Pension Schemes Bill

Lord Palmer of Childs Hill Excerpts

Report stage
Monday 23rd March 2026 Lords Chamber

Moved by

[Lord Palmer of Childs Hill]

120: After Clause 96, insert the following new Clause—
“Report on the impact of pension market consolidation(1) The Secretary of State must, within 12 months of the day on which this Act is passed, publish a report on the impact of consolidation in the occupational pensions market.(2) The report must include an assessment of—(a) the level of market concentration among pension scheme providers, including trends in the number and size of schemes;(b) the effects of consolidation on competition, innovation, and consumer choice in the pensions market;(c) the potential barriers to entry and growth for small and medium-sized pension providers;(d) the adequacy of existing regulatory and competition safeguards in preventing anti-competitive behaviour regarding—(i) exclusivity arrangements,(ii) exit charges, and (iii) pricing structures;(e) the role of The Pensions Regulator and the Competition and Markets Authority in monitoring and responding to market concentration;(f) the merits of policy or regulatory measures to support new market entrants.(3) The Secretary of State must lay a copy of the report before both Houses of Parliament.”Member’s explanatory statement
This new clause would require the Government to report on the impact of market consolidation on competition and new market entrants.

[Lord Palmer of Childs Hill (LD)]

My Lords, in leading once again on this Bill, I say that this group is bound together by a simple question: is the pensions system working as it should for its members and do we have the evidence to judge this properly? The proposed review is on consolidation, access to impartial pension advice, injustices experienced by scheme members, communications and data accuracy. It all goes to trust, fairness and whether savers can navigate the system with confidence.

From these Benches, we think these are legitimate concerns. Consolidation may bring efficiencies but could also reduce competition and choice if left unchecked. Better access to impartial advice is plainly in members’ interest, especially at key decision points. If data is inaccurate or communications unclear then even a well-designated, well-designed system can fail the people it is meant to serve.

I am pleased to have raised in my amendments the issues of competition, access to impartial pensions advice, and injustice experienced by scheme members. These are matters that I raised in Committee and I appreciate the time of, and the response from, the Minister and her colleagues in government. With all the pressures on us, I will not use any more of your Lordships’ time and bring my remarks on my amendments to an end. I beg to move.

[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.

--- Later in debate ---

[Baroness Sherlock (Lab)]

I invite the noble Baroness to come back in at the end if she feels I have not answered that. I would say two things to her. One is that the duty is on the trustees or managers. If they become aware that the appropriate things are not being done by employers, or that an employer does not appear to be taking adequate steps to remedy a situation where things have gone wrong—for example, if there are repetitive or regular payment failures—they have a duty to report it to the regulator.

But crucially, the proposed value-for-money framework introduces an assessment of quality-of-service metrics, which directly addresses the accuracy and promptness of core administrative functions, including the secure, timely and accurate processing of contributions. Metrics related to saver engagement will be phased in at a later date, but schemes will be required to disclose how often they review and correct both common and scheme-specific data as well as the proportion of members with complete and accurate records. They also will have to report on the timeliness and accuracy of core financial transactions, such as paying in contributions.

We are currently considering the feedback received from industry on the latest VFM consultation in order to make sure that we develop a VFM regime that will drive greater transparency and higher standards around data quality and contribution accuracy. I hope that is exactly what the noble Baroness wants, and that that has encouraged her. These measures demonstrate that there is a well-established and effective framework that, together with the VFM measures, will make all the things she wants come into place.

I will not dwell on Amendment 163 from the noble Lord, Lord Palmer, about universal pension advice; we gave that a fair outing in Committee. I simply say that we completely share the view that we want to make sure that people get the appropriate advice at the time they need it. But there is already a very large amount of support out there. Being realistic, the option proposed in his amendment would probably, at the best guess on first estimates, cost around £2 billion and require us to double the size of the financial advice sector. I know he is not pushing that, but he is pushing the important underlying point: to make sure that people have access to the support they need. We believe that, between what is available at the moment and what is coming on stream—Pension Wise, stronger nudge and guidance, and targeted support and guided retirement—there is a lot out there that will do that job.

I turn to Amendment 169 from the noble Baroness, Lady Stedman-Scott. It is always faintly dispiriting when someone announces at the start that they will listen to you but they are going to vote on it anyway. But let me do my best, notwithstanding that challenge, and maybe I can persuade the noble Baroness and she will change her mind—one never knows.

This amendment relates to pension communications. I understand that its aim is to ensure that pension providers can communicate effectively with their members so that they can navigate their choices with confidence. We share that aim, which is why we are acting to reduce complexity and strengthen the support available to pension members. The Government have heard extensive feedback from firms on how targeted support may interact with the direct marketing rules contained in the privacy and electronic communications regulations.

Having considered this feedback, the Government have committed to take forward secondary legislation to amend those regulations. This change will enable workplace pension providers to send targeted support recommendations, which amount to direct marketing, to members who have not opted out of receiving it. That reflects the fact that workplace pension providers have fewer opportunities to obtain consent for direct marketing, limiting the level of engagement they have with their members. We aim to deliver this legislative change quickly to ensure that targeted support can reach as many pension members as possible, while maintaining robust protections from unwanted marketing. We will continue to engage with stakeholders and regulators throughout to ensure that we get the right balance.

In Committee, concerns were also raised around communications that may be required under guided retirement. The Government have examined this carefully in developing the policy, including engaging with the sector and the Information Commissioner’s Office. We will seek further stakeholder views through a public consultation, expected later in the year; this will cover proposed requirements on the information and communications journey for pension members, including the extent to which trustees can intervene to provide support, but that is the best way in which to consider any such interactions in a timely manner. Running a separate review to a different timescale would make it difficult to incorporate any findings in the design and implementation of the policy, but I hope that reassures the noble Baroness that the Government are taking action, and she will not feel the need to test the opinion of the House.

Finally, Amendment 165 is from the noble Lord, Lord Palmer, although he did not speak to it—my noble friend Lord Davies did. I do not want to dwell on any particular scheme but say simply that the Government recognise the importance of pension security in retirement and protections for those saving into pension schemes, and those concerns are at the heart of the Bill. We are also acting where previous Governments have not; for example, by introducing annual increases on compensation payments from the PPF and FAS relating to pensions built up before 6 April 1997, when the scheme provided for this. There are clear and established routes for members to raise concerns or complaints about their scheme when they feel that things have gone wrong. The Pensions Ombudsman provides an independent and impartial service to resolve pension-related complaints that cannot be resolved through a scheme’s internal dispute resolution process; that gives a route to settle issues fairly and ensure that members’ rights are upheld.

This has been a good chance to have a canter across the waterfront of pensions, but I hope, in the light of my responses, the noble Lord feels able to withdraw his amendment.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for her reply—and she got to the crux of the matter. We are trying to make sure that there is information and advice for people who do not have easy access to that information and advice. I take her reassurances that the Government are looking to give that information and advice by whatever means available. These Benches will look at and keep abreast of what advice and information are given, and whether they are sufficient. I hope that we can come back to the Minister, even if informally, if we feel that they are not and to see whether they are what we want. I think that we are after the same thing—we are just looking at it in a different way. I kept my words brief because I want to get through things today, as much as we can, so I did not concentrate on some of those matters.

The problem with the how we deal with things in your Lordships’ House is that Amendment 169 happens to be a very high number—the highest-numbered amendment is around 170, I think, so the Division will come right at the end of the day, and that is very much in our minds when we think about it. My feeling from these Benches is that, if there is anybody left in the House, we will support it if the noble Baroness puts it to a vote. It is not at the top of my wish list, but I think it does make a point, and if it was an earlier amendment than Amendment 169 it would get a lot more support—but the practicalities mean that it will not.

In the light of all that, I beg leave to withdraw the amendment.

Amendment 120 withdrawn.

--- Later in debate ---

[Viscount Thurso (LD)]

My Lords, I support Amendment 155 from the noble Baroness, Lady Altmann, and will speak briefly to my Amendment 162, which seeks to achieve exactly the same effect. Since the noble Baroness has explained it so well, I do not have to repeat the arguments in favour of it. Amendment 162 was tabled shortly after I tabled Amendment 161, when I was looking for remedies for the problem that was being created around Amendment 161. As most of the arguments for that should properly be deployed when we get to Amendment 161, I will not make them at this point, which I hope the Minister will understand to be appropriate. However, I give notice that if we get to that point and we have not had anything helpful—you can always hope—then I will seek the opinion of the House on Amendment 162.

[Lord Palmer of Childs Hill (LD)]

My Lords, people often wonder, speak and write about whether the House of Lords performs a valid function. This group of amendments justifies the House of Lords in one fell swoop. In this group, the Government are proposing 20 amendments to their own Bill, which shows that it had not been thought out properly in the beginning and we are now trying to amend it in your Lordships’ House—and amend it correctly, I add. I am not speaking against the amendments but noting that things are coming to us ill prepared; that there are 20 amendments makes that clear to see.

This group has amendments that raise an important issue of fairness for members of the Pension Protection Fund and the Financial Assistance Scheme, particularly in relation to pre-1997 service, as well as technical government amendments, to which I just referred. There are amendments probing whether members should, in some circumstances, be allowed to move to a better supported arrangement or receive more meaningful redress where historic indexation has been lacking. On these Benches, our instinct is that member protection must remain the starting point, but protection should not become an unnecessary rigidity. There is a secure and properly funded route to a better outcome for members. The Government should at least be willing to consider this, and I hope that the Minister will say some positive words on it.

On pre-1997 rights in particular, Parliament is entitled to ask whether the proposed remedy is full enough or whether fairness is justified. The noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, referred to Amendments 155 and 162, which both seek to do a similar thing. As I said, we are going to vote on the amendments with high numbers later; which one we will vote on, or whether we will vote on both, I do not know. However, we on these Benches agree with the principle of both. We shall see later whether we have had some success in persuading the Government to support these amendments.

[Viscount Younger of Leckie (Con)]

My Lords, I start by referring to the reference the noble Lord, Lord Davies, made to “Mastermind”; I am tempted to say that I have started so I will finish. I thank the Government for bringing forward these technical amendments, which seek to protect schemes from unintended consequences arising from the Bill; to ensure that GMP equalisation is properly treated as a narrow legal correction rather than as full indexation; and to provide greater technical clarity and consistency across the relevant legislative framework. These seem very sensible and constructive changes, and I thank the Minister for her clarifications and the detail she gave.

I thank the noble Baroness, Lady Altmann, and the noble Viscount, Lord Thurso, for the points they succinctly raised on their amendments. As we have heard, Amendment 162 would require the Secretary of State to bring into force the currently uncommenced power in the Pensions Act 2004, allowing the PPF to discharge certain compensation liabilities by paying a cash lump sum. Activating this long-dormant paragraph would add a pragmatic fourth option alongside insurance policies, annuity contracts or transfers. As the noble Baroness, Lady Altmann, said, it would not cost any money to do so.

We therefore support the amendment because it would widen the PPF’s toolkit to act in the best interest of members, giving flexibility to settle appropriate cases efficiently where regulations specify the safeguards and calculation method while retaining parliamentary oversight under the negative procedure and the PPF’s core purpose of protecting members of failed schemes. I therefore say to the noble Viscount, Lord Thurso, and the House that, should he wish to seek the opinion of the House on Amendment 162, we will be minded to support him.

--- Later in debate ---

I thought the noble Lord, Lord Palmer, was uncharacteristically harsh about the government amendments. They are very minor and technical and do not reflect a lack of clarity in the policy objective. We were clear as to what happens. Every now and again—and pensions law is especially complex—it turns out there is an unintended consequence in the drafting, and these amendments simply make sure that the original policy intent is followed through. I apologise to the House for the fact that they are necessary, but this does not reflect anything about the clarity of the policy that GMPs were intended to address.

[Lord Palmer of Childs Hill (LD)]

I accept the Minister’s answer.

[Baroness Sherlock (Lab)]

I am grateful to the noble Lord for his gracious response. In light of what I have said, I hope that the House feels able to support the government amendments and that the noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, will not press theirs.

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I shall speak also to the other government amendments in this group. I start with the context for these amendments. The AWE pension scheme is a trust-based defined benefit—DB—pension scheme for employees and former employees of AWE plc, the Atomic Weapons Establishment. Since 2021, AWE plc has been wholly owned by the Ministry of Defence, and the pension scheme is backed by a Crown guarantee.

The new clauses will allow the Government to defund the existing scheme and establish a new central government pension scheme for its members. They apply only to the DB pension scheme; AWE’s DC contract-based scheme is not affected.

The assets held by the scheme will be sold and proceeds transferred to the Treasury. This measure was announced by the Chancellor in her 2025 Budget, but the principle was announced by the previous Government in a Written Ministerial Statement on 6 July 2022. The new scheme will be a public pension scheme. This is in accordance with wider government policy that when a financial risk sits wholly with government, as it does here, it should not hold assets to cover that liability. The taxpayer is already exposed to the risks, and the liability can be managed more efficiently in the round along with other unfunded liabilities met out of general taxation.

This measure will help to ensure that liabilities are funded in the most efficient way while ensuring the long-term security of members’ benefits. This will also support the Government’s fiscal strategy by reducing near-term borrowing, as it will reduce the amount to be raised in debt markets.

I assure the House that the amendments in this group explicitly protect the accrued rights of all members at the point of transfer. The new public scheme must make provision that is, in all material respects, at least as good as that under the AWE pension scheme. This includes any rights to discretionary benefits that may exist under that scheme at the point of transfer.

The new statutory scheme will be based on the existing rules, and the discretions exercised under the existing rules by the trustee, AWE plc and, indeed, by the Secretary of State for Defence will be codified into the rules of the new statutory scheme. The rules of the new scheme will be drafted in consultation with the trustee of the present scheme. The Government will work with the trustees and future administrator of the scheme to ensure transparency and clarity at the point of transfer. AWE will also work with the current trustee and the future administration to ensure members receive all the information they need at that time.

The new clauses in Amendments 145 and 146 provide that the new scheme should be established by regulations and set out the kind of provision that may be made by these regulations and any amending regulations. Although they are fairly standard for public schemes, I assure the House that the Government have considered carefully how they may be relevant to this scheme.

The new clause in Amendment 148 ensures that scheme rules cannot be amended unless prescribed procedures have been followed. In most cases, the requirement is to consult. However, if the proposed amendment might adversely affect members’ rights, the regulations must prescribe additional procedures to protect the interests of members, including obtaining the consent of interested persons or their representatives. This will include the employer, the members and their representatives.

AWE has already engaged with both its recognised trade unions—Unite and Prospect—and will continue to have regular contact with the unions about future changes.

The new clause in Amendment 149 will enable the Government to direct the disposal of the assets currently held by the pension scheme for the benefit of the Exchequer. We expect the bulk of the assets to be sold before the new scheme is established. Regulations under this clause must ensure that trustees’ liabilities following the sale of assets will be met by public funds, thus ensuring that pensions in payment and any other trustee expenses will not be affected.

Regulations under this clause will also ensure that the trustee and AWE plc are protected against any liability that might otherwise arise because they have complied with the Government’s direction to sell assets. This clause includes a Henry VIII power to disapply or modify specified statutory provisions. To be clear, these powers can be used only in relation to regulations made under this clause and are intended to enable protection for the trustee. For example, we expect that we will need to disapply the scheme funding regime in relation to the scheme once the sale of assets begins.

The new clause in Amendment 150 will allow the Treasury to amend tax legislation to ensure that the transfer of the AWE pension scheme to a new public scheme will be tax-neutral, meaning no additional or unexpected tax liabilities will arise for those affected by the changes. The Treasury will use these powers to modify the application of relevant tax law where it is needed, following the precedent set when the Royal Mail pension scheme was defunded. Indeed, this clause is based closely on that legislation.

The new clause in Amendment 151 provides a legal gateway to permit the sharing of information between named parties to facilitate the establishment and administration of the new scheme. It also gives the Government the power to make regulations requiring individuals or organisations to provide the information needed to establish and administer the new public scheme and transfer the accrued rights. This should not be needed, as the Government are collaborating with the relevant parties. The provision will be required only in the unlikely case that a party does not provide the necessary information upon request.

The proposed new clause in Amendment 152 ensures proper consultation and parliamentary scrutiny for regulations made under this part of the Bill, particularly those affecting the establishment and operation of the new public pension scheme and the transfer of assets. The Government are required to consult the trustee of the AWE pension scheme before making regulations to establish the new public scheme, to transfer accrued rights, or to transfer assets and liabilities. That will ensure that the interests of scheme members will be fully considered before these regulations are made.

In addition, any regulations that could adversely affect existing rights that have retrospective effect or that set financial penalties are subject to the affirmative procedure. That will ensure that significant changes are subject to parliamentary approval and scrutiny. Other regulations under this part of the Bill are subject to the negative procedure, although I note that the taxation regulations are subject only to annulment in pursuance of a resolution in the other place, as is usual for such legislation. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, what can I do but say that I welcome these amendments? They are overdue and I hope they will pass with no dissension.

[Viscount Younger of Leckie (Con)]

My Lords, in the spirit of consensus, we had some initial concerns with the Government’s approach, which we raised in Committee, specifically whether these provisions might render the Bill hybrid. That would be a serious procedural issue, and one we felt was important to explore fully. Since then, we have engaged constructively with the Government and the Public Bill Office on this question. As the Minister will know, there were a good number of meetings and exchanges. I am grateful to both for their time and careful consideration. We have been reassured that these provisions do not, in fact, make the Bill hybrid and we are content to proceed on that basis. I place on record our thanks for that engagement.

I turn briefly to the substance of the amendments, which set out a comprehensive framework for the transfer of the AWE pension scheme into a new public sector arrangement, while seeking to preserve the accrued rights of members, ensure appropriate handling of assets and liabilities, and provide for the necessary technical matters, including tax treatment, information sharing and parliamentary oversight. I thank the Minister for setting out her approach with such detail. Given the reassurances we have received on the procedural point, we are content with the approach set out in this group.

--- Later in debate ---

[Lord Lucas (Con)]

My Lords, I am delighted to see this series of requests for reviews. I support my noble friend’s Amendment 157. I support also my noble friend on the Front Bench in his Amendment 159, which he will no doubt speak to in due course. It echoes what the noble Lord, Lord Vaux of Harrowden, said on a previous day: we really need to understand the causes of the drop in investment in the UK and address them, rather than try to apply some layer of instruction on top without dealing with the foundations.

I am particularly fond of Amendment 170A. As was shown by the last Division and previous Divisions, I feel that the Government are getting themselves into some difficulty on the question of mandation. Surely it should not be the Government telling pension funds what to do—it should be their members. Their members should have a say in and influence over the question of whether more should be invested in the UK. There is also the question of whether we should invest more in protecting us from climate change—again, that should be decided by members; it should not be mandated centrally. However well-intentioned this Government may be on mandation, there is such huge potential for it going wrong under future Governments. Members are the people who have to suffer if their investments go wrong; they should be the people whose views are taken into account.

[Lord Palmer of Childs Hill (LD)]

My Lords, this group brings together a number of proposed new clauses on the wider health and fairness of the pensions system: public service pension availability; intergenerational fairness; the impact of the Act on retirement incomes; barriers to UK investment; and member engagement and rights. In addition, my amendment proposes a new clause to address the fairness of police pension survivor benefits forfeiture rules. Taken together, the amendments reflect a wider concern that major structural reform should be accompanied by a proper review, transparency and evidence.

On these Benches, we believe that there is obvious merit in asking the Government to come back to Parliament on these questions, whether the issue is long-term sustainability, actual retirement outcomes or the obstacles that may prevent productive investment. They are not hostile to reform; they are part of legislating responsibly in an area as consequential and complex as pensions. On these Benches, we are minded to support Amendment 157, moved by the noble Baroness, Lady Neville-Rolfe.

Through the amendment in my name, I am pleased to have raised the issue of police pension survivor benefits in this Chamber. I raised the matter in Committee, and I feel strongly about it. I appreciate the Government’s response to our earlier discussion, so I will not pursue the amendment further today.

[Lord Davies of Brixton (Lab)]

I welcome the comments from the noble Lord, Lord Palmer of Childs Hill, on police pensions. It is a clear injustice that my noble friend the Minister will understand. The truth is that the only objection is the classic “read-across”—the implications it has for other groups—but I do not see that as a good reason to continue with an injustice. I am therefore happy to express my support for Amendment 164.

I do not support Amendment 157, calling for a review of public service pensions. In truth, the House deserves a proper, full debate on the issue and not as a by-product of this Bill. If other Members want to take the necessary steps to have a proper debate on the issue, I would welcome that. I am confident in that because I know that when such a review takes place, it will come up with the same conclusion as the last review.

It should be of no surprise to anyone that an unfunded pension scheme is not funded—it is inherent; it is in the name. Why do we fund private sector pensions? We do so to provide members with a guarantee. There is no ideological issue involved here. For members to feel safe about receiving their pensions, they want to see the employer putting aside the members’ money into a fund that will be there to provide the pensions when they get to retirement—that is why we have a fund. If the pension is being provided by the Government, we can rely on the Government. We have always relied on the Government, and so a fund is not necessary. Calculating what the fund would be, if it were funded, is an interesting exercise—I would do it myself for a reasonable fee—but it does not tell you anything about the management of that unfunded pension scheme arrangement.

The noble Baroness, Lady Neville-Rolfe, mentioned interest rates. Interest rates make no difference whatever to the cost of an unfunded scheme, because it is not funded. They do make a difference to the figure that you calculate at the current time, but that is purely a ghost figure—that is not the cost of the scheme. The cost of the scheme is what arises when you pay the benefits, which is not affected in any way by interest rates.

I look forward to the noble Viscount, Lord Younger, introducing his amendment on member engagement. If I had seen it before this weekend, I would have been minded to add my name to it—I like the amendment. I do not know whether my noble friend the Minister will accept it, but I agree that it is time for a review of how members are engaged in their pension scheme. The system we have now dates back almost 30 years; it is post Maxwell. The Pensions Act 1995, introduced by the noble Lord, Lord Hague—as he is now—established the structure, and the operation of pension schemes has moved on so much since then.

An interesting wrinkle in the legislation comes in the light of the Goode report. Professor Goode was asked to provide advice on member involvement in the wake of the Maxwell scandal. He recommended that there should be member-nominated trustees. This was adopted by the then Conservative Government. The interesting fact is that the Goode commission recommended that there should be a majority of member-nominated trustee in defined contribution schemes, which, of course, is the majority form of provision at the moment. If we were to adopt its approach, as part of the noble Viscount’s review, we would want much greater involvement in looking after the money and taking investment decisions, which I regard as a very good thing.

There have been big changes since 1995. There has been massive growth in single corporate trustees, which precludes the possibility of member-nominated trustees—again, another good reason to support the noble Viscount’s amendment. Of course, how you have member involvement in schemes that are closed is a much more difficult issue than when they are open with active members.

There are good reason for having a review of how members are engaged in occupational pension provision. I have not discussed this with my noble friend the Minister but my guess is that she will reject the amendment, which is a bit of a pity but I will of course, as almost always, support the Whip.