Pension Schemes Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 3rd February 2026 Grand Committee

Moved by

[Baroness Noakes]

168: Clause 42, page 56 line 23, leave out “for the purposes of restricting” and insert “in connection with”
Member’s explanatory statement
This amendment would allow regulations to encourage new entrants to enter the pension scheme market.

[Baroness Noakes (Con)]

My Lords, in moving Amendment 168, I shall speak also to Amendments 169 to 171 in my name; I thank my noble friend Lady Neville-Rolfe for adding her name to three of those four amendments.

Last week, I promised the Minister that we would return to the issues of new entrants, competition and innovation. I make no apology for returning to these themes, because they are fundamental to a healthy pension provision market. The Government have decided that they wish to accelerate the consolidation of pension providers into a smaller number of larger players because they believe that this will enhance the returns that pension savers will get. I think that that is arguable, but I am not going to relitigate that case today; some of us tried to make it last week, and I know that we will return to it on Report.

Instead, I want to focus on how that market can be future-proofed so that it will deliver for savers in the long term. The Government should be interested in this because I am fairly sure that they will not want to contemplate a further significant market intervention, such as the one in this Bill, a few years down the line when they find that the performance of the oligopolists they have created starts to disappoint.

I know that the value-for-money regime in the Bill might well deal with the worst performers, but getting rid of poor performers will not be good enough to make the pension provision market develop in a positive direction. For several reasons, the pension provision market is one where customer choice is not a force for significant change, so we have to look elsewhere. Healthy markets are those in which innovation can challenge existing market norms, often by identifying underserved or badly served customers and by using technology to transform cost bases. Competition within established markets is rarely enough to achieve disruption, which is why the focus has to be on new entrants. This is the story of practically every business sector. It certainly encompasses all aspects of financial services, and pension provision is no exception; for example, cloud-native pension platforms are potential current disruptors in the DC pensions space.

We have already had some conversations about new entrants in the context of the new entrant pathway and the transitional pathway. The noble Baroness, Lady Altmann, and I have tried to argue that new entrants are going to struggle to survive because of the rules of the two pathways, because of the timescales involved in getting from innovation to significant size, and because of the interaction between the financing of growth and the requirements of the scale provisions. I still live in hope that we will be able to persuade the Minister about that.

Three amendments in this group are aimed at the provisions in Clause 42, which concern default arrangements. The aim of my amendments is to ensure both that new entrants are encouraged and that competition and innovation can thrive. Clause 42 is, astonishingly, headed “Regulations restricting creation of new non-scale default arrangements”. Unsurprisingly, my Amendment 168 takes aim at this notion of restricting new non-scale default arrangements. It would replace the purpose of the regulation-making power, which is to restrict the ability of a pension scheme provider to begin operating a non-scale default arrangement, with the more neutral “in connection with”. I could have gone further—indeed, I probably should have gone further—and replaced “restricting” with “encouraging”, or at least something more positive.

My central proposition is that new pension providers should be welcomed with open arms and not be assumed to be something to be squashed. It may well be that not all new entrants are successful—the Bill has provisions that will allow them to be consolidated if they are not—but starting with the presumption that they are bad news and need to be controlled and restricted is completely wrong. Amendment 169 would add some words to Clause 42(2)(f) so that the regulations on new non-scale default arrangements can confer a function of encouraging competition on regulators. The wording is almost certainly not quite right but, for the purposes of Committee, I am trying to ensure that the regulators can be given a role in creating and developing competition in the markets in which pension providers operate.

It gets a bit complicated here. As I read it, the Pensions Regulator has no function, power or objective in relation to pension provision markets, including competition. This is in stark contrast to the FCA, which has a strategic objective to ensure that the markets it regulates function well. It also has an operational competition objective and a secondary objective to promote competitiveness and growth. It is quite possible that the FCA’s statutory objectives will, in effect, ensure that they act in a pro-competition way when exercising powers granted under the regulations in Clause 42. I hope the Minister can tell the Committee how the Government see Clause 42 of this Bill interacting with the FCA’s existing statutory framework.

It is, however, clear that TPR operates in a wholly different statutory framework, which is undesirable, as later amendments will explore, and could lead to different outcomes under this Bill in the different pension provision markets that they regulate. I ask the Minister how the Government can justify one regulator having quite clear competition and pro-market powers while the other regulator does not. Will this produce different outcomes in the exercise of the powers?

Amendment 170 would add a new subsection (2A) to Clause 42 so that the regulators

“must have regard to the desirability of encouraging innovation”

in pension provision. While the FCA’s legislation does not specifically reference innovation, as I have explained, it has several references to competition and competitiveness, which are generally interpreted to include innovation as a key driver. TPR’s legislation has nothing about innovation. I believe that, as a minimum, the regulator should have something like a statutory “have regard” duty to innovation to ensure that it keeps that in sharp focus as it carries out its regulatory functions in relation to new providers.

Lastly, Amendment 173 would require the review of non-scale default arrangements, which Clause 43 requires, to consider the extent to which non-scale default arrangements contribute to competition, which I hope is self-explanatory. I hope the Minister can also explain the timetable for the Clause 43 review, since no timing appears in the Bill, which itself is a rather extraordinary way to legislate.

The contrast between the type of regulation that this Bill is trying to create and that in the FCA and Prudential Regulation Authority more widely is stark. For some time, both the PRA and the FCA have had a special focus on fostering start-ups. They have regulatory sandboxes to allow innovative ideas to be tested outside the normal regulatory framework. Just today, they have announced new arrangements to help scale-ups to achieve their potential. This Bill feels positively prehistoric in its approach to squashing new entrants into the market and I hope that the Government will think again. I beg to move.

[Viscount Trenchard (Con)]

My Lords, I would like to add my voice in support of Amendment 168 and the other amendments to which my noble friend Lady Noakes has spoken.

It seems quite counterproductive for legislation to discourage innovation and the introduction of new types of investment based on different strategies in order to widen the choice available to the trustees of our pension funds. Anything that seeks to restrict new entrants is by definition counter competitive and likely to lead ultimately to worse, not better, outcomes.

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[Baroness Sherlock (Lab)]

We may disagree on some of the approaches to the market, but we want innovation, so I do not disagree with the noble Lord on that. However, we want innovation that serves member outcomes, and that may mean different approaches to understanding what innovation does. We do not want innovation to pull away from scale.

The noble Baroness asked about timescale. The intention is that the review will be carried out in 2029, but it will need to follow the introduction of the VFM framework and contractual override measures for this to work. That was set out in both the final Pensions Investment Review and in the pensions roadmap, which the Government published. Hopefully that is helpful.

[Baroness Noakes (Con)]

Can the Minister explain why that timescale has not been put in the Bill? I cannot think of another review that has been written into law without a relevant timeframe being attached to it.

[Baroness Sherlock (Lab)]

I think because it has to happen. It has to follow VFM; the pensions road map has set out the connection and the order in which things will happen. My understanding is that it is because it follows that.

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In summary, this group presents a shared ambition of better outcomes for members. The Government’s position is that achieving genuine scale, aligned with clear value for money and proportionate safeguards, will unlock the investment expertise, governance and net returns that members deserve. I hope that that was enough for the noble Baroness, Lady Noakes, to be able to withdraw her amendment.

[Baroness Noakes (Con)]

My Lords, I thank all noble Lords who took part in this interesting debate. The big difference between what I have advocated and what the Minister has set out as the Government’s position is that she is describing what they hope to achieve by consolidation in the current market, but what I was trying to get at was future-proofing that market.

Markets stagnate unless they are subject to the kind of pressures that ensure that they continue to develop. I mentioned that customer choice is one that we can largely discount in the context of this particular marketplace. So we need to look for the other classic ways in which markets improve themselves over time, which is why I look to the role of new entrants and innovation. The Minister seemed to suggest that that could occur between these new larger players that have been created, but I believe that is fundamentally wrong because those players have a lot of investment in systems and infrastructure, and they are not very interested in significant disruption. That is not an absolute rule, but if you look at the experience of the telecoms industry, media and almost any other industry, you get disruptors from outside the marketplace. That is why in financial services we have fintechs disrupting the financial service marketplaces at the moment in many different ways.

Unless we are absolutely clear that we can facilitate that process of market disruption—it is to the long-term benefit of savers, because the markets will deliver those long-term benefits—we need to ensure that those markets stay vibrant. The pension provision market could easily seize up, broadly, with a smaller number of larger players dominating the pension provision market but not being subject to real competitive pressures because of all the hurdles put in the way of organisations that want to enter the market, whether via the new entrant pathway relief or via the regulations under Clause 43, which will squash them.

There is a fundamental difference between us on this side of the Committee and the Government. I am not at this stage challenging whether getting to a smaller number of larger players is the right answer—I accept that for the sake of argument—but I am concerned with making sure that the pension provision market itself has the right incentives within it to ensure that it remains relevant for the purposes of improving and protecting savers’ returns in the long term. I have to say to the Minister that we will return to this in one way or another on Report because it is a really serious issue.

I am absolutely not convinced that TPR’s arrangements—there is no reference to the pension provision marketplace in TPR’s powers and responsibilities—can be set alongside the FCA, which has to operate in a clear pro-competition environment. I do not think that is the right approach either, and I am not convinced about TPR’s approach to innovation, which is again about the existing players in the market rather than how you encourage new players. That has been done pretty successfully in the context of the FCA and the PRA for banking and insurance markets, by positively hand-holding new entrants and helping them through the whole process so that they can operate against the big boys. It is important that we allow little players to come and challenge the big players, because that is what produces the benefits in the long-term for consumers—for savers in this instance. I of course withdraw the amendment but, as I indicated, we have a fair way to go in this area.

Amendment 168 withdrawn.

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Moved by

[Baroness Noakes]

175: Clause 48, page 62, line 29, leave out from beginning to end of line 22 on page 63
Member's explanatory statement
This amendment probes whether the “best interests” test is the correct test to use.

[Baroness Noakes (Con)]

My Lords, Amendment 175 is a probing amendment about the best interests test, which is a part of the power to make unilateral changes to FCA-regulated pension schemes in Chapter 5 of Part 2 of the Bill. I am grateful to the noble Baroness, Lady Bowles of Berkhamsted, for adding her name to this amendment.

The FCA requires the firms it regulates to comply with a consumer duty, which means that firms must act to deliver good outcomes to retail customers—in this case, those within pension schemes. The duty was introduced after a long period of consultation and is intended to replace a lot of rules-based consumer protection measures. This Bill, on the other hand, goes in the opposite direction by requiring the FCA to layer some specific rules in relation to the best interests test on top of the consumer duty.

My amendment, in effect, asks the simple question of how the best interests test relates to the consumer duty. In what ways does it differ from the consumer duty? If there are differences between the two, the Government need to be clear about what they are. Alternatively, they need to require the FCA to make it clear what the differences are, and the Bill does neither. Can the Minister say why achieving better outcomes for the members affected by the unilateral change is necessary? For example, if members are being transferred to another scheme using the power in new Section 117B, why is it necessary to go beyond good outcomes?

In addition, transferring members who will be better off, while leaving behind those who are no worse off, may mean that over time some groups will be stranded in uneconomic schemes because they are the last man standing. How does the Minister think that this will work if there are several transfers over time and each taken in isolation was better for some but no worse for others, but cumulatively there is a detriment for those left behind? In practical terms, how is this meant to work in practice? I beg to move.

[The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)]

I inform the Committee that if this amendment were to be agreed to, I cannot call Amendment 175A for reasons of pre-emption.

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[Baroness Sherlock (Lab)]

I am happy to reflect on the noble Baroness’s point. If it leads the Government to believe that we have phrased the test badly, then of course we will take appropriate action; if not, then we will say where we are.

[Baroness Noakes (Con)]

My Lords, I thank noble Lords who have taken part in this short debate. I hope the Minister will look again at the point that the noble Baroness, Lady Bowles, has raised. In fact, that particular issue was raised in the Chamber either yesterday or last Friday—I cannot remember which, as all the days run into each other—in connection with another Bill going through. It very definitely is interpreted as sub-50%, so it is definitely a fairly weak formulation. I am quite surprised if that is what the Government want, so it is worth looking at again.

I do not think I got a satisfactory answer on the difference between the FCA having the consumer duty and what is intended under this Bill, except that the FCA is going to issue more rules about what “best interests” actually means in this context. To me, it seems to be going against the grain of FCA regulation, as I tried to point out earlier, and it could potentially cause problems in understanding.

The Minister did not respond to my point about the last men standing, which was that if you allow groups of members to be transferred because they will be better off and the others are not worse off then, in the long term, you structurally weaken what is left. Does the Minister have any views on whether that is the correct approach? A long-term problem cannot be avoided in that area, which calls into question whether you can leave members behind.

I am still very mystified as to how all this will work in practice, but I will reflect on what the Minister has said and what she has not said before determining whether to come back on Report. I beg leave to withdraw my amendment.

Amendment 175 withdrawn.

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Taken together, these amendments reflect a cautious but constructive approach. We support the policy intent behind guided retirement, as I said at the outset, but it is right to probe whether the framework is sufficiently clear, workable and robust enough to deliver better outcomes for savers, while preserving flexibility, encouraging innovation and avoiding unintended consequences for trustees and providers. I look forward once again to the Minister’s response. I beg to move.

[Baroness Noakes (Con)]

My Lords, my Amendments 177, 179 and 180 in this group are all probing amendments. Amendment 177 would delete Clause 49(3)(b). Subsection (3) defines “default pension benefit solution”, and paragraph (b) says that it must be

“designed to provide a regular income”

in an individual’s retirement. I wish to probe whether it is right to force all prospective pensioners into a lifetime income solution. There is a problem with “one size fits all”. If a pensioner is going to continue working on a full-time or part-time basis, as many do, they may not need to draw income for at least part of their retirement. But paragraph (b) seems to be a straitjacket requiring an income for all their retirement years, even if the pensioner does not need it. In addition, smaller pots do not lend themselves to lifetime income solutions because they can produce insignificant amounts of income and are also costly to administer. The Bill does not provide for a de minimis exemption.

Furthermore, a prospective pensioner who has significant accumulated debt pre retirement may well benefit more from clearing those debts with a capital sum than having income throughout retirement. I see that Clause 49(6) regulations can make provision about the term

“designed to provide a regular income”,

but that, using normal language, does not appear to be capable of encompassing the payment of lump sums without a lifetime income component within the use of such a power.

Amendments 179 and 180 concern Clause 50, which deals with the people called “transferable members”, who are basically those for whom their pension scheme determines that they do not fit with its scheme for pension default benefit purposes—I paraphrase, but that is the gist of it. The pension scheme determines that these are the members they cannot design a default pension for. Subsections (14) and (15) allow regulations to require certain pension schemes to accept transferable members, while subsection (16) allows regulations to prohibit or limit the charging of fees in respect of transfers. Hence pension scheme A can determine that some of its members are too difficult to devise default retirement solutions for, and then the Government can tell pension scheme B that it must take them and might not even get paid for it. This sounds like quite an extraordinary set of powers, which is why my Amendments 179 and 180 would delete subsections (14) to (16). I would be interested to hear the Minister explain why the Government need such draconian powers and what limits will be placed on them.

[Lord Fuller (Con)]

My Lords, there are three clauses here and one would have to be pretty churlish to want to reject and disagree with the thrust of what they are trying to achieve. But I am concerned, as is my noble friend Lord Younger, about how we might put in these contractual arrangements. I am concerned that we are going to sleepwalk into a situation where there is unrealistic customisation and we are going to set unrealistic expectations about the ability of schemes—particularly the larger schemes, because we know schemes are going to be much bigger than today—to give personalisation.

We are going to see, if I read these regulations correctly, a huge number of bespoke arrangements. There is going to need to be candour, not just from the schemes themselves but from the members when they are asking questions. What is the duty upon the person to take advice? Normally, at the moment, if you want to change your pension arrangements, you need to take advice and pay for it. Who will pay the fees? Is it the member or the scheme itself?

When I think about candour, it leads me down the path of thinking about what happens to people who are in impaired life situations. Perhaps they have cancer or another terminal disease. I am not going to trespass on the arguments that are made every Friday in your Lordships’ House, but as we have learned from those debates, there is a lack of certainty about people who are in those impaired situations.

That leads on to my noble friend’s point about capacity and capability of trustees to make these judgments—that is difficult. So I am entirely in agreement with the idea that people should be able to have control and a bespoke arrangement just for them, but I am concerned about the practicality of delivering what can be subjective judgments of the trustees. In these large schemes you may have to deal with hundreds or thousands of these applications.

In local government—a parallel world— the EHCP system mandates a personalised regime for children’s special educational needs. I suppose my concern is that it has led to a huge bureaucracy—a cottage industry of a huge amount of appeals, process and, of course, delay. When you have pensions, you cannot have a delay because people are at the end of their lives—are they going to make it?

I want to agree with the thrust of this, and these are probing amendments, but I am interested in the Minister laying out in some detail how these bespoke arrangements might be calculated and defended by trustees with lots of other things to do. I am also very much drawn to the amendments from the noble Baroness, Lady Noakes, about being realistic about the current ways of work, in which people have blended retirements, and about the requirement to have indexation and all those sorts of things. It does seem complicated, and I am interested to hear what the Minister might say about it.

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Moved by

[Baroness Noakes]

181: Clause 65, page 82, line 4, leave out “does not have any active members” and insert “will not have any active members immediately after the transfer has taken effect”
Member’s explanatory statement
This amendment probes the timing of ceasing to have active members.

[Baroness Noakes (Con)]

My Lords, the noble Lord, Lord Katz, will be pleased to know that this will be my shortest intervention. With my Amendment 181, to which the noble Baroness, Lady Altmann, has added her name, we now move on to superfunds, which are an excellent innovation that allow employers to shed their DB liabilities while also protecting or enhancing members’ interests.

My Amendment 181 is a small, technical amendment designed to address an issue to which I was alerted by Pensions UK. Clause 65(2) sets out the onboarding conditions that must be met for superfund transfers. Superfunds are designed to deal only with non-active members, as is clear in subsection (1); however, for some reason, the time at which this condition is tested is when the application for approval of the transfer is made by virtue of subsection (2)(a). I understand that it is quite possible for arrangements for transfer to a superfund to be made on the basis that members will become deferred—and, therefore, no longer active members—as soon as the transaction has taken place. I am therefore not sure what purpose is served by requiring all of those members to be deferred at the date of the application to the regulator, since that could be many months before the transfer will take place.

I look forward to the Minister’s comments and beg to move.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, everyone—apart from insurers, perhaps, who prefer buyout and the regulatory cash bonus it brings them—is in favour of superfunds. They should improve member benefit security. They can enhance members’ benefits, as the noble Baroness, Lady Noakes, just said. They can return cash to employers when appropriate, supporting UK businesses. They can also invest more in productive finance than a buyout or a DB scheme can.

However, numerous barriers make it difficult for superfunds and my Amendments 182 and 183 seek to address two of them. Amendment 182 seeks to remove gateway test 1, which is the test that prevents a scheme that can afford a buyout entering a superfund. The policy of pushing everything to buyout is intended to address risk, but it is not always in the members’ best interests; that could be considered more. Discretionary benefits, which can often include things on which expectations are based, may be lost. For example, spouses’ entitlements and increases in pensions are often discretionary; I know that that is the case in parliamentary schemes.

In a buyout, discretionary benefits are likely not to be paid, but a superfund could pay them. There seems to be some underlying assumption that superfunds do not serve risk reduction, but that does not reflect the extremely secure funding position that superfunds are held to by the regulations. Additionally, the test is unstable because funding levels vary. A scheme can start the process unable to afford buyout, and therefore be deemed able to go into a superfund, but if later on it could afford buyout part-way through, it would be required to reverse out and would be forced into a buyout. That can mean a lot of wastage of cost and time, as well as worse-off pensioners. Removing the test would give schemes more flexibility in the course they pursue, and may be better for the economy. If they chose a superfund, it would mean that more schemes could keep money invested in pensions and pay out more generously, rather than that extra money being lost in the insurance companies.

Amendment 183 is about the wind-up trigger and the protected liabilities threshold. This in, in essence, the point at which a superfund’s funding drops to such a level that it must close and enter the PPF. The recent PPF indexation means that the protected liabilities threshold is now above the low-risk trigger—that is, the technical provisions threshold—which is upside-down from the policy design, where the low-risk trigger is intended to be a less critical warning scenario than the wind-up trigger and is the point at which the scheme funds must be boosted by investor money.

This upside-down formulation will make it harder for superfunds to attract investor capital and will probably push pricing up closer to buyout levels, narrowing the slice of the market that superfunds can operate in. That is good if you are shareholders in insurance companies but, again, not for pensioners, who lose benefits. The amendment proposes a “lower of” formulation for the definition of the protected liabilities, which would set it at lower and more reasonable levels.

There could be other ways to fix this or remove the protected liabilities threshold entirely and rely on trustee powers in distressed situations, which is normal practice for regular DB schemes. But staying in the upside-down formulation does not seem right and risks stifling the nascent superfund model. I appreciate that this is a recent development because of the indexation and possibly one that the Government did not originally foresee, but it none the less needs tackling.

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[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Baronesses, Lady Noakes and Lady Bowles, for introducing their amendments. I will start with Amendment 181, which would broaden the range of schemes able to apply for a transfer into a superfund by effectively including active schemes.

On the points made by the noble Baroness, Lady Noakes, the responses to the DWP’s initial consultation on DB consolidation noted clear practical difficulties in assessing the future of a scheme. It is not clear how the regulator would conclude that the scheme will have no active members at an unspecified time of transfer. Furthermore, closing DB schemes can be a protracted exercise, where unforeseen complicated issues can arise. This Government, and previous Governments, have been consistent in saying that superfunds should be an option only for closed DB schemes. To avoid such complications for the scheme trustees and the regulator, Clause 65 sets out that closed schemes alone can transfer to a superfund and only where they are unable to secure member benefits with an insurer at the date of application.

Amendment 182 from the noble Baroness, Lady Bowles, would broaden the range of schemes able to apply for a transfer into a superfund by removing the restriction that schemes which can afford insurance buyout cannot transfer to a superfund. By removing this requirement from the Bill, superfunds could compete directly with insurers. That would risk superfunds offering endgame solutions in the same space as insurers, while being held to a lower standard in terms of member security.

The onboarding condition was introduced following industry response to the consultation on superfunds which first identified this risk. There was concern that employers may see superfunds as a way to relinquish their responsibilities at a lower cost than insurance buyout, and that trustees could be pressured to transfer into a superfund when a buyout solution is available. It is important for us to remember that insurers and superfunds operate under very different regimes. Insurers under Solvency UK requirements have stringent capital requirements and their members are fully protected by the FSCS.

Superfunds are built on existing pensions legislation and, as such, the PPF acts as a safety net providing compensation. The PPF provides a great deal of security, but not as much as the FSCS. Superfunds offer a great deal of security, but their capitalisation requirements are not as stringent as insurers as they are not designed to be as secure. That is because superfunds have been designed as a slightly less secure, more affordable endgame solution for schemes that are well funded but cannot afford buyout. They are not intended as a direct competitor for insurance buyout. The onboarding conditions address the risk of regulatory arbitrage, recognising those differences.

Clause 65 therefore provides clarity by ensuring that only appropriately funded schemes can transfer to superfunds. As introduced, it includes the power to substitute another condition if needed. We will consult with industry to assess what, if any, further refinements may be needed to protect scheme members.

Amendment 183 from the noble Baroness, Lady Bowles, would require superfunds to assess their protected liabilities threshold at the lower of a prudent calculation of a scheme’s technical provisions or based on a Section 179 calculation of the buyout price of PPF-level benefits. This amendment, and the noble Baroness, recognise the importance and impact on this threshold of the Chancellor’s Budget announcement that the PPF will provide prospective pre-1997 indexation for members whose schemes provided for this.

The purpose of the protected liabilities threshold is to ensure that in the rare circumstances where a superfund continues to underperform, the scheme is wound up and member benefits are secured at the highest possible level. The threshold is an important part of member protection and has been designed to prevent members’ benefits being reduced to PPF compensation levels should a superfund fail. The threshold also recognises the risk that scheme funding could continue to deteriorate in the time it takes to wind up.

Clause 71 therefore aligns the protected liabilities threshold with the calculation of those protected liabilities. It sets the threshold at a level above the Section 179 calculation, so that members in a failing superfund receive higher-than-PPF benefits. There is the added benefit that PPF-level compensation that is bought out with an insurer protects the PPF itself.

We recognise the impact that changes announced in the Budget have on the superfund protected liabilities threshold, and that it would not be good for members’ outcomes if a superfund is required to wind up prematurely when there is still a strong likelihood that benefits can be paid in full. Any changes to reduce the threshold, however, will require careful consideration and need to ensure that members and the PPF are protected. The level of the protected liabilities threshold will be subject to further consultation with industry as we continue to develop the secondary legislation.

The Committee will also note that for those instances in which technical provisions are lower than the Section 179 valuation of a scheme, Clause 85(4) allows the Secretary of State to provide by regulations that a breach of a threshold has not taken place. These calculations have the potential to converge, and sometimes swap, in very mature schemes and we acknowledge that that occurrence is more likely following the introduction of pre-1997 indexation for prospective PPF benefits.

The use of this power will aim to ensure there are no unintended consequences for well-funded superfunds in those circumstances. It is not our intention to place any additional pressures on superfunds. Providing pre-1997 indexation for PPF benefits is the right thing to do. All members in schemes supported by the PPF benefit from knowing they can count on higher levels of compensation should the worst happen—a fact that should be celebrated. We are committed to working with industry to create, as the noble Baroness, Lady Stedman-Scott, questioned, a viable and secure superfunds market and will consult on issues such as these following Royal Assent to ensure we appropriately balance the metrics of each threshold.

My noble friend Lord Davies asked me to look forward to see what demand there will be for this. That is quite hard to do, but we estimate that around—I am told—130 schemes with £17 billion in assets may take up the option of entering a superfund, but we recognise these figures are highly uncertain. It will depend on how the industry reacts, future economic conditions and competition. The numbers, of course, could be significantly greater if the market grows.

It has been an interesting discussion, but I hope in the light of my remarks, the noble Baronesses feel able not to press their amendments.

[Baroness Noakes (Con)]

My Lords, at least we are going to please the noble Lord, Lord Katz, this evening. We might even manage to stick within our normal timeframe and not go beyond.

I thank the noble Baroness for setting out the rationale for the time at which schemes have to demonstrate that they are closed. I will consider that carefully. I am sure the noble Baroness, Lady Bowles of Berkhamsted, will consider carefully what the noble Baroness has said in respect of her amendments. I beg leave to withdraw the amendment.

Amendment 181 withdrawn.