Pension Schemes Bill (Sixth sitting)

Debate between Sarah Edwards and Mark Garnier

Committee stage
Tuesday 9th September 2025 Public Bill Committees

[Sarah Edwards]

On that basis, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Mark Garnier]

I beg to move amendment 257, in clause 41, page 53, line 7, at end insert—

“117GA FCA guidance

(1) The FCA must issue guidance on contractual overrides.

(2) Guidance on contractual overrides must include—

(a) when and how overrides can be used;

(b) how to demonstrate transfers are always in members’ best interests; and

(c) how contractual overrides are independently certified.”

Amendments 255, 256 and 257 ensure that contractual override powers are operational in advance of the first value for money assessments.

The amendment is very similar to amendment 278, which was tabled by the hon. Member for Tamworth. The industry has highlighted to us a concern that the Government’s proposed sequencing will not provide enough time between contractual overrides becoming permissible and VFM assessments being conducted, which will totally undermine the effectiveness of consolidation and value improvement. Pensions UK has encouraged the Government to accelerate that and to bring forward the implementation to allow schemes to make progress on consolidation sooner, so that the override is in place well in advance of the VFM framework.

We drafted amendment 257 with the idea that if transfers took place before the VFM framework was implemented, further guidance from the FCA would be required on how and when overrides could be used. However, we welcome the compromise set out in amendment 278, which would ensure that external transfers do not take place until VFM assessments are available. Frankly, that amendment is better-crafted than ours. If we had done them the other way around, I would have deferred to the advice of the hon. Member for Tamworth on whether she wanted to move the amendment. She was right to withdraw her amendment, and we will withdraw ours, but I urge the Minister to write to us both on the outcome of this matter before Report. It would be useful to have his comments beforehand so that we can challenge him on Report, and possibly move the amendment again—who knows?

Pension Schemes Bill (First sitting)

Debate between Sarah Edwards and Mark Garnier

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Mark Garnier (Wyre Forest) (Con)]

So do I.

[Sarah Edwards (Tamworth) (Lab)]

And I.

--- Later in debate ---

[Mark Garnier]

Q I have one final question. The key point, from the point of view of your members and the local government pension scheme, is that the interest of the members should not be trumped by the interest of the wider economy—their interest comes first. Is that right?

Zoe Alexander: That is right, but often those things are consistent, and our members would agree with that. Those things are not inconsistent.

Rob Yuille: I agree.

[Sarah Edwards]

Q I am interested in hearing a little more about unlocking surplus and some of the challenges, particularly in the way that it is described or calculated, and what the thresholds might be. Obviously, there is an opportunity, but there is also a balance around conflicts arising when an employer might wish to access the surplus. Perhaps you could comment on your understanding and interpretation of how the Bill deals with that issue.

Rob Yuille: The challenge is aligning it with scheme members’ interests so that they are not put at risk. If a surplus turns to a deficit, which it can do because it is by no means guaranteed, and if an employer then fails, there is actual detriment to those scheme members. As we know, economic conditions can change. It is an opportunity for employers, though—that is the purpose of it—and schemes can and do extract surplus now, often when they enter a buy-out with an insurer.

It does need guardrails, and the Bill includes the provision that it has to be signed off by an actuary and it is the trustees’ decision. That is important, but there is a related challenge about the interaction of the surplus and superfunds. Each of those is okay: you can extract a surplus, for the reasons that we have discussed, and you can go into a superfund if you cannot afford a buy-out. The problem is, if a scheme could afford buy-out, extracts a surplus and then no longer can, and then it enters a superfund, the scheme members are in a weaker position than they would otherwise be. There are a couple of things that could be done about that: either leave the threshold for extracting surplus where it is—which is buy-out level, rather than low dependency—or change the Bill so that the combination of surplus and superfund cannot be gamed to get around that. In any case, as you say, it is important to monitor the market, and for the regulators to be alive to potential conflicts of interest.

Zoe Alexander: Pensions UK is content with the idea of using the low dependency threshold for surplus release. We think the protections are sufficient. Providing that the actuarial certification is in place, the sponsoring employer is in a strong financial position and a strong employer covenant is in place, we think there are real benefits to be had from surplus release. We highlight the fact that some employers and trustees will be looking to move benefits from DB to DC using surplus release, or even to a collective defined-contribution scheme. We are interested in the potential of that to bolster the benefits of those types of scheme, and we would like Government to look at the 25% tax penalty that applies when doing that, because if those funds are kept within the pensions system, that is to the benefit of savers, so perhaps that tax charge need not apply.