Pension Schemes Bill

Debate between Viscount Thurso and Lord Davies of Brixton

Report stage
Monday 16th March 2026 Lords Chamber

[Viscount Thurso (LD)]

My Lords, I shall speak to my Amendments 14, 16, 17 and 18, in my name and that of my noble friend Lord Palmer. It is always a pleasure to follow the noble Baroness, and I thank her for her support, which I am happy to reciprocate. As it is the first time that I have spoken on Report, I reiterate my interest as a trustee of the Parliamentary Contributory Pension Fund. I do not think that this Bill affects that fund, but for clarity I declare it. I also thank the Minister for the engagement that she has had with me and other colleagues—but particularly with me—on this subject. I came away feeling that I had had tea and sympathy, although possibly not with the greatest expectation for the future. But I thank her for engaging with me.

We debated this matter at some considerable length in Committee, and I shall not go over it. The key issue in this set of amendments is about permitting, when there is a surplus, that surplus to be fairly used, in part to give some inflationary uplift, if that would be the appropriate thing, to members of a scheme. There is nothing in any of the amendments that mandates that course of action; these are designed to permit it and also perhaps to draw attention to some of the historic injustices, as they might be called.

I cannot hear the word “surplus” in relation to pension funds without immediately putting quotation marks around it, as I said in Committee. I was grateful to the noble Lord, Lord Davies, for his suggestion that we really ought to talk about “assets” rather than a “surplus”, which is a best guess by some intelligent professionals. The starting point is a known—the actual market value of the fund on a given day—to which are added a series of known unknowns, in the form of what the guesstimated inflation rate might be, what the likely actuarial longevity of the members might be, and a variety of other things, to arrive at a best guesstimate of what the value of the assets might be at a time in future and what the liabilities might be. If you take one from the other, you come up with a surplus or a deficit. Like many who have spoken, I am extremely cautious about the notion of surplus, and I know from the funds that I have been involved in that, if you are at the top of the cycle, as I suspect we are getting close to now, a larger surplus is much needed to cushion you against the volatility of the shocks to come, whereas if you are at the bottom of the cycle, you are probably very near parallel and possibly slightly in deficit—and you have to have regard to that.

There is a general principle, which I shall speak to more on my next amendment later on tonight, that there is a contract between the employer and the employee that is, in the case of a direct benefit pension, that they are remunerated and, as part of their remuneration, there is a future remuneration, which is the pension. In the case of those schemes that have in their rules full indexation and there is a large surplus, the principle is that that surplus should, by whichever means are chosen, be returned to the employer. The schemes that I am concerned about are schemes which are in surplus and which, in their documentation, made clear that it was the intention at the time to uprate for inflation—but, for whatever reason, usually prudence, the designers of the scheme did not mandate that but allowed a degree of flexibility so that the employer or the scheme could choose not to uprate in whatever circumstances. In that circumstance, when a surplus arises and when indexation arises that had been indicated, if not absolutely promised, part of that surplus belongs to the pensioners, and it is only fair and just that they should have it. This set of amendments is designed to make that possible.

[Lord Davies of Brixton (Lab)]

I have worked in the pension sphere for far longer than I care to remember, and so-called surpluses have been a big issue throughout. They have come and gone. Sometimes they have been negative surpluses—deficits—but they are still central to the health or otherwise of a pension scheme. They have been totally embedded in my working life, so I hope the House will forgive me if I choose to make a longer contribution on this issue.

I support all the amendments in this group. The noble Baroness, Lady Altmann, suggested that I might not like her amendments, and maybe they are a bit unnecessary in principle, but in practice, the idea that trustees should consider all these issues when they make a decision about releasing surplus to the employer is a good one, so I support Amendments 13 and 15. I also support the amendments in the name of the noble Viscount, Lord Thurso. I particularly welcome his Amendment 17, which effectively points out that the existing legislation on the release of surpluses says explicitly that the trustees should do so only when it is in the interests of members. This legislation removes that guarantee.

We debated this issue in Committee and we have heard the Government’s argument, which, essentially, is, “We can leave it to the trustees to look after it”. My experience is that that is not a safe basis to rely upon. Some trustees are fine and they do a great job; others do not consider their role to be to help the members. They see their role as very restricted, so not having something in the Bill about members is a massive disadvantage.

In introducing this legislation, Ministers said extensively that members are going to benefit from the release of surpluses. Any bystander not deeply engaged in the issue, listening to what Ministers have said, would come to the conclusion that members are going to benefit. Indeed, I quoted about half a dozen ways in which different Ministers have given that impression, but for the purposes of this debate, I shall just quote the Minister for Pensions, my honourable friend Torsten Bell. He argued consistently and rightly that the release of assets is not just for employers but for members as well. The Government’s road map for pensions, to which he put his name, states under the heading, “Surplus Flexibilities”:

“We will allow well-funded … pension schemes to safely release some of the £160 billion surplus funds to be reinvested across the UK economy and to improve outcomes for members”.


The Government’s case is that this change in the legislation is required to benefit members, yet there is nothing at all in the Bill about benefit for members. This has been highlighted in the amendment from the noble Viscount, Lord Thurso. It is a big gap in the Bill, and it needs to be rectified.

My Amendment 19 goes together with Amendment 16 from the noble Viscount, Lord Thurso. His amendment adds the word “consulted”, saying that members should not only be notified of the trustees’ intention to release surplus to the employer, they should be consulted about that decision. Consultation is obviously a good thing. The structure for trustees to consult scheme members is not, to my mind, strong enough to provide a helpful way forward. The better way forward is the one suggested in my amendment. There is already provision in legislation for employers to consult members about changes in occupational pension schemes. There is a list of changes to or actions in relation to pension schemes, whereby the employer—if they are involved—has to consult with the independent recognised trade unions. I am very much a trade unionist here. The point of trade unions is to provide a viable means of consultation, and it applies here.

Pension Schemes Bill

Debate between Viscount Thurso and Lord Davies of Brixton

Committee stage
Monday 23rd February 2026 Grand Committee

[Viscount Thurso (LD)]

My Lords, I rise to support my noble friend, particularly in respect of Amendment 218, to which I have added my name. I do so because I have something of an interest: for most of its existence and until quite recently, the superannuation fund of the United Kingdom Atomic Energy Authority was based in Thurso. A number of my former constituents were beneficiaries of that fund and a small number of them ended up becoming beneficiaries of the AEAT plc fund, when that came into existence. It has always struck me that something remarkably close to mis-selling went on at the beginning and that we really have a moral duty to try to correct it.

I, too, looked at the comments that the Minister made in her speech on 5 February. As my noble friend pointed out, she said that the case around AEAT pensions had “been fully considered”. What sprang to my mind when I read those words was the scene in “Independence Day”, when the President is telling everybody that there is no such thing as Area 51 and Defense Secretary Nimziki says that that is not, strictly speaking, true.

Looking at the Minister’s comments that came afterwards that there were three ombudsmen involved, as my noble friend said, the ombudsmen were all asked and all declined, because of vires, to give an answer. Looking at the parliamentary scrutiny, that was two Westminster Hall debates, one by Sir Geoffrey Clifton-Brown and one by Sir Oliver Letwin, I think. As anybody who has done a Westminster Hall debate knows, that is not proper parliamentary scrutiny. Of much more importance were the NAO and PAC reports, which came to the conclusion that there was a case to answer. Indeed, the last Pensions Minister in the previous Government, Paul Maynard, accepted that something should be done and suggested that something would be done, but the election has intervened.

The core issue is that the Government Actuary’s Department, in its publications, gave the distinct impression that the quality of the pension for those who transferred would have an equivalent security to the quality of the pension that had the Crown guarantee with UKAEA. That is clearly not the case, which is the core issue around all this.

As an aside, and in parenthesis, there have been occasions when a Crown guarantee has in these circumstances been transferred across. I was in fact responsible for one when I was chairing VisitScotland and we took the Scottish staff out of the BTA scheme and obtained a Crown guarantee to let that happen, so it is perfectly possible.

This amendment gives an elegant redress that the Government can use to look at, as my noble friend says, a very small number of remaining pensioners suffering under this. I commend it to the Government. In summary, this seems to me to be something that, were it in the private sector and sold by a bank on the high street, would be called PPI, frankly. That is the level of it, in my humble judgment. Therefore, first, there is a duty to do something about a clear mis-selling. Secondly, it has not been properly scrutinised up until the NAO and PAC reports. Consequent on those reports, a previous Government Minister indicated that they would look at doing something about it. For all those reasons, we should now take this opportunity to right a manifest wrong.

[Lord Davies of Brixton (Lab)]

These two amendments are grouped together. There are clear common themes between them, the most obvious one being dissatisfied scheme members: dissatisfied pensioners concerned that they have ended up worse off than they might reasonably have expected. I thank the noble Lord, Lord Palmer of Childs Hill, for his excellent description of both problems, and in broad terms I support the spirit behind these amendments. Of course, both of them call for a review, but in truth we do not really need a review; we know that wrong was done here and we are really asking for the Government to accept some responsibility for providing an element of redress.

Amendment 216 is actually about a thing called integration in pension schemes. This was a technique used widely in the 1970s, 1980s and 1990s, where the occupational pension had a target taking account of the state pension, integrating the state pension into the benefit model. Where the retirement age of the scheme was, for example, 60—we had schemes with a retirement age of 60 in those days—it was integrated by paying more money between 60 and 65. We are talking about a man here. That was when the state pension would come into payment. At that point, the scheme pension would be reduced to allow for the fact that they are now getting this pension from the state.

That is an issue of scheme design, and my view is that the rules of the scheme should be set through collective bargaining. The problem is that that sort of arrangement is much more obvious to someone like me with a lot of experience. I sometimes would claim that my superpower is understanding scheme rules. It is absolutely clear to me, but I can well understand that an ordinary member of the scheme would not immediately have that understanding. Of course, it is quite possible that they see their pension being cut when they get to state pension age. In some schemes, it is actually cut before they get to state pension age now, because the rules still refer to a reduction at 65 and the state pension is not payable until 66, so there are big problems.

Of course, it is possible to look at it the other way around: the member is actually getting a bigger pension after state pension age, and that is to their advantage. This goes to the central point, which is a lack of understanding among scheme members. Were they misled into giving more credit to the scheme? Clearly, for the particular campaigning groups we have heard from—under Amendment 216, there are a number of different groups—their case rests on the argument that the way the rules worked was not adequately explained to them, and they need compensation for how they were misled.

Pension Schemes Bill

Debate between Viscount Thurso and Lord Davies of Brixton

Committee stage
Monday 19th January 2026 Grand Committee

[Viscount Thurso (LD)]

My Lords, I will speak to my Amendments 34 and 37 and will briefly comment on the other amendments. Quickly, before I do that, I seek to assist the Minister with the question I asked her on the last group. I was written to by people who came together as a small group to protest against the failure of a trustee and an employer to award discretionary increases, contrary to their joint policy of matching inflation, originally published in 1989 and repeated in pensions guides and newsletters over the years. For the last four years, the employer has refused consent to modest discretionary increases recommended by the trustee and supported by the independent actuary. That is the situation I am looking at. I hope that is helpful.

I turn to the current group. Let me say, first, in response to the noble Viscount’s amendment and his Clause 10 stand part notice—as he said, both are probing amendments—broadly speaking, I concur with him. If we had had regulations, draft regulations or just something to look at, an awful lot of these questions would not have needed to be put at this stage. As a matter of principle, I am always in favour of the affirmative procedure, rather than the negative one; I shall leave that there.

I know that the noble Lord, Lord Davies, will speak eloquently to his own amendments in a moment, but they are a bit of a variation on the theme of the ones in my name. My Amendment 34 would, in Clause 10 and at line 23,

“after ‘notified’ insert ‘and consulted’”.

What that would do is to say that the trustees would have not only to notify the members but to consult them. My Amendment 37 is very much along the same lines. It would insert, at the end of proposed new subsection (2B), a new paragraph—paragraph (e)—

“requiring that the trustees are satisfied that it is in the interests of the members that the power to pay surplus is exercised in the manner proposed in relation to a payment before it is made”.

Both amendments seek to explore the relationship between the employer, the members and the trustees.

I have listened to the arguments where it has been put forward that the employer has underwritten the surpluses, almost, and is at the mercy of the trustees. The case that I have put forward shows that, actually, there is often a power imbalance between the members—they are probably at the bottom of the pile—the trustees and the employer. I completely concur that the idea of mandating a response is wrong, but it is open to have regulations that require the trustees both to have regard to and to look at that, so that we reach a situation where members’ interests have at least equal value, in the eyes of the trustees, as the requirements of the employer.

I feel that these amendments are very modest. Who knows what might happen later on, but this stage the amendments are designed to reinforce members’ ability to be consulted and know what is going on.

[Lord Davies of Brixton (Lab)]

My amendments address how members’ interests can best be represented whenever a release of assets is under consideration.

As the Bill stands, the first members will know about such proposals is when they are a done deal—that is, when the decision has been made by the trustees, having talked to the employer. That is what the Bill says, and that is clearly wrong. There is also nothing in the Bill about any involvement of members in the process, such as consultation. This is obviously unacceptable; they should be involved fully from the start. I support the amendments in this group in the name of the noble Viscount, Lord Thurso.

I would probably oppose Amendment 42 in the name of the noble Baroness, Lady Noakes, but, obviously, I shall wait to hear what she says before coming to a conclusion—although the noble Baroness’s remarks on the previous group gave me the gist of what is proposed. Finally, I shall await my noble friend the Minister’s response to the questions raised by the amendments in the name of the noble Viscount, Lord Younger of Leckie.

My Amendment 36 is relatively straightforward and, I hope, uncontentious. Members need to be told before, not after, a decision is made by the trustees and agreed by the employer. This is a point of principle. Scheme members are not passive recipients of their employers’ largesse; they should be equal partners in a shared endeavour, and they have the right to be involved.

My other two amendments would bring scheme members’ trade unions into the process. A question has been asked a number of times during the passage of the Bill in the Commons: who represents members when a release of assets is proposed? The answer, of course, is their trade unions. This is a matter of fact. Consultation is inherently collective and there is now extensive and detailed legislation on how members are to be represented collectively. This applies here, as it does to all other terms and conditions of employment. I should emphasise that this is a requirement to consult on the employer, not the trustees. It applies to trade unions recognised for any purpose under the standard provisions of employment law.

Amendment 36 is relatively straightforward. It would simply require the employer to inform recognised trade unions at the same time as scheme members of the proposals that it is considering in discussion with trustees to release scheme assets. Amendment 40 would go further; it would require an employer to consult with those recognised trade unions before reaching any agreement with the trustees. The requirement to consult with trade unions about changes in pension arrangements that they sponsor is not a new provision. I am not proposing anything radical or new. Pension law already requires consultation with trade unions in this particular form; it requires them to take place before major changes in employees’ collective arrangements. My case is simply that the decision to release assets is a major change and hence it should be brought within the consultation requirements that are already set out in legislation.

This is all in accordance with Section 259 of the Pensions Act 2004 and the regulations under the Act. These are the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006, that is SI 349 of 2006. These regulations require employers with at least 50 employees to consult with active and prospective scheme members before making major changes—known as listed changes in the legislation—to their pension arrangements.

The key requirements set out in the legislation includes a mandatory consultation period. First, employers must conduct a consultation lasting at least 60 days before a decision is made. Secondly, there must be a spirit of co-operation. Employers and consultees are under a duty to work in the spirit of co-operation and employers must take the views received into account. Thirdly, the affected parties consultation must include active members, those currently building benefits, and prospective members—eligible employees not yet in the scheme. Deferred and pensioner members are generally excluded, which I have always regarded as a shortcoming in the legislation.

The listed changes that currently trigger statutory consultation are: an increase in the normal pension age; closing the scheme to new members; stopping or reducing the future accrual of benefits; ending or reducing the employer’s liability to make contributions; introducing or increasing member contributions; changing final salary benefits to money purchase benefits; and reducing the rate of revaluation or indexation for benefits. It should be noted that this is not just about changes in benefits; it is about changing the financing of the scheme. A release of assets is a change in the financing of a scheme, and so it should be included in the list in these regulations. My amendment would simply direct that regulations should be laid that will add release of assets to the list of these listed changes.

There are consequences under the legislation for employers that fail to comply with it, but the spirit here is one of setting out a process of working together, in order, as far as possible, to reach changes to the scheme that are accepted to both sides of the employment relationship.