Pension Schemes Bill

Lord Davies of Brixton Excerpts

Monday 16th March 2026 Lords Chamber

[Lord Lucas (Con)]

My Lords, it is a long time since I was managing big pension funds in the 1980s. In those days, we were in the happy position of considering it a bit underweight if you had less than half your money in British stocks; now, it is 5%. It is extraordinary for politicians to have done that to the economy—and it is because of us that it has dropped. The way we have framed our regulations and organised how pension funds are assessed has, over time, resulted in that extraordinary diminution. This has left us with a stock market that is cash negative and a City that is immensely weaker than it would be. We will address this later, but the solutions to that problem perhaps lie in this part of the Bill.

If we communicate better with pensioners and say to them, “Do you really trust the country you live in, are part of and benefit from so little that you want only 5% of your pension in it?”, I think we would get a positive response to the idea that perhaps that figure should be higher. Through the mechanisms in this part of the Bill, we could ask pension fund managers to respond to that, and I hope that we would be able then to get away from the bits in the Bill about compulsion and direction that are causing difficulty to my noble friends, whose concerns I share. I think we would get a good response if we informed members of pension funds, as my noble friend said, so that they could take good decisions, and then empowered them to say that they want to back their own, with a good chunk of their money going to improve, invest in and support this country and take it forward. This bit of the Bill would be a good place to do that.

I hope the Minister can confirm that, in the governance aspects of this, it will be expected that pension fund managers should vote their shares. It is extraordinary that we have moved to a position where the owners of companies just do not vote—they do not use that power to decide what their opinion is on what companies have been doing; they merely buy and sell. That is a huge diminution in the mechanism by which companies are held to account. We need people to vote and to take an interest. Having a direction on pension funds that they should participate and be a real part of the corporate governance process would be a useful thing to come out of this Bill.

[Lord Davies of Brixton (Lab)]

I have three points. First, I profoundly disagree with the noble Lord, Lord Lucas. To pin the blame just on politicians lets everyone else off scot-free. It is more like Murder on the Orient Express—everyone had a hand. My particular favourite is the accountants, who had a big hand; the way they defined accounting for pension costs was pernicious. Let us not blame just the politicians.

Secondly, one cannot not be in favour of value for money. Obviously, we are all in favour of people getting value for money from their pension schemes. However, I think the Government underestimate the difficulty of providing something useful. As the noble Baroness, Lady Altmann, pointed out, there are more than two or three factors to be taken into account. It is particularly difficult when one starts including prospective factors—how are these to be judged? It is very difficult, and it is not just the factors. The pension holders’ circumstances vary so widely. How can there be a simple, straightforward way of assessing whether someone has had value for money when their needs are so different from those of other people who are saving for their pension?

Thirdly, I apologise for not being present in the Chamber to support the amendment in the name of the noble Viscount, Lord Thurso, in the previous group. I realise I am cheating here, but I was elsewhere. I had not realised that one of the groups had disappeared; otherwise, I would have been here and supported his amendment.

[Baroness Stedman-Scott (Con)]

My Lords, I begin by thanking the noble Baroness, Lady Altmann, for her opening remarks, which set the scene effectively on an important part of the Bill. She has done so at the close of what has been a long first day on Report—longer than we would have thought. She has once again brought clarity to a set of issues that are central to the operation of the reforms before us.

The amendments in this group are, in large part, concerned with ensuring that the value-for-money framework works well—both in how it is constructed in legislation and how it is communicated to and understood by those who will ultimately be operating under it. If this framework is to achieve its objective of improving outcomes for savers, it must be both robust in its design and clear in its application.

Amendment 24, in the names of the noble Baronesses, Lady Altmann and Lady Bowles, is both welcome and important. Throughout our discussions today and, indeed, in Committee, we have spoken a great deal about fiduciary duty: the principle that those responsible for managing pension schemes must act in the best interests of their members. Amendment 24 would help ensure that this vital principle is properly reflected within the value-for-money framework. It would require the regulations underpinning the framework to include explicit criteria relating to the quality of service provided to members. It would include matters such as the accuracy of recorded contributions; the reliability of scheme data; the efficiency of administration; the clarity of communication; the provision of guidance and education for members; and the support available to vulnerable members. Thus it recognises that value for money in pensions is a question not simply of investment performance and cost but of how effectively schemes serve the people whose savings they are entrusted to manage.

Amendment 25 has a complementary effect of strengthening transparency. It would require the value-for-money framework to provide separate assessment and reporting for each asset type in which a scheme invests. Rather than relying on a single aggregated measure of performance, schemes would need to report performance by asset class; for example, equities, bonds or infrastructure. This would allow for a clearer and more granular understanding of how investment strategies are performing, and therefore enhance transparency and accountability.

We also welcome the amendments in the name of the noble Baroness, Lady Altmann, which seek to ensure that the language used within the value-for-money framework is both intelligible and meaningful. The framework can succeed only if it is understood by those who are subject to it and by those whose savings it is designed to protect. Replacing more technical or opaque terminology with clearer expressions, such as “good value” and “poor value”, may seem a small change, but it is a practical one that helps ensure that the framework communicates effectively with members and the wider public.

Amendment 32 addresses another important issue: the practical realities facing pension schemes as they adapt to a rapidly changing regulatory landscape. This amendment would ensure that schemes are given time to improve before facing additional regulatory obligations. We have heard considerable concern throughout our debates about the sequencing of reforms in the Bill. Funds are being asked to do a great deal at once and to respond to a system that is evolving significantly under these provisions. Allowing a longer period before additional reporting requirements are triggered therefore seems both sensible and pragmatic. If schemes are to improve performance, they must first be given the time and space to adjust.

Finally, I turn to Amendment 44 in my name and that of my noble friend Lord Younger, which would require the Secretary of State to establish the value-for-money framework within 12 months of the Act being passed. This again speaks to the issue of sequencing: those who operate the system need clarity about the framework within which they are expected to operate. Providing that framework in a timely manner gives funds the greatest possible opportunity to understand its requirements and prepare for implementation. That, in turn, makes compliance more achievable and the reforms themselves more effective.

I thank the Minister for the technical amendments in this group. These drafting corrections help to ensure that the framework is expressed clearly and consistently in legislation, and we welcome that work. Taken together, the amendments before us seek to ensure that the value-for-money framework is clear, transparent and workable. If we are to ask pension schemes to operate within a new regulatory structure, it is only right that we ensure that structure is robust in its design and comprehensible in its operation. These amendments help us to move in that direction.