Pension Schemes Bill

Baroness Coffey Excerpts

Thursday 18th December 2025 Lords Chamber

[Baroness Coffey (Con)]

My Lords, there is a lot in this Bill. Some of it is to be welcomed—there are quite a few crackers in it. However, there are also large elements of it that feel—dare I say it at this time of Christmas?—like a little bit of a turkey. It is such a skeleton Bill that it is more appropriate for Halloween than the time in which we find ourselves.

I am not the only person here who believes that. I must say that the report from the DPRRC is one of the most damning that I have seen on a piece of primary legislation coming to your Lordships’ House. Indeed, the committee says that

“we have found it exceedingly difficult to provide meaningful comment on the Bill precisely because it is so skeletal”.

This extent of delegated powers—there are nearly more delegated powers than there are clauses—does not feel like the right place to be. Of course, I know that trying to work with the pension industry and see the scope of what it is trying to achieve means that a bit of flexibility may be needed, but it is important that we do not just, candidly, hand things over to almost a ministerial diktat, which I am afraid that parts of this Bill do.

I was Secretary of State when the previous Pension Schemes Act was passed in Parliament, and my noble friend Lady Stedman-Scott took it through this House; in fact, it started in this House. It built on—and this Bill continues to build on—the idea that where consensus comes together, we can get a very good product. Indeed, that continuity of thought is important, not just for the pensions industry but for the current and future pensioners that we seek to serve.

It has been useful to see the variety of consultations there has been, going back even to 2015, including about local government funds, and the actions taken when consolidation started to happen. There was a consultation in 2022 about other aspects of small pot consolidation. The clause I probably welcome the most is about value for money. It is really important that we make sure that we address these issues. In particular, the power to effectively shut down underperforming funds is good because, regardless of how little or how much people put in, many people are putting into their pensions all the time but do not necessarily realise quite how little will come out at the end of it. We will see more communication with the pensions dashboard, but the value-for-money framework will be a critical part of that.

There has been quite a lot of talk about trustees, and I know that a number of bodies have been trying to see if we can move to having solely professional trustees. That would be a mistake. I appreciate that is not what the Bill is calling for, but one of the challenges is that trustees, driven by a certain type of asset adviser, have been attracted to low-cost and low-risk pension schemes, but too often that has led to low return. So many of the gradual changes we have seen and that will start to come through in response to some of this legislation will be able to address that. That is vital and I will support measures to achieve it.

However, there is an underlying issue here about the mandation clause. From my experience in government, I remember a meeting in Downing Street with a bunch of pension providers, which was mainly driven by insurers. People had been told that they could not raise the issue of Solvency II being a problem. One or two were brave and did so, and were later chastised by Treasury officials. Nevertheless, it was important that they did. I understand the frustration of Government Ministers at the very top of government. People saying “We need investment” is all well and good, but why do they not put some of their money into it? I include the Local Government Pension Scheme in that. Ultimately, our traditional approach is one of state pensions not being particularly generous and trying to incentivise people to put into the private pension market, as well as what has happened historically with the defined benefit industry. That is why we have the system that we do, which has grown to the extent that it has so far—so much so that, as has been recognised, trillions of pounds in assets could be deployed to greater use, but it still must be for the benefit of current, future and, indeed, deferred pensioners.

Further, there is a missed opportunity in this Bill. Having two different regulators for pensions is a wasted opportunity. I know that the two bodies, the FCA and the Pensions Regulator, have been working on joint strategies, but fundamentally we still have significantly different rules on what can or cannot happen with pension funds, depending on how they are regulated. That just does not make sense.

This is the moment to try to change that. Frankly, the FCA has enough to do. Under their different rules, TPR allows a particular investment but the FCA does not, although it may seem to be a very similar product. We should not leave that element of complexity to be solved via delegated powers but take the opportunity to fix it in this Bill. That will need primary legislation and I hope that, although she may not welcome it—and, as I am trying to get it all out of the Treasury and the FCA, they certainly will not welcome it—the Minister will try to get it into one regulator to make a difference for the prosperity of our pensioners.

I am conscious that this is a missed opportunity in how pensions can help our planet. I strongly promoted the concept of planet, prosperity and people. These are mutually beneficial and there is no doubt that investment by the industry can play a part. That is why we put in place world-leading, pioneering regulations making the link to the TCFD and net zero. However, crucially, they did not mandate how investments were to be made or the drawing from a variety of assets but, basically, put a much greater duty of transparency on what was happening in the long term. The same needs to happen with nature and the TNFD. I will explore that in Committee.

In terms of what we want to achieve from this, I think your Lordships will share with the Government the outcome of having a good, robust and fully functioning pensions industry that generates prosperity, but let us not go down this tricky route of mandation. In particular, the DPRRC singles out that Ministers keep saying, “We don’t intend to use it”. In that case, let us not legislate for it. Let us make sure that we keep that blunt instrument away and continue to have a productive pensions industry. Nest, which was originally provided for in legislation prior to 2010 and came into effect within the last decade or so, has been a fantastic source to drive and make sure that we have private asset allocations. Let us celebrate that, work out why it worked so well and, as I have already suggested, make sure that we get rid of the stuff that is massively underperforming when prospective pensioners do not realise it.

It is going to be an interesting time in Grand Committee. I am afraid there will be a lot of amendments—this is not the only Bill I will be tabling amendments to—but I hope the Government will think again on the themes we will get into. If a lot of this is just about getting investment in Britain, the Government will need to answer why they scrapped the British ISA, which was a ready-made model. It is almost because it was not invented here. Fortunately, on the pensions journey, there is normally good cross-party consensus, but I fear that mandation has blown that out of the water. Nevertheless, let us see if we can try to fix it.