Pension Schemes Bill

Lord Kirkhope of Harrogate Excerpts

Committee stage
Monday 12th January 2026 Grand Committee

[Viscount Thurso (LD)]

My Lords, I am not entirely certain that I am wholly in favour of the concept of a clause at the beginning of a Bill that sets out its purpose in the way that the noble Viscount has set down, but I appreciate the opportunity to speak to one of the points that it makes.

First, I am not sure whether it is a declarable interest but I will declare it anyway: I am a trustee of the Parliamentary Contributory Pension Fund, for which I do not get remunerated—none of us does. As far as I am aware, nothing in the Bill affects that scheme, and therefore I am declaring it just in case. Secondly, I apologise for not having been here at Second Reading. I had to attend something extraordinarily rare: a hospital appointment in Inverness. I am afraid that not even I could get from Inverness to here in the required time for the Second Reading. I apologise for that, but I have read the Second Reading debate and was very taken by what was said.

The specific point that I want to come to is the point that the noble Viscount makes in proposed new subsection (1)(h) and his reference to

“responsible and innovative use of pension scheme surplus”.

What does he mean by an innovative use of the surplus? When the Minister comes to respond, will she say what the Government’s purpose was behind what they are doing on surpluses? I know we will come to that in much greater detail later on.

It seems to me that two things are behind this. One is doing something with a surplus, which begs the question: how much of a surplus should actually be taken? Also, how is that surplus calculated, bearing in mind that a range of actuarial factors—including the strength of the employer covenant, the level of risk of the investment, the actuarial factors regarding life and death, and so on—go into making up a surplus? All those factors can, at each valuation, move the surplus considerably. Therefore, how much is considered surplus surplus, as it were, as opposed to prudent management by the trustees?

The second thing is, I think, the underlying thought that the money given back to the employer will be used for investment. I see no evidence to suspect that will be the case. I have a horrible suspicion that, although we might have a desire to have more money for companies to invest, with the best will in the world, it is more likely that they will take the money, run it through the P&L and use it to pay dividends.

Those are the two issues I am looking at: the quantum of surplus and, in general terms, the principle behind that; and, secondly, the extent to which the Government expect it to be used for investment. If they do expect it to be used for investment, how do they hope that will happen?

[Lord Kirkhope of Harrogate (Con)]

My Lords, I declare my interests as a current member and director of a pension trust. I want to take us back to the amendment for a moment. I shall refer to the reference to surpluses made by the noble Viscount, Lord Thurso, because it is an indicator of how this Bill is going to move; I suspect we shall get a surplus of comments about surpluses.

I go back to the amendment. We are starting to hear remarks suggesting that this amendment is critical. I do not criticise it at all because this is an enormously complex and comprehensive piece of legislation. Bringing our minds closely to the purpose of what we are going to debate, if ever a piece of legislation required it, this amendment is an essential ingredient. I fully support all parts of this amendment, which seem to encapsulate all the different areas to which we shall give more detailed consideration as we proceed.

However, I want to refer briefly to something already referred to: the matter of pension scheme surpluses under subsection (1)(h) of the proposed new clause to be inserted by Amendment 1. I referred to this at Second Reading; I will not repeat word for word what I said then—that would not be appropriate—but I want to probe my noble friend and, in particular, the Minister on this matter a little.

We all know that, historically, when we had low interest rates in this country, deficits often used to be repaired with any surpluses that might occur in schemes. As a result, employers that did not have DB schemes were obviously at a disadvantage. I am interested in how we might deploy surpluses in future. For instance, will they be deployable for capital expenditure? That seems quite desirable, particularly looking at the economy at present.

My second point concerns crossovers, referred to here, enhancing the contributions that already exist in DC schemes. How on earth can crossovers be legitimately and properly handled? That seems rather difficult to me.

Finally, I turn to surplus sharing. There is a case going on at the moment; I referred to it in my speech at Second Reading so I will not go back to it now. The encouragement of surplus sharing between employers and between members is terribly important. How can that be done fairly and equally? Will we be able to rely—as we should, I believe—on the powers of trustees always to do everything in the best interests of members? Pressures from employers, for instance, must be curbed when it comes to those decisions that might be taken.

It is a difficult area. I know that we will look at it in more detail, but it is worth mentioning at this starting point because this list is perhaps another example of how complicated things are and how we need to get a grip. Whoever has been responsible in the past for legislation in this field, this is an ideal opportunity, which I greatly support, for us to get this right. I therefore fully support Amendment 1 and hope that, as we move forward, we will use those objects as the basis for our discussions.

[Lord Wigley (PC)]

My Lords, I apologise that I, too, missed Second Reading, for reasons outside my control. When you are in a party with two or three Members, it is very difficult to spread yourself in all directions. I have an interest in this area going back to when I was a trustee of the National Assembly’s pension scheme some years ago and, before that, I had involvement as financial controller of the Hoover Company and with Mars Ltd, which is one of the foremost companies in these islands.

I want to flag up one point as we look at the generalities in this comprehensive umbrella amendment—the position of employees such as those of Allied Steel and Wire in Cardiff in 2002, who found themselves on their backs without adequate safeguards for the pensions that they had. Over the almost quarter of a century since, those still surviving did not get justice out of the system. Whatever balance we have to strike in terms of risk—which is inevitably part of the equation—benefits, security and the longer term against the shorter term, we must also have some safety nets for those who fall through, through no fault of their own, as did the employees of Allied Steel and Wire.

I commend the Government for the steps they have taken for the coal miners, who have been in a difficult position, but if the coal miners were justified so are the workers at Allied Steel and Wire. I draw to the Government’s attention that the First Minister of Wales, the noble Baroness, Lady Morgan, spoke about this last month and called on them to take action to recompense those who have lost out so badly.