Pension Schemes Bill (Eighth sitting)

Mark Garnier Excerpts

Committee stage
Thursday 11th September 2025 Public Bill Committees

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

I thank the proposers of these new clauses. I will take them in the way they were intended—to spark debate.

We have had quite a wide debate and I think there is consensus on the subject, but I want to put a slightly different spin on the problem statement we are talking about. We have come at a lot of the discussion on the new clause as if there is too little advice. I would slightly reframe the question when it comes to pensions, which is that there is too much complexity, and too little advice or guidance. I think that is the right way to think about the problem that we are confronting with the system as a whole.

I will broadly outline our approach to try to tackle that problem statement. The task is to reduce the complexity as well as to increase the guidance and the advice that are available. Having watched the pensions debate over the past 15 years, I have observed that we have too often made pensions more complicated, and then said, “If we only had this advice, it would all be fine.” I do not think that is the right answer. That is a mistake about the nature of the system that we are delivering.

Our job is to reduce the complexity, or to reduce the consequences of it being difficult for people to deal with. That is obviously what a lot of the Bill is trying to do. With small pots, the aim is obviously to reduce complexity. That is what the value for money measures are designed to do. Seen through that lens, they are also aimed at reducing the costs of that complexity. The value for money regime is there to reduce the consequences of it being difficult to engage with and members not choosing their own provider.

[Mark Garnier (Wyre Forest) (Con)]

The Minister raises an interesting point. We have talked about a lot of different bits and pieces with complexity and all the rest of it. We have not spoken about when we educate people about money.

In the olden days, when I was a newly elected MP, I was one of the chairs of the all-party parliamentary group for financial education for young people. That was about getting financial education into the curriculum. It is probably now more important than ever that we teach people of school age about the importance of financial planning, including pensions. Can the Minister assure the Committee that he will take up with his colleagues in the Department for Education the changes that could be made to bring this type of education into the curriculum for kids, who are all going to be adults soon?

[Torsten Bell]

I shall take that up directly with the new Economic Secretary to the Treasury, who I am sure will talk to her colleagues in the Department for Education. I can offer the hon. Member some entirely anecdotal optimism on that issue. Whenever I now do school events in Swansea, I am seeing very high levels of financial engagement. After I have given a very worthy speech, most of the questions are not about how to reduce inequality but instead are about personal financial advice. I think the youth of today are all over it—that is my lived experience.

I have mentioned small pots and value for money. I want to flag two other areas. Dashboards have been mentioned, and they are a very large part of how we provide support. The default pensions solutions are crucial to reducing complexity, and that is probably the biggest measure in the Bill. The need to provide more advice or guidance for people to access their defined-contribution pots is reduced significantly because of the existence of default solutions. We definitely still want people to have access to advice and the ability to opt out of those defaults, but default solutions help significantly. That is why the communication of those default pension solutions, which we discussed quite extensively, is so important for people. That is why that is in the Bill.

We have touched on making more support available. We have universal access for people of any age to free impartial support through MoneyHelper—that is what the Money and Pensions Service is providing—and we have a specific focus on support for over-50s in Pension Wise. Several hon. Members have said, absolutely rightly, that access to financial advice fell in the aftermath of the reforms over a decade ago, but there is some better news on Pension Wise. The 2024 Financial Lives survey showed that of those who accessed a defined-contribution pot within the last four years, 40% had accessed Pension Wise. I think that is probably more than most hon. Members in this debate would expect, though it may not be enough. However, those people had used Pension Wise when heading towards access; they had not used it as a mid-life MOT product, which is a different thing. That 40% was up from 34% in 2020, so some things have gone in the right direction. I am gently noting that, not claiming any credit for it because it predates the election. There is a lot of overlap between what those systems of advice are providing and the measures in new clause 1.

Regarding new clause 40, I absolutely agree on how we think about under-saved groups. The groups identified in the new clause are more or less the same groups of people experiencing financial wellbeing challenges whom MaPS targets, so that is a point of consensus, but I am absolutely open to suggestions of what more we can do to make sure that we are tackling that issue. The Pensions Commission is considering the wider question of adequacy, which is why we are looking at not just average adequacy but the fairness of the system.

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[Kirsty Blackman]

I rise to speak in support of the new clause tabled by the Liberal Democrats and new clauses 18 and 19, which were tabled by my wonderful colleague from Plaid, the hon. Member for Caerfyrddin (Ann Davies).

The witnesses who came before us last week to speak about the lack of indexation for pre-1997 pensions made an incredibly passionate and powerful case for changing the system. We mentioned earlier the Work and Pensions Committee’s report, which suggested that the Government need to look at this issue seriously. I was quite disappointed by the Government’s response, which did not actually say very much. All it said was that changing the system would have an impact on the Government’s balance sheet. Well, yes, it might have an impact on the Government’s balance sheet, but it would have a significant impact for people who are in this situation through absolutely no fault of their own. They did the right thing all the way along, but the company they were with collapsed and the Pension Protection Fund or the financial assistance scheme has not given them the uplift.

The group of people we are talking about are getting older. They are not young any more. We know that older pensioners are the most likely to be in fuel poverty and to be struggling with the cost of living crisis. They are the ones making the choice about whether to switch on the heating. Given the rate of inflation that we have had in recent years, there is a real argument for utilising a small amount of the PPF’s surplus to provide a level of indexation. The cut-off is very arbitrary; it is just a date that happened to be put in legislation at that time. Were the Government setting up the PPF today, and the compensation schemes for people who lost their pension through no fault of their own, I do not think they would be arguing for not indexing pensions accrued before 1997. That would not be a justifiable position for today’s Government to take.

I am not sure whether the Bill is the right place to do this, but my understanding is that it needs to be done in primary legislation; it cannot be done in secondary legislation. Given what I mentioned earlier about the significant length of time between pieces of primary pension legislation, if the Government do not use the Pension Schemes Bill to address this problem today, on Report or in the House of Lords, when will they? How many more of the pensioners who are suffering from the lack of indexation will have passed away or be pushed into further financial hardship by the time the Government make a decision on this, if they ever intend to?

As I have said, I cannot see a justification for not providing the indexation. We know the PPF levy changes have been put in place because of that surplus, and there is recognition that the surplus exists and has not been invented—the money is there. I understand that the situation is different for the two funds, but particularly with the PPF, I do not understand how any Member of this House, let alone the Government, could argue against making this change to protect pensioners.

It may have an impact on the Government’s balance sheet, but it does not have an impact on the Government’s income, outgoings and ability to spend today. The PPF money cannot be used for anything other than reducing the levy or paying pensions. It is very unusual to have such ringfenced, hypothecated money within the Government’s balance sheet, but this money is ringfenced. The Government cannot decide to spend it on building a new school or funding the NHS. It can be used only for paying the pensions of people whose companies have gone under.

I very much appreciate the hard work of my colleagues in Plaid Cymru on this issue in supporting their constituents, as well as people such as Terry Monk, who gave evidence to us last week along with Mr Sainsbury. Now is the time for the Government to change this to ensure fairness and drag some pensioners out of poverty, so that they have enough money to live on right now during this cost of living crisis.

[Mark Garnier]

I want to follow on from the two powerful speeches by the Liberal Democrat and SNP spokespeople, the hon. Members for Torbay and for Aberdeen North, in highlighting the fact that this problem is—dare I say it—disappearing over time. This feels slightly similar to the ongoing contaminated blood debate, and it is a similar type of thing. The people who would be compensated for the contaminated blood are, for tragic reasons, disappearing. Indeed, I think there are now 86,000 pensioners who were caught up in this particular problem, and the longer this is kicked down the road, the smaller the problem will become, for obvious reasons.

The principle behind this is absolutely right. It is incredibly important that we as a country, society and community look after all these people. Where people have done the right thing and put money into their pension, but it has not followed through, that is a big problem.

One thing does bother me: I do not want to be too political, but the Government have dug themselves a freshly made £30 billion black hole in the last year. Although the SNP spokesperson is absolutely right that the £12 billion in the PPF is available to spend only on pensions, the problem is that because it appears on the country’s balance sheet, if the money to pay the price for this—I think it is £1.8 billion—came out of that, there would be a £1.8 billion increase on the country’s collective balance sheet. The argument would go that it would then reduce it. At some level, fiscal prudence has to come in to make sure we are not creating a deeper black hole. Because of the change of accounting at the back end of last year, this could turn the Government’s £30 billion fiscal black hole into a £32 billion one, even though that money is earmarked only for pensions.

I would like to hear from the Minister how the Government will resolve that. I would like him to make an undertaking that we will hear something about it on 26 November, and that there will be something in the Budget to resolve this fiscal conundrum. We need to know where the money will come from, and that the Government have set it aside. This is a perfect opportunity to deal with a problem that has been going on since 1997, and that becomes more profound every time the Office for National Statistics announces the rate of inflation. If the Minister gave us that assurance, I would trust him—being an honourable and decent man—that he could make his current boss get something done about this on 26 November.

[Torsten Bell]

Despite the hon. Member’s kind invitation, and as he well knows, I am not about to start commenting on the Budget—something I have heard him say himself many times over the years in his previous roles.

More seriously, the last 50 years tell us that the question of pension uprating is a big deal and very important. By “uprating”, I mean how pensions keep pace with earnings or prices. Obviously, on the state pension we tend to talk in terms of earnings. It is a big issue. The lesson of the 1980s and 1990s was about rising pensioner poverty at a time when the state pension was not earnings indexed but earnings were growing significantly. That is why we ended up with 30% or 40% pensioner poverty during those years. History tells us that those things are important. History aside, they are also obviously important for individuals, as we heard at the evidence session.

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[Torsten Bell]

I suspect that I have already written to the hon. Lady, because she has raised some constituency cases with me, but she can receive another one of those letters.

New Clause 33

Report of defined benefit schemes impact on productivity

“(1) The Secretary of State must, within 12 months of the passing of this Act, publish a report on the impact on corporate productivity of defined benefit schemes.

(2) The report must include an assessment of—

(a) investment strategies of defined benefit funds,

(b) the returns on investment of defined benefit funds, and

(c) the impact of investment strategies and returns on productivity.

(3) The Secretary of State must lay a copy of the report before both Houses of Parliament.”—(Mark Garnier.)

This new clause would require the Government to commission a report on the impact on corporate productivity of defined benefit schemes.

Brought up, and read the First time.

[Mark Garnier]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss the following:

New clause 34—Recognition rules for Defined Benefit scheme deficits—

“(1) The Secretary of State must by regulations revise the balance sheet recognition rules for Defined Benefit pension scheme deficits.

(2) Revision of the balance sheet recognition rules under subsection (1) may include allowing the deferment or partial deferment of deficits to future financial years when calculating the balance sheet.”

This new clause would require the Secretary of State to revise the balance sheet recognition rules for Defined Benefit pension scheme deficits.

New clause 35—Alternative disclosure for long-term deficits—

“(1) When a Defined Benefit pension scheme has a long-term deficit, it shall be permitted to disclose the deficit on an alternative basis, rather than recognising the full deficit as an immediate liability, if a formal recovery plan has been agreed.

(2) For subsection (1) to apply, a formal recovery plan must have been—

(a) agreed by the scheme trustees, and

(b) approved by The Pensions Regulator.

(3) The Pensions Regulator shall issue guidance on the format and content of the alternative disclosure specified in subsection (1).”

This new clause permits DB schemes to disclose a long-term deficit on an alternative basis.

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[Mark Garnier]

When we look at the thrust of the Bill, the mandation measure is all about trying to get pension funds to help to create greater productivity within the UK economy. A couple of days ago, in a very helpful intervention on a speech made by my hon. Friend the Member for Mid Leicestershire, the hon. Member for Hendon made the point that, while we are standing against mandation, we must ask: what are we standing in favour of? How are we trying to get behind the grain of the Bill? These three new clauses respond to that question of what we are doing to ensure that the Bill actually can use pension fund money to promote economic growth, invest into the UK and get better returns for the pensioners.

One of the problems facing defined-benefit pension schemes is that, in response to the outrage over Maxwell and Mirror Group Newspapers pinching money from pension schemes back in the 1980s and 1990s, rules were introduced that were basically designed to ensure that it would not happen again. They were introduced in such a way to ensure that, if a defined-benefit pension scheme were to go into deficit, the deficit would be reflected on the balance sheet of the host company.

We still see that today in some larger companies; I think the British Telecom pension scheme currently has a deficit of £7 billion, and that appears on British Telecom’s balance sheet. That does two fundamental things. First, if a company has a deficit on its balance sheet, that restricts its ability to raise equity or debt to invest into its business, so the host business cannot expand because it has a defined-benefit pension scheme with a deficit attached to it.

A second problem then comes as a result of the Maxwell rules: the trustees of a defined-benefit scheme with a host company will be reluctant to invest that into high-volatility assets. We know that, over a long period of time, the equity market will perform far better than the bond market. The problem is that we can have volatile markets in the short term, which could introduce a deficit in the defined-benefit pension scheme that translates to a deficit on the balance sheet.

For example, if we look at stock market performances from the 1980s to now, we will see a very steady rise in the stock markets over time, which have done particularly well. However, if we go back to 1987 or various other times, such as 2000-01, we will see big stock market crashes that will have appeared on the balance sheets of those defined-benefit pension scheme host companies. As a result, these pension schemes are missing out on the long-term growth to push away the short-term volatility that hits the host company. With these three new clauses, we are trying to get that out of the way so that defined-benefit pension schemes feel more comfortable about investing in higher-growth and therefore higher-volatility assets.

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[Torsten Bell]

I am grateful to the hon. Member for Wyre Forest for tabling the new clauses, and for his impressive consistency; he has spoken to this issue many times not only in this Committee, but elsewhere, and I have heard him. I agree on some of the wider issues he is raising, particularly his reflections on some of the impacts of decisions taken in the late 1990s. Before I come to the more technical responses to the new clauses, the hon. Member’s objective is to see different investment approaches taken by defined-benefit schemes. Many issues that were historically the case have been removed by the passing of time, because they are now closed schemes whose investments are now changing for other reasons, not because of the questions of regulatory pressure in the 1990s and so on. I leave that as an aside.

To give the hon. Member a bit more optimism, based on the Bill, I already have schemes saying to me that they may take different approaches on investments because of the option of a surplus release. That gives a different incentive structure for employers about what they wish to see their pension schemes doing, and for trustees, if there is a sharing of the benefits of upside risk that comes with that. I have had several large employer’s pension schemes raising that issue with me in the recent past. That is to give him some case for optimism to set against the long-term pessimism.

I will turn to the details of the new clauses. New clause 33 would require the Government to produce and lay a report before both Houses of Parliament, with an assessment of the investment strategies of defined-benefit pension schemes and their impact on productivity.

There is already a requirement for defined-benefit schemes to produce much of that information in their triennial valuation and to submit key documents to the Pensions Regulator, including information on investments and changes in asset allocations over time, so the regulator has much of the information already. In addition, multiple reports are already produced annually on defined-benefit schemes and their investments. The purple book is the most obvious example; it is produced by the Pension Protection Fund. I know that everybody here will be an avid reader of it; I promise people that it is reasonably widely read, including in the City.

New clause 34 seeks to change the arrangements for reporting defined-benefit pension scheme liabilities in the employer’s accounts. I am impressed by the wish of the hon. Member for Wyre Forest for us to engage in a Brexit from international financial reporting standards, but he will be unsurprised to learn that the Government are not about to do that. These are globally recognised financial reporting frameworks that allow comparability, and we are not in the business of changing them.

New clause 35 would require the Secretary of State to introduce an alternative basis to disclose schemes’ funding deficits. The Pensions Act 2004 put in place the current regime for valuations. Our view is that that approach has taken some time to implement but it is now well understood and well established, so leaving it in place is by far the best thing that we can do, while also considering in more detail the consequences of other things that drive the choices of pension schemes. On that basis, I encourage the hon. Member for Wyre Forest to withdraw the new clause, and I certainly do not expect to see my hon. Friend the Member for Hendon support it.

[Mark Garnier]

I am partially reassured by the Minister’s comments, but it really comes down to the kindness of my heart—I would not want the hon. Member for Hendon to be pulled off the Committee and put in an awkward situation. It would be unfortunate to force him to fall out with the Whips so early in his parliamentary career, so I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 37

Review of impact of this Act

“(1) Within five years of the passing of this Act, the Secretary of State must carry out a review of the impact of the provisions of this Act on actual and projected retirement incomes.

(2) The review must consider—

(a) the impact of the provisions of this Act on actual and projected retirement incomes, and

(b) whether further measures are needed to ensure that pension scheme members receive an adequate income in retirement.

(3) The Secretary of State must prepare a report of the review and lay a copy of that report before Parliament.”—(Mark Garnier.)

This new clause would require the Secretary of State to prepare a report on the impact of this Act within 5 years of its passing.

Brought up, and read the First time.

[Mark Garnier]

I beg to move, That the clause be read a Second time.

Under new clause 37, the review of the impact of the Act would focus on pensions adequacy. The current Government plan to delay the comprehensive consideration of pensions adequacy to future phases of the pensions review. Any resulting reforms from those future evaluations are projected to take several years to develop and implement, and there is widespread concern that without a mandated regular review process, inadequate pension outcomes will persist. Millions of people in the UK therefore risk having insufficient retirement income, particularly lower earners, ethnic minorities, the self-employed and those with interrupted careers.

Automatic enrolment has expanded workplace pension participation and now covers over 88% of eligible employees, but significant savings shortfalls remain. Recent forecasts and analysis warn of a retirement crisis, with many future pensioners expected to have less income than today’s retirees unless action is taken. The Government’s renewed Pensions Commission is due to report in 2027, focusing on the adequacy, fairness and sustainability of the retirement framework, but that report will only come in 2027.

The new clause would create a statutory obligation for the Secretary of State to conduct a full review within five years of the Bill’s passage, focusing on its impact on actual and projected retirement incomes. It would require an assessment of whether current policies and contribution levels are sufficient to ensure adequate retirement incomes. The Secretary of State would have to report the findings to Parliament, increasing accountability and transparency. That would formalise an ongoing review cycle to monitor pension adequacy regularly, preventing the consideration of the issue being indefinitely postponed.

As we all know, pension adequacy is vital to preventing poverty in later life and to ensuring quality of life for retirees. Despite expanded coverage through auto-enrolment, however, many people are still on track to fail to meet retirement income targets. Financial resilience frameworks show disparities in adequacy among lower earners, women and other vulnerable groups, and current retirement income depends on a number of variables, including contribution, sufficiency, investment returns, longevity and state pension level.

The new clause would ensure that the Government take responsibility to monitor and report regularly on pension adequacy outcomes. It would mandate a formal review mechanism, enhancing policy responsiveness and parliamentary oversight. Ultimately, it aims to safeguard millions of future retirees from inadequate incomes, and support a sustainable and fair retirement system.

[Torsten Bell]

We have now had a few discussions about the case for monitoring and evaluating the Bill and what is going on in the pension landscape more generally. I do not want to repeat everything I have said previously, so I will just address whether this is the right approach or whether it should be done through the Pensions Commission that is under way and looking at most of these issues. My view is that the Pensions Commission is focused on the headline issues that the hon. Member for Wyre Forest has just mentioned. I do not want to confuse that work by having another process consider the same issues at the same time. It is also valuable to have the independence of the commission when doing that.

My main message is that we do not have to wait long, because the Pensions Commission will report in 2027, which is earlier than the five years that we would have to wait for the Secretary of State’s inevitably excellent report as a result of this new clause. We should have faith in Baroness Drake, Ian Cheshire and Nick Pearce to deliver that.

[Torsten Bell]

I do not want to speak for the commissioners because that would be to prejudge their work. I can tell the hon. Lady what the terms of reference require and they definitely rule out long-grassing in that they require actual recommendations for change to deliver a fair, adequate and sustainable pension system. It would certainly be open to them to say, “Do these things, and we also think that monitoring should be x and y.” That would be for them to say, and as it is an independent commission, I do not want to prejudge that. It definitely cannot be just that; it would have to include recommendations for change.

[Mark Garnier]

We tabled new clause 37 partly to try to get some reassurance from the Minister. Two years is still quite a long time, as is five, but it is incredibly important that we are on top of what is going on in the pension industry, not least because we do not want any of our constituents to end up with miserable retirements. However, I am marginally reassured by the Minister’s comments. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 38

Guidance on the roles of the Financial Conduct Authority and the Pensions Regulator

“(1) The Secretary of State must establish a joint protocol outlining the roles and responsibilities of the Financial Conduct Authority and the Pensions Regulator regarding their regulatory responsibility of the pension industry.

(2) A protocol established under subsection (1) must include—

(a) an overview of the coordination mechanisms between the two bodies;

(b) a published framework for oversight of hybrid or work-based personal pension schemes;

(c) a requirement for regular joint communications from both bodies to clarify regulatory boundaries for industry stakeholders.”—(Mark Garnier.)

Brought up, and read the First time.

[Mark Garnier]

I beg to move, That the clause be read a Second time.

This will be the last new clause I will be talking to. It looks at the guidance on the roles of the Financial Conduct Authority and the Pensions Regulator. In preparing for this Bill, we spent a lot of time engaging with the industry just a mile and a half up the road. Among the industry there is persistent confusion regarding the division of regulatory responsibility between the Financial Conduct Authority and the Pensions Regulator.

The FCA regulates contract-based pension schemes—personal pensions, group personal pensions and stakeholder pensions—focusing on firm authorisation, conduct and consumer financial advice. TPR regulates trust-based occupational schemes, including defined-benefit and defined-contribution trust schemes, and it targets schemes, governance and employer duties. Overlapping interests exist in hybrid or workplace pension schemes, but unclear boundaries and differing enforcement powers can create regulatory gaps and inconsistencies. That ambiguity causes compliance difficulties for employers, trustees and industry stakeholders, and may ultimately affect pension savers.

The new clause would require the Government to establish a statutory joint protocol between the FCA and TPR, clearly defining and publishing their respective roles and responsibilities. The protocol must outline formal co-ordination mechanisms between the FCA and TPR, include a published framework specifically addressing oversight of hybrid and workplace personal schemes where regulatory remit overlaps, and include a requirement for regular joint communications from both regulators to guide industry and clarify regulatory boundaries. That matters because collaboration between the FCA and TPR ensures comprehensive consumer protection across all pension products.

With pension system complexity increasing—with mega schemes, master trusts and hybrid arrangements—co-ordinated regulation is critical. That will enable both regulators to leverage their strengths—the FCA in consumer conduct and financial advice, and TPR in governance and compliance enforcement. That will help trustees, employers, firms and savers to better understand which regulator to engage to resolve issues and access support.

Industry feedback consistently calls for more precise demarcation to avoid confusion and compliance risks. The Government’s wider reforms and digitisation initiatives, such as pension dashboards, further heighten the need for co-ordination. The new clause would promote regulatory clarity and efficiency through mandated guidance, protecting pension consumers and enabling robust governance across the sector. Clear regulatory pathways will better support pension savers by ensuring consistent standards and enforcement across all types of pension schemes.

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[Torsten Bell]

We all agree that we want providers and, most importantly, consumers to operate in this landscape as easily as possible. Particularly in the case of consumers, we do not want them to know the difference between the two. I have been very clear with both regulators that that is the objective, and I have been very clear with both Departments that oversee them that that is what we are doing.

Delivering that in practice requires thinking about how we legislate, and that is what we have done with the Bill to make sure that we are providing exactly the same outcomes through both markets. It is about Government providing clarity to regulators—we are absolutely providing that—and then about how the regulators themselves behave.

I am very alive to the issue that is being raised. There is some good news about the existing arrangements, which need to continue, because they are examples of effective co-ordination between the FCA and TPR. I have seen that through joint working groups, consultations, shared strategies and guidance, and regular joint engagement with stakeholders. The value for money measures in the Bill are probably the most high-profile recent experience of entirely joint working between the FCA, TPR and DWP.

The wider collaboration is underpinned by what is called the joint regulatory strategy and a formal memorandum of understanding that sets out how the two regulators should co-operate, share information and manage areas of overlap. I think that that basically achieves the objectives that the hon. Member for Wyre Forest set out, even if it is provided not by the Secretary of State but by a memorandum of understanding between the two organisations. I can absolutely reassure him and the hon. Member for Aberdeen North that I am very focused on this issue.

[Mark Garnier]

I am highly reassured by the Minister’s words. The important point is to ensure that if the bodies are to work together and do this, we need to keep them held to account on it. The Financial Conduct Authority was set up as an independent regulator and reports back to such things as the Treasury Committee. Presumably, TPR reports back to the Work and Pensions Committee. Already we can see a potential problem there, because separate Select Committees are doing the investigation. That is an important point, but I am confident that the Minister and his civil servants are aware of the problem and will be resolutely super sharp-focused on this issue to ensure that we have regulatory clarity. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 39

Section 38: commencement

“(1) The provisions in section 38 shall not come into force except in accordance with regulations made by the Secretary of State.

(2) A statutory instrument containing regulations under subsection (1) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”—(John Milne.)

This new clause would require that the provisions in clause 38 could only be enacted once agreed through secondary legislation.

Brought up, and read the First time.

[John Milne]

I beg to move, That the clause be read a Second time.

Overall, this Bill has wide cross-party support, as evidenced by the fact that we have been rattling through it at such a pace. However, the power of mandation is undoubtedly the most controversial aspect. To be briefly Shakespearean: to mandate or not to mandate, that is the question.

The new clause would require that the provisions in clause 38—the mandation powers—be enacted only through secondary legislation. It is an attempt to square the circle between two competing views. The Liberal Democrats have concerns about the implications of mandation, frankly, as has much of the pensions industry. For example, Pensions UK, which is a signatory of the Mansion House accords, has stated:

“We believe that the best way of ensuring good returns for members is for investments to be undertaken on a voluntary, not a mandatory basis. We also note powers being taken to specify required investment capability for schemes, and to direct LGPS funds to merge with specific pools. All of these powers will require careful scrutiny.”

Similarly, the Society of Pension Professionals has said:

“The SPP does not support the reserve power to mandate investment in private market assets and recommends its removal from the legislation. The mandation power creates significant uncertainty, including questions about legal accountability for investment underperformance and how eligible assets will be defined. The threat of mandation risks distorting market pricing and could reduce public trust in pensions, as savers may fear that financial returns are no longer the top priority.”

The Minister has stated on a number of occasions that mandation should not be necessary, that he does not expect to have to use it and that the Mansion House accord demonstrates the industry’s willingness to act voluntarily. The obvious response is that if that really is the case, and that UK private markets truly offer the best option for pension savers while meeting the fiduciary duties, the industry should not need any prodding and mandation will not be required. The Minister’s response on previous occasions, and no doubt today, has been to observe the history and point out that thus far, the industry has been slow to make that change.

We recognise that the Minister is wholly committed to the path of giving himself mandation powers, whatever we or anyone else says. Indeed, he sees it as core to the legislation. For that reason, we have proposed the new clause as a halfway house. The power would be put on the books, but it would require secondary legislation to be enacted. It would give the Minister the ability to have access to mandation powers at short notice if he deemed it necessary, without needing primary legislation, but in the meantime, it does not hang over the industry like a sword of Damocles. It may seem just a psychological difference, but psychology matters, and there are other advantages.

Somewhat counterintuitively, sometimes having too much of a stick can be a problem in itself. The Minister would be under pressure to use the stick for the sake of consistency in every case where any company went slightly over the limit or was under the limit, even when he might prefer to take a softer, more conciliatory approach. We therefore see this new clause as a way to help the Minister exercise the powers he needs, but without stepping too heavily on industry’s toes. As he has said, he does not believe that he will ever need to exercise the power, so let us keep it at arm’s length.

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[Torsten Bell]

Clause 98 is a standard provision setting out how regulation-making powers in the Bill may be used. It confirms that all regulations will be made by statutory instrument and allows them to be tailored to different situations and scheme types. The clause ensures that the Bill can work effectively in practice.

Clause 99 sets out how regulations under the Bill will be scrutinised by Parliament, using either the affirmative or negative procedures—we were discussing a particular case relating to clause 38 just now. The clause also allows that regulations that would otherwise be subject to the negative procedure can be made as part of a joint package of regulations under the affirmative procedure.

Government amendment 241 is a technical amendment. The new provisions in chapter 1 of part 4 about changes to Northern Ireland salary-related, contracted-out pension schemes apply specifically to schemes in Northern Ireland. The rest of the provisions in chapter 1 apply to schemes in England, Wales and Scotland. Clause 100 is a standard legislative provision confirming the territorial extent of the measures in the Bill.

Question put and agreed to.

Clause 98 accordingly ordered to stand part of the Bill.

Clause 99 ordered to stand part of the Bill.

Clause 100

Extent

Amendment made: 241, in clause 100, page 98, leave out line 10 and insert—

“( ) Subject as follows, this Act extends to England and Wales and Scotland only.

(1A) Sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1 etc : Northern Ireland) extend to Northern Ireland only.”—(Torsten Bell.)

This amendment secures that the new clauses inserted by NC28 to NC30 extend to Northern Ireland only. Northern Ireland has its own pensions legislation, but in view of the retrospective provisions in those new Clauses it is considered appropriate to include material in the Bill for Northern Ireland corresponding to the new clauses inserted by NC23 to NC26.

Clause 100, as amended, ordered to stand part of the Bill.

Clause 101

Commencement

[Mark Garnier]

I beg to move amendment 255, in clause 101, page 98, line 22, leave out “Chapters 1 and 2” and insert “Chapter 1”.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 256, in clause 101, page 98, line 23, at end insert—

“(aa) Chapter 2 comes into force six months after Chapter 4 comes into force.”

Government amendments 225 to 228, 242 and 243.

Amendment 263, in clause 101, page 99, line 5, at end insert—

“(d) section [Administration levy] comes into force on 1 April 2026.”

This amendment is consequential on NC44 and would ensure the amendment to abolish the PPF administration levy should come into force on 1 April 2026 (at the start of the 2026/27 levy year).

Clause stand part.

Clause 102 stand part.

--- Later in debate ---

[Mark Garnier]

Amendments 255 and 256 relate to the value-for-money framework timeline that we discussed when we considered clause 41 on Tuesday and are related to Conservative amendment 257, which was withdrawn. When we considered amendment 278, which was tabled by the hon. Member for Tamworth, the Minister committed to consider the matter on Report, so I will not press those amendments today.

This is, however, because I think it is the last time that I will speak in this Committee—or I hope it will be—a good opportunity to thank everyone. I say a huge thank you to everyone who has worked incredibly hard: the Clerks; you, Ms Lewell, and your fellow Chairs; and all the DWP officials who have supported the Minister who, frankly, with his not inconsiderable inexperience and youth, has done a magnificent job of working in his first Bill Committee. I think we can all agree that he has a terrific future in front of him as an individual who can get stuck into really quite dry, anodyne Bills. Of course, I also thank the members of my office staff, who have worked extraordinarily hard. I had not quite realised how difficult it is to be in opposition and up against the might of the Government, but my office staff have done very well, so I thank them all very much indeed.

--- Later in debate ---

[Torsten Bell]

I thank all Opposition Members for those reflections. I will come to my own after I have dealt with the remaining clauses and amendments—we must finish the job.

On the Opposition amendments, I am grateful to the hon. Member for Wyre Forest for his words. I am firmly committed to writing to both him and my hon. Friend the Member for Tamworth, which I shall do before Report. I am glad that the hon. Member will not press his amendments on that basis.

Amendments 225, 227 and 228 address the timing of the implementation of the provisions introduced by clause 38. Amendments 225 and 227 make it clear that the relevant master trusts and GPPs will not have to comply with the scale requirement until 2030. That is a point of clarification. In response to industry concerns, elements of the provision, such as the transition pathway, can be commenced and become operable prior to the scale requirement itself being active. We are responding to those concerns, and the amendment achieves exactly that. Amendment 228 provides clarification on the asset allocation elements of clause 38 by making it clear that those requirements will fall away if not brought into force by the end of 2035. Amendment 226 provides for the commencement of new chapter 3A, which will be inserted by new clauses 12 to 17.

On amendment 263, we have just discussed the PPF admin levy question. Given what we have just discussed about new clause 44, I ask the hon. Member for Torbay not to press the amendment.

Government amendment 242 introduces a commencement provision for the new chapter 1 of part 4 of the Bill on the validity of certain alterations to salary-related contracted-out pension schemes for both Great Britain and Northern Ireland. This measure means that two months after the Bill receives Royal Assent, effective pension schemes will be able to use a confirmation from their actuary obtained under this part of the Bill to validate a previous change to benefits—this is the Virgin Media discussion we had earlier today. Two months after the Bill becomes law, a previous change to benefits under an effective pension scheme will be considered valid if the scheme actually confirms that it met the legal requirements at the time of the change. This measure means that this part of the Bill will come into force two months after the Act receives Royal Assent and is a necessary accompaniment to new clauses 23 to 30.

Turning to the clauses, clause 101 is a standard commencement provision that details the timetable for bringing the Bill’s measures into operation and allowing transitional and saving provisions to ensure orderly implementation. Clause 102 is crucial, because it gives the Bill its short title. I commend those clauses to the Committee.

I will finish by adding my support to the comments made by all hon. Members about the proceedings of this Committee. I thank all hon. Members from all parties for their support—broadly—and also for their scrutiny, which is an important part of everything we do in this place. The Bill is important, but the debate around it is also important, both so that the legislation can be improved and in its own right. Such debate makes sure that issues are brought to the attention of the House and are on the record. I also thank this Chair, as well as several others, including those who have stood in at short notice at various phases of the Bill’s consideration. I am particularly grateful to one individual, and I am also grateful to the Clerks for all their work.

Most of all, I put on record my thanks to all the civil servants in the Department for Work and Pensions, His Majesty’s Treasury, the Financial Conduct Authority and the Pensions Regulator. Many of them have been working on the content of this Bill for many years, far longer than I have been Pensions Minister and, as many hon. Members have kindly reminded me, far longer than I may end up being the Pensions Minister, given the high attrition rate over the past 15 years in modern British politics. I thank them for the warning, and will take it in the way it was hopefully intended.

To be slightly worthy at the end of my speech, it is probably true that pensions legislation does not get the attention it deserves, but looking back over the 20th century, nothing was more important to the progress that this country and others made in delivering leisure in retirement. That very big win was delivered not only by productivity growth, but by Government decisions and collective decisions made by unions and their employers. The Bill goes further in that regard and, on that basis, it deserves all the coverage it gets.

[Mark Garnier]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: 225, in clause 101, page 98, line 24, leave out “after 31 December 2029”.

This amendment, together with Amendment 227, means that relevant Master Trusts and group personal pensions will not have to comply with the scale requirement until after 2030, but that Chapter 3 of Part 2 (including provision relating to the scale requirement, such as the application can otherwise be brought into force at any time in accordance with regulations.

Amendment 226, in clause 101, page 98, line 25, at end insert—

“(ba) Chapter 3A comes into force on such day as the Secretary of State and the Treasury jointly may by regulations appoint;”.

This amendment provides for commencement by regulations of the new Chapter referred to in the explanatory statement to NC15.

Amendment 227, in clause 101, page 98, line 30, leave out subsection (5) and insert—

“(5) Regulations under subsection (4)(b) may not provide for the following to come into force before 1 January 2030—

(a) section 38(4), in respect of the insertion of Condition 1 in section 20(1A) of the Pensions Act 2008 (Master Trusts to be subject to scale requirement);

(b) section 38(8), in respect of the insertion of section 26(7A) of that Act (group personal pension schemes to be subject to scale requirement)

(but nothing in this subsection prevents section 38 from being brought into force before that date in respect of the insertion in that Act of other provision related to that mentioned in paragraph (a) or (b)).”

This amendment ensures that schemes will not be legally subject to the scale requirement before 1 January 2030. It allows, however, for provision relating to that requirement (e.g., provision around applications for approval) to be commenced before that date in anticipation of the requirement itself taking effect.

Amendment 228, in clause 101, page 98, line 34, at end insert—

“(5A) If section 38 has not been brought into force before the end of 2035 in respect of the insertion of—

(a) Condition 2 in section 20(1A) of the Pensions Act 2008 (asset allocation requirement: Master Trusts), and

(b) subsection (7B) in section 26 of the Pensions Act 2008 (asset allocation requirement: group personal pension schemes),

section 38 is repealed at the end of that year in respect of the insertion of those provisions.”

This amendment transposes and clarifies the provision currently in clause 38(16). It provides for the key provisions imposing the asset allocation requirement to fall away if they are not brought into force before the end of 2035.

Amendment 242, in clause 101, page 98, line 37, at beginning insert—

“( ) Chapter 1 of Part 4 comes into force at the end of the period of two months beginning with the day on which this Act is passed.

( ) Chapter 2 of”.

This amendment provides for the commencement of the new Chapter relating to the consequences of the Virgin Media case .

Amendment 243, in clause 101, page 99, line 5, after “section 96” insert

“and (Information to be given to pension schemes by employers)”.—(Torsten Bell.)

This amendment provides for the commencement of NC20.

Clause 101, as amended, ordered to stand part of the Bill.

Clause 102 ordered to stand part of the Bill.

[The Chair]

I also thank all hon. Members, Committee Clerks and officials, and our Doorkeeper team.

Bill, as amended, to be reported.