Pension Schemes Bill

Lord Palmer of Childs Hill Excerpts

Thursday 19th March 2026 Lords Chamber

[Baroness Coffey (Con)]

My Lords, I also support my noble friend Lady Altmann’s amendments. Whether she chooses Amendment 49 or Amendment 50 on which to divide, I will support her by voting with her.

The important point here is that people’s lives are unpredictable. One reason why we are extending this even now is that the pensions dashboard is so late in helping to get people informed. Those are the sorts of issues that we are still dealing with. The sooner that people can be better informed, the more agile they will be able to be in consideration of contributions that might need to be made in the future. So, this is an important amendment.

I gently say to my noble friend Lord Fuller—how can I put it?—Caxton House is not as glamorous as the Treasury pitch that he sets out. I know that officials have been working carefully on aspects of this, but it is the wrong move. It was the decision of Ministers rather than civil servants to make this recommendation. That is why I am sure that we will all be in the same Lobby.

[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.

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[Baroness Altmann (Non-Afl)]

Obviously, I support Amendment 55 and a number of the other amendments in this group, but I urge the Minister to consider the dangers of trying to engineer a few large schemes while at the same time knocking out new entrants and competition. From now to 2030, if a scheme is not yet at the £25 billion scale requirement, it will find—and it is finding, such as in the case of Penfold—that it cannot get new business. The employer cannot be confident that it will reach the £25 billion in time, and knows that it could potentially have to change provider. This requirement is undermining innovation and competition in the market right now, and may continue to do so. I hope that the Minister will recognise the dangers.

I apologise to the House, as I should have declared my interests. As stated in the register, I am a non-executive director of a pensions company and an adviser to a pension master trust.

[Lord Palmer of Childs Hill (LD)]

My Lords, I think that everybody in your Lordships’ House wants good investment, whichever side of the House we are on. If you are investing, with apologies, sometimes faith is not enough—you have to see what happens in the market. It is about the choices that are made.

These amendments would allow pension schemes to demonstrate a strong investment performance or innovation in members’ services and administration to be exempt from the scale requirements set out in the Bill, and would introduce greater flexibility on how scale is assessed, including recognising assets held across multiple arrangements.

The amendments reflect concerns that the Bill places disproportionate emphasis on size rather than outcomes, risks disadvantaging smaller or newer entrants and may reduce competition and innovation in the pensions market without clear evidence that larger schemes consistently deliver better returns for members. Amendment 77 would allow exemptions to scale requirements if the regulator deemed that there was no evidence of improved outcomes for members in the case of a proposed merger to meet the scale requirements. This would make sure that members’ interests are protected. On these Benches, we support Amendment 77, and if it comes to a vote, we will support it.

[Viscount Younger of Leckie (Con)]

My Lords, I thank all noble Lords who have amendments in this group, which broadly seeks to refine the Government’s scale requirement as set out in the Bill to reflect the fundamental principle that size is not everything. We have heard a lot about that in this short debate. For the sake of brevity, I shall limit my remarks to my Amendment 77. The scale requirement as currently framed is too blunt an instrument. It risks prioritising size over quality, process over performance and structure over outcomes—in other words, it risks innovative and high performing funds merely because they are small. These remarks have been echoed by the noble Baroness, Lady Altmann.

The central question we must always ask in pensions policy is: does this improve outcomes for savers? This was the essence of my noble friend Lord Fuller’s remarks. If the answer is no, then we should think very carefully before proceeding. When this power comes into force, it will bring into scope schemes that are already delivering strong outcomes—schemes that are well run, well governed and performing effectively for their members. In such cases, forced consolidation is not just unnecessary but may be actively harmful. It risks disrupting successful investment strategies, increasing costs and ultimately undermining the very outcomes that we are seeking to improve.

This amendment would introduce a vital safeguard. It would give the regulator the discretion to recognise where consolidation would not benefit members and to treat such schemes as meeting the scale requirement. It would ensure that the policy is applied intelligently and does not run roughshod over schemes that are already doing what the Government want. Crucially, it would also reinforce fiduciary duty: trustees and managers must act in the best interests of their members, not in pursuit of arbitrary thresholds set by the Government. This amendment would ensure that they are not compelled to take actions that run counter to that duty.

Scale should be a means to an end, not an end in itself. Where scale improves outcomes, it should be encouraged, but where it does not, where schemes are already delivering for their members, we should not force change for its own sake. This amendment would simply ensure that savers remain at the centre of the policy, and therefore when this amendment is called I will seek to test the opinion of the House.

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The trouble is that, unless our amendment is accepted, we will not see this kind of innovation in future. The 15 to 20 master trusts will rest on their laurels, without the risk of too much competition from smaller schemes. Indeed, we heard earlier that the Government are hoping to keep costs up, apparently in the interests of the health of the big schemes. This will be very bad for returns to savers and for our UK pension industry. If the Government do not keep innovation and competition in mind when they make regulations under this Act, we will have a less successful pension sector. I encourage the House to continue the good work and to vote for my noble friend Lady Noakes’s amendment, as it has done for other sensible amendments today.

[Lord Palmer of Childs Hill (LD)]

My Lords, this degrouped set of amendments is very narrow in drafting but, we believe, important in principle. Amendments 105A, 114 and 115 would require the Secretary of State and the reviews and regulations under these clauses to have regard to innovation and competition in the design and operation of pension schemes and in the treatment of non-scale default arrangements.

On these Benches, we strongly agree with the proposition that pension legislation should not inadvertently—this is the problem—freeze the market in favour of the largest existing players. Whenever the Bill pushes schemes towards fewer, larger structures, we believe that Parliament must ask what happens to specialist providers, digital entrants, more tailored propositions and competitive pressure generally. A market that is tidy—tidy is not always right—for Ministers but closed to challengers does not necessarily serve savers well.

This concern was expressed repeatedly in Committee. The critique of the Bill’s scale provisions has been not simply that small is beautiful but that innovation can come from schemes that do not yet meet an arbitrary threshold and that competition itself is one of the mechanisms by which member outcomes improve. I have spoken in this vein on earlier parts of this Bill, warning against an overemphasis on size, which may crush newer entrants and reduce competitive discipline in the market.

There is nothing radical about asking Ministers to have regard to innovation and competition. It is a modest discipline, not a veto. It would not prevent consolidation where consolidation is justified; it would simply ensure that regulations and reviews must notice what might be lost as well as what might be gained. In our view, it is an entirely reasonable request. A well-functioning pensions market should be safe, well-regulated and member-focused, but—this is important—it should also remain open to new ideas and new providers. These amendments would do something to help that balancing view, which is why we on these Benches support them.

[Viscount Younger of Leckie (Con)]

My Lords, I thank my noble friend Lady Noakes for her amendments in this group and I am grateful for the helpful remarks made by my noble friend Lady Neville-Rolfe and the noble Lord, Lord Palmer.

These amendments recognise an important point: a rigid, one-size-fits-all approach risks crowding out innovation, flexibility and ultimately better outcomes for savers. Schemes are not identical, nor are their members, and it is entirely right that providers should be able to design different default arrangements to meet different needs.

Amendment 105A is especially important in this regard. It would require regulations concerning the operation of the scale provisions in Clause 40 to have regard to innovation and competition. The Government have said time and again that they are pursuing a growth mission and that growth will underpin their ability to fund day-to-day spending. Yet what we have seen instead is very different: an ever-greater reliance on taxation to plug the gap, something that is not only economically damaging but ultimately unsustainable for the country.

The noble Lord, Lord Palmer, put it well. If the Government are serious about growth, then they must be serious about fostering innovation and competition in sectors such as pensions. Recognising and ensuring that innovation is not stifled is a practical and constructive way to support that mission.

This amendment does exactly that. It ensures that, in shaping the regulatory framework, the Government actively consider the importance of a competitive and innovative market—one that delivers for savers and contributes to wider economic growth. For those reasons, the Government should accept this amendment. Should my noble friend Lady Noakes wish to test the opinion of the House, we would be glad to support her.