Pension Schemes Bill

Nusrat Ghani Excerpts

2nd reading
Monday 7th July 2025 Commons Chamber

[Torsten Bell]

The right hon. Member invites me to skip quite a long way forward in my speech, and it is a long speech.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Ah.

[Torsten Bell]

That was not the support I was hoping for from the Chair—understandable, but harsh. I will come to some of the points that the right hon. Member raises. I think he is referring particularly to pre-1997 indexation, which I shall come to.

As I said, the Bill includes a reserved power that will allow the Government to require larger auto-enrolment schemes to invest a set percentage into wider assets. That reflects the wider calls that have been made for this change but have not led to its taking place. What pension providers are saying is that they face a collective action problem, where employers focus too narrowly on the lowest charges, not what matters most to savers: the highest returns. I do not currently intend to use the power in the Bill, but its existence gives clarity to the industry that, this time, change will actually come.

Some argue—I will come to some of the points made by my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier)—that this somehow undermines the duty that pension providers have to savers. That is simply wrong. First, the Bill includes clear safeguards to prioritise savers’ interests and is entirely consistent with the core principle of trustees’ fiduciary duties. Clause 38 includes an explicit mechanism, which I have discussed with Members from the main three parties in this House, to allow providers to opt out if complying risks material detriment to savers. Secondly—this is the key point that motivates a lot of the Bill—savers are being let down by the status quo. There is a reason major pension schemes across the rest of the world are already investing in this more diverse range of assets.

Fragmentation within the pensions industry happens within providers, not just between them. Some insurers have thousands of legacy funds, so clause 41 extends to contract schemes the ability that trust-based schemes already have to address that. Providers will be able to transfer savers to another arrangement without proactive individual consent if, and only if, it is independently certified as being in the member’s best interest.

Another point that I hope is of common ground across the House is that we need to do more to realise the untapped potential of the local government pension scheme in England and Wales. We need scale to get the most out of the LGPS’s £400 billion-worth of assets. Again, the Bill will turn that consensus into concrete action. It provides for LGPS assets spread across 86 administering authorities to be fully consolidated into six pools. That will ensure that the assets used to provide pensions to its more than 6 million members—predominantly low-paid women—are managed effectively and at scale. Each authority will continue to set its investment strategy, including how much local investment it expects to see. In fact, these reforms will build on the LGPS’s strong track record of investing in local economic growth, requiring pension pools to work with the likes of mayoral combined authorities. In time, bigger and more visible LGPS pools will help to crowd private pension funds and other institutional investors into growth assets across the country.

Our measures will build scale, support investment and deliver for savers, but the Bill does more to ensure that working people get the maximum bang for every buck saved. To reinforce the shift away from an excessively narrow focus on costs, clause 5 provides for a new value-for-money framework. For the first time, we will require pension schemes to prove that they provide value for money, with standardised metrics. That will help savers to compare schemes more easily, and drive schemes themselves to focus on the value that they deliver. For persistently poor performers, regulators will have the power to enforce consolidation. That will protect savers from getting stuck in poorly performing schemes—something that can knock thousands of pounds off their pension pots.

We are also at last addressing the small pension pots issue. I was out door-knocking in Swansea earlier this spring, and a woman in her mid-30s told me that something was really winding her up—and it was not me knocking on the door. [Laughter.] This is a very unsupportive audience. It was trying to keep track of small amounts of pension savings that she had from old jobs; the only thing that was worse was that her husband kept going on about it. There are now 13 million small pension pots that hold £1,000 or less floating around. Another million are being added each year. That increases hassle, which is what she was complaining about, with over £31 billion-worth of pension pots estimated to currently be lost. It costs the pensions industry around £240 million each year to administer. Clause 20 provides powers for those pots to be automatically brought together into one pension scheme that has been certified as delivering good value. Anyone who wants to can of course opt out, but this change alone could boost the pension pot of an average earner by around £1,000.

Of course, once you have a pension pot, the question is: what do you do with it? We often talk about pension freedoms, but there is nothing liberating about the complexity currently involved in turning a pension pot into a retirement income. You have to consolidate those pots, choose between annuities, lump sums, drawdowns or cashing out. You have to analyse different providers and countless products. Choice can be a good thing, but this overwhelming complexity is not—77% of DC savers yet to access their pension have no clear plan about how to do so.

--- Later in debate ---

[Mark Garnier]

The hon. Member makes an important point. The earlier people start putting money in, the better. As a result of compound interest, over many years they will end up with a bigger pension pot, even if at the beginning the contribution is quite small; the amount aggregates over a long period. We will discuss that in Committee.

We are concerned about the lack of detail in the Bill. Too much is left to the discretion of regulators and to secondary legislation. Parliament deserves to have proper oversight of these reforms. From my discussions with the industry, it seems there is tentative support for many of the reforms in the Bill. However, the message that keeps coming back is that the devil will be in the detail, so I hope that as this Bill makes progress through the House, the Minister will be able to fill in more of the blanks—and I am sure he will; he is a diligent individual.

I move on to the most important thing that this Bill hopes to achieve: growth. We want to support Labour Members on the growth agenda, but too often they go about it in slightly the wrong way. Surpluses in defined-benefit pension schemes are a great example. Interest rates have risen post-covid, and that has pushed many schemes into surplus. In principle, we support greater flexibility when it comes to the extraction of these surpluses, but there need to be robust safeguards; that is certainly the message coming back from the industry.

Under the legislation, there is nothing to stop these surpluses being used for share buy-backs or dividend payments from the host employer, for instance. Neither of these outcomes necessarily help the Government’s growth agenda. We would welcome a strengthening of the Bill to prevent trustees from facing undue pressure from host employers to release funds for non-growth purposes. In addition, to provide stability, the Government should carefully consider whether low dependency, rather than buy-out levels, will future-proof the funds, so that they do not fall back into deficit.

Although the Government are keen to extract surpluses from the private sector, there is not the same gusto shown in the Bill when it comes to local government pensions. The House has discussed in detail the Chancellor’s fiscal rules, not least earlier today. Under the revised rules introduced by the Chancellor, the measure of public debt has shifted from public sector net debt to public sector net financial liabilities. As a consequence, the local government pension scheme’s record £45 billion surplus is now counted as an asset that offsets Government debt. This gives the Chancellor greater headroom to meet her fiscal targets—headroom that, dare I say it, is shrinking week by week. I do not wish to sound cynical, but perhaps that is the reason why the Bill is largely silent on better using these surpluses. This may be a convenient accounting trick for the Chancellor, but the surpluses could have been used, for instance, to give councils pension scheme payment holidays. The Government could make it easier to follow the example set by Kensington and Chelsea, which has suspended employer pension contributions for a year to fund support to victims and survivors of the 2017 Grenfell Tower tragedy. These revenue windfalls could be redirected towards a range of initiatives, from local growth opportunities such as business incubators to improving our high streets. We could even leave more money in council tax payers’ pockets.

I turn to the part of the Bill on which we have our most fundamental disagreement: the provisions on mandation. The Bill reserves the power to mandate pension funds to invest in Government priorities. That not only goes against trustees’ fiduciary duties—although I appreciate and recognise the point the Minister made earlier—but means potentially worse outcomes for savers. Pensions are not just numbers on a spreadsheet; they represent a lifetime of work, sacrifice, and hope for a secure future. The people who manage these funds and their trustees are under a legal duty to prioritise the financial wellbeing of savers. Their job is not to obey political whims, but to invest prudently, grow pension pots and uphold the trust placed in them by millions of ordinary people.

That fiduciary duty is not a technicality; it is the bedrock of confidence that the entire pension system rests on. These pension fund managers find the safest and best investments for our pensions, no matter where in the world they might be. If things go wrong, we can hold them to account. But if this reserve power becomes law, we have to ask the question: if investments go wrong, who carries the can? Will it be the pension fund manager and the trustees, or the Government, who did the mandation?

Likewise, while the reserve power in the Bill focuses on the defined-contribution market, the shift in emphasis has potentially profound impacts across the sector. UK pension funds, along with insurance companies, hold approximately 30% of the UK Government’s debt or gilt market. If mature defined-benefit schemes move from the gilt market to equities, that potentially has a profound impact on the Government’s debt management, or ability to manage debt, and therefore interest rates and mortgage rates. For that reason, we would welcome the Minister confirming whether any concerns have been raised by the Debt Management Office, and possibly the Bank of England. There is widespread opposition from across the industry to this power—I am approaching the end of my speech, you will be pleased to hear, Madam Deputy Speaker. There are better ways for the Government to deliver growth, such as changing obsolete rules and removing restrictions.

In the annuity market, solvency rules prevent insurers from owning equity in productive UK assets. Wind farms, for example, deliver stable returns through contracts for difference and contribute to the Government’s green agenda. They could be an ideal match for long-term annuity investments, while also delivering clean energy. Releasing the limits on the ability of insurers to fully deploy annuity capital has the potential to unlock as much as £700 billion by 2035, according to research by Aviva. Rather than imposing top-down mandates, we want the Government to maximise growth opportunities from our pension industry by turning over every stone and seeking out the unintended consequences of old regulations, not imposing new ones.

I will conclude, Madam Deputy Speaker, as you will be delighted to hear. [Interruption.] Yes, I have taken a lot of interventions. We reaffirm our commitment to working constructively with the Government. Stability in the markets is of paramount importance, and we recognise the need for a collaborative approach as the Bill progresses through the House. We will bring forward amendments where we believe improvements can be made, and we will engage in good faith with Ministers and officials to get the detail right.

We want to go with, not against, the grain of what the Government are seeking to achieve through this Bill, and I look forward to working with the Minister in the weeks and months ahead.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Chair of the Select Committee, Debbie Abrahams, after whom I will call Steve Darling.

--- Later in debate ---

[Debbie Abrahams]

I understand what my hon. Friend says. There is always a balance to be found with long-term financial decisions, but this is partly a political decision, so I point to the Pensions Minister to come up with a response.

Do the Government propose to consult on the design of the mandation power and how to mitigate against unintended consequences? Do the Government think that there is a case for changing the law on fiduciary duty to make clear that trustees can take account of wider issues, such as the impact of pension scheme investments on the economy and the environment? What would be the pros and cons of doing that?

Briefly, I would like to touch on the LGPS. I slightly disagree with some of the shadow Pensions Minister’s points. Since 2015, the 86 funds have been formed into eight groups. If the Pensions Minister is proposing to reduce that still further, will he set out the reasons behind that? What is the problem that merging them even further is trying to fix? Will he let me know about that in his closing remarks?

Finally, I would like to touch on the pre-1997 indexation, as the Pensions Minister knew that I would. At the end of March 2024, the Pension Protection Fund had a surplus of £13.2 billion. The PPF has taken steps to reduce the levy from £620 million in 2020 to £100 million in 2025. However, under current rules, if it made the decision to reduce the levy to zero, it would then be unable to increase it again. The 2022 departmental review by the Department for Work and Pensions recommended that the PPF and the DWP work together to introduce changes to the levy, so that the PPF would have more flexibility in reducing and increasing the levy level.

There is another issue, which the Pensions Minister will know about. PPF and financial assistance scheme members, particularly those in their later years, are really struggling. I came across a piece—I think it was in The Daily Telegraph—that said that one of the key supporters of the Pension Action Group and a FAS member, Jacquie Humphrey died a few days ago, just 11 weeks after the death of her husband. They were both employed by Dexion, which folded, and, like hundreds of others, refused to leave it there. Is there any comfort that we can provide? I understand and recognise what the Minister says about the PPF surplus being on the public sector’s balance sheet, but given that these people, who are in their 70s and 80s, are unable to live in dignity, what can we do to provide that for them in their later years?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Jennie seems to have captured the mood of the House, but I call the spokesperson for the Liberal Democrat party.

Pension Schemes Bill

Nusrat Ghani Excerpts

Consideration of Lords amendments
Wednesday 15th April 2026 Commons Chamber

[Alison Griffiths (Bognor Regis and Littlehampton) (Con)]

There is a simple question running through what we are debating today: who is ultimately in control of people’s pension savings? When I speak to residents in Bognor Regis and Littlehampton, they assume that the answer is straightforward. They assume that their pension exists to deliver the best possible outcome for them, not to serve a wider policy aim and not to be steered from the centre. That is why Lords amendment 1 matters. It would do something very simple. It would remove the ability for Ministers, through regulations, to require schemes to invest in particular assets, particular sectors, or in particular places. It would set a clear boundary. It would say that those decisions sit with trustees, acting in the best interests of savers. If the Government believe in the strength of their growth agenda, they should make the case for it. They should create the conditions for investment, and they should not need a reserve power to lean on pension funds if that case does not land.

The same concern sits at the heart of the Lords amendments to clause 40. Those amendments would strip out what is known as the “asset allocation requirement”. In plain terms, they would remove the mechanism in the Bill that would allow Ministers to set conditions on how pension schemes invest their assets as part of the approval framework. We are told those are only backstop powers that may never be used, but if that is true, why fight so hard to keep them? Why remove amendments that simply take that power off the table?

The Government have, in effect, acknowledged the issue by proposing limits in lieu—caps on how far they might go—but that does not answer the underlying question. It just manages it. Because this is not about whether the number is 5% or 10%. It is about whether that power should exist at all. There is a broader point here: bigger schemes and consolidation can bring benefits, but only if they improve outcomes, not if they are driven by a single model applied from the top down and not if well-performing schemes are pushed into structures that do not suit them.

Lords amendment 77 would require the Government to publish a full review of public service pension schemes within 12 months, and not just their cost, but their long-term affordability, their sustainability, and whether they are fair across generations—a point made so well by my right hon. Friend the Member for Tonbridge (Tom Tugendhat). That is not a controversial ask. It is basic due diligence. People in my constituency are thinking about their own retirement, about what they can afford to save and about the pressures on public finances. They expect us to do the same at national level.

Taken together, the Lords amendments would do something quite straightforward.

They would protect savers from unnecessary interference, they would keep decision making where it belongs, and they would ask the Government to be transparent about the long-term picture. I do not think those are unreasonable tests, and the Government are wrong to strip them out.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Minister, if he is ready.

[Torsten Bell]

I am always ready to engage in exciting debates about pensions. The right hon. Member for Tonbridge (Tom Tugendhat) is right to say that far more Members should be enthused enough to come and talk for as long as possible about pensions. I hope not to speak for two hours, but somewhere close to that, and I thank Members on both sides of the House and from the other place for their thoughtful contributions to an important debate. I will avoid trying the House’s patience by reiterating the reasons why the Government do not think it right to accept amendments that are unnecessary or that undermine policy intent, but I will respond in detail to the important points that hon. Members have made.

The Chair of the Select Committee, my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) asked specifically about what the international evidence on asset allocation tells us. Two things stand out. The first is that the UK defined contribution market has an unusually low allocation to private assets, for example compared with similar schemes in Australia. The second is the point she raised that they have lower home bias—a point also partially raised by the right hon. Member for Tonbridge. Those two are related. We tend to see higher levels of home bias in investments that are in private assets than investments in public assets, for all the obvious reasons to do with the comparative advantage that comes from knowing more about the home market.

I recognise the argument that my hon. Friend the Member for Oldham East and Saddleworth made about the PPF and the FAS. Her powerful campaigning on this issue, including raising it through the Work and Pensions Committee, is one of the reasons why we have acted in a way that previous Governments and Pensions Ministers have not.

--- Later in debate ---

[Torsten Bell]

Yes, basically I recognise the risks that the right hon. Member raises.

I think that I should now turn to the shadow Secretary of State, the hon. Member for Faversham and Mid Kent (Helen Whately). [Interruption.] It is not that I was confused; I was worried, because she used to be a calm and reasonable person, but something weird has happened. I fear that she has been infected by the existential angst of the modern Conservative party, and a leader whose entire political strategy is to focus on being rude rather than being right. This infection has left the shadow Secretary of State desperately trying to tell anyone who will listen—that is not many—that pensions are being raided and that there is a war on savers. Wow—those are strong words.

There are just two problems with those words. First, they are nonsense on stilts, designed to scaremonger good savers. I am afraid that the hon. Member has confused a conspiracy theory with a pensions policy, which is disappointing. The second problem is the lack of consistency and self-respect. If you really thought the Bill was as dangerous as we have been told today, you would have fought it in the trenches. You would have opposed it every single step of the way—

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Minister, you are making a very passionate speech, but you said “you” and I do not think I was involved in fighting with you in any trenches at any point.

[Torsten Bell]

As a point of principle, Madam Deputy Speaker, I never fight with you—it would end badly for everyone and I would lose every time.

The Conservatives would have opposed the Bill every step of the way. They would have not just been on the barricades but built them, which is the exact opposite of what the shadow Secretary of State did. What did the hon. Member for Wyre Forest tell the House on Second Reading? He said that

“the Minister will be pleased to hear that there is cross-party consensus on many of the planned changes.”—[Official Report, 7 July 2025; Vol. 770, c. 722.]

Well, that was nice.

--- Later in debate ---

[Torsten Bell]

No, I am going to finish.

Let us be reasonable. Maybe Conservative Front Benchers just needed some time to think about it. What happened at Third Reading? On that occasion we had the pleasure of the shadow Secretary of State—she had not quite got to the frothing phase of her development—saying that

“there is a lot in it that we do welcome”,

as it will

“help people to manage their pension savings and get better returns.”

She went on,

“so we will not be voting against the Bill”—[Official Report, 3 December 2025; Vol. 776, c. 1130-1131.]

We are now told it is an Armageddon Bill.

The shadow Secretary of State was right then, and she is ludicrously over the top now. The Bill puts savers’ interests first, as she well knows. She knows something else, which makes this faux crusading all the more embarrassing. Who are the politicians who have lobbied me to mandate pension scheme investment decisions? Tories. That has been mainly in private, so I will spare their blushes, but one ventured out into the open. The Leader of the Opposition’s Parliamentary Private Secretary, the right hon. Member for Salisbury (John Glen), called me and others to a Westminster Hall debate just a few months ago. Why? Because he was worried about what he called my

“effort to hold back from mandation”.—[Official Report, 25 November 2025; Vol. 776, c. 110WH.]

What was he worried about? That we were not doing enough to push pension savers into UK investments. That is the truth behind all the froth today. The Bill supports savers and focuses on driving up the returns on their savings, and even the most over-excited Opposition Members know that is the right thing to do.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. The Minister gave a very passionate speech, but when one mentions colleagues in the Chamber, one is meant to give prior notice. I assume that has happened.

[Torsten Bell]

I apologise, Madam Deputy Speaker. I shall contact the right hon. Member for Salisbury. The comments in the Westminster Hall debate are on the record.

[Madam Deputy Speaker]

The appropriate thing to do will be to drop him a note very quickly.

Question put, That this House disagrees with Lords amendment 1.—(Torsten Bell.)

--- Later in debate ---

[John Glen (Salisbury) (Con)]

On a point of order, Madam Deputy Speaker. During the winding-up speech on the Pension Schemes Bill, I understand that the Minister for Pensions made specific reference to me. I was elsewhere at the Treasury Committee, but I am told that he referred to a Westminster Hall debate on 25 November, and depicted me as arguing for the mandation of pension investments. In that debate, I explicitly said that mandation would be an “overreach”. I went on to say:

“I hope that the Minister will reflect a little more on the need to empower pension holders to take decisions in the interest of investing more in UK equities.”—[Official Report, 25 November 2025; Vol. 776, c. 122WH.]

I would be grateful if you could advise me on how I could avoid being inadvertently misquoted by the Minister in future.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I thank the right hon. Member for notice of his point of order. The Chair is not responsible for the content of Ministers’ speeches in the Chamber—if only we were. However, the Minister is in his place and will have heard what the right hon. Member has said. If an error has been made, I am sure that the Minister will seek to correct it as quickly as possible.

[Torsten Bell]

Further to that point of order, Madam Deputy Speaker. I thank the right hon. Member for Salisbury (John Glen) for his point of order. As I have already said to him, I apologise for not giving him advance notice that I would raise the comments that he made in that Westminster Hall debate. The point that I made in my closing speech, which unfortunately he missed out on—but I know that his hon. Friends on the Conservative Front Bench enjoyed every minute of it—is that he has made the case that there is a challenge, in that there is not enough investment in UK equities, and he has called for measures to push in that direction.

[Madam Deputy Speaker]

We do not want to prolong the debate any further. Both the Back-Bench Member and the Minister have put their points on the record.

Motion made, and Question put forthwith (Standing Order No. 83H(2)), That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing with certain of their amendments.

That Torsten Bell, Gen Kitchen, Natalie Fleet, David Pinto-Duschinsky, John Slinger, Helen Whately and Mr Will Forster be members of the Committee;

That Torsten Bell be the Chair of the Committee;

That three be the quorum of the Committee;

That the Committee do withdraw immediately.—(Deirdre Costigan.)

Question agreed to.

Committee to withdraw immediately; reasons to be reported and communicated to the Lords.

Children’s Wellbeing and Schools Bill (Programme) (No. 4)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provision shall apply to the Children’s Wellbeing and Schools Bill for the purpose of supplementing the Order of 8 January 2025 (Children’s Wellbeing and Schools Bill: Programme), as varied by the Orders of 17 March 2025 (Children’s Wellbeing and Schools Bill: Programme (No. 2)) and 9 March 2026 (Children’s Wellbeing and Schools Bill: Programme (No. 3)):

Consideration of Lords Message on 15 April 2026

The Lords Amendments and Reasons shall be considered in the following order: 17B, 38, 41B, 102, 106 and 105B.

Question agreed to.

Pension Schemes Bill

Nusrat Ghani Excerpts

Consideration of Lords message
Monday 27th April 2026 Commons Chamber

Consideration of Lords message

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Financial privilege is not engaged by any of the items in the Lords message relating to the Bill.

Clause 40

Certain schemes providing money purchase benefits: scale and asset allocation

Pension Schemes Bill

Nusrat Ghani Excerpts

Consideration of Lords message
Tuesday 28th April 2026 Commons Chamber

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

I beg to move,

That this House insists on its disagreement with the Lords in their Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, insists on its amendments 88C, 88E to 88P, 88R, 88S and 88W to the words restored to the Bill by that disagreement, does not insist on its amendments 88A, 88T, 88U and 88V to the words so restored to the Bill, but proposes further amendments (a) to (j) to the words so restored to the Bill.

It is obviously disappointing to see that not every Member in this Chamber wishes to stay for a detailed discussion of the Pension Schemes Bill, but it is not the biggest disappointment ever. It is good to see our regular engagers on this Bill in their place. I thank in particular those Members for helpful discussions on the Bill in recent days.

I do not intend to detain the House for long. [Hon. Members: “Hear, hear.”] That is the reaction we are always looking for. Members will be aware that there is one outstanding issue between this House and the other place when it comes to the Bill, and it relates to the reserve power on asset allocation. Today the Government return to their previous amendments on this issue. They spell out the intended purpose of the reserve power to underpin the industry’s own commitments in the Mansion House accord and to rule out other uses, such as a focus on any specific asset or asset class.

We are also bringing forward a final set of changes that aim to do justice to the points made in this House and the other place, while retaining the original policy intent. They have three elements. First, there is a new requirement on regulators—in this case, the Pensions Regulator and the Financial Conduct Authority—to make an assessment of barriers to the delivery of private asset investment, including the extent to which those barriers reflect the collective action problem, which we have discussed extensively in our exchanges on the Bill. That assessment would be required to be incorporated into the ex-ante report that the Secretary of State must produce before any use of the reserve power that the Bill provides for.

Importantly, our amendments also place on the Government a duty to have regard to this regulatory assessment before any use of the power. That will ensure that a Secretary of State behaving reasonably—as they are required to do—must place weight on the assessment of the regulators on this matter. It was always the Government’s intention to evaluate progress against the Mansion House accord commitments in terms of the broad direction of travel over a substantial period of time, rather than looking at short-term movements in private asset exposure. To reinforce that, we propose to add to the Bill that the power cannot be exercised any earlier than 2028.

Our second set of changes builds on the savers’ interest test to reinforce the central role of trustees and providers. Our amendments in lieu would change the bar required to engage the savers’ interest test. Rather than having to demonstrate that meeting the asset allocation requirements would be likely to cause material financial detriment, a scheme would instead have to show that meeting the requirements is

“likely not to be in the best interests of members”.

That reflects language regularly used when considering trustees’ duties. In addition, we have more tightly specified the regulators’ role, confining it to ensuring that the trustee or provider’s own assessment of what is in the best interests of members is “reasonable”, rather than replacing that assessment with their own.

Thirdly, our amendments address worries about the differential treatment of particular investment vehicles by allowing for consideration of direct or indirect holdings in the six asset classes named in the Mansion House accord.

I remind the House that the Bill has its roots in much work that was under way for some time in Government, but also in the commitment in the Labour party manifesto to ensure that workplace pension schemes take advantage of scale and invest in a wider range of productive assets. That is why one of the first things that the Government did on taking office was to launch a comprehensive review of pensions investment. That review found clear evidence that the defined-contribution pensions market is operating with an excessively narrow focus on costs, to the detriment of saver outcomes. That is where the reserve power comes from. It exists because the review found—and the industry itself has told us this, publicly and privately—that competitive pressure focused on cost minimisation is the single biggest barrier to diversifying in savers’ long-term interests.

However, things can of course change over time, and a range of other factors may come into play. We have discussed them with, in particular, the hon. Member for Wyre Forest (Mark Garnier). The changes that we propose today address directly that worry and others. They require regulators to assess whether these competitive pressures remain a material barrier to more diverse private asset investment before any use of the power, and they put trustees’ or providers’ own assessments of savers’ best interests centre stage.

On that basis, I commend the Government’s position to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Secretary of State.

[Helen Whately (Faversham and Mid Kent) (Con)]

Let me begin by welcoming the Minister back to his place—we missed him last night, and it is good to see him back in the Chamber.

Throughout our many debates, we have broadly agreed on the policy intent behind most of the Bill, but as I have said time and again, agreement on the principles of a Bill is not the same as offering the Minister unqualified support for every measure in it, particularly the power contained in clause 40, the power of mandation—or the reserve power, as the Chief Secretary calls it—which enables Ministers to instruct pension funds where to invest. When the Bill was first introduced, that mandation power was truly breathtaking in its scope. It was extraordinary—an unconstrained power that would have allowed the Secretary of State access to 100% of at least £400 billion-worth of auto-enrolment default pension funds. It would have allowed Ministers to direct their investment in whatever way they saw fit.

What happened the moment that became clear to people? Members sitting opposite and, indeed, behind me—not least those in Reform UK—were already queuing up with pet projects and struggling sectors. They thought that savers’ money should be used for net zero schemes, steel and renationalising water. They were not proposing those measures on the grounds of the return on investment for savers, and the income that they would generate for people’s later life; that much is obvious. But we said no—no to politicians having that power, no to Ministers directing pension savings into their pet projects, and no to overriding the interests of savers in favour of politicians desperate for access to capital.

I was clear from the outset that the power was dangerous and had no place in the Bill. After sustained pressure from the industry, from the other place and from this side of the House, the Government have, very slowly, been forced to row back. They have rowed back from a power grab that threatened trust in auto-enrolment pensions and risked damaging savers’ retirement incomes. Let us be clear about what those concessions amount to. First, on allocation limits, the original Bill contained no cap whatsoever on how much of a saver’s pension could be mandated into specified assets. Now, after pressure, the Government have imposed hard limits. No more than 10% of a default fund may be directed into qualifying assets, and no more than 5% may be directed specifically into UK assets. That is a major retreat from the original proposal.

Secondly, on sunset and single-use restrictions, the Government have brought forward the expiry date of the reserve power to 2032, if unused. They will repeal the whole regime by 2035 unless it is renewed by fresh primary legislation, and have limited the core mandation power so that it can be exercised only once—another retreat. Thirdly, the scope has been narrowed. Mandation can now apply only to the main default auto-enrolment fund, not the entire pension scheme or every pot—again, another retreat.

Today we have had further concessions. The Government now accept that before this power can be exercised, regulators must conduct an independent assessment of whether a genuine collective action problem exists—whereby no one wants to be the first mover—and whether that problem is inhibiting investment in private markets. We have been consistent in our view that mandation is not the right solution, but we accept that requiring independent assessment before the power can be exercised is a safeguard against ministerial overreach, and I appreciate the Pensions Minister’s assurances from the Dispatch Box on the weight of evidence required. The Government have also accepted that the reserve power cannot be used before 2028—again, another retreat.

The Government have further strengthened the savers’ interest test following yesterday’s amendment. Schemes will no longer have to prove that compliance would likely cause “material financial detriment”. Instead, they need only demonstrate that compliance is likely not to be in the best interests of members, thereby aligning the test with trustees’ existing fiduciary duties. That matters, because fiduciary duty is sacrosanct and must be protected. Nothing is more important in a modern pension system than the duty to act solely in the best interests of savers. That duty is the foundation on which trust in our pension system rests. This amendment means that in a conflict between mandation and fiduciary duty, fiduciary duty wins—again, another important retreat. Finally, the Government have agreed to remove discrimination between investment vehicles by clarifying that both direct and indirect holdings in the relevant asset classes count towards compliance—the final retreat.

Every one of those changes tells the same story: the Government introduced a power that was too broad, too vague and too dangerous. Step by step, and under pressure, they have been forced to narrow it, constrain it and hedge it with safeguards. Why? Because the original power was indefensible, and because the Government knew that the concerns were real. The work that we have done has obliterated the Government’s original proposal. As it stands now, the mandation power looks nothing like how it was first imagined. What began as a sweeping ministerial power grab has been stripped back, pared down and boxed in on all sides. Only now, after our intervention, has it become at least palatable. It is a vestige of its former overmighty self—a shrivelled husk.

Let me be clear: we do not believe that the Government should direct private capital, or that Ministers should interfere in investment decisions that are properly left to trustees and markets. Here we have Labour doing what it always does: thinking that the Government are the answer, with the state going where it has no place to go. When the Conservatives return to government, we will remove mandation from the statute book entirely, because at the heart of this policy lies a dangerous assumption that Ministers in Whitehall know better than trustees, fund managers and markets on how to invest the public’s pension savings. I have yet to meet anyone who wants a politician managing their pension, and pensions belong to the people who earn them, not Government Ministers. It is as simple as that.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Liberal Democrat spokesperson.

[Steve Darling (Torbay) (LD)]

The Liberal Democrats have opposed mandation from day one, and we have continued to oppose it throughout the passage of this Bill. The challenge is that once we cross the Rubicon, we change the dynamics of pensions significantly. Crucially, people need to have confidence that contributing to pensions is a good way of saving for their retirement. If we undermine that through Government interference, it will reduce people’s confidence in saving for their pensions. That would be a complete reversal of what this Bill is all about, because it is mostly about making sure that our pension system is fit for the future and fit to serve those who are looking to have a good retirement. That is to be celebrated, and the vast majority of this Bill is to be welcomed. However, although the Liberal Democrats welcome the significant concessions—those steps in the right direction—the Rubicon has still been crossed. We continue to have grave concerns.