Pension Schemes Bill

Lord Bishop of Hereford Excerpts

Thursday 19th March 2026 Lords Chamber

[Lord Fuller (Con)]

My Lords, the Government are obsessed with size, but everyone knows that it is not about size but what you do with it. That point was made forcefully in the Financial Times this morning, which discussed the fact that the larger funds are not necessarily better performers, with the sub-headline:

“Seeking size for its own sake can distract fund managers from focusing on clients and shareholders”.


There is so much I can say, but I will restrict myself to one substantive point. When schemes get large, their normal market investment size gets bigger too. They do not have the time, capacity or need to go away from the big global stocks, most of which are, by their nature, overseas. It limits the constellation of investment ideas, so they chase the same MSCI stocks, creating a value-destroying bubble and systemic risks by all chasing the same thing. It becomes all about speculation.

That is not necessarily what capital markets are for. Capital markets exist to provide capital so that smaller companies can become big ones. Right now in the UK, there are lots of smaller companies with bright ideas and great prospects that could become bigger if only they were relevant to the funds—a few million pounds here, perhaps a few tens of millions there. But they are all but invisible to the superfunds, for which anything less than half a bar is a rounding error.

The problem for the UK is that, while Ministers are worshipping the false icons of scale, they will actually make it harder for the stock market to invest in small British businesses at home. If the schemes are forced to bulk up, they simply will not have the time to look for or after the small fry. British companies that are crying out for long-term patient capital will go hungry, which directly contradicts the Mansion House objectives. Once again, the Government have been suckered into a position by the big boys, understandably keen to cut out the competition, visiting harm on the UK economy and especially on small British firms we all want to see do well. As the Financial Times says today:

“A substantial body of evidence in academic research suggests that mergers in financial services frequently lead to prolonged periods of underperformance. Revenue synergies often fail to materialise and cost synergies tend to be overstated”


—quite.

[The Lord Bishop of Hereford]

My Lords, I speak in favour of Amendment 55, in the name of the noble Baroness, Lady Noakes. There is a questionable theory of change in the Bill—that bigger pension schemes are necessarily better, suggesting the minimum scale of £25 billion. While scale certainly creates advantages, Australian experience suggests that funds can be run at less than this size and still provide value and good outcomes for members. However, concentrating the market into a few megafunds introduces a new system of risk, of schemes that become too big to fail and so are effectively the state’s problem.

Also, megafunds are unlikely to allow for nuance and specialism, such as faith-based funds. Unfortunately, the understanding of faith-based funds in the commentary on the Bill seems to be limited to Sharia-compliant funds and exclusions. The understanding of and engagement with the nuances of faith-based investing in the Bill commentary are superficial at best. There may be perfectly good arrangements with faith-based or ethical distinctiveness; such arrangements may perform well for members in financial and non-financial terms and be significantly smaller than the threshold envisaged. The distinctiveness that they offer might easily be lost in generic megafunds. This amendment makes the important point that absolute size and performance for members need not be correlated.

[Baroness Altmann (Non-Afl)]

Obviously, I support Amendment 55 and a number of the other amendments in this group, but I urge the Minister to consider the dangers of trying to engineer a few large schemes while at the same time knocking out new entrants and competition. From now to 2030, if a scheme is not yet at the £25 billion scale requirement, it will find—and it is finding, such as in the case of Penfold—that it cannot get new business. The employer cannot be confident that it will reach the £25 billion in time, and knows that it could potentially have to change provider. This requirement is undermining innovation and competition in the market right now, and may continue to do so. I hope that the Minister will recognise the dangers.

I apologise to the House, as I should have declared my interests. As stated in the register, I am a non-executive director of a pensions company and an adviser to a pension master trust.