Pension Schemes Bill

Baroness Warwick of Undercliffe Excerpts

Thursday 18th December 2025 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, I too look forward to the maiden speech of the noble Baroness, Lady White of Tufnell Park. I was delighted to discover that we are both honorary alumni of the University of Bradford.

An adequate pension must be the goal for everyone to ensure a happy and secure retirement. This Bill aims to achieve higher returns for pension savers. As many millions more people are now in pension schemes through automatic enrolment, it is imperative that we ensure they get good value for the money they are saving from their hard-earned incomes. At the same time, those savings must provide the best possible support in their retirement.

Both the previous and current Governments recognised that, if we are to achieve the growth our country needs, domestic markets must be stimulated to invest in the UK. This inevitably led to a review of the pension system. The pension sector is a major allocator of capital, which has a direct impact on the efficiency of the wholesale financial markets in driving innovation and investment in our economy.

The pension systems in most other advanced economies invest significantly more in their domestic economies than does the UK, as has already been said, where pension savings, as we should remind ourselves, are also supported by tax relief of over £70 billion per annum. The UK has deep savings pools, yet we have seen a reduction in domestic investment in the UK. The UK has one of the largest pension systems in the world. As the parliamentary Under-Secretary of State for Work and Pensions reminded us in another place, it is our largest source of domestic capital, underpinning not just retirement of millions of people but the investment on which the country’s future prosperity depends. It makes so much sense to seek better to harness that capital, to invest in a more diverse range of assets that would benefit the UK economy, but also not to place savers at risk. This Bill is a serious and most welcome attempt to address both issues of concern: domestic capital investment in the UK and improving the outcomes for millions of workers saving for their retirement.

The pension sector’s role as a major allocator of capital will come increasingly from defined contribution schemes. There is momentum behind the need to focus on the DC pension sector’s ability to deliver good value for pension savers. In addressing these twin challenges of improving the outcomes for pension savers and achieving sustainable economic growth, there is general agreement that we need market consolidation, to see fewer pension providers operating at scale, and to deliver higher returns to savers and greater investment in UK productive assets. The Bill introduces the enabling powers to achieve that structural reform and greater consolidation in the market. But that raises major issues in respect of regulation and the governance standards required in both the management and administration of those schemes and the oversight of them by those with the fiduciary duty to protect the scheme members.

The case for consolidation is compelling, but will the Government give further consideration to the governance and regulatory requirements that need to be placed on those fewer scale pension providers managing billions, even trillions of assets over time so that downside risks are controlled and the desired outcome is achieved?

On the specific issue of trustees in these consolidated schemes, in another place, Liam Byrne MP called out the risk that in creating scale through fewer and bigger pension funds, there would still be a failure to deliver desired levels of investment in the UK. He called for greater legal clarity on trustees’ fiduciary duties, their ability to consider systemic factors and their impact on members pension savings when taking investment decisions. The Minister, Torsten Bell, advised that the Government will bring forward legislation to clarify that trustees can take systemic factors into account. Can the Minister advise the House as to the timescale for bringing forward that legislation?

The Bill aims to improve the returns workers receive on their retirement savings. We know that the DWP, the regulator and the FCA are working together to create a disclosure framework for assessing value for money that is to apply across the whole DC market, enabling consistent and comparable assessments of workplace pension schemes. To fully implement that framework, however, will require primary legislation in addition to the provisions in this Bill. When do the Government anticipate fully rolling out a new framework for assessing value for money?

I turn to the issue of accessing pension savings on retirement. In a DC world, UK savers are not well supported at retirement in making the complex decisions they face. They must manage their own longevity, inflation, and investment risk, and many struggle. Which? rightly points out that these decisions may have severe consequences and can mean that an individual outlives their savings. So it is good news that the Bill requires trustees of pension schemes to provide their scheme members with default retirement solutions that are relevant to their needs, and to help them manage the risks they face when they move into retirement. But we have to ensure that those solutions are fit for purpose. Are the Government actively considering additional guidance and regulation on the assessment of the value and benefit for members of the default retirement solutions to be provided by the schemes?

There are now many millions of small pension pots, as workers move from employer to employer, and the numbers are increasing. It is a major inefficiency in the pension system, as the Minister herself pointed out. The welcome advent of the pensions dashboard will help savers to take action to consolidate their pension pots. Characteristically, however, inertia means that many will not. The Bill provides for very small pots to be automatically transferred into qualifying consolidator schemes, which should reduce administration costs and deliver better returns for consumers through lower costs and charges. Can the Minister say what the Government’s current thinking is on the timetable for implementing the necessary regulation to allow this to happen?

There are several other important changes in the Bill which other noble Lords have already raised, but I finish by highlighting one of the changes to the PPF—the Pension Protection Fund—compensation. The decision to introduce legislation to enable prospective annual increases on pre-1997 compensation to PPF and FAS members is welcome. It could benefit more than a quarter of a million PPF and FAS members, but I am concerned that it will leave an unfairness, because no retrospective increases are applied to pre-1997 accrued pensions. The prospective increases will not apply to those members whose schemes did not provide increases to pre-1997 pensions prior to entering the PPF, and there is no recognition in any form of the major past loss of pension value, particularly given the incidence of high inflation and the acute financial impact on those affected. In its foreword, a recent PPF levy policy document concludes:

“The likelihood of the PPF encountering significant funding problems in the future … is low and is expected to continue to reduce over time … if funding problems did arise, these could be resolved over a multi-year period with our investment returns likely to be the most significant contributor”.


I go back to the points made by my noble friend Lady Drake on 23 April, when she raised this issue. Taking into account the considerable confidence in the funding level and investment returns, that £32.2 billion of assets, £19 billion in liabilities and reserves of £13.2 billion are held by the PPF, and the reduction in the levy to zero, the level of fairness set in the striking of the balance between levy payer and PPF/FAS member does not appear right. As my noble friend said:

“Not only has the levy in quantum declined hugely; the levy has also declined as a proportion of the PPF’s funding mix. Roughly one-third of the funding comes from the assets transferred to the PPF from those members’ pension schemes. Similarly, another third comes from the investment returned on assets, and 11% comes from assets recovered by the PPF on behalf of those schemes. Less than a quarter—23%—of the funding comes from the levy, and that is going to fall”.—[Official Report, 23/4/25; col. GC 32.]


Can the Minister take back to the Government consideration of an ad hoc payment to those members of the PPF with pre-1997 service, in recognition of the considerable real loss of pension that they have experienced? Such a payment should be well within the funding levels of the PPF. Payment of the prospective increases to pre-1997 pensions accrued to those whose original scheme may not have made provision for such increases.