Pension Schemes Bill

Judith Cummins Excerpts

Consideration of Lords amendments
Wednesday 15th April 2026 Commons Chamber

Consideration of Lords amendments

[Madam Deputy Speaker (Judith Cummins)]

I inform the House that Lords amendments 68 to 76, 78, 80, 84 and 86 engage the Commons’ financial privilege. If any of these Lords amendments are agreed to, I will cause the customary entry waiving the Commons’ financial privilege to be entered in the Journal.

Clause 2

Asset management

[The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)]

I beg to move, That this House disagrees with Lords amendment 1.

[Madam Deputy Speaker]

With this it will be convenient to discuss:

Lords amendments 5, 6, 13, 15 to 24, 26, 27, 30 to 43, 77 to 79, 83, 85 to 88, and Government motions to disagree.

Government amendments (a) to (c) to the words restored to the Bill by the Commons disagreement to Lords amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88.

Lords amendments 2 to 4, 7 to 12, 14, 25, 28, 29, 44 to 76, 80 to 82, 84 and 89.

[Torsten Bell]

Let me start by thanking Members of both Houses for their careful scrutiny of the Bill before us today. I thank Members of the other place for their amendments, which we are considering today; in particular, I thank Baroness Sherlock and Lord Katz for their steering of the Bill in recent months.

This is a complex Bill, but it is one with a simple goal: higher returns for pension savers. As I noted on Second Reading, this is a particular responsibility of this House, because it is legislative action, in the form of auto-enrolment, that has got Britain back into the habit of workplace pension savings. We must ensure that those savings deliver, overcoming the challenges of a system that is too fragmented and where there is insufficient focus on how hard people’s savings work to support them in retirement.

A complex Bill means something else: amendments. As is normal, the Government brought forward changes in the other place that we today ask this House to endorse. The vast majority of them are technical, ensuring that the legislation works as intended. Of the more substantive changes, I will highlight three.

First, the Government tabled amendments in the other place that will help to ensure that superfunds will not be forced to wind up when they still provide a high level of security to their members. Secondly, on the Atomic Weapons Establishment pension scheme, we are reflecting the reality that since 2021, AWE has been wholly owned by the Ministry of Defence. Its closely defined benefit pension scheme is backed by a Crown guarantee. These Government amendments therefore move it on to the same basis as other central Government pension schemes; the accrued rights of members are of course fully protected. Finally, on the value for money measures, the Government amendments provide for provisions to be commenced via regulations, to allow decisions about the introduction of elements of the VFM framework to reflect detailed design work and consultation.

Peers in the other place have, as always, provided useful scrutiny of the Bill, so let me turn to doing justice to their amendments. First, there are the Lords amendments to the local government pension scheme. Lords amendment 1 understandably tries to introduce an explicit prohibition on regulations about investment in specific assets or asset classes, or about the location of investments. That is duplicative, because a 2020 Supreme Court ruling effectively means that LGPS regulations cannot provide such direction without a specific basis from Parliament, and there are no new provisions in the Bill that would allow it to be provided.

Lords amendments 5 and 6 relate to worries about excessive prudence in the valuations of the local government pension scheme. I recognise the intent behind these Lords amendments, given the importance of those valuations for decisions about contribution levels, and I can offer hon. Members some reassurance on that front. The 2025 valuations look set to see the average employer contribution rate in England and Wales reduce by slightly less than 5% on average, which is a substantial reduction. Lords amendment 5 would introduce specific benchmarks for the next valuation in 2028, but the right way to learn lessons from this valuation is via the statutory review by the Government Actuary’s Department, which will begin shortly.

Lords amendment 6 focuses not on the LGPS valuations themselves, but on facilitating employers seeking interim reviews between valuations. I have heard calls for that from several Members over the last few months. However, the Government have already committed to consulting on regulations governing interim contribution reviews, reflecting the requirement in the Public Service Pensions Act 2013 to consult on changes to regulations—something that this Lords amendment would breach.

Let me turn to small pots. I am pleased to see that there remains a strong consensus on the need to act here, given the costs to individuals and to the pension system as a whole of the proliferation of small pots. This is an area where work begun under the Conservatives. Lords amendment 13 probes the case for extending the dormancy period for automatic consolidation from 12 months to 36 months. I recognise the intent, but that would be a mistake. It would significantly prolong the period during which a pot remains both small and dormant, with members facing multiple sets of charges and the wider scheme membership continuing to subsidise scheme losses on such pots, which might total around £50 million per year.

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[Torsten Bell]

If I have understood the hon. Member’s question, we are ruling out the ability for the power to be used for any purpose other than for the broad private asset class. That would include questions of specific asset classes, but it would also include questions of geography. I hope that gives him the reassurance he is looking for.

It is also in the interests of savers to tackle the UK’s fragmented pensions landscape. Scale matters: it reduces costs, opens up a wider range of investment strategies and enables more active asset ownership. Those arguments, I think, have cross-party consensus, and they lie behind the measures in the Bill to require pension schemes to operate at scale in the years ahead. Unfortunately, that policy objective, motivated by a desire to ensure that savers get the best returns, would be undermined by Lords amendments 26 and 37, which seek to create more exemptions from the scale requirements for small schemes. They would do so in a way that would create ongoing uncertainty for years as schemes, regulators and likely courts debate whether or not the conditions for such exemptions have been met, a process that itself would impose significant costs on savers. Both regulators have expressed their concern that, as a result, these amendments would be inoperable.

I do, however, recognise the case that has been made, in this House and in the other place, for the importance of both competition and innovation in the market. That is what lies behind the pragmatic approach we have taken to achieving scale: not only have we set a pragmatic £25 billion starting point, but smaller schemes will be given time to reach that point, with the transition pathway lasting until 2035. The new entrant pathway will also provide a route for truly new and innovative disruptors to enter the market. This supports the policy intent of Lords amendments 35 and 43, which require the Secretary of State to have regard to innovation and competition when making regulations that support scale. Those amendments are, however, largely duplicative, given that the Bill already sets out that regulations made under the clauses in chapter 4 must take into account the conclusions of the review of non-scale default arrangements, and that review will consider innovation and competition.

Turning from private to public pension schemes, Lords amendments 77 and 85 seek a review of the long-term affordability of public service pension schemes, a matter that I am sure many Members are interested in. The content of the proposed review, however, overlaps almost entirely with existing mechanisms through which public service pension details are reported, not least the Office for Budget Responsibility and its reports and the whole of Government accounts. Reflecting major reforms over recent years, those mechanisms provide important reassurance that the cost of public sector pensions as a share of GDP is set to fall significantly in the years ahead.

Lords amendments 78 and 86 deal with the Pension Protection Fund and the potential for that fund to discharge its existing liabilities to members through a lump sum payment. I understand the sentiments of those in the other place who brought forward those amendments, in recognition of the absence of pre-1997 increases in PPF compensation, but the amendments would not achieve their intended objective of changing the level of compensation to which members are entitled. Instead, the Government are acting to improve the PPF safety net, with the Bill providing for prospective pre-1997 indexation of compensation for members whose former schemes provided for those increases.

Turning back to today’s savers, we all want to see more engagement with pension savings. I am an optimist on this front: as DC pots grow, so will engagement with those savings. Lords amendment 79 seeks to support that engagement from the perspective of providers, instigating a review of marketing and member communication rules, but instead of another review, the Government favour acting to make it easier for pension schemes to give high-quality support to their members. That is the purpose of the new targeted support regime, allowing schemes—for example—to suggest appropriate contribution and drawdown rates. In developing that policy, we have considered the interaction with the direct marketing rules contained in the privacy and electronic communications regulations. As a result, the Government have committed to take forward secondary legislation to amend those regulations, and we will also return to this issue as we develop default pension regulations through consultation later this year.

I close by thanking peers for their scrutiny of the Bill, and for the discussions I have had with many of them about it. I have endeavoured to do justice to the amendments retuned to us, and particularly to the motivations behind them. In aggregate, despite the divisions that the Lobbies of the House and of the other place exist to facilitate, we all want to see a flourishing pensions system that delivers for savers. This Bill will play a major part in making that happen, supporting a landscape of bigger, better pension schemes that are focused on the returns they deliver for members and, ultimately, the comfortable and hopefully long retirements that we all want our constituents to enjoy.

[Madam Deputy Speaker (Judith Cummins)]

I call the shadow Secretary of State.

[Helen Whately (Faversham and Mid Kent) (Con)]

Who knew that the Pension Schemes Bill would become so controversial? It is a Bill on which there was so much consensus; a Bill begun by one party in government and now being continued by another; a Bill that could have sailed through Parliament. But no, that was not to be, because the Government had an idea—a bad idea. Labour saw £400 billion-worth of pension funds, the savings built up through years of successful auto-enrolment, and it was tempted. We can picture Labour Members looking at the pensions piggybank and saying to each other, “Just imagine what we could do with that money—we could perhaps put it towards some of the Energy Secretary’s net zero schemes.” They have taxed the country to the hilt, they cannot bring themselves to make savings on welfare, and they have run the Treasury dry, so now they are coming for pensions.

Labour snuck in the power that we talk about as mandation under the auspices of a backstop to the voluntary Mansion House agreement. Well, well, well. It really did not have to be this way. If only the Pensions Minister had been a little more receptive to suggestions from other parties or from the pension sector itself. It is hard to find anyone who supports his mandation policy. Pensions UK, the Pensions Management Institute, the Association of British Insurers, Aviva and BlackRock—I could go on—are all against mandation, as are any number of economists and respected voices, from Paul Johnson to Dominic Lawson, and even the Minister’s former colleague Ed Balls. In the other place, noble Lords in their droves have sought to expose this policy for what it is. He should have listened to their debate, as I did, but listening may not be something he likes to do. He even blocked one respected industry voice, Tom McPhail, on social media when Tom simply called out mandation for what it is: a dangerous power grab by the Government.

Pension Schemes Bill

Judith Cummins Excerpts

Consideration of Lords message
Wednesday 22nd April 2026 Commons Chamber

[The Parliamentary Under-Secretary of State for Work and Pensions (Torsten Bell)]

I beg to move,

That this House insists on its disagreement with the Lords in their amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, insists on its amendments 88A and 88C to the words restored to the Bill by that disagreement, does not insist on its amendment 88B to the words so restored to the Bill, but proposes amendments (a) to (j) to the words so restored to the Bill.

[Madam Deputy Speaker (Judith Cummins)]

With this it will be convenient to consider the following Government motions:

That this House disagrees with Lords amendments 37B and 37C but proposes amendments (a) and (b) in lieu.

That this House disagrees with Lords amendment 35B but proposes amendments (a) and (b) in lieu.

That this House insists on its disagreement with Lords amendments 77 and 85 but proposes amendments (a) to (c) in lieu.

[Torsten Bell]

I thank Members and peers for the continued scrutiny of the Bill before us. Our task today is to focus on the limited outstanding areas of disagreement, although that should not detract from the consensus behind this Bill—behind the case for a better pension landscape that sees bigger, better pension schemes focused on delivering stronger returns for savers. On the issues that remain before us, I hope that Members and peers will see that we have listened to the points they have raised and brought forward amendments that directly address what we have heard, while of course holding to the core principles of delivering against the Labour manifesto, which was clear on our policy intent around scale and productive investment.

First, I turn to the reserve power on asset allocation. Last week I set out the Government’s case for such a power at some length, and I will spare the House a full repetition today—[Interruption.] I know, I know, but there is so much more to discuss. We will not have time to discuss the hair of the hon. Member for Wyre Forest (Mark Garnier) if I offer a full statement.

In brief, since hon. Members have asked, there is a well-evidenced collective action problem in the defined-contribution pensions market. Providers want to diversify their asset allocations in their members’ long-term interests and in the interests of better pensions for savers, but they are clear publicly—and even more emphatically in private—that market dynamics, which focus on minimising cost rather than maximising long-term value for savers, are the single biggest barrier to doing so. That is not a theoretical risk; it is exactly why so little progress was made against the Mansion House compact under the last Government. The reserve power exists for the sole purpose of solving this problem.

Last week, we brought forward changes to make that absolutely explicit by writing the industry-set Mansion House accord targets into primary legislation through the 10% and 5% caps, and requiring any regulations to operate neutrally across asset classes. These were designed to make it clear in the Bill that the power can be used only in line with what the industry itself has committed to. The cap prohibits any move beyond the accord targets and the neutrality requirement rules out the possibility that any Government could direct investments into a particular asset or asset class.

As is plain, however, we have not yet reached agreement across the two Houses. Rather than simply restating our position today, the Government are bringing forward a further package of changes.

First, we are bringing forward the current sunset date for the reserve power from 2035 to 2032. The Mansion House accord commits the industry to reaching its targets by 2030, and bringing forward the sunset clause aligns the power more closely with that timeline. If the power has not been exercised by the end of 2032, it falls away entirely. Secondly, because the power has only one purpose, we are providing that it may be exercised only once.

Thirdly—I want the House to understand the significance of this—we are providing for not just the power but any effects of it to fully fall away at the end of 2035. That goes beyond the sunset clause I have just described and means that even if the power has been used, the entire framework and any requirements on schemes will fall away at the end of 2035. This timeline reflects the fact that once the cultural shift has occurred and the impacts of the Mansion House accord are embedded, the collective action problem falls away. At that point, other elements of the Bill—greater scale and the impacts of the value for money framework—will help to sustain the change.

I want to return to a point made by the hon. Member for Faversham and Mid Kent (Helen Whately) in our previous debate. She observed correctly that the Bill referred to assets held in default funds as a whole, whereas the Mansion House accord applies only to main default funds. As the policy is intended to reflect the accord, the legislation would ideally use the same language, so we have tabled amendments to ensure that that is the case throughout the relevant provisions and have retabled the percentage cap with the same wording. I am grateful to the hon. Lady for pressing that point last week.

Let me be clear that the House today is being asked to consider a reserve power that is highly constrained and narrowly focused on solving a very specific problem. It is capped at the accord targets and provides for absolute neutrality among private asset classes. The Government cannot direct investments. The power explicitly applies only to main default funds, more explicitly matching the language used in the accord. The power’s timeline also matches tightly that of the accord. It can be used only once and lapses entirely in 2035 if not used; even if used, which is unlikely, the entire regime is repealed at the end of 2035. On top of all that, it remains subject to the savers’ interest test, the affirmative procedure and the statutory reporting requirements, both before and after any regulations are made.

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[Torsten Bell]

As always, my hon. Friend asks an important question. As I have said, the entire focus of the Bill is on ensuring that we drive up returns for savers. I am sure that he has already read all 200-odd pages of the extensive impact assessment, which sets out clearly that we would expect an average earner who saves over their lifetime, in line with auto-enrolment levels, to see higher returns of around £29,000 to their pension pot when they head towards retirement. That is not an inconsequential amount when we want to ensure that future generations can trust the system to deliver them a comfortable retirement in the years ahead.

As I was saying, the Lords amendments in this area are unworkable, but we must recognise the importance of innovation. That is why we have taken our pragmatic approach. The evidence suggests that the benefits of scale are achieved once a threshold ranging from £25 billion to £50 billion of assets is reached. The scale requirements in the Bill not only target the bottom end of that range—£25 billion—but provide a long timeline for schemes to reach it, especially given that this is a fast-growing market. Smaller schemes require only £10 billion of assets in 2030 to qualify for the transition pathway.

To provide further reassurance, I have tabled amendment (a) in lieu of Lords amendment 37B to require the Secretary of State to publish a report about the effects of pension schemes consolidation and the extent to which innovative product designs are adopted or maintained following consolidation activity, as well as any barriers that may exist to preserving those features. The timing of the report, which is required to be published within 12 months, will ensure that the Government are then able to take necessary action in advance of the scale measures being commenced in 2030.

On Lords amendments 77 and 85, the Government agree with the points made during the Bill’s passage regarding the importance of transparency around, and clear accounting for, public service pensions. I discussed those issues yesterday with Baroness Neville-Rolfe, who tabled the amendments. I completely agree with her that it is crucial that the future cost of payments from unfunded pension schemes is understood and taken into account in Government decision making. That applies to the Treasury in aggregate, as well as to individual organisations making decisions about the nature and level of staffing. We will continue to ensure that accounting and budgetary processes support this.

The Government invite the House to accept our amendment (a) in lieu, which recognises the important principle that Parliament, policymakers and the public should be able to see clearly the long-term cost of unfunded public service pension schemes. The amendment requires the Government Actuary to produce within 12 months a document setting out its analysis of the long-term impacts of public sector pensions, covering both expenditure on benefits and income from member contributions. The document must be provided to the Treasury and the Office for Budget Responsibility, and the former is required to make it available to Parliament. That approach is focused on the evidence base, using the Government Actuary to produce impartial numbers to aid understanding and debates on this issue.

I hope that Members will have heard our serious engagement with the issues raised by peers and by Opposition parties in this House. We are committed to delivering the policy intent in the Bill, given its crucial role in driving better outcomes for savers and the important place given to these pension reforms in our 2024 manifesto. We have tabled significant amendments to address the specific issues raised, aiming to further reinforce the consensus on the Bill that has been evident since its Second Reading in this House. On that basis, I hope that Members will be happy to support our amendments.

[Madam Deputy Speaker (Judith Cummins)]

I call the shadow Secretary of State.

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This is an extraordinary hill for the Minister to choose to die on. Mandation was never put to voters, it never had the backing of industry, and it should not be forced through Parliament now. I urge the Minister to think again.

[Madam Deputy Speaker (Judith Cummins)]

I will now announce the result of today’s deferred Division on the draft Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026. The Ayes were 380 and the Noes were seven, so the Ayes have it.

[The Division list is published at the end of today’s debates.]

[Liam Byrne]

I rise to say a couple of things in support of the Minister, who not only has done a heroic job in laying out the intellectual architecture for the legislation before he got to the House, but is so expertly steering it through the House. I wish him all the very best this afternoon in finishing the job.

I want to make three points. First, the measures that the Minister has set out are essential if we are to pursue the long-term interests of pension savers in this country. It is in their fundamental interests that they live and retire in an economy that is growing faster in the years to come. The only way in which we can collectively achieve that is by raising the investment rate in this country. For a long time, our investment rate was the lowest in the G7; it is improving and is now the second-lowest in the G7. It is for exactly that purpose that hon. Members on both sides of the House made the argument that we need to repatriate investment saving.

The fact is, we have got to resolve the paradox that, on the one hand, we have £3 trillion-worth of pension savings and, on the other hand, while we have some of the world’s best life science, best universities and best entrepreneurs, we do not have the investment institutions and systems that connect long-term savings to that brilliant tradition of entrepreneurial genius. Unless we fix that long-standing paradox, this country will not grow faster. That is not a Labour analysis; it is an analysis that was first advanced by the former Conservative Chancellor, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt).

If we manage to get that right, the investment rate in the country will go up and the economy will grow faster in the years to come. Therefore, there is not a cost to the savings of Britain’s pension savers—it will actually be to their advantage.

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My last point, as I mentioned in my intervention, is that I was heartened to hear the Minister’s commitment at the Dispatch Box that we will proceed with reform of that clarification of fiduciary duties. Too many pension fund trustees today lack the legal certainty that they can make strategic, long-term investments that are in the best interests of their pension savers and will create a higher return on investment in this country by investing in things such as net zero infrastructure and other virtuous investments that are good for the long-term growth of the economy. It is disappointing that Lib Dem peers and others voted against the provision in the other place and prevented the Government from bringing in the necessary amendments. However, I am reassured by the Minister’s commitment that he will seek a further legislative opportunity at the earliest point in the next Session. With that, I add my support to the Minister’s ambitions.

[Madam Deputy Speaker]

I call the Liberal Democrat spokesperson.

[Steve Darling (Torbay) (LD)]

The Liberal Democrats broadly support the proposals before us in the Bill as a whole. I know from conversations with residents in Torbay that there are some challenges within the pensions market, and the Bill as a whole addresses an awful lot of them. However, I suggest that the Minister has been studying his Greek history, assumed the position of Odysseus and developed a Trojan horse, which he has sneaked into the Bill. The Trojan horse is, of course, mandation.

While the Minister may have cut off a couple of the Trojan horse’s legs, it remains a Trojan horse before us. Clearly, as Liberal Democrats, we welcome that as a step in the right direction, but the Government should be shaping the market appropriately through policy so that there is a pipeline of opportunities for investments—that goes across to the Mansion House accord—so that the market has those opportunities and can invest in them appropriately.

There is an element that we need to touch on. Since 2008, there has been risk aversion in the market, which stifles profits; we need to be alive to that. Risk is a good thing when investing, but investments should be sensible and with appropriate spreads. The Bill does elements of that, but I fear that some of the monitoring could stifle risk and therefore stifle returns.

The Liberal Democrats are keen to ensure opportunities. The Government should be ensuring that there are baskets of opportunities to invest in things that matter to our communities, whether regenerating our town centres or social rented housing. We know that people such as Legal & General lead the market in those investments; we need to think about how we can enhance those opportunities. We must also ensure that we are investing in net zero, which is close to the heart of several parties. Again, the Government should be shaping the market in that way rather than dictating. While the Minister alludes to this as a one-shot opportunity, other colleagues are fearful that mandation is the thin end of the wedge.

Finally, I would like to reflect on the changes that the Minister has proposed. We welcome the changes allowing greater innovation and greater development of the market, which are significant steps in the right direction. However, as Liberal Democrats we are not prepared to see the dead hand of Government directing here. We continue to oppose mandation in whatever form it may take.

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[Helen Whately]

On a point of order, Madam Deputy Speaker. The last Division we voted on was on a motion proposed by the Government that grouped a series of amendments with which we agreed, alongside amendments on mandation, with which we had strong disagreements. What steps can be taken to bring about a separate Division on the mandation clauses, with which we disagree?

[Madam Deputy Speaker (Judith Cummins)]

I thank the hon. Member for her point of order. The content of the motions is a matter for the Government. I can reassure her that they would not have appeared on the Order Paper unless they were in order. Those on the Government Front Bench have heard what she has said. If she would like any further advice on procedure, I recommend that she contact the Public Bill Office.

[Matt Western (Warwick and Leamington) (Lab)]

On a point of order, Madam Deputy Speaker. I thank you for granting my point of order and apologise for not giving you due notice of it. Given the events of recent days and some of the debates that have been called, when can we get an update from the Intelligence and Security Committee on the work it is undertaking and on its findings regarding the Mandelson papers?

[Madam Deputy Speaker]

I thank the hon. Member for his point of order. That is not a matter for the Chair; it is a matter for the Committee.