Pension Schemes Bill

Baroness Stedman-Scott Excerpts

Thursday 19th March 2026 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, in a less confrontational way than the noble Lord Fuller, from these Benches, I confirm that we support Amendment 49. The Government should not fail to support this. It is in the name of noble Baroness, Lady Altmann, and it would increase the time before a pot was considered dormant in order to provide greater flexibility for savers such as mothers, those on sabbatical or mature students, who may not add to their pots for one to three years. We have no hesitation on these Benches in supporting amendment in the name of the noble Baroness, but not in quite such confrontational terms as the noble Lord, Lord Fuller.

[Baroness Stedman-Scott (Con)]

My Lords, in continuing the spirit of good grace, I wish our Deputy Chief Whip a very happy birthday today.

I will speak briefly in support of Amendment 49 in the name of the noble Baroness, Lady Altmann, which I was pleased to sign. Fundamentally, the amendment is about ensuring that we do not move too quickly to classify pension pots as dormant and, in doing so, risk making decisions on behalf of savers before they have had a fair opportunity to act for themselves.

By extending the period before a pot was treated as dormant, the amendment would delay when pots became eligible for automatic consolidation. That is important, because it would reduce the risk of pots being moved prematurely, perhaps at a point when an individual was between jobs, was taking a short break, on maternity leave or simply had not yet re-engaged with their savings. It would also give savers more time to re-engage with their pension, to make further contributions and to take an active and informed decision about what they want to do with their savings.

If we are serious about putting savers at the centre of this system, we must ensure that pots are not automatically consolidated after only a short period of inactivity. The new period proposed by the noble Baroness, Lady Altmann, seems to be eminently sensible. I therefore hope that the Minister will give it careful and serious consideration, and I hope she will adopt it. If not, we will be pleased to support the noble Baroness, Lady Altmann, if she chooses to test the opinion of the House on the amendment.

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[Lord Lucas (Con)]

My Lords, we know that a much higher percentage of pension fund assets could happily be invested in UK assets; indeed, that was the case when I was managing pension funds. It is not the case now entirely because of what politicians have done to the system. We should seek to undo that, not fudge it, as the noble Lord, Lord Vaux of Harrowden, said.

My recommendation to the Government is that, rather than giving themselves power, they should give pensioners and investors in pension schemes power. There are structures in the Bill that allow pensioners to express their opinions on what their money is being invested in, but nothing that gives any effect to that. I suspect that most of us receive our annual returns from the pension funds we are part of and put them straight in the bin, because there is nothing we can do with them. We ought to be in a position to do something that would have an effect. I recommend that the Government choose that route rather than the one they have chosen.

[Baroness Stedman-Scott (Con)]

My Lords, of all the amendments we have tabled and discussed on this Bill, for me, this group is the most important. Mandation is, rightly and understandably, the most contentious part of the Bill. I am grateful to all noble Lords who have helped raise awareness of this issue, which, as I am sure the Minister is aware, has garnered a lot of attention—and criticism—outside of this place.

The ABI has written to the Minister in the other place, Torsten Bell, to warn him of its “serious concerns” about the mandation power, saying that it is “not necessary” for the Government to mandate investment. It has asked the Government to withdraw this part of the Bill. Pensions UK has been unambiguous on this point. It too has called on the Government to remove this power from the Bill, warning that it would harm

“free and open market competition aimed at driving better saver outcomes”.

It has said that mandation would

“put those outcomes at risk”.

More recently, Paul Johnson, formerly of the IFS, wrote strongly against mandation in an article in the Times. Just the headline and strapline will give the Minister all the information she needs:

“Telling pension funds where to invest will not end well. The government’s desire to boost UK assets is understandable, but overriding the fiduciary duty of trustees crosses a line”.


The industry is clear, the experts are clear and much of this House is clear that the Government should not be directing private sector investment. It is obvious that this power overrides the fiduciary duty of trustees. This is a radical step, and it establishes the principle that it is appropriate and desirable for Governments to tell schemes how to invest to meet their own political objectives. The Government are right to want investment in UK assets—indeed, I am sure that no one in this Chamber would not welcome more money in UK assets. However, if the picture is not where we want it to be, the question for the Government is: why? Why is the UK not attracting that capital? What barriers exist? What reforms are needed?

Instead of doing that work, the Government have reached for a shortcut, a reserve power that is really a threat to compel investment. This is reckless. It sets a dangerous precedent, and the Government’s central defence—that they do not intend to use the power—raises two unavoidable questions. First, if they never intend to use the power, why are they legislating for it? Secondly, how can the Minister assure us that the power will not be used when they will not be in office for ever? This power is going into law, and I am afraid it will outlast the Minister and indeed all of us. The noble Baroness cannot speak for future Administrations, or indeed political parties such as Reform, God help us, which has signalled a great willingness to direct investment. The Government are handing this power not merely to their own Ministers but to future Ministers.

I will not detain the House any further than to say that this power must be removed. It is a massive overstep from the Government and, despite all the assurances of the Minister, no one is yet convinced that this can remain. Industry rejects it, experts have expressed serious concerns about it, and the Minister must remove it. I am sure she has listened to all noble Lords’ contributions. As my noble friend Lord Wolfson said, we must remove this Robert Maxwell power. We on these Benches, and I am sure others, will support the noble Baroness wholeheartedly if she seeks to divide the House on this matter.

[Baroness Sherlock (Lab)]

My Lords, as we have heard, the combined effect of these amendments would be to remove from the Bill the Government’s reserve power to require certain pension schemes to hold a prescribed percentage of their assets in qualifying assets. As the noble Baroness, Lady Bowles, indicated, we explored this territory in some depth in Committee, and noble Lords made a number of detailed and considered arguments. It has been good to have an opportunity to talk to a number of colleagues since then and to discuss their concerns. The Government have reflected but continue to regard the asset allocation reserve power as a necessary part of the reform package that this Bill introduces, and I will set out why.

The headline case is that there is strong evidence that savers’ interests lie in greater investment diversification than we see today in the DC market, and there is probably broad agreement on that. DC pension providers themselves have recognised this. A small allocation to private markets, as part of a diversified portfolio, offers the potential for better risk-adjusted returns over the long term. But despite that recognition, many providers are not yet acting on it. That is not because diversification is against savers’ interests. It is in significant part because of competitive dynamics, the pressure to keep headline costs as low as possible in order to win and keep new business from employers, and the difficulty of any single provider moving ahead of the market. This is not just the Government’s view. It is what the industry has said repeatedly.