Pension Schemes Bill

Baroness Warwick of Undercliffe Excerpts

Monday 12th January 2026 Grand Committee

[Lord Davies of Brixton (Lab)]

I emphasise that this is not about mandation. Mandation is a big issue, but this is not about that; it is about the possible ways in which Local Government Pension Scheme assets could be invested. It is a probing amendment and I am sure that it is not word perfect in achieving its objective.

It arises under subsection (4) of this clause. It mentions various issues with how the strategy that is set out should be implemented. It is a probing amendment that seeks to explore how, and to what extent, Local Government Pension Scheme assets might be used to provide social housing as an investment. The oddity about this debate is that I am sure we all share the belief—tell me if I am wrong—that housing is an ideal investment for a pension fund. What I want to know from the Government is the extent to which that will be possible within the structure being established by this Bill.

I start with the fund, which is a long-term defined benefit pension scheme with inflation-linked liabilities. Social housing assets provide long-dated stable income streams that closely match this profile, so the sheer logic of these funds investing in local housing is clear. This issue has been debated extensively, within the relevant field, among the think tanks and so on that support local authorities and are interested in the investments of the Local Government Pension Scheme. For example, a think tank called Localis produced a report recommending that council pension assets should be a funding solution to the UK’s affordable housing crisis; that issue is widely discussed and widely supported.

Of course, that has already happened and is already happening. The London CIV has a substantial investment on behalf of the London pool of investments in social housing. I refer to social housing; personally, I have a preference for council housing, but the issue is broader and includes all forms of social housing. For example, the head of real estate at the London CIV says:

“Our UK Housing Fund is designed to help increase the supply of good quality affordable housing while delivering income-driven returns to our Partner Funds”.


Again, in the heart of the industry and the sector, the value of this approach is strongly supported.

More specifically, are funds investing in local housing? They might be investing in housing, but it could be anywhere. However, the synergy with a local fund investing in local housing has a massive attraction in terms of both the councils involved and the members of a scheme seeing how their funds are being invested in the local community. That is a very attractive perspective on how the funds should be decided.

At the same time—this point does not need spelling out—we face a severe housing crisis. There is a need for extensive housebuilding. We have the resources and the need, so why do we not just get on and do it? Council pension funds are, by their nature, patient, long-term investments; that is such a good match for housing delivery. Of course, it is accepted, from the number of funds that have already gone this way, that the fiduciary responsibility is suitable. The committees managing these funds see that investing in housing matches their fiduciary responsibility.

Everyone agrees that there is a great deal of synergy here. Local pension schemes investing in social housing is financially prudent and low-risk, provides a long-term strategy and delivers clear public value. What is there not to like? Can my noble friend the Minister assure the Committee that this synergy will be recognised in the forthcoming regulations and the accompanying statutory guidance?

We are debating this matter in terms of the Bill here, but, as the previous debate made clear, it is the regulations that count. The regulations that will govern how these pools can invest are currently being discussed—an extensive consultation is taking place—but, alongside that, is a closed consultation on the statutory guidance that will accompany the regulations. There may be a debate as to why it is not a public consultation on the statutory guidance, because the two things—the regulations and the guidance—mash together closely.

The problem is that the draft statutory guidance limits the extent to which local funds can set requirements on the actual decisions that will be taken by the pools. I am getting into the detailed structure of how the administering authorities and the investment pools will work together. The point relates generally to all forms of local investment but it is particularly acute in this area, where we are talking about building houses for local people. More specifically, does the proposed pooling framework act as a potential barrier to Local Government Pension Scheme investment in social housing?

There is a broader, more general issue here; I am gear-shifting. The specific issue is whether the pooling arrangements interfere with local investments, particularly in housing, but there is the general issue of whether administering authorities—local councils, in effect, for these purposes—can pass their ESG considerations, for example, on to the pooling arrangements. We need to be clear at this stage. I have raised this issue specifically in relation to housing—it would be good to get a clear answer on that—but there is a wider point around the other ways in which these funds should be investing in the local community. Are the new structures going to stop that happening in practice?

On the other amendments in this group, I think that I agree with Amendment 9, but I will listen to my noble friend the Minister’s response on it. I look forward to hearing the reasons for Amendment 10; I do not understand it, but I shall listen carefully. I do not really understand Amendment 11 either, so, again, I look forward to the explanation from the noble Viscount. In the meantime, I beg to move the amendment standing in my name.

[Baroness Warwick of Undercliffe (Lab)]

My Lords, I have no extant interests to declare—my interest in pension schemes is in the past—but I have considerable sympathy with my noble friend Lord Davies’s Amendment 7.

We suffer from chronic underinvestment in genuinely affordable and social housing, which is undermining the social fabric of this country and limiting the opportunity for the growth that we so badly need. The Government have vowed to build 1.5 million homes by the end of this Parliament, with a longer-term aim of resolving the housing crisis; other Governments have attempted to do the same. The Government have already committed substantial sums towards that aim, but demands on public funding are increasing and more resources will clearly be needed to deliver it.

I had a particular interest in housing associations in the past. These raise private debt to put alongside public grant to fund social housebuilding, and currently have more than £130 billion of debt facilities in place. The social housing sector is a great example of harnessing public and private investment to drive economic growth and build the homes that we need. Net additional dwelling figures for the 2024-25 financial year showed that 208,600 homes were added to England’s stock—well short of the 300,000 homes a year needed to meet the Government’s target of 1.5 million homes by the end of this Parliament. With the right funding, investment and financial capacity in place, social and affordable housing can play a key role in boosting supply and meeting that ambitious homes target.

There is a general recognition of the need to increase institutional investment in the UK and that pension schemes, with their long-term characteristics, could and should be part of that solution. This part of the Bill refers specifically to the LGPS. The Chancellor has already cited the LGPS as a means of achieving that necessary level of investment. In fact, several LGPS funds already have a strong track record of co-investment in affordable housing, and that potential needs to be maximised. I hope that the Government will ensure that all large pension schemes have the right incentives and strategic tools, coupled with an effective regulatory regime, to provide returns to the scheme while protecting scheme members’ interests and ensuring enduring social impact.