Pension Schemes Bill

Lord Willetts Excerpts

Committee stage
Tuesday 3rd February 2026 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, we want innovation. That is what I have just tried to describe. TPR has made innovation the central pillar of its corporate strategy. It launched an innovation service, and it has had the industry test innovative ideas and proposals such as new retirement products and the like. That has been up and running for some time. We want innovation but we want innovation that will serve member interests.

The noble Baroness asked about TPR and competition. While TPR does not have a statutory objective in competition, it does actively consider it, and it forms part of its strategy. Competition has been part of its evolution in a changing landscape; it started off in a world of single employer schemes and it is now in a very different world with a market that has moved towards master trusts and an authorisation supervisory framework. Value for money is a key enabler to drive transparency and competition in the market, and TPR plays a direct role in delivering that for the sector alongside the FCA.

Clause 45 amends the Financial Services and Markets Act 2000 so that the FCA has the necessary powers to monitor and enforce the default arrangement requirements and support the review of non-scale default arrangements on a consistent footing with TPR. In practice, that will mean gathering relevant information for the review, considering applications for any new non-scale default arrangements and—should regulations require it after the review—assessing consolidation action plans.

To make the distinction, Clause 42 relates to restricting new default arrangements for schemes in the market. It aims to reduce fragmentation that does not serve member interests but allows new arrangements to meet member interests. It does not restrict new entrants to the market. Clause 45 allows new regulations to set out the powers for both TPR and the FCA to approve new default arrangements and will work with both regulators to ensure there is alignment and co-ordination between them. In short, Clause 42 introduces the restriction of new default arrangements without regulatory approval and Clause 45 gives the FCA the powers to do this in relation to its functions on FSMA. I hope that has cleared it up.

[Lord Willetts (Con)]

In the light of what the Minister has said, I am even more struck by the significance of Amendment 170. Given that there is going to be this change in the regulatory regime in terms of the FCA, I do think that Amendment 170 is the crucial one. It absolutely is not inconsistent with the Government’s objectives of scale—I have a lot of sympathy with trying to promote scale—but it just ensures that whatever the appropriate authority is, there is also scope for innovation. The more the Minister talks about the power of these clauses, the more I think the case for this amendment gets stronger.

[Baroness Sherlock (Lab)]

We may disagree on some of the approaches to the market, but we want innovation, so I do not disagree with the noble Lord on that. However, we want innovation that serves member outcomes, and that may mean different approaches to understanding what innovation does. We do not want innovation to pull away from scale.

The noble Baroness asked about timescale. The intention is that the review will be carried out in 2029, but it will need to follow the introduction of the VFM framework and contractual override measures for this to work. That was set out in both the final Pensions Investment Review and in the pensions roadmap, which the Government published. Hopefully that is helpful.