. This Government want to preserve the fundamental principle that work is the best route out of poverty. We believe that leaving the overall benefit cap in place encourages personal responsibility while maintaining the incentive to work. Where possible, it is in the best interests of children to be in working households. Being in work substantially reduces the chance of poverty: the poverty rate of children living in households where all adults are in work is 17%, compared to 65% for children who live in households where no adults work. We will continue to protect the most vulnerable—those who are unable to work because of a disability or a caring responsibility are protected and exempted from that.

The noble Baroness, Lady Bennett, asked about numbers. When I answered her Written Question, the impact assessment had not been published at that point. I can say that among households in scope to gain from the removal of the two-child limit in 2029-2030, approximately 50,000 are estimated to be capped before the policy change, and a further 10,000 households will be capped afterwards. In contrast, 550,000 households in Great Britain will gain in full from the removal of the two-child limit in 2029-30, as will an estimated 2 million children in the United Kingdom.

The noble Baroness, Lady Janke, and my noble friend Lady Shah raised the impact of poverty on children and schools—

Pension Schemes: Ministerial Powers

Baroness Stedman-Scott Excerpts

Wednesday 11th March 2026 Lords Chamber

[Baroness Sherlock (Lab)]

As the noble Baroness well knows, we have been discussing this matter for some weeks now in Committee and will be discussing it again on Monday, when we come to the matter on Report. Let me give her a brief answer to the points she has made. I know that she agrees with the Government’s objectives, because she herself has advocated previously—indeed, in Committee—that we make pension tax relief contingent on 25% of new investment being allocated to UK assets. I know she wants the same thing that we do.

To be really clear, the power is being taken as a reserve power to back the voluntary, industry-led Mansion House Accord, which said that by 2030, 17 of the largest pension schemes in the private pensions sector would be investing 10% of their relevant default funds into private investment, with half of that in the UK. The expectation is that having done that, the industry will do it. The reason for taking a reserve power is, as the noble Baroness knows very well, that the challenge in the UK is too often schemes compete on cost and not on value. There is always a risk that for some small competitive advantage, somebody may want to try to separate off from that, so the reserve power is signalling clearly to the industry: this is the direction of travel, so let us stay with it. All we are doing is backstopping that.

[Baroness Stedman-Scott (Con)]

My Lords, the Government say that this power is merely a backstop to the Mansion House Accord but that is a gross misrepresentation. The Pension Schemes Bill goes far beyond that and gives Ministers sweeping authority to mandate pension investments to whatever level they choose. The state should not be directing the allocation of private pension assets. Those decisions must be taken by trustees in the best interests of their members, not by Labour Ministers pursuing political objectives. This policy risks undermining confidence in the entire auto-enrolment system, which was built on the promise that people’s savings would be invested in their interests, not the Government’s. I ask the Minister a simple question: will the Government remove this dangerous and unjustified power from the Bill?

[Baroness Sherlock (Lab)]

There is a short and a long answer. The short answer is no. The long answer is that the Government have made it abundantly clear, because I have done it myself many times in Committee, what the purpose of the reserve power is: to backstop the Mansion House and trust commitments. My honourable friend the Pensions Minister and I have made it clear—he said it again this morning at a pensions conference—that we would make absolutely sure that the Government’s intention simply to backstop those agreements was there in the Bill. That is what the legislation is for, but I need to correct something in particular. This power does not direct schemes into specific assets or projects. What it does is set a broad framework aligned with the industry’s own voluntary commitments under the Mansion House Accord. Trustees retain full discretion over individual investment selection and the balance between asset classes. The role of a pension trustee has always been to exercise judgment, subject to constraints, and nothing in these provisions changes that.

Access to Work Fund

Baroness Stedman-Scott Excerpts

Thursday 5th March 2026 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, the Minister and I suffer from the same condition: an obsession with getting people into work and keeping them there. I hope the whole House shares an obsession with the same outcome. Nothing makes my heart sing more than knowing how many people we get into work, how many stay in work—particularly after a year—how much a job costs and how we can make sure we measure what we are doing. How does the department keep these outcomes under review and how does it ensure that expenditure in this area is demonstrably helping people enter and stay in work?

[Baroness Sherlock (Lab)]

I commend the noble Baroness for the really interesting and innovative work she has done in the past, and for her commitment to this area. It is always a pleasure to debate these issues with her. On value for money and the results of Access to Work, she will remember from her time in the department that the previous Government tried to look at how you assess the impact of this scheme, only to find that it is very difficult, because you do not have a counterfactual: you cannot have a control group who get no help at all and struggle on their own, and compare to see how the two groups are doing. The NAO flagged these issues to the department and we are very aware of them. We are looking all the time at how we reform the scheme in a way that helps individuals, demonstrates additional value for money and is not a substitute for what employers should be doing, but which none the less is not so bureaucratic that you cannot get the money you need. To reassure her, all those things are being taken into account in the review process.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2026

Baroness Stedman-Scott Excerpts

Monday 2nd March 2026 Grand Committee

[Baroness Donaghy (Lab)]

My Lords, I will be brief. This is somewhat of an anniversary for the noble Lord, Lord Jones, and me, albeit a very sad one. I think the noble Baronesses, Lady Sherlock and Lady Stedman-Scott, would be quite surprised if we did not turn up for it. I speak as a chair, for many years, of the mesothelioma oversight committee. I could recite the industries affected, but I will leave that to the Minister.

The only thing I want to add to what the noble Lord, Lord Jones, said, is to thank the noble Baroness, Lady Stedman-Scott, as well as the Minister. I remind the Committee that the noble Lord, Lord Freud, introduced the legislation, for which thanks are due. It is important to remember these things.

The average age of those diagnosed is 75 and over, for whom the payment sums, which look very healthy at the start of the table, are less than £20,000. If there is any reason for keeping these figures under review, rather than being automatic, it is the fact that they do not look very good any more. It would be much appreciated if something could be done about that.

[Baroness Stedman-Scott (Con)]

My Lords, I think this is about the fifth anniversary of me taking part in these uprating instruments. This year, for me, they are completely different.

When I started my charity, Tomorrow’s People, more than 35 years ago, the first lady I employed was absolutely outstanding. Last year, I received a letter from a lawyer, saying that somebody who had been employed by my charity had contracted mesothelioma and they wanted to talk to me about the buildings that we occupied. I got in touch with them immediately and said, “Yes, of course I will help. Could you tell me who it is?” They went back to the person and then came back to me to say that it was this lady, the very first one I had ever employed, who had got mesothelioma. It suddenly hit home that this was a disease that affected somebody whom I rated highly and had great respect for. She came here to see me for lunch and told me her story, and I have kept in touch with her. I expect—and hope—that she is watching what we are doing today. I want to say that it made the whole thing pretty personal.

I am pleased to say that we on these Benches support these two sets of draft regulations, which provide for a 3.8% uprating of the lump sum payments available under the mesothelioma and pneumoconiosis compensation schemes from April this year. These schemes remain a vital, no-fault safety net for those suffering from some of the most devastating industrial diseases. Mesothelioma and pneumoconiosis are cruel conditions, often emerging decades after exposure and, in many cases, at a point when it is no longer possible to pursue former employers through the courts. The provision allowing dependants to claim when a sufferer dies before making an application reflects the harsh reality and rapid progression of these illnesses.

Maintaining an inflation link is essential if these payments are to retain their real-terms value, particularly given the debilitating nature of these diseases and the financial strain that they place on families. The long latency period associated with asbestos-related illnesses makes statutory compensation schemes not merely desirable but necessary. Although there is no statutory duty to uprate these payments each year, successive Governments have taken the view that that is the proper course. I agree. Uprating in line with inflation is the least that justice requires, ensuring that compensation continues to provide meaningful recognition and practical support.

These instruments may be technical in form, but they are significant in human terms. For those confronting terminal illness as a consequence of historic workplace exposure, this support represents fairness, dignity and the acknowledgement of a debt long owed. We on these Benches therefore fully support the regulations before the Committee.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for their helpful contributions to this debate. I confess that I would miss it if we did not gather once a year to talk about the impact of this, but I will come on to that in a moment. It is always a moment, and I appreciate that, from around the House, we have all come here to demonstrate the strength of cross-party support for these two lump sum schemes.

It was good of my noble friend Lady Donaghy to acknowledge the work of the noble Lord, Lord Freud, and others, as well as that of my late and much-lamented noble friend Lord McKenzie, who did so much work in this space for many years. My noble friend Lord Jones showed very well that, when it comes to anything in this space, we are standing on the shoulders of giants. He talked about the history of all the great Labour figures who knew that they came to Parliament to speak up for those who did not have a voice and those who had suffered at the hands of people who, in many cases, should have known better but, in some cases, did not know better. We learn as time goes on.

I remember my noble friend Lord Mann from a very long time ago as well. It is incredibly moving to think that his very first piece of casework was somebody who went on to die that day from one of these terrible diseases. As noble Lords will know, I am a priest in the Church of England, so I know what it is to be with people when they are close to death. It is a privilege as well as a challenge. To be able to take that experience and use it to advocate for others is what so many people go into politics for, so I commend my noble friend for being here to tell that story and to speak up for those who are not here and are unable to do the same.

Let me pick up on my noble friend’s point about process. This is a debate that we have regularly. Most years, somebody will suggest that we should put this into the annual uprating and then somebody else will say that we should not and give reasons why. On the reasons given today, the thoughts on the opportunity to debate these regulations and the point made by my noble friend Lady Donaghy about wanting to keep the amounts under review are interesting.

One thing I should say to my noble friend Lord Mann is that, if these payments were uprated automatically in the way that, for example, social security benefits are—these are almost always affirmative—they would still require affirmative regulations that have to be debated in Parliament. They could theoretically be rolled into a general social security operating order, but that would do the exact opposite of what my noble friend wants by putting them in with benefits rather than separating them out from benefits. Today is an opportunity for us to be here and to discuss this; either way, it would not make a difference to the claimants.

My noble friend made a wider point about understanding that these are not benefits. Of course, these schemes are quite different. Technically, they come out of what is known as departmental expenditure, rather than, like most benefits, annual expenditure. They are not benefits; they are compensation for something that people suffered but should not have done. My department offers a range of other financial support to people, including the main industrial injuries disablement benefit. Many people who get these diseases may have other costs as a result of their disability and may get things such as personal independence payments, the attendance allowance or other state benefits to cover their income replacement needs. The department wants to provide all the appropriate support for people who really cannot work as a result of injuries, while wanting to make sure that those who are economically inactive or unemployed are supported to get back to work, where they should be. We can help them to do that, and we should be expecting them to do that.

The noble Lord, Lord Palmer, asked about the amount. One of the reasons it is labelled as a percentage is that the amount any individual gets depends on the scheme and the age of sufferer at the point of death, so the amounts that people are paid are different. I can tell him the average amounts: under the 1979 Act scheme, the average award to sufferers was £14,700 and to dependants it was £11,500. Under the 2008 scheme, the average award to sufferers was £26,600 and £8,500 to dependants. That would have included a range of figures for individuals.

My noble friend Lord Jones asked me for the number of awards. For the record, under the 1979 scheme, there were 2,540, and under the 2008 scheme, there were 610. Those statistics are from the latest financial year for which figures are available.

On the point made by my noble friend Lady Donaghy, I recognise that there are many who want those amounts to be larger. All I can say is that the Government keep this under review and will continue to do so.

In terms of the comment from the noble Baroness, Lady Stedman-Scott, there is nothing that brings this home like knowing somebody affected by this, and being asked about the building in which, presumably, she also worked as well as the person she hired.

My noble friend Lord Mann talked about asbestos gloves. Some noble Lords will remember, and I remember, some of the horrific stories that have been told. I remember one of my noble friends talking about what happened onboard ships, where ratings were basically playing with balls of asbestos. There were stories of people trundling trollies down corridors of hospitals, porters and all kinds of things. There were stories about schools and all kinds of public buildings. There are people who are suffering simply for doing their jobs. Most of these jobs were in public service, serving the community and caring. The very least we can do is to make sure that they get appropriate levels of support.

I think that I have addressed most of the specific questions I was asked. I just want to finish on a positive note. I mentioned the work of the HSE in relation to awareness of exposure, but I would like to put some of the work that has been done elsewhere in government on the record. Quite often we discuss research, and we know how important research is in supporting individuals with these diseases. It is still the case that the life expectancy is incredibly low, especially by the time that people are diagnosed with diffuse mesothelioma. DHSC invests over £1.6 billion each year on research through the National Institute for Health and Care Research, and cancer is a major area of NIHR spending at £141.6 million in 2024-25.

Respiratory disease is a clinical priority within the NHS long-term plan. The aim is to improve outcomes for people who have these respiratory diseases through early diagnosis and increased access to treatment. NHS England has established 13 respiratory clinical networks across the country. These have been vital in providing clinical leadership for respiratory services and supporting services in primary care. Indeed, that continued investment in cancer research and support for people with respiratory diseases is key to reducing the numbers of families affected in the future and providing better support following a diagnosis.

I think that I have addressed all the questions that were asked. Once again, it is always a privilege to participate in this debate. I acknowledge the position of those who suffer from these terrible diseases and their families. The least we can do is carry on providing support. In light of that, I beg to move.