Pension Schemes Bill

Baroness Stedman-Scott Excerpts

Wednesday 14th January 2026 Grand Committee

This amendment seeks to probe the process that the Secretary of State will be required to follow in order for a compulsory merger to take place, and the wider considerations that will be applied in deciding whether such a merger is appropriate.

[Baroness Stedman-Scott (Con)]

My Lords, it is a pleasure to open today’s debate on the remaining groups of amendments relating to the Local Government Pension Scheme. We are conscious that Ministers have already undertaken to write to the House on a number of points, and we do not wish to add unduly to that correspondence or set exam questions. However, we hope that today’s debate may allow some of these issues to be addressed in real time.

Let me be clear at the outset that this is a probing stand-part notice intended to seek clarity from the Government. Clause 6 is striking in its brevity, but the power it confers is anything but modest. It would allow scheme regulations to provide for the merger explicitly, including a compulsory merger, of local government pension funds. Compulsory merger is a significant and, in many cases, irreversible intervention. It has profound implications for governance, funding positions, local accountability and, ultimately, the retirement savings of millions of scheme members and the obligations of employers. We are dealing here with very substantial sums of public money and the livelihoods of millions of people.

Before such a power is afforded to a Secretary of State who may have little or no specialist expertise in pensions, it is only right that the Committee understands clearly how this power will be exercised and what safeguards will apply. The clause itself, however, tells us very little. It provides no indication of the process that will be followed, the criteria that will be applied or the protections that will be in place for members, employers and administering authorities. I therefore hope that the Minister can assist the Committee on a number of points.

First, on expertise and decision-making, pension scheme governance is highly complex and technical. What confidence can the Government offer that the Secretary of State is the appropriate decision-maker for imposing compulsory mergers, particularly in the absence of any requirement in the Bill to obtain independent expert pensions advice?

Secondly, on process, what precise procedural steps will be required before a compulsory merger can be ordered? Will there be a statutory consultation and, if so, with whom? Will affected scheme managers, administering authorities, employers and scheme members have a formal opportunity to make representations before a decision is taken?

Thirdly, on safeguards and accountability, what independent checks and balances will exist to ensure that the Secretary of State cannot act unilaterally? Will decisions be required to meet defined tests, such as necessity or proportionality, and to be supported by evidence? Will there be any right of review or challenge where a fund believes a compulsory merger is not in the best interests of its members?

Fourthly, on financial risk, given the scale of the assets involved, what assurances can the Government provide that members’ savings will not be exposed to undue risk or that decisions will not be influenced directly or indirectly by political or short-term considerations rather than long-term fiduciary interest?

Finally, on precedent, does the Minister accept that conferring such a broad enabling power sets an important precedent for ministerial intervention in pensions governance more widely? If so, how do the Government justify that approach, and why are the limits of this power left entirely to secondary legislation?

We ought to have answers to these questions before the conclusion and passing of the Bill. Clause 6 confers wide discretion in a highly technical and sensitive area, with potentially far-reaching consequences. It is therefore entirely appropriate for the Committee to press the Government to explain how this power will be exercised, what safeguards will be in place and how the interests of scheme members will be protected. I look forward to the Minister’s response.

[Lord Palmer of Childs Hill (LD)]

My Lords, as has been stated, this clause introduces compulsory mergers of Local Government Pension Scheme funds, and the word “compulsory” worries me. We on these Benches accept that consolidation can sometimes improve efficiency and governance, but compulsion—I emphasise this—is a serious step that demands strong justification and clear safeguards, as the noble Baroness, Lady Stedman-Scott, stated.

At present, the Bill establishes the power without clearly setting out the criteria, process or routes of challenge. That sequencing matters. Trustees, employers and members need confidence that mergers will occur only when there is compelling evidence of benefit to the people—that is, the pensioners themselves. We on these Benches are concerned that forced mergers, if poorly handled—and some may well be poorly handled—could undermine trust rather than strengthen it. Before endorsing compulsion, which we are asked to do, Parliament should understand how decisions will be made, how dissent will be treated and what protections exist if a merger proves detrimental.

At this stage, it is quite right that there should be probing as to what is behind all this and what will happen in all the various circumstances that need to be in place to protect members of the Local Government Pension Scheme. I wait to see further information as the Bill progresses.

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[Lord Katz (Lab)]

I am seeking help from my noble friend Lady Sherlock in a helpful conference on the side. The investment assets are in pools, so that is not necessary. The backstop powers are very clear: if there is a need for a merger or we are worried about a failing scheme, there is that backstop power and this is why. It would not be used to direct particular investment strategies.

[Baroness Stedman-Scott (Con)]

My Lords, I thank all noble Lords who have taken part in this debate, and I also thank the Minister for his full and detailed response to the questions that were asked. The Minister talked about perhaps using these powers when there are local government reorganisations; that is highly likely in the current climate, I would think.

The purpose of this stand part notice is not to resist sensible reform but to underline the importance of clarity, certainty and proper accountability where Parliament is being asked to confer powers on this scale. Clause 6 is framed at a very high level, yet it opens the door to decisions that could permanently reshape local government pension arrangements, where powers are capable of compelling structural change. It is vital that those affected understand not only that the power exists but the principles that will govern its use. Clarity matters for scheme managers, employers and, above all, scheme members, whose long-term interests depend on confidence in the stability and predictability of the system. Certainty matters because pension funds operate on long horizons, and opaque or open-ended powers can create risk.

Most of all, the responsible exercise of delegated powers depends on transparency. When Parliament is asked to delegate authority in a highly technical and sensitive area, it is entirely reasonable to expect a clear account of how that authority will be exercised and what safeguards will guide it. However, in view of the response given by the Minister—I am sure that all noble Lords who have taken part in this debate will look at Hansard; if there are any issues, we will go back to the Minister—I beg leave to withdraw the stand part notice.

Clause 6 agreed.

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Moved by

[Baroness Stedman-Scott]

14: After Clause 7, insert the following new Clause—
“Review of the cost and sustainability of the Local Government Pension Scheme(1) The Secretary of State must conduct a review of the long-term cost and sustainability of the Local Government Pension Scheme.(2) The review must give particular consideration to admitted bodies, including housing associations.(3) A report must be laid before Parliament within 12 months of the day on which this Act is passed.”Member’s explanatory statement
This amendment requires the Government to review the long-term cost and sustainability of the Local Government Pension Scheme, with particular consideration given to admitted bodies such as housing associations, and to report its findings to Parliament.

[Baroness Stedman-Scott (Con)]

My Lords, this group of amendments is the first of three groups that together seek to ensure that the Local Government Pension Scheme operates more effectively and proportionately, protecting member benefits, supporting long-term sustainability and remaining affordable for employers.

The context is critical. The financial position of the scheme has changed profoundly. On a low-risk basis, the LGPS was around 126% funded in March 2025, rising to around 147% by September, with surpluses of £87 billion and £147 billion respectively. This is a striking shift from the 2022 valuation, when the scheme stood at around 65% funded. In short, the scheme has moved decisively from deficit recovery into sustained overfunding.

That shift has unavoidable implications for contribution rates. On prudent assumptions, future services costs are around 15%—falling closer to 6% once surplus is taken into account—yet employers continue to pay contributions of around 21%, costing roughly £9 billion a year across the scheme. Even under highly cautious assumptions, those levels now appear materially higher than is necessary to maintain long-term solvency. These amendments do not seek root-and-branch reform; they ask whether the regulatory framework is still operating as intended and whether contribution setting remains fair, transparent and proportionate.

Amendment 14 therefore requires a review of Regulation 62 of the Local Government Pension Scheme Regulations 2013, which lie at the heart of how employer contributions are determined. The concern here is not actuarial prudence in valuing liabilities but contribution prudence—the policy choice to extract additional buffers from employers, even where funds are demonstrably in surplus. At the centre of this issue are the undefined concepts in Regulation 62(6): desirability, stability, long-term cost efficiency and solvency. Their ambiguity has allowed increasingly conservative interpretations to become embedded in valuation practice, driving contribution rates beyond what the funding position alone would justify.

So I would like to ask the Minister three questions. How do the Government define “desirability”? How do they define “stability”? And how do they define “solvency” in this context? If the Government cannot clearly articulate what these terms mean, how can they be applied consistently when determining contribution rates? If Ministers cannot explain their intent, how can those responsible for applying the regulations be expected to reflect the Government’s wishes rather than their own interpretation? Does the Minister accept that, in the absence of clear guidance, it will be pension funds and actuaries that end up defining these terms in practice? This interpretation will shape outcomes.

In practice, expansive interpretations of “stability” and “long term cost efficiency” can justify unaffordable contribution rates, diverting resources from adult social care, housing delivery and other front-line services, while offering employers little scope to make legitimate trade-offs. There is also a clear imbalance of power. Employers bear the full cost of contributions yet often have limited influence over outcomes. Practice on the treatment of surpluses varies widely, with some funds permitting release and others prohibiting it on opaque grounds. Does the Minister agree that greater clarity and consistency would plainly be beneficial?

Amendment 15 asks a simple but necessary question: is the Local Government Pension Scheme affordable in the long term? It requires a review of long-term costs and sustainability, including impacts in respect of admitted bodies such as housing associations, with the findings reported to Parliament. This is an attempt not to undermine the LGPS but to ensure transparency, proportionality and long-term affordability—principles this House has always upheld.

This analysis is not abstract; a growing body of concrete cases now demonstrates how these regulatory interpretations are operating in practice. I would be very happy—indeed, delighted—to share the full set of these examples with the Minister, should he not already be aware of the scale and consistency of the issue. I trust that he will feel free to take up this offer if it helps.

I will briefly outline one such case. In this instance, the fund in question is assessed as being 107% funded on a gilts minus 0.2% basis. This compares with the previous valuation basis of gilts plus 2.3%. At the current valuation, the council had a reported surplus of £57 million. Despite that clear surplus, measured on an exceptionally prudent valuation basis, the contribution outcome is, frankly, striking. Under the fund’s stabilisation policy, the employer’s primary contribution rate is permitted to reduce by no more than 2%. At the same time, the employer is still required to pay approximately £20 million per year in secondary, or so-called deficit recovery, contributions. That outcome is extraordinarily difficult to justify. Secondary contribution rates exist for one purpose only: to repair deficits. In this case, there is no deficit. Assets exceed liabilities, even under assumptions more conservative than those typically employed by insurers, whose pricing is generally close to a gilt-flat basis. Yet, notwithstanding that surplus position, the employer is still being required to make substantial deficit recovery payments. The council involved has been forced to seek exceptional financial support from MHCLG.

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[Lord Davies of Brixton (Lab)]

The noble Baroness cited a particular case and gave considerable detail about the circumstances. Is there any reason why the Committee cannot be told which authority it concerns? As things stand, there is no way that I or any other Member of the Committee could comment on that case. If the noble Baroness can tell us which authority it is, in the interest of transparency, I urge her to do so.

[Baroness Stedman-Scott (Con)]

I have always been a supporter of transparency. I do not know the answer to the noble Lord’s question, but I will find out and let him know either the name of the council or the reason why I cannot give it to him. We have other examples that we are happy to share. I hope that answers the noble Lord’s question. I beg to move.

[Lord Davies of Brixton (Lab)]

It is a pleasure to take part in this debate. It is an important issue and public money should always be open to scrutiny and deep thought about how we approach these issues. The noble Baroness, in introducing the amendments, quoted the significant switch round in the financial state of the Local Government Pension Scheme. She will be able to have an interesting discussion with her former colleagues, Liz Truss and Kwasi Kwarteng, as to why exactly that has happened. They have had more influence on it probably than the actuarial profession.

My message essentially is, “If it ain’t broke, don’t fix it”. What we have here is the Official Opposition attempting to make a crisis out of a significant success. The Local Government Pension Scheme has been successful, as attested to by the noble Lord, Lord Fuller, yet here we are being presented with it as if there is some crisis to address. We should recognise that, in actuarial terms, the financial management of the scheme has been a significant success. It is up to those suggesting reviews—two in this group of amendments and two more in the following group, which should more accurately be here—to explain, rather than providing anonymous details, what the problem is.

The context is that, compared to private sector funded schemes, where contributions have been increasing, what we are going to see in the coming year is the opportunity of significant cost reductions. This is for two reasons. First, it is because of the successes of Local Government Pension Scheme investments, with returns of around 9% per annum since the last valuations. As a result, that has generated significant surpluses—significant excess of assets over liabilities. I shall come back to that in a later group. Following the latest set of triennial valuations, substantial reductions will be available. It is up to individual authorities to make their decisions, but the opportunity will be there, certainly for most funds.

As far as actuaries who support and work within the local government sector are concerned, as I explained on Monday, this discussion comes as a bolt from the blue. What we really need in this area is stability. It would be far better to promote discussion first within the sector, with those who know what they are talking about, before producing these proposals, which inevitably lead to uncertainty.

It is not a surprise, given the environment we are in, that there has been no consultation on this, unlike the investment changes, because it is part of a programme that we see with amendments submitted later in this Bill. There are some people who just do not like successful collective pension provision. There is an agenda at work here. As I say, I do not oppose consideration of the issues, but we should understand where it is coming from.

It is important to understand that the last valuations were in 2022. The current valuations, as at 31 March last year, are under way and we do not yet have the full results. Early results have been provided and we know the direction of travel, but we do not know the final results, which is why I question the figures being quoted. We do not yet know the results over the sector as a whole of the current series of valuations. Any speculation about that outcome misses the point.

The second point I want to make is that there is no one-size-fits-all solution to the funding of local government pension schemes. They vary widely in their size. The staff membership has to be taken into account, and that varies, and you also have to understand that some of these funds have significant numbers of non-local government members through the admitted body process and each of those has to be assessed in a proper way. There is no way you can have a one-size-fits-all approach to the actuarial management of these funds. You need the professional knowledge and judgment of actuaries—you may think I am promoting my own profession—to decide what is the best approach.

Clearly, that judgment should be open to review and, of course, it has been reviewed. That is what is so nonsensical about these proposals. Under Section 13 of the Public Service Pensions Act 2013, the Government can ask for reviews of the funded public service schemes, which effectively means local government schemes. Indeed, such a review has been carried out and a full detailed report produced by the Government Actuary, setting out the approach that has been adopted, comparing the different approaches—there are four firms of actuaries, which all have slightly different approaches—reconciling them and judging the assumptions that have been made.

Broadly speaking, the Government Actuary has given these valuations a clean bill of health. Therefore, any suggestion that there is anything wrong about the actuarial approach that is being taken is denied by the Government’s own actuarial adviser. Funds need to take account of local needs and public interest has a role in deciding how services can be employed in these funds. There is no question of refund in these funds, but the way in which it affects contributions is crucial.

Another point, which I think the noble Baroness ignored, is that these funds are all subject to the cost- capping arrangements set out in the coalition Government’s review of public service pensions of 14 or 15 years ago. There is a cost cap. I made a note of what the noble Baroness said: that the full cost of the contributions “bears on the employers”. That is just wrong. It bears on the employers and the members together. It is the employers’ costs that are capped under legislation and it is the members who bear the risk of increasing costs and stand to enjoy the benefit of reducing costs. The cost cap is crucial in these schemes and to ignore its important role fails to understand what we are doing. I am sorry—I could go on, but I think the situation is clear.

There was just one other point—I will go on. It arises under the next group and it is the idea of a statutory funding standard. Of course, we tried that with private sector pension schemes and it was a disaster. Everyone agreed it was a disaster and we had to have a new system—whether the new system was any better is a matter for debate. However, the idea of having a statutory funding standard just did not work.

To conclude—I hope it is a conclusion this time—there is no evidence that the existing system has failed. Indeed, we expect to see the benefits of the current approach when we decide what these funds should be in the light of the forthcoming valuation results.

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In conclusion, I consider that the existing statutory processes already provide routes to examine and remedy any issues of affordability in the scheme. I ask the noble Baroness to withdraw her amendment.

[Baroness Stedman-Scott (Con)]

My Lords, I thank those taking part in this interesting debate, and the Minister for his response. I completely agree with the noble Lord, Lord Davies of Brixton, that discussion and consultation is best first. I will take advice on the naming of the authority, and I will certainly take advice on speaking to Kwasi Kwarteng. This is not a matter of political inheritance; it is a matter of changed circumstances. In 2022, when many Local Government Pension Scheme funds were still in deficit, higher employer contribution rates were, on balance, the correct and responsible course of action. At that point, the application of prudence, both actuarial and contribution-based, were broadly aligned with the financial position of the scheme.

What has changed is the context. Market conditions have shifted materially in recent years. Higher interest rates, improved funding positions and stronger asset values have transformed the balance sheets of many funds. This has been underscored by the most recent triennial valuation in 2025, which has revealed the scale of surplus that was neither anticipated nor problematic in earlier cycles. It is precisely at this point that the interpretation of the regulations, particularly Regulation 62(6), has come to the fore. The issue is no longer whether prudence is appropriate but how it is being applied in a materially different financial environment. Rules that operated sensibly when schemes were in deficit are now, through interpretation rather than legislation, producing outcomes that risk becoming disproportionate and unaffordable.

That is why the amendment matters. It is not an attempt to rewrite history or to relitigate past policy decisions; it is a forward-looking attempt to ensure that a regulatory framework designed for balance and sustainability remains fit for purpose as conditions change. This should not be a partisan issue. It is about ensuring that regulation keeps pace with reality, that prudence remains proportionate and that employers are not locked into contribution levels that no longer reflect the underlying financial position of the scheme. I hope noble Lords have appreciated the spirit in which we have tabled these amendments but, for now, I beg leave to withdraw the amendment.

Amendment 14 withdrawn.

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Moved by

[Baroness Stedman-Scott]

20: After Clause 7, insert the following new Clause—
“Interim reviews of employer contribution rates in the Local Government Pension Scheme(1) The Secretary of State must by regulations made under section 3 of the Public Service Pensions Act 2013 (scheme regulations) amend the Local Government Pension Scheme Regulations 2013 (S.I. 2013/2356) as follows.(2) After regulation 58(4), insert—“(5) The funding strategy statement must comply with regulation 64A(2) and be published in a form accessible to non-specialist readers.”(3) Regulation 64A (revision of rates and adjustments certificate: scheme employer contributions) is amended as set out in subsection (4).(4) For paragraphs (1) and (2), substitute—“(1) The administering authority may obtain a revised rates and adjustments certificate where the funding strategy statement sets out the administering authority’s policy on revising contributions between valuations and one or more of the following conditions is met—(a) there has been a significant change in the liabilities arising or likely to arise since the last valuation;(b) there has been a significant change in the employer’s ability to meet its obligations to the Scheme, consistent with that employer’s obligations to deliver value for money and services for local taxpayers;(c) the employer requests a review and agrees to meet the reasonable costs of that review.(2) The funding strategy statement must include a clear and accessible policy on revising contributions between valuations, including—(a) the process and evidential requirements for employers to request a review,(b) indicative timescales for the administering authority to determine such a request,(c) the criteria the administering authority and fund actuary will apply (including risk appetite and prudence levels), and(d) the approach to apportioning reasonable costs of any review.(2A) Where an employer makes a request under paragraph (1)(c), the administering authority must—(a) acknowledge the request within 10 working days,(b) determine the request within 12 weeks (or such longer period as is agreed with the employer), and(c) provide written reasons for its decision.(2B) For any review under this regulation, the fund actuary must prepare an Actuarial Methods Statement which— (a) explains, step by step, the models and methodologies used to project liabilities, assets and funding needs,(b) sets out all material assumptions, including discount rates, inflation, salary growth, mortality, longevity improvements and any smoothing or damping mechanisms,(c) specifies the level of prudence applied and how that prudence has been determined, and(d) provides sensitivity and scenario analysis showing potential outcomes under varying market conditions and employer covenant assessments.(2C) The administering authority must publish the Actuarial Methods Statement alongside the decision under paragraph (3)(c), subject only to the redaction of information which is commercially sensitive or relates to individuals. (2D) The Secretary of State must issue statutory guidance on—(a) how councils and other employers may make requests under paragraph (1)(c),(b) the matters administering authorities should take into account when considering such requests, including the balance between Scheme solvency and local taxpayers’ interests in the continued delivery of core services, and(c) the minimum standards for actuarial transparency under paragraph (5).(2E) Administering authorities must have regard to guidance issued under paragraph (6)(a).(2F) The Secretary of State must publish the guidance within six months of the day on which this Act is passed and keep it under review.””Member’s explanatory statement
This new Clause aims to strengthen Regulation 64A of the Local Government Pension Scheme Regulations 2013 to make interim reviews of employer contribution rates more accessible and transparent.

[Baroness Stedman-Scott (Con)]

My Lords, I hope the Committee will forgive me for the length of this amendment, which is tabled in my name and that of my noble friend Lord Younger of Leckie.

Despite its length, its purpose is in truth a simple one. It seeks to ensure that the provision for interim reviews of employer contribution rates under the Local Government Pension Scheme is not merely available in theory but genuinely usable in practice. At present, while the regulation allows interim reviews, the circumstances in which they may be triggered are so narrowly framed and so conservatively interpreted that many employers find them effectively inaccessible. The consequence is that contribution rates can remain detached from the financial reality and workforce profile for prolonged periods, even when there has been a clear and material change in circumstances.

I will not revisit the funding position of individual schemes, but it is important to note, once again, how sharply the position of the Local Government Pension Scheme has changed. Recent low-risk analysis shows the scheme moving from around 65% funded in 2022 to significant and sustained overfunding in 2025, with all funds now above 100%. That shift has clear implications for contributions. Even on prudent assumptions, implied future service rates are far below the roughly 21% that employers currently pay, at a cost of around £9 billion a year.

The difficulty is that the formal valuation process is not designed to respond quickly to changing circumstances. In this case, the 2025 valuation cycle in a number of cases has already concluded. As a result, councils now face contribution rates based on assumptions that no longer reflect current financial conditions, with no realistic prospect of adjustment through the normal valuation timetable. In those circumstances, the interim review mechanism becomes the only viable route to a fair and proportionate outcome.

Valuations are infrequent by design, but financial reality does not always conform to that schedule. Where there has been a material change in funding position, workforce composition or employer risk, interim reviews are intended to act as a safety valve, allowing contribution rates to be reassessed before costs are locked in for years at a time. In practice, however, access to that mechanism is so constrained that it often fails to perform the role it was created to serve. For that reason, although previous amendments address the deeper structural drivers of the current contribution pressures, I will turn to the interim mechanism.

The proposed new clause before us does not change the intent of the law. It seeks only to ensure that the safeguards Parliament has already provided can be used effectively by councils whose contribution rates may no longer be justified by the scheme’s underlying financial position. Specifically, it strengthens Regulation 64A of the 2013 regulations by addressing the practical barriers that councils face when seeking a review. It clarifies when a review may be requested, requires funds to set out clearly how requests are made and assessed, introduces transparency around the actuarial assumptions and underpinning contribution rates, and promotes greater consistency through statutory guidance.

Taken together, these changes do not weaken prudence or undermine solvency, but they make the process intelligible and navigable for the employers expected to engage with it. The underlying problem, therefore, is not that councils lack the right to request an interim review but that they lack a realistic means of exercising that right. Processes are unclear, evidential thresholds are opaque, and actuarial models are often presented in ways that make meaningful engagement extremely difficult.

In those circumstances, Regulation 64A functions less as a practical safeguard and more as a theoretical reassurance. That matters, because the financial consequences for councils are immediate and real. Pension contributions represent a significant and growing share of local authority expenditure. When contribution rates remain misaligned with financial reality, they absorb resources that would otherwise support front-line services. Yet councils remain fully accountable to local taxpayers for their financial decisions, even when the assumptions driving those costs are neither transparent nor consistently applied. The result is a system that undermines sound financial management at precisely the moment when many authorities are already under severe strain.

This brings us directly to the statutory duties that already rest on local government. Section 151 of the Local Government Act 1972 requires every authority to appoint a Section 151 officer, typically the chief financial officer, who bears personal responsibility for the proper administration of the authority’s financial affairs. These officers are legally obliged to ensure that expenditure is lawful, prudent and sustainable, and that duty does not stop at pension cost. Where long-term liabilities appear misaligned with risk, or where contribution volatility threatens service delivery, it is entirely reasonable that a Section 151 officer should be able to seek closer scrutiny through an interim review.

If such an officer believes that the assumptions underpinning contribution rates warrant examination, the system should enable that scrutiny rather than obstruct it. This clause does not ask actuaries to abandon prudence or funds to compromise solvency; it simply ensures that those charged with financial stewardship are given the transparency and procedural clarity necessary to discharge their existing legal responsibilities. Indeed, this is the most significant change made by the amendment. It clarifies the trigger conditions for an interim review by amending the second condition so that an employer’s ability to meet its LGPS obligations is assessed in a way that is consistent with its statutory duties to deliver value for money and to maintain services for local taxpayers.

At present, actuarial assessments tend to treat local authorities as possessing an effectively risk-free covenant, on the assumption that central government would ultimately step in to prevent failure. As a result, actuaries are understandably reluctant to accept that a council might be unable to meet its pension obligations, and contribution rates are set on the basis that payment is in practice guaranteed. However, that assumption does not reflect the financial reality facing local government. The strength of a council’s covenant is not unlimited; it is ultimately constrained by its local tax base and its legal obligation to balance its budget. Councils cannot borrow indefinitely to meet pension costs, and they also cannot insulate those costs from their wider responsibilities to residents.

This amendment would require the actuarial assessments to recognise that balance. Prudence must not operate as a one-way ratchet, where contribution levels can only ever rise or remain elevated, regardless of changing circumstances. Instead, prudence must be weighed alongside councils’ duties to local taxpayers, while continuing to protect and secure the benefits of scheme members. In short, this change does not undermine member security but simply ensures that assessments of affordability reflect the real-world constraints under which councils operate rather than an abstract assumption of unlimited state backing. The law already allows interim reviews in principle but, in practice, the system makes them inaccessible. This proposed new clause would close the gap, clarify the rules, improve transparency, introduce consistency and strengthen accountability, ensuring that interim reviews function as a real safeguard rather than a theoretical one.

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With that, I ask the noble Baroness, Lady Stedman-Scott, to withdraw her amendment, given that the information is already publicly available and because of the importance of consultation on changes.

[Baroness Stedman-Scott (Con)]

My Lords, I thank all noble Lords who have contributed to the debate on these amendments; I also thank the Minister for his response. I thank in particular my noble friend Lady Altmann for both her amendment and the way in which she explained it. Her expertise, track record and knowledge of this industry are second to none; I know that others in the Room are equally in that position.

My noble friend Lady Scott made a very important point about local government reorganisation, which is bound to have an impact on pension schemes. The question that she asked on financial statements was pertinent.

I have been intrigued to watch the relationship between my noble friend Lord Fuller and the noble Lord, Lord Davies of Brixton, develop. I am sure that it will become even more interesting as the Bill carries on. I can tell the noble Lord, Lord Davies of Brixton, that we have chapter and verse on the information to which we have referred today; where we are able to share it, we will do so.

The Minister made the important point that the markets change; the skill is in knowing at what point to intervene and review matters, but it is important that we have the right process and framework in place to do so.

In closing, I reiterate that this amendment is ultimately about making the system work as Parliament intended. Interim reviews exist on the statute book for a reason. They are meant to provide flexibility where circumstances change materially between formal valuations, and to prevent contribution rates becoming detached from economic reality. Yet where a safeguard exists in law but cannot be exercised in practice, it ceases to be a safeguard at all.

This amendment seeks not to weaken the Local Government Pension Scheme or to second-guess actuarial judgment but to ensure that prudence operates as a balanced discipline rather than an inflexible default. Where funding positions have strengthened significantly and where contribution rates place growing pressure on local services, it is reasonable that employers should be able to access a clear, transparent and intelligible process to seek reassessment. Clarity matters here. Councils are legally required to manage their finances prudently, deliver value for money and protect essential services for local taxpayers. They cannot discharge those duties effectively if contribution-setting processes are opaque, thresholds are unclear or review mechanisms are practically out of reach.

This amendment would simply align pension governance with those existing statutory responsibilities. It would make explicit how interim reviews may be requested, how they will be assessed and on what basis assumptions will be scrutinised. In doing so, it would strengthen confidence that decisions affecting billions of pounds of public expenditure are being taken proportionately, transparently and in full recognition of the real-world constraints under which councils operate. In short, it would turn a theoretical right into a usable one and restore the balance between member security, financial sustainability and the proper stewardship of public funds. That, I suggest, is not unreasonable but a modest and responsible objective. With that, I beg leave to withdraw my amendment.

Amendment 20 withdrawn.