Pension Schemes Bill (First sitting)

Rachel Blake Excerpts

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

If the Government amendments in relation to the local government pension scheme go through, I have an interest as I am a deferred member of a local government pension scheme in Scotland.

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

I also wish to declare such an interest.

[Damien Egan (Bristol North East) (Lab)]

So do I.

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[Mr Peter Bedford (Mid Leicestershire) (Con)]

Q Many aspects of the Bill command cross-party support, but I want your view on where the Bill does not quite go far enough, and where it perhaps goes too far.

Zoe Alexander: I would probably lean towards talking about the local government pension scheme in that context. There are some parts of the Bill where we feel powers are being taken that may not be required; one is around requiring funds to choose a particular pool, and one is requiring particular pools to merge. We think that the LGPS is moving in a very positive direction. Obviously two pools have been closed, and funds are merging with other pools already. We are not sure that those powers are actually required. We think that the direction of travel is set and that the LGPS understands that, so we feel that those powers might be overstepping the mark.

Rob Yuille: I have no view on local government. I think what I am about to say should have cross-party support, or at least cross-party interest. It is a macro Bill about how the market and the system work, but it is also about people and the decisions that they need to make. We are glad to see the small pots provision in the Bill, but it is on an opt-out basis, similar to the default pension benefits solutions. People have decisions to make, such as whether to stay in or not, and they need to be supported in the decision making. We are proposing a textbook amendment that would enable schemes to communicate electronically in a way they currently cannot and in a more positive way—even where people did not have a chance to opt in to that kind of communication, which is seen and regulated as direct marketing. We know that there is cross-party interest in the ability to communicate more clearly with customers, specifically in relation to those provisions.

[Rachel Blake]

Q I want to probe the suggestion that the mandation sunset clause should come back from 2035. You alluded to your rationale for that, but can you expand on the argument about what difference that could make?

Zoe Alexander: If you put yourself in the position of pension scheme trustees, having the presence of the reserve power, which may or may not be exercised, to direct the way that you invest does not necessarily feel like a comfortable position to be in. We understand why the Government are taking that power. We understand the imperative to get more investment in the UK and we support that. Clearly, the longer the power abides on the statute book, the longer there is that risk hanging over those trustees. They may be required to invest in particular ways. We do not know where we will be politically in 2035. We do not know what Government will be in place. It pushes us potentially into another Government, another Parliament—it is the unpredictability. So we did talk with many of our members about this, and had lively debates about whether it should be 2030, 2032 or 2035. There was a really strong consensus around bringing it forward to 2032. We do not want it too early because it might pre-empt a decision that need not be taken. But 2035 felt too far away.

[Rachel Blake]

Q My understanding is that there is broad industry support. You have alluded to it in terms of recognising the direction and the purpose of the mandate. So there does not seem to be that much difference between those years, is my observation.

Zoe Alexander: I think the trustees we have spoken to, of the schemes in our membership, would disagree. It is a significant point to them, which they have asked us to pass on.

[Rachel Blake]

Q Mr Yuille, in terms of your analysis of why there is a higher rate of investment in the UK from international funds than UK funds, do you think that the direction of the Bill will address those causes?

Rob Yuille: I am not sure there is, first of all. Canadian and Australian schemes have a big presence here, but I am not sure that they invest more, especially compared with our bigger schemes or in percentage terms. But will the Bill help that? Yes, it will. Driving scale and consolidation, which was happening anyway but which the Bill will accelerate, will open up different types of investment opportunities for those firms. They will be more likely to have in-house asset capability and bargaining power to invest in those kinds of assets. One caveat, however, is that they will be able to invest globally—the same as Canadians and Australians—so it is not a given that they will invest more in the UK. The UK still needs to work hard to be an attractive place to invest.

--- Later in debate ---

[The Chair]

For the last question, I call Rachel Blake.

[Rachel Blake]

Q I want to go back to member and trustee transparency around surplus flexibility. Could you be more specific on what preparations and possible changes would be needed to give that confidence to trustees and members about any surplus flexibility?

Jack Jones: Like I said, I think the one specific measure is not allowing surplus extraction where you have a sole corporate trustee.

[Rachel Blake]

Okay, so that is the one specific measure.

Jack Jones: Yes, that is the one specific one. More generally, I think there should be guidance that makes it clear to trustees that they have to weigh up the benefits to members, or to make sure that any kind of surplus extraction benefits members through improved benefits, rather than just through improving the company or returning money to the sponsor in some way, which they may or may not then use to do things that would give the member more security in various ways as an employee. Those are the two areas.

[The Chair]

Thank you very much indeed. We have a couple of minutes, actually—

[Rachel Blake]

Can I follow up, then?

[The Chair]

Please do.

[Rachel Blake]

Q Do you foresee any risks or additional challenges to the regulator in overseeing some of those decisions that might be made by trustees on surplus flexibility?

Jack Jones: It sounds plausible, but we have not really looked at that yet. However, that is certainly something that we can do, and we will look at including that in our written submission.

[The Chair]

Order. That brings us to the end of the time allotted. I thank the witnesses for their evidence, and we will move now to the next panel. Thank you very much indeed.

Examination of Witnesses

Colin Clarke and Dale Critchley gave evidence.