Pension Schemes Bill

Lord Sharkey Excerpts

2nd reading
Thursday 18th December 2025 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I join the Minister and the noble Baroness, Lady Stedman-Scott, in saying how much I look forward to the maiden speech of the noble Baroness, Lady White, especially since I too live in Tufnell Park.

It is always a pleasure to follow the Minister. We welcome an important set of proposals for reform. We would support many of these proposals, but several merit serious examination and probing in Committee. As things stand, I should say upfront that we cannot support the mandation proposals in the Bill. I hope that we can constructively modify these proposals during the Bill’s passage through the House.

The Minister will know that stakeholders have expressed significant concerns about risk to member security, trustee independence and long-term saver outcomes that may be contained in the Bill’s proposals. For example, there are worries that easing access to DB surpluses of employers could undermine member benefits. Phoenix has noted that surplus release thresholds will be set in secondary legislation. It believes that a post-release funding level is essential to protect members and limit covenant risks. It opposes lowering the threshold to “low dependency” and believes that surplus should only be released above buyout affordability. Some MPs and the ABI have called for stricter oversight, including retention of the three “gateway tests” to prioritise buyouts over superfunds.

The ACA also recommends that trustees have a formal role in assessing and agreeing any rule changes and in determining any refund of a surplus to an employer. The CEO of TPR, Nausicaa Delfas, whose name I googled—it means “burner of ships”—is on record as saying that:

“Where schemes are fully funded and there are protections in place for members, we support efforts to help trustees and employers consider how to safely release surplus if it can improve member benefits or unlock investment in the wider economy”.


It is not entirely clear how those two outcomes may be traded off, but I would be grateful if the Minister could say more about government thinking on member protection in release and distribution of surplus. I know that my noble friend Lord Thurso, who cannot be here today because he is undergoing a medical procedure in Inverness, will also wish to test the Government’s thinking in this area in Committee.

Then there is the critical question of mandated asset allocation. This Bill, as everyone knows, contains a reserve power to authorise DC master trusts and group personal pensions used for automatic enrolment to invest a minimum proportion of assets in “productive” investments, including UK assets. On the face of it, this cuts directly across trustees’ fiduciary duties and members’ best interest tests. It risks political direction of asset allocation. Does anyone really believe that the Government would be better at allocating funding than the markets? This mandation may well create significant market distorting effects if, for example, the demand for such “productive” assets outpaces their availability.

There is also the risk that such a power may be extended over time to influence allocation on an even larger scale than might be currently envisaged. It is worrying that the Governor of the Bank of England has been reported as saying that he does not favour mandation. The Institute and Faculty of Actuaries has said in a written submission:

“The criteria for Master Trust authorisation were intended to produce a safe and reliable savings environment and we do not believe the concept of qualifying assets belongs there”.


This power to mandate

“introduces a commercial conflict between pension providers and trustees over asset allocation, weakening the fiduciary accountability of the trustees … It is also premature to give the Government a sweeping power it does not expect to make use of (we note the percentage of mandated assets cannot be increased after 2035 but that might encourage a government to ‘use it or lose it’.) We would urge Parliamentarians to consider the implications of a future government—of any configuration—having a power to define qualifying assets as any project that the government of the day can meaningfully define, charging the capital costs to the auto-enrolled pension savings of the nation … Should mandating schemes to invest in accordance with Government direction proceed, it needs to be made clear what the respective responsibilities of Government and trustees are”

as the finances work themselves through.

I would be very grateful if the Minister could set out for us how mandation and fiduciary duty can be reconciled without complicating or diluting the proper exercise of fiduciary duty. Perhaps a definition of “productive” would be a useful start. My noble friend Lady Kramer, who is attending a funeral this afternoon, had intended to speak to this point and wanted to ask for a detail and risk profile of assets that will qualify as “productive”.

Most people contribute through auto-enrolment into default funds. They have few resources and should not be in high-risk investments—and certainly not without their permission. Ministers have promised statutory guidance to help resolve the issue of potential conflict between mandation and fiduciary duty. On Report in the Commons, Torsten Bell said

“I intend to bring forward legislation that will allow the Government to develop statutory guidance for the trust-based private pensions sector”.—[Official Report, Commons, 3/12/25; col. 1043.]

He did not specify what kind of legislation or when. The Minister has told us that this guidance will not amount to direction and will have the usual force, or lack of force, present in the many existing “have regards” that exist in the financial services arena. She has also told us that this draft guidance will not be available before Committee begins. This is surely not ideal.

Can the Minister reassure us that, at the very least, this draft guidance will be available before the end of Committee stage? We need to be able to discuss the details of the guidance before we agree to legislation. That is especially the case if the Government intend to rely on the use of SIs, which would of course deprive Parliament of any effective means of scrutiny at all. May I ask her to take another look at the timing, so that we may be able to take guidance properly into account in our discussions of mandation?

Perhaps the Minister can also explain why the mandation currently has sunset provisions for expiry in 2035 if no regulations are in fact made. Why not use, for example, the Mansion House targets to generate a significantly earlier cut-off?

Then there are questions of value for money and consolidations, which have been discussed already. The ABI, as I am sure the Minister knows, pushes for regulatory mechanisms to force consolidation only when it clearly benefits customers. I heard the Minister endorse that approach. The key word here is “clearly”—what does this mean? What will be the test, and who will be doing the testing?

As important as any of these things is the question of pensions adequacy or inadequacy. It is very disappointing that the Bill does nothing to tackle such things as low contribution rates, self-employed exclusion and early savings barriers. The question of whether people are saving enough is probably easy enough to answer, but what to do about it is entirely absent from the Bill. We will want to discuss this further.

Finally, there is no substantive mention of climate issues in the Bill and no reference to, for example, the Paris Agreement. There is an obvious asymmetry here. The Bill provides for increasing investment in productive assets, which are to be defined. It says nothing about which assets should be avoided or minimised. Industry analysts caution that, if the mandation favours domestic growth sectors without, or which do not have strong, climate screening, schemes could be nudged into assets misaligned with the 1.5 to 2 degrees pathway. That would certainly conflict with the spirit, if not the letter, of the Paris Agreement, and it would damage everybody and every enterprise.

Proposed new Clause 19, brought forward at Third Reading in the Commons by my honourable friend Manuela Perteghella, addresses this issue. This new clause, not voted on, would have required the Government and the FCA to make regulations and rules restricting exposure of some occupational and workplace pension schemes to thermal coal investments, and to regularly review whether the restriction should be extended to other fossil fuels. We will bring forward a similar amendment in Committee.

This is a very important Bill with some obviously welcome proposals but also some deep causes for concern, especially as regards mandation and the failure to address pension inadequacy. We look forward to a constructive discussion with the Government and detailed examination of the Bill.

Pension Schemes Bill

Lord Sharkey Excerpts

Committee stage
Monday 12th January 2026 Grand Committee

Moved by

[Lord Sharkey]

3: Clause 1, page 3, line 7, at end insert—
“(7A) Scheme regulations made under this section are subject to the super-affirmative procedure, as defined by section (Super-affirmative procedure).”Member’s explanatory statement
This probing amendment seeks to clarify the Government’s willingness to subject regulations made under this section to the super-affirmative procedure, as defined in another amendment in the name of Lord Sharkey to after clause 120. It is connected to other amendments to clause 120 in Lord Sharkey’s name.

[Lord Sharkey (LD)]

My Lords, in moving Amendment 3, I will speak also to Amendments 221 and 222. These amendments would enable meaningful scrutiny of any of the Bill’s nearly 130 delegated parts when it seemed appropriate to Parliament.

The Bill before us is a skeleton Bill. The DPRRC says that the test for a skeleton Bill is whether it is

“legislation containing so many significant delegated powers that the real operation of the legislation depends entirely or in very large part on regulations made under it”.

This Bill, with nearly 130 delegated powers, clearly passes that test; in fact, it is an obvious and extreme example of a skeleton Bill. This means that parliamentary scrutiny of the Bill is severely restricted. That is because, as things stand, statutory instruments cannot be amended and, by convention, are not rejected. As a result, the Government are taking powers to make policy before they have decided what that policy should be or before critical policy details are in place.

The Constitution Committee was clear in its 2018 report The Legislative Process that:

“Without a genuine risk of defeat, and no amendment possible, Parliament is doing little more than rubber-stamping the Government’s secondary legislation. This is constitutionally unacceptable”.


The DPRRC, in its recent report on the Bill, is equally critical and alarming. It says, among other things:

“We take the view that this Bill is in large part a licence for Ministers to make subordinate legislation … We would have found helpful an explicit declaration from the Department that the bill is a skeleton bill, accompanied by a full justification for adopting that approach, including why no other approach was reasonable to adopt and how the scope of the skeleton provision is constrained”.


The committee’s report, one of the most damning and disturbing that I have read, goes on to say:

“We would also have welcomed an opportunity to examine indicative regulations for at least some of the more important delegated powers given the large part played by delegated powers in this Bill”.


Can the Minister say whether and when the Government will comply with the committee’s suggestion on indicative regulations? We have seen no such indicative draft regulations. I understand that such drafts were circulating among government and industry after the summer. Is that the case? If it is, why has Parliament not been included in the circulation? It is hard to avoid the conclusion that Parliament is being deliberately bypassed.

The affirmative procedure proposed in my Amendments 3, 221 and 222 is designed to deliver a measure of real scrutiny. Together, they would deliver a form of super-affirmative statutory instrument. Paragraph 31.14 of Part 4 of Erskine May characterises the super-affirmative procedure like this:

“The super-affirmative procedure provides both Houses with opportunities to comment on proposals for secondary legislation and to recommend amendments before orders for affirmative approval are brought forward in their final form. (It should be noted that the power to amend the proposed instrument remains with the Minister: the two Houses and their committees can only recommend changes, not make them”.


The noble Baroness, Lady Penn, who is not in her place at the moment, when a Minister gave this House a helpful summary of how the procedure would work in practice, once the House had decided that the procedure should be followed in a particular case. She said that

“that procedure would require an initial draft of the regulations to be laid before Parliament alongside an explanatory statement and that a committee must be convened to report on those draft regulations within 30 days of publication. Only after a minimum of 30 days following the publication of the initial draft regulations may the Secretary of State lay regulations, accompanied by a further published statement on any changes to the regulations. They must then be debated as normal in both Houses and approved by resolution”.—[Official Report, 19/10/20; col. GC 376.]

According to the Library, the last time I asked, the last recorded insertion into a Bill of a super-affirmative procedure was by the Government in October 2017 into what became the Financial Guidance and Claims Act. When they are not doing it themselves, they have traditionally opposed its use on any or all of three grounds. The first is that it is unnecessary because the affirmative procedure provides sufficient parliamentary scrutiny. The second is that it takes too long and the third is that it is cumbersome. We may hear any or all of these objections from the Minister today.

The first objection, that the affirmative procedure provides sufficient scrutiny, is plainly and simply wrong—unless the Government regard no effective scrutiny as sufficient. The second objection, that it takes too long, is to misread its purpose; the super-affirmative procedure takes longer, but that is because it contains provisions for real scrutiny, which necessarily takes time. This is not a negative—it is the merit of the procedure and the point of it. The third traditional objection, that the super-affirmative could turn out to be cumbersome and a disproportionate use of parliamentary time, has no force in the proposed use of the super-affirmative procedure set out in my three amendments. The procedure would be used only if either House decided that an issue was important enough to require the extra scrutiny that the procedure provides.

The House has debated the use of super-affirmatives before. In 2021, we addressed the matter in Committee and on Report on the Medicines and Medical Devices Bill and other notorious skeleton Bills. There was very broad support for using super-affirmatives from around the Chamber, including from the late and much-lamented Lord Judge, who said:

“The wider use of the super-affirmative process would ensure better parliamentary scrutiny and control of the Executive, which for too long have simply ignored the constant urgings of the parliamentary committees in this House”.—[Official Report, 12/1/21; col. 654.]


When the proposal on that Bill was put to a vote, the result was: Content 320, Not-Content 236. Many distinguished Members voted for the use of super-affirmatives, including the noble Baroness, Lady Sherlock. I beg to move Amendment 3.

--- Later in debate ---

[Baroness Sherlock (Lab)]

I was going to say that I am grateful to the noble Lord, but I am not sure that I am, really. I am sure he has not missed the fact that the amendments put forward by the noble Lord, Lord Sharkey, do not apply simply to the LGPS provisions in the Bill. They would have widespread application throughout the Bill and implications beyond it. I say that they would have all these implications and I am talking about trustees because they would have a significant impact on the way that all those actors in the pension space would be able to engage in future.

In the past, I have heard people around the House criticise Governments for making decisions at the centre without engaging with those in industry and business who have to deliver them. I know that, if the Government had given huge amounts of certainty and left nothing out there, the criticism would simply be the reverse of what we have heard today. We have to find a balance. The Government believe we have found the right balance. Some Members of the Committee will disagree. I have looked carefully into this, and I am defending the balance that the Government have come to, but I accept that if noble Lords disagree, we will have to come back to this in due course.

We think the existing framework already strikes the right balance between scrutiny and practicality, enabling Parliament to oversee policy development while allowing essential regulations to be made in a timely and orderly way. In the light of my comments, particularly about the proportionality of this, its comparability with previous pensions legislation and the degree to which it is in continuity with the way pensions legislation has traditionally been made by successive Governments, I hope the noble Lord will feel able to withdraw his amendment.

[Lord Sharkey (LD)]

I am grateful to all those who have contributed to this brief debate. The complexity described by the Minister is obviously real and clearly important, but one of the ways of dealing with complexity is to have the instruments to simplify it and discuss it. My response to the scenario painted by the Minister would be to say: let us have super-affirmative procedures and accept that they will take up a bit more time and involve a bit more work, but, as I pointed out, that is their entire point.

Skeleton Bills always limit parliamentary scrutiny, and the Pension Schemes Bill is not an exception to that; in some ways, it is a confirmation of it. I understood the Minister’s case, but the Government’s desire to limit parliamentary scrutiny is a mistake. The SIs generated by this Bill will have real consequences for the real economy. We cannot usefully discuss these consequences until we have the detail. It seems to me as simple as that. Of course, having the detail helps only if we can do something about it, and the super-affirmative procedure provides that opportunity.

--- Later in debate ---

[Lord Davies of Brixton (Lab)]

I am still mystified as to why Amendment 220 is not included in this group. It is left bereft, right at the end of the Marshalled List. Is there a reason?

[Lord Sharkey (LD)]

If the noble Lord is asking why it is there, I am afraid I will have to plead the Public Bill Office.

[Baroness Sherlock (Lab)]

I am advised that Amendment 220 had been withdrawn, not just not debated. We will look into that, and the noble Lord will need to clarify it.

--- Later in debate ---

[Lord Sharkey (LD)]

I beg leave to withdraw Amendment 3.

Amendment 3 withdrawn.