Pension Schemes Bill (First sitting)

Damien Egan Excerpts

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

I also wish to declare such an interest.

[Damien Egan (Bristol North East) (Lab)]

So do I.

[Gerald Jones (Merthyr Tydfil and Aberdare) (Lab)]

As do I.

--- Later in debate ---

[Steve Darling]

Q Thank you both for coming. My questions are for Christopher Brooks. From your perspective at Age UK, what are the three wicked issues that the Bill could help tackle—the ones that come most often across your desk at Age UK, which people find a challenge in later life?

Christopher Brooks: That is a really good question. I think that first, I would flag the decumulation provisions, which are a really excellent idea. They are exactly what should be happening at the moment. Because it is a new regime, there are lots of challenges around designing and implementing it, which probably need quite a bit of thinking through, just to make sure we can get it right for members.

There are some tensions in that process: if you are defaulted into something at, say, 65, there would be some tensions around the point at which you should do certain things. I think the general consensus is that it will result in people purchasing an annuity further down the line—probably around, say, age 75 or 80. We have seen for many years, pre-freedom and choice, big issues with the annuity market, with people shopping around, or failing to shop around, to get a better deal. If you are encouraging people to do that at age 80, that is potentially a recipe for disaster. First, because people will be taking a decision that they are not familiar with, and it is alien to them. Secondly, at age 80, a number of people are experiencing cognitive decline, so it is going to be even more challenging than it would have been at 65. That kind of thing, exactly how it works, needs thinking through in more detail.

On that point, I still think that ultimately, if you are going to force people into the open market, you probably need some kind of clearing house, so that it removes the risk, because there will be scammers out there, listening to this session, I am sure, and rubbing their hands with glee at the thought of lots of people taking those decisions.

The second point is about the contractual overrides, which are clearly crucial to make the whole system work. I think we need to make sure that the best interests test is working for members. When I read the Bill initially, the thing that stood out most for me was that there seemed to be a lack of consumer protection at that point. When the provider undertakes the best interests test, if they are making an external comparison, they only have to compare with one other situation, one other scenario. That is what it says in the Bill. I do not think it is sufficient. I think the Bill should be amended, at least to say, “Make two comparisons,” or possibly to be a bit vaguer and say, “Make a reasonable number of comparisons,” so that it can be left open-ended and give a bit more scope for flexibility. That seems to be one area.

I think the best interests test needs to consider different classes of members as well. At the moment, it just looks at members as a whole, but there are different people in different situations within any scheme. For example, people approaching retirement are in a completely different position from people in their 20s or 30s, so any decisions about transfers need to make sure that all those interests are considered.

Probably the main point is about the independent assessor, who will then look at the best interests test and how it has been conducted and rubber-stamp it according to some FCA regulations yet to be written. We think quite strongly that the independent assessor should have some kind of fiduciary duty applied to them. I do not think there is any reason why this could not work, but at the moment they do not seem to be fully incentivised to act in the members’ interests or prioritise members’ interests above those of the scheme.

That is another really clear addition to the Bill that we think should take place. I think that would make the system so much more robust. There are potentially some really negative outcomes for members if they are transferred into inferior arrangements. I am sure it is not the intention of the Bill to do that, and it is probably not the intention of most providers, but it could still happen. I think putting some kind of fiduciary duty on the independent person would give this a lot more strength and make it fairly watertight for members.

[Damien Egan]

Q Christopher, a number of us are on the Work and Pensions Committee and we know that one of many big issues is people coming up to retirement and being prepared—even knowing how much they have got to take into retirement. How do you see this Bill—you have talked through some of the challenges—helping people to prepare for their future, know how much money they will have and make decisions at a better time?

Christopher Brooks: How the Bill tackles that is probably through the governance structures that will be put in place. When there is a fiduciary duty, the governance is reasonably strong. I believe it is stronger under a fiduciary duty than under the contract-based system. For example, the trustees are better placed than IGCs—independent governance committees. I think we will see IGCs potentially play a greater role in some of the transfers. That is an opportunity to make sure that IGCs can do their job more effectively and have better access to the necessary data, which was flagged previously by the FCA as not always being the case. Clearly they need to be independent, so it will not be appropriate to have employees of the firm sitting on them any longer. I believe a number of them do at the moment, but I do not think getting employees taken off will be an issue.

Once you are in retirement, you have a separate issue. Because the decumulation part of the Bill leaves a lot to the regulators to decide in the future, it has not been clearly specified how the governance will work, so there is an issue about making sure, when those regulations are written, that it does work well for people. There is clearly going to be a gap around information as well. We recently did some research with Aviva, and one of the recommendations was that we need some kind of intervention for people in their mid-70s about how they look after the rest of their lives and how they manage their pension. That kind of support is going to be crucial if people are expected to take a decision in their late 70s or early 80s with regard to annuitisation or how they draw down the rest of their money. There is a big gap there as well.

[Mr Bedford]

Q I think financial education is the key to ensuring pensions adequacy. To build on Damien’s question about ensuring that members are fully informed about their pension assets and what the returns are going to be, what they will provide, what are your thoughts on what support the Bill offers, or does not offer, to ensure members are fully informed on the key decisions they have to make?

Christopher Brooks: Providing information takes you so far, and it is really important to do that: there are some really big gaps, as we see with Pension Wise UK, which is a really good and well-liked service, but has a really low take-up. That is just an example, but we need to get more people into a position to access the information. However, they will then still need a lot of support, because pension decisions are really challenging for the vast majority of people.