Pension Schemes Bill (Seventh sitting)

Debate between Torsten Bell and John Milne

Committee stage
Thursday 11th September 2025 Public Bill Committees

[Torsten Bell]

Chapter 3 sets out the criteria for approving superfund transfers. The clause protects the integrity of the superfund regime that we are aiming to put in place through the Bill by making it clear that the penalty for committing an unauthorised superfund transfer may be a fine, imprisonment for up to two years, or both. I commend the clause to the Committee.

Question put and agreed to.

Clause 57 accordingly ordered to stand part of the Bill.

Clause 58

Approval of superfund transfers

[John Milne (Horsham) (LD)]

I beg to move amendment 268, in clause 58, page 67, line 34, leave out subsection (a) and insert—

“(a) that, as at the date of the application, the financial position of the ceding scheme is—

(i) not strong enough to enable the trustees to arrange an insurer buy-out, or

(ii) not affordable for the next 36 months following an assessment, certified by the scheme actuary, of all funding options to become strong enough;”.

This amendment expands the onboarding condition to give an alternative to a single day snapshot of a scheme’s funding position.

The Bill tests a scheme’s funding position on a single snapshot day. We feel that is too rigid and could unfairly exclude schemes. A scheme might just miss the mark on that day, even though funding prospects over the next three years are realistic and affordable. The amendment would allow actuaries to certify affordability over a 36-month horizon, providing a fairer and more flexible test. It would protect members by ensuring viable schemes are not shut out, while still requiring strong actuarial oversight. That is especially important in an environment where economic conditions and markets can move significantly and take scheme funding positions with them.

Schemes have not always enjoyed the present funding levels, and today’s surplus is tomorrow’s deficit. We should have regard to that fact and approach the legislation in a manner that reflects it. In the assessment over a longer time period, the trustees would also be able to consider and respond to the situation in relation to dividends, changing investment strategies and expected scheme contributions, among other key factors. In summary, the purpose of the amendment is not to block the superfund option for schemes, but rather to ensure that the legislative framework is set squarely on the basis of protecting DB scheme member benefits and the security and soundness of the pensions system.

[Kirsty Blackman (Aberdeen North) (SNP)]

We have discussed other parts of the regime—for example, new entrants and their ability to scale up, and the longer-term prospects for that—which were perhaps a bit more flexible than this part. Although I am not entirely convinced that the exact wording of the amendment provides the best way to go about it, if the Minister gives some reassurance and a commitment to consider the possibility of not just taking a snapshot day, and to look at the potential ability to scale up or grow, I would be more comfortable with the legislation than I am currently.

[Torsten Bell]

I thank the hon. Members for Torbay and for Horsham for the amendment. It is sensible to discuss one of the key questions in the design of superfunds policy. My main reassurance is that this exact option, or options in this space, were part of the extensive consultation on superfunds. That is important to understand. They were in the consultation, and a wide range of views were expressed in the responses, many of them pointing to the clear practical difficulties of providing the legislative test to assess whether a scheme could afford an insurance buy-out in future, as opposed to its exact position at the time of the assessment.

For reasons I will come on to, that does not mean that it is not important to look ahead to whether a scheme is likely to be able to buy out in the future, but we have taken the view, following the consultation, that that should not be the test on the face of the Bill. That is because, when it comes to projections looking ahead, both the cost of an insurance buy-out and the scheme funding levels can fluctuate significantly. Forecasts ask for more judgment to be exercised compared with an assessment of what the buy-out market is offering at the time it is carried out. It is about the current funding levels. Clause 58 already states that schemes can transfer a superfund only when they are currently unable to secure members’ benefits with an insurer.

I will offer two elements of reassurance to the hon. Member for Horsham. First, we need to be clear about the role of the legislation, which is as I just set out, and the role of the trustees, who are the ones who would approve a transfer to a superfund. Trustees will absolutely be looking ahead and thinking about the kinds of issue that the hon. Member highlighted. Do they wish to see a superfund transfer or a buy-out transfer in future? Is it plausible that they would get one? They will be relying on the guidance of the TPR and the clear intent in the legislation, which is that superfunds will provide an additional option, not replace the core approach of most defined-benefit schemes’ goal, which is an insurance buy-out. I therefore do not support putting the proposed test on the face of the Bill. Also, as the hon. Member for Aberdeen North pointed out, there are issues with the drafting of the amendment, which requires trustees in legislation to do what they will, in practice, be doing anyway.

The second point of reassurance I can offer is that the Bill sets out a power to substitute another condition to replace this condition, if needed. We will consult the industry to assess what, if any, further requirements might be added to satisfy members before the regime comes into effect. I hope that on that basis, the hon. Member will be happy to withdraw his amendment.

[John Milne]

I thank the Minister for his reassurance, but urge him to keep this in mind. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Kirsty Blackman]

I beg to move amendment 277, in clause 58, page 67, line 34, leave out from “application” to end of line 36 and insert

“the Trustees agree, after due consideration, that it is the best option for their fund’s members;”.

This amendment would prevent a fund from having to carry out an insurance buy-out option.

The amendment asks a reasonable question about the duties of the trustees, and the possibility that they will be overwritten by the legislation and taken away from trustees. I would appreciate some reassurance from the Minister on whether the trustees will still have a duty to act in the best interests of scheme members once the legislation goes through, and whether the amendment tabled by the hon. Member for Tamworth would make things better for trustees, with them better able to act in the best interests of pension scheme members.

--- Later in debate ---

[Torsten Bell]

These new clauses are intended to help schemes affected by the implications of the Virgin Media v. NTL pension trustees court judgments, which found that certain benefit changes could be void if a scheme cannot produce actuarial confirmation that they met the requirements at the time. That has created significant uncertainty about affected schemes’ liabilities and funding requirements.

The new clauses apply to private and public sector defined-benefit pension schemes that were contracted out between 1997 and 2016 under the reference scheme test, which imposed certain legal requirements upon them. The new clauses let schemes ask their actuary to confirm retrospectively that a past change to benefits would not have stopped the scheme from meeting these legal requirements at the time, rather than requiring the scheme to produce actuarial confirmation of the same facts at the time that the change was actually made. They will help members and schemes get the certainty they need.

I want to assure the Committee that these new clauses do not change the underpinning standards that were required. They are not a retrospective pardon for benefit changes that did not meet the legal standards within existing schemes. If a scheme did not obtain written confirmation at the time, and cannot obtain retrospective confirmation, the benefit changes can be held to be void, as provided for under current law.

New clause 23 defines the language and parameters of the other clauses of this section of the Bill. New clause 24 gives the trustees or managers of a scheme the power to ask the scheme actuary to confirm that a previous change to benefits would not have stopped the scheme from meeting legal requirements at that time.

New clause 25 introduces an approach for schemes whose liabilities have already been transferred to the Pension Protection Fund or to the financial assistance scheme. Any benefit changes will be deemed to have been made with actuarial confirmation in those cases. This different approach is needed because individual schemes no longer exist when they have entered the PPF, and there is no longer a scheme actuary. The PPF and FAS would also not have the information required on individual schemes to enable an actuary to provide retrospective confirmation. This ensures that the level of compensation or assistance will continue to be paid to members at current levels.

New clause 25 also introduces an explicit provision for wound-up schemes that deems that benefit changes made to the scheme were compliant with the requirement to have confirmation from an actuary. This will make sure that the benefits provided to members, for example through an annuity, will not be incorrect as a result of any historical failure to obtain a written actuarial confirmation.

The legal recourse for members would otherwise be against the former scheme trustees, because they cannot have recourse against the provider of the annuity. However, we think it would be unreasonable for these trustees to be potentially personally liable in a situation where they could not obtain a retrospective actuarial confirmation because the scheme and its records no longer exist.

New clause 26 provides a regulation-making power to provide for specified alterations to be excluded from the scope of the retrospective confirmation route and to make consequential amendments to the legislation. The power is not intended for immediate use but is included to future-proof the legislation. The clause also contains a separate power to amend existing primary legislation. I want to assure the Committee that the power is narrow, enables consequential amendments to be made, and is subject to the affirmative procedure.

New clauses 27 to 30 make mirroring provisions for Northern Ireland, at the request of the Northern Ireland Executive. I commend the new clauses to the Committee.

Question put and agreed to.

New clause 23 accordingly read a Second time, and added to the Bill.

New Clause 24

Validity of certain alterations to GB salary-related contracted-out pension schemes: subsisting schemes

“(1) This section applies to any potentially remediable alteration purportedly made to a scheme other than one to which section (Validity of certain alterations to GB salary-related contracted-out pension schemes: wound up schemes and other special cases) applies.

(2) If the conditions mentioned in subsection (3) are met in relation to it, the alteration is to be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made, and so as having always been a valid alteration so far as those requirements are concerned.

(3) The conditions are—

(a) that the trustees or managers of the scheme have made a request in writing to the scheme actuary for the actuary to consider whether or not, on the assumption that it was validly made, the alteration would have prevented the scheme from continuing to satisfy the statutory standard, and

(b) that the scheme actuary has confirmed to the trustees or managers in writing that in the actuary’s opinion it is reasonable to conclude that, on the assumption that it was validly made, the alteration would not have prevented the scheme from continuing to satisfy the statutory standard.

In this subsection ‘the statutory standard’ means the statutory standard for a contracted-out scheme under section 12A of the Pension Schemes Act 1993 as it had effect at the time the alteration was purportedly made.

(4) A scheme actuary who has received a request under subsection (3)(a) in relation to a potentially remediable alteration to a scheme—

(a) may take any professional approach (including making assumptions or relying on presumptions) that is open to the actuary in all the circumstances of the case;

(b) may act on the basis of the information available to the actuary, as long as the actuary considers it sufficient for the purpose of forming an opinion on the subject-matter of the request.

(5) A condition mentioned in subsection (3) may be met by action taken before (as well as action taken after) this section comes into force.

(6) Subsection (7) applies to a scheme if —

(a) there is an assessment period in relation to the scheme within the meaning of Part 2 of the Pensions Act 2004, or

(b) the scheme is operating as a closed scheme under section 153 of that Act.

(7) The powers of the Board of the Pension Protection Fund under section 134 and section 155 of the Pensions Act 2004 to give directions includes power to give a direction to the trustees or managers of the scheme requiring them—

(a) to make a request under subsection (3)(a) above in relation to a potentially remediable alteration to the scheme, and

(b) to take any necessary action to enable or facilitate the making of a decision by the scheme actuary as to whether to give the confirmation described in subsection (3)(b) above in relation to that alteration.”—(Torsten Bell.)

This new clause enables the trustees or managers of a scheme to ask the scheme actuary to consider the position of an alteration when it was (purportedly) made. If the actuary confirms that it is reasonable to conclude that at that time the alteration would not have prevented the scheme from continuing to meet the statutory standard for contracted-out schemes, then the alteration is retrospectively deemed by subsection (2) to have been validly made, so far as the requirements of regulation 42(2)(a) and (b) are concerned.

Brought up, read the First and Second time, and added to the Bill.

New Clause 25

Validity of certain alterations to GB salary-related contracted-out pension schemes: wound up schemes and other special cases

“(1) This section applies to any potentially remediable alteration purportedly made to the rules of—

(a) a scheme which has been wound up before this section comes into force,

(b) a scheme for which the Board of the Pension Protection Fund has, before this section comes into force, assumed responsibility in accordance with Chapter 3 of Part 2 of the Pensions Act 2004 (see section 161 of that Act), or

(c) a scheme which is a qualifying pension scheme for the purposes of regulation 9 of the Financial Assistance Scheme Regulations 2005 (SI 2005/1986) and in respect of which payments are required to be made under section 286 of the Pensions Act 2004.

(2) The alteration is to be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made and so as having always been a valid alteration so far as those requirements are concerned.”—(Torsten Bell.)

This new clause deals with cases where it would not now be practicable for the confirmation described in NC24(3)(b) to be obtained in relation to a potentially remediable alteration. In such cases the clause retrospectively deems the alteration to have been validly made so far as the requirements of regulation 42(2)(a) and (b) are concerned.

Brought up, read the First and Second time, and added to the Bill.

New Clause 26

Power to amend provisions of Chapter 1 etc: Great Britain

“(1) The Secretary of State may by regulations amend any of sections (Sections (Validity of certain alterations to GB salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1): interpretation and scope), (Validity of certain alterations to GB salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to GB salary-related contracted out pension schemes: wound up schemes and other special cases) for the purpose of providing for purported alterations of any specified description to be outside the scope of remediation under either or both of sections (Validity of certain alterations to salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to salary-related contracted-out pension schemes: wound up schemes and other special cases).

(2) In subsection (1) ‘specified’ means specified in the regulations; and a specified description of purported alterations may be framed by reference to features of the alterations or of the schemes purportedly altered by them (or a combination of both).

(3) Regulations under subsection (1) are subject to the negative procedure.

(4) The Secretary of State may by regulations make incidental, supplementary, consequential or transitional provision in connection with any provision of this Chapter (other than this section and section (Powers to amend Chapter 1 etc: Northern Ireland)).

(5) Regulations under subsection (4) may amend any Act passed before or in the same Session as this Act.

(6) Regulations under subsection (4) are subject to the affirmative procedure if they contain provision made under subsection (5); otherwise they are subject to the negative procedure.”—(Torsten Bell.)

This new clause enables regulations made for England and Wales or Scotland (a) to specify further categories of alterations in respect of which the clauses validating otherwise void alterations do not apply and (b) to make incidental, supplementary, transitional or consequential provision relating to any provision of the new Chapter addressing the validity of alterations to pension schemes.

Brought up, read the First and Second time, and added to the Bill.

New Clause 27

Sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Power to amend Chapter 1): interpretation and scope

“(1) The provisions of this section have effect for the purposes of this section and sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1 etc: Northern Ireland).

(2) ‘NI scheme’ means an occupational pension scheme that was a salary-related contracted-out scheme in Northern Ireland; and for this purpose an occupational pension scheme was a salary-related contracted-out scheme in Northern Ireland at any time if the scheme was contracted-out at that time by virtue of satisfying section 5(2) of the Pension Schemes (Northern Ireland) Act 1993 (as it then had effect).

(3) ‘Scheme actuary’, in relation to an NI scheme, means—

(a) the person for the time being appointed as actuary for the scheme under Article 47 of the Pensions (Northern Ireland) Order 1995 (SI 1995/3213 (N.I. 22)) (professional advisers), or

(b) if there is no person so appointed, a Fellow of the Institute and Faculty of Actuaries appointed by the trustees or managers of the scheme to carry out the functions of the scheme actuary under section (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes).

(4) ‘Section 33(1)’ refers to section 33(1) of the Pension Schemes (Northern Ireland) Act 1993 (prohibition of alterations to rules of contracted-out schemes in certain circumstances).

(5) ‘Regulation 42’ refers to regulation 42 of the Occupational Pension Schemes (Contracting-out) Regulations (Northern Ireland) 1996 (SR 1996 No. 493).

(6) An alteration purporting to have been made to the rules of an NI scheme is a ‘potentially remediable alteration’ if—

(a) by virtue of section 33(1) and paragraphs (1) and (2) of regulation 42 (as they had effect at the time), the alteration could not be made unless the requirements of paragraph (2)(a), (b) and (c) of regulation 42 (as they then had effect) had been met,

(b) it was treated by the trustees or managers of the scheme, after it was purportedly made, as a valid alteration,

(c) no positive action has been taken by the trustees or managers of the scheme on the basis that they consider the alteration to be void (and so of no legal effect) by reason of non-compliance with the requirements of paragraph (2)(a) and (b) of regulation 42, and

(d) it is not excluded from the scope of remediation under section (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) (see subsection (7)).

(7) In subsection (6)(c) ‘positive action’, in relation to a purported alteration, means—

(a) notifying any members of the scheme in writing to the effect that the trustees or managers consider the alteration to be void (by reason of non-compliance with the requirements of paragraph (2)(a) and (b) of regulation 42) and that the scheme will be administered on the basis that it has no legal effect, or

(b) taking any other step in relation to the administration of the scheme, in consequence of the trustees or managers considering the alteration to be void, which has (or will have) the effect of altering payments to or in respect of members of the scheme.

(8) An alteration purporting to have been made to the rules of an NI scheme is excluded from the scope of remediation under sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) if any question relating to the validity of the alteration, so far as relating to the requirements of paragraph (2)(a) and (b) of regulation 42—

(a) has been determined by a court before this section comes into force in legal proceedings to which the trustees or managers were a party,

(b) was in issue on or before 5 June 2025 in legal proceedings to which the trustees or managers were a party, but has been settled by agreement between the parties at any time before this section comes into force, or

(c) was in issue on or before 5 June 2025 in legal proceedings to which the trustees or managers were a party, and remains in issue when this section comes into force.”—(Torsten Bell.)

This new clause makes provision for Northern Ireland corresponding to NC23. Northern Ireland generally has its own pensions legislation which is separate from the legislation applying to England and Wales and Scotland.

Brought up, read the First and Second time, and added to the Bill.

New Clause 28

Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes

“(1) This section applies to any potentially remediable alteration purportedly made to an NI scheme other than one to which section (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) applies.

(2) If the conditions mentioned in subsection (3) are met in relation to it, the alteration is to be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made, and so as having always been a valid alteration so far as those requirements are concerned.

(3) The conditions are—

(a) that the trustees or managers of the scheme have made a request in writing to the scheme actuary for the actuary to consider whether or not, on the assumption that it was validly made, the alteration would have prevented the scheme from continuing to satisfy the statutory standard, and

(b) that the scheme actuary has confirmed to the trustees or managers in writing that in the actuary’s opinion it is reasonable to conclude that, on the assumption that it was validly made, the alteration would not have prevented the scheme from continuing to satisfy the statutory standard.

In this subsection ‘the statutory standard’ means the statutory standard for a contracted-out scheme under section 8A of the Pension Schemes (Northern Ireland) Act 1993 as it had effect at the time the alteration was purportedly made.

(4) A scheme actuary who has received a request under subsection (3)(a) in relation to a potentially remediable alteration to a scheme—

(a) may take any professional approach (including making assumptions or relying on presumptions) that is open to the actuary in all the circumstances of the case:

(b) may act on the basis of the information available to the actuary, as long as the actuary considers it sufficient for the purpose of forming an opinion on the subject-matter of the request.

(5) A condition mentioned in subsection (3) may be met by action taken before (as well as action taken after) this section comes into force.

(6) Subsection (7) applies to a scheme if —

(a) there is an assessment period in relation to the scheme within the meaning of Chapter 3 of Part 3 of the Pensions (Northern Ireland) Order 2005 (SI 2005/255 (N.I. 1)) , or

(b) the scheme is operating as a closed scheme under Article 137 of that Order.

(7) The powers of the Board of the Pension Protection Fund under Article 118 and 139 of the Pensions (Northern Ireland) Order 2005 to give directions include power to give a direction to the trustees or managers of the scheme requiring them—

(a) to make a request under subsection (3)(a) in relation to a potentially remediable alteration to the scheme, and

(b) to take any necessary action to enable or facilitate the making of a decision by the actuary as to whether to give the confirmation described in subsection (3)(b) in relation to that alteration.”—(Torsten Bell.)

This new clause makes provision for Northern Ireland corresponding to NC24.

Brought up, read the First and Second time, and added to the Bill.

New Clause 29

Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases

“(1) This section applies to any potentially remediable alteration purportedly made to the rules of—

(a) a scheme which has been wound up before this section comes into force,

(b) a scheme for which the Board of the Pension Protection Fund has, before this section comes into force, assumed responsibility in accordance with Chapter 3 of Part 3 of the Pensions (Northern Ireland) Order 2005 (see Article 145 of that Order), or

(c) a scheme which is a qualifying pension scheme for the purposes of regulation 9 of the Financial Assistance Scheme Regulations 2005 (SI 2005/1986) and in respect of which payments are required to be made under section 286 of the Pensions Act 2004.

(2) The alteration is be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made and so as having always been a valid alteration so far as those requirements are concerned.”—(Torsten Bell.)

This new clause makes provision for Northern Ireland corresponding to NC25.

Brought up, read the First and Second time, and added to the Bill.

New Clause 30

Powers to amend Chapter 1 etc: Northern Ireland

“(1) A Northern Ireland Department may by regulations amend any of sections (Sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1 etc: Northern Ireland): interpretation and scope), (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) for the purpose of providing for purported alterations of any specified description not to be within the scope of remediation under either or both of sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases).

(2) In subsection (1) ‘specified’ means specified in the regulations; and a specified description of purported alterations may be framed by reference to features of the alterations or of the schemes purportedly altered by them (or a combination of both).

(3) A Northern Ireland Department may by regulations make incidental, supplementary, consequential or transitional provision in connection with any provision of this Chapter (other than section (Powers to amend Chapter 1 etc: Great Britain) and this section).

(4) Regulations made under this section are subject to negative resolution within the meaning given by section 41(6) of the Interpretation Act (Northern Ireland) 1954.

(5) The power of a Northern Ireland Department to make regulations under this section is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).”—(Torsten Bell.)

This new clause enables regulations made for Northern Ireland (a) to specify further categories of alterations in respect of which the clauses validating otherwise void alterations do not apply and (b) to make incidental, supplementary, transitional or consequential provision relating to any provision of the new Chapter addressing the validity of alterations to pension schemes.

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Universal Pension Advice Entitlement

“(1) The Secretary of State must by regulations establish a system to ensure that every individual has a right to receive free, impartial pension advice at prescribed times.

(2) Regulations under subsection (1) must provide for individuals to be offered advice—

(a) at or around the age of 40; and

(b) at a prescribed age, not more than six years before the individual's expected retirement age.

(3) The regulations must make provision about—

(a) the content and scope of the free, impartial pension advice, which may include, but is not limited to, guidance on—

(i) pension types (including both defined contribution and defined benefit schemes),

(ii) investment strategies,

(iii) charges,

(iv) consolidation of pension pots, and

(v) retirement income options;

(b) the qualifications, independence, and impartiality requirements for any person or body providing advice;

(c) the means by which individuals are notified of their entitlement to receive the advice and how they may access it;

(d) the roles and responsibilities of pension scheme trustees, managers, and providers in facilitating access to advice;

(e) the sharing member information with prescribed persons or bodies subject to appropriate data protection safeguards.

(4) Regulations under this section may—

(a) make different provision for different descriptions of pension schemes or different descriptions of individuals;

(b) confer functions in connection with the provision or oversight of the advice on—

(i) the Pensions Regulator,

(ii) the Financial Conduct Authority,

(iii) the Money and Pensions Service, or

(iv) other prescribed bodies;

(c) require the provision of funding for the advice service from prescribed sources.

(5) A statutory instrument containing regulations under this section 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 makes provision by regulations for everyone to receive free, impartial pension advice at age 40 and again around five years before their expected retirement.

Brought up, and read the First time.

[John Milne]

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

Pension Schemes Bill (Eighth sitting)

Debate between Torsten Bell and John Milne

Committee stage
Thursday 11th September 2025 Public Bill Committees

[Torsten Bell]

I thank the hon. Member for Torbay, who has just left us, for moving new clause 7. To clarify, it would require the Secretary of State to commission an independent review into the police pension scheme on these particular issues. I know this will be a matter of cross-party consensus, but the most important thing is to stress the value placed on the contribution of police officers across the country. I see them every day, particularly in the centre of Swansea, and they play a really important role.

The rules providing for the cessation of survivor benefits, where a survivor remarries or cohabits, are typically features of legacy public service pension schemes, and we are discussing the 1987 police pension scheme in this case. Reformed public service pension schemes do not include these challenges, as we have moved away from a system with significant inheritable rights. The same also applies to the new state pension system introduced under the coalition Government, which does not include the same degree of inheritability as the basic state pension did.

I want to take a similar approach to the many issues that will be raised in such calls for reviews. It is really important for me to be clear about why we do not support reviews into these schemes—particularly in this case, where it closed 20 years ago—as I do not want to raise expectations that will not be met. That would be deeply unhelpful to people who have been campaigning on this issue for many years.

In this particular case, there is the principle that we will not retrospectively legislate to change the terms of pensions far in the past, around 20 years ago. I am saying this very gently, but the reality is that my position is shared by most parties in this House. If the coalition Government, made up of a Liberal Democrat Pensions Minister and other Conservative Ministers, had wanted to resolve these issues and take an approach different from the one I am setting out today, they would have done it in a previous Parliament.

The last thing I want to do is give false expectations to people who often face consequences from the terms of these pension schemes—terms I do not support, but that is why they have ceased to be part of modern pension schemes. I do not want to give false certainty that we will start reopening public service pension schemes from decades ago. That would lead to false expectations, and that is the last thing we should be doing.

On that basis, we will not be supporting the new clause, but I understand the case that people have made and why people are raising it in this place. As I say, that is our approach to this issue.

[John Milne]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 8

Independent review into pension losses incurred by former employees of AEA Technology

“(1) The Secretary of State must, within three months of the passing of this Act, commission an independent review into the pension losses incurred by former employees of AEA Technology who—

(a) transferred their accrued pension benefits out of the UK Atomic Energy Authority (UKAEA) public service scheme to AEA Technology (AEAT) on privatisation in 1996, and

(b) suffered financial losses when AEA Technology went into administration in 2012 and the pension scheme entered the Pension Protection Fund (PPF).

(2) The review must examine—

(a) the extent and causes of pension losses incurred by affected individuals,

(b) the role of Government policy and representations in the transfer of pensions during the privatisation of AEA Technology,

(c) the findings of the Public Accounts Committee and the Work and Pensions Select Committee,

(d) the adequacy of safeguards provided at the time of privatisation,

(e) potential mechanisms for redress or compensation, and

(f) the estimated financial cost of any such mechanisms.

(3) The review must be—

(a) conducted by an independent panel appointed by the Secretary of State, with relevant expertise in pensions, public policy, and administrative justice, and

(b) transparent and consultative, including engagement with affected pensioners and their representatives.

(4) The panel must report its findings and recommendations to the Secretary of State and lay a copy of its final report before Parliament within 12 months of its establishment.

(5) The Secretary of State must, within 6 months of the publication of the report under subsection (4), lay before both Houses of Parliament a statement setting out the Secretary of State’s response to that outcome.”—(John Milne.)

This new clause would require the Secretary of State to commission an independent review into the pension losses incurred by former employees of AEA Technology.

Brought up, and read the First time.

[John Milne]

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

The new clause would require the Secretary of State to commission an independent review into pension losses suffered by former employees of AEA Technology. It focuses on employees who transferred benefits from the UK Atomic Energy Authority to AEA on privatisation in 1996, and who later suffered losses when the company went into administration. Many former employees experienced significant losses due to circumstances beyond their control, and this review would ensure a transparent, evidence-based assessment of what went wrong. It would also hopefully provide a structured way to explore redress or compensation options for affected pensions.

To summarise, the new clause would ensure that lessons were learned and safeguards were strengthened for future privatisations and pension transfers. We move it in the hope that the Minister will put his thoughts on the record, so that campaigners can at least see them—like them or not, they will know where he stands.

[Torsten Bell]

I reiterate my overall approach to the issues being raised in relation to historical cases, but we all recognise the difficult position that members of this particular scheme found themselves in. Many scheme members who move into the PPF receive a lower pension than they were otherwise expecting, and I think we are all sympathetic.

The hon. Member will be aware that there have been many reviews of this case, including by the Public Accounts Committee, the Work and Pensions Committee and, obviously, the Pensions Ombudsman. The coalition did not act on this particular case, and I do not want to raise expectations that we are going to reopen it now, given the number of reviews that have already taken place.

However, I can offer slightly more reassurance to the hon. Member going forward. He will be aware of changes in policy that mean that, when there are privatisations of the kind that sits behind this challenging case, workers will remain in public service pension schemes. They would not be moved across into another scheme. That is obviously what sits behind anxieties about the transparency of the advice provided in this case. I hope that that offers the hon. Member the kind of reflection that he asked for, but we are not in a position to support the new clause.

[John Milne]

I thank the Minister for his observations, and I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 9

Independent review into state deduction in defined benefit pension schemes

“(1) The Secretary of State must, within three months of the passing of this Act, commission an independent review into the application and impact of state deduction mechanisms in occupational defined benefit pension schemes.

(2) The review must consider—

(a) the origin, rationale and implementation of state deduction in the Midland Bank Staff Pension Scheme,

(b) the clarity and adequacy of member communications regarding state deduction from inception to present,

(c) the differential impact of state deduction on pensioners with varying salary histories, including an assessment of any disproportionate effects on—

(i) lower-paid staff, and

(ii) women,

(d) comparisons with other occupational pension schemes in the banking and public sectors, and

(e) the legal, administrative, and financial feasibility of modifying or removing state deduction provisions, including potential mechanisms for redress.

(3) The Secretary of State must ensure that the person or body appointed to conduct the review—

(a) is independent of HSBC Bank plc and its associated pension schemes;

(b) possesses relevant expertise in pensions law, occupational pension scheme administration, and equality and fairness in retirement income; and

(c) undertakes appropriate consultation with—

(i) affected scheme members,

(ii) employee representatives,

(iii) pension experts, and

(iv) stakeholder organisations.

(4) The person or body conducting the review must—

(a) submit a report on its findings to the Secretary of State within 12 months of the date the review is commissioned; and

(b) the Secretary of State must lay a copy of the report before Parliament and publish the report in full.

(5) Within three months of laying the report before Parliament, the Secretary of State must publish a written response setting out the Government’s proposed actions, if any, in response to the report’s findings and recommendations.

(6) For the purposes of this section—

‘state deduction’ means any provision within a defined benefit occupational pension scheme that reduces pension entitlements by reference to the member reaching state pension age or by reference to any state pension entitlement;

‘defined benefit pension scheme’ has the meaning given in section 181 of the Pension Schemes Act 1993;

‘Midland Bank Staff Pension Scheme’ includes all associated legacy arrangements and any successor schemes administered by HSBC Bank Pension Trust (UK) Ltd.” —(John Milne.)

This new clause would require the Secretary of State to commission an independent review into clawback provisions in occupational defined benefit pension schemes, in particular, the Midland Bank staff pension scheme.

Brought up, and read the First time.

[John Milne]

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

New clause 9 would require the Secretary of State to commission an independent review into the application and impact of state deduction mechanisms in occupational defined benefit pension schemes. It focuses specifically on clawback provisions in the Midland bank staff pension scheme and associated legacy arrangements.

We believe that a review is needed because state deduction provisions can reduce members’ pension entitlements, sometimes in ways that are complex or unclear. There are concerns about fairness, transparency and disproportionate impact, particularly on lower-paid staff and women. A review would ensure that members, regulators and Parliament had clarity about the origin, rationale and effect of such provisions.

The review would examine the history and rationale for the deductions, assess the clarity and adequacy of member communications over time, analyse differential impact on pensioners with varying salary histories, and compare state deduction practices with other occupational schemes in banking and the public sectors. It would also consider the legal, administrative and financial feasibility of modifying or removing state deduction provisions. Finally, it would be an independent and consultative process. The clause would ensure transparency and fairness, and it would provide Parliament and Members with clear, evidence-based guidance on the way forward.

[Torsten Bell]

I am conscious that there was a debate in the main Chamber on this issue before the summer recess, when we were able to go into the issue in much more depth. The debate related to integrated pensions, but in that context people are usually referring to the HSBC historical pension scheme in particular. Without rehearsing everything I have said about our not being in the business of promising to change pension scheme rules, schemes have wide discretion about the nature of their rules and the entitlements that scheme members accrue. It is not for the Government to change those.

The law is very clear that the Government require transparency, just as the hon. Member for Horsham called for, and that includes clear communication of what the entitlement from any given pension scheme is, including issues to do with what is referred to as integrated pensions or clawback pensions. People do have to have received communication that spells that out. The role of the Pensions Ombudsman is to check that that has happened. That is where people can go if they feel that they have not received clear communication about what their scheme entitlements were.

I think we can all understand that if anybody started to receive a pension and was shocked to see a deduction in it when they went over the state pension age, that would be very significant for them. It is the job of the Pension Ombudsman to investigate cases such as that.

[John Milne]

I thank the Minister and beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 10

Use of electronic mail for direct marketing purposes relating to pensions

“(1) Section 22(3) of the Privacy and Electronic Communications (EC Directive) Regulations 2003 is deemed to apply to unsolicited electronic communications relating to pensions when the sender is—

(a) a firm authorised to provide Targeted Support under Article 55A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 issuing a Targeted Support communication, or

(b) a qualifying pension scheme, as defined in section 16(1) of the Pensions Act 2008.

(2) Subsection (1) applies when the recipient is—

(a) a customer of the firm under subsection (1)(a), or

(b) a member of the pension scheme under subsection (1)(b).” —(John Milne.)

This new clause would require that the provisions relating to the use of electronic mail for direct marketing purposes under the Privacy and Electronic Communications *(EC Directive) Regulations 2003 would apply to communications from firms providing targeted support on pensions or from qualifying pension schemes.

Brought up, and read the First time.

[John Milne]

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

New clause 10 would require that provisions relating to the use of electronic mail for direct marketing purposes would apply to communications from firms providing targeted support on pensions or from qualifying pension schemes. That matters because pension savers deserve protection from unwanted or misleading marketing, especially when they may be vulnerable to scams. I used to work in direct marketing, so I feel a little bit guilty.

[Torsten Bell]

That is impressive honesty.

[John Milne]

Obviously, all mine were absolutely above board. Currently, the privacy and electronic communications regulations do not clearly cover pension-related marketing from schemes or targeted support firms. This new clause seeks to close that loophole. People should be able to trust that communications from their scheme or adviser are genuine and not just spam dressed up as guidance. We would position this as a balance, so that legitimate communications to scheme members remain possible, but only within clear safeguards. In summary, it is a simple consumer protection measure that would protect savers from nuisance emails and potential mis-selling.

--- Later in debate ---

[Torsten Bell]

Let me attempt to offer some words of clarification and then come to what the Government are doing on this issue.

To clarify, pension schemes are covered by the rules on direct marketing already. I think the new clause as drafted would probably have the opposite effect to what the hon. Member for Horsham intends, by carving out pension schemes from the limitations on direct marketing. That would be a loosening of the direct marketing restrictions for pension schemes. There are people in the industry that have been calling for exactly that, so that may be where the new clause is coming from, but I clarify that they are covered; the direct marketing rules prevent pension schemes from behaving in those kinds of ways.

What is the context here? We are obviously aware of concerns that the existing direct marketing rules, which apply to pension schemes, may limit providers’ ability to deliver the new targeted support regime that is being developed by the Government, exactly as the hon. Member for South West Devon has just set out. Under targeted support, FCA-authorised firms will be able to proactively suggest appropriate products or courses of action to customers. That could help people to make decisions about access to their pension, but it obviously needs to be done in the right way.

We have heard the feedback from stakeholders on the interaction between that wish for targeted support and direct marketing rules, which is where most of the debate on this area has been. Because targeted support involves recommending specific courses of action, it could be considered direct marketing. That is the cause of the tension.

There are particular issues for pension providers who administer auto-enrolled members, where the individual has not chosen the pension scheme or engaged with them. As a result of that, they cannot generally satisfy the requirements of what is called the soft opt-in, because the provider has not collected the information from the individual at the point at which they were enrolled—it has gone through the employer.

What are we doing about that? We are examining quite a range of policy options at the moment. That includes legislative change, which can probably be done via secondary legislation. I think that is the right way for us to proceed. When we do that, we need to get the balance between enabling targeted support and making sure that we do not have inappropriate direct marketing within the pension space. I definitely would not want to see a carve-out from all direct marketing rules for the pension sector as a whole, as there are risks that come with that. I hope that gives Members some clarity and an explanation of what the Government are doing to take this issue forward.

[John Milne]

I thank the Minister for his clarification, and I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

[Kirsty Blackman]

On a point of order, Ms Lewell, I am aware that I cannot make a speech at this point, but will the Minister write to me on whether he is planning to do anything about pre-1997 indexation of the PPF and FAS? If he writes to me about that, I will be happy not to push new clause 18 to a vote.

--- Later in debate ---

[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.

[Torsten Bell]

I will resist the temptation to relitigate the entire argument about clause 38, which we discussed at some length on Tuesday. I entirely agree with the thrust of the new clause, which is that there should be scrutiny of the use of any such powers—that includes the scale measures, not just asset allocation.

I can offer the hon. Member for Horsham some reassurance, because the Bill already provides that all significant regulations made under clause 38, including the ones he is referring to, are always subject to the affirmative parliamentary procedure. That is the effect of the changes made to section 143 of the Pensions Act 2008 by clause 38(15). That should give him a lot of reassurance. It is true that the new clause could put a further vote in the system, but the effect is the same. I have bad news about Governments with majorities: whether they are asked to vote once or twice, the outcome will look quite similar.

For the sake of transparency, I should flag that there are some much less significant measures in clause 38 that are subject to the negative resolution procedure. I will spell them out: regulations made that require regulatory authorities to report information relating to asset allocation to the Secretary of State, regulations made in respect of new information provisions, and regulations made in respect of the regulator’s power to issue a risk notice. The negative procedure is never used for the major aspects of clause 38, which, as the hon. Gentleman set out, is a central part of the Bill. I hope that reassures him that Parliament would have to support any measures to bring in the regulations that will underpin clause 38. As I have said ad nauseam, we intend to bring into effect the scale parts of clause 38, but do not anticipate the need to use the reserve power elements.

[John Milne]

I thank the Minister for his clarification. I emphasise that the new clause is as much for industry’s comfort as Parliament’s; nevertheless, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 44

Administration levy

“(1) The Pensions Act 2004 is amended as follows.

(2) In section 116 (grants), leave out from ‘expenses’ to end of section.

(3) Omit section 117 (administration levy).

(4) In section 173(3) (Pension Protection Fund), before subsection (3)(a) insert—

‘(aa) any sums required to meet expenses incurred by the Board in connection with the operation or discontinuance of the Pension Protection Fund,’

(5) In section 188(3) (Fraud Compensation Fund), before subsection (3)(a) insert—

‘(aa) sums required to meet expenses incurred by the Board in connection with the operation or discontinuance of the Fraud Compensation Fund,’.” —(John Milne.)

This new clause abolishes the administration levy and provides for the expenses of the PPF and the FCF to be met out of their general funds. It would enable FCF expenses to be covered by the FCF levy.

Brought up, and read the First time.

--- Later in debate ---

[Kirsty Blackman]

I appreciate the reassurances that the Minister has given me. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 46

Trustees: independence

“(1) The Pensions Act 1995 is amended as follows.

(2) In section 29 (Persons disqualified for being trustees), after subsection (d) insert—

‘(da) he has a personal or financial interest in the pension scheme, except for member nominated trustees.’”—(John Milne.)

This new clause makes pension scheme trustees truly independent of the sponsoring companies so that they can protect scheme members’ interests without any conflict of interest.

Brought up, and read the First time.

[John Milne]

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

The new clause would have the effect of making pension scheme trustees truly independent of the sponsoring companies so that they can protect scheme members’ interests without any conflict of interest. Trustees should act solely in the best interests of their members, not those of the sponsoring employer.

Currently, conflicts of interest can arise where company-appointed trustees also have personal or financial ties to the scheme sponsor. The new clause seeks to strengthen independence, excluding conflicting trustees while still allowing member-nominated trustees. Members deserve trustees who are free to challenge employers and prioritise pensions over corporate interests. Having strong, independent trustees means stronger protection for savers’ retirement security.

[Torsten Bell]

I will remark briefly on the new clause. To state the obvious, the quality and independence of trustees is an integral part of our trust-based pensions system. It is very important, and it is right for the hon. Member to highlight it. Within those schemes, there are a range of trustee models. I would not want to put a blanket regime in place within the currently varied landscape. I want to give the hon. Member some different reassurance on this point. We are committed to strengthening scheme governance, including for some of the issues that he has raised. I have already announced my intention to consult later this autumn on measures to improve the governance of trust-based schemes. That work will consider again some of the exact issues that he raises. That is the right way forward, because there are lots of strengths to our current system. The quality of our trustees, their independence and everything they bring to their role are all valuable, but it is important that we maintain that as the best it can possibly be. I hope that the hon. Member will enjoy the consultation later this year.

[John Milne]

I thank the Minister for his encouragement. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 47

Report on Pension Scheme Eligibility and Access

“(1) The Secretary of State shall, within 12 months of the passing of this Act, lay before Parliament a report into the operation of occupational pension schemes where certain categories of employees have been excluded on the basis of job classification or employment start date.

(2) The report must examine the case of employees and former employees of Fife Joinery Manufacturing (a subsidiary of Velux), including—

(a) whether affected workers were provided with opportunity to join existing pension schemes,

(b) the adequacy of record-keeping and employer accountability, and

(c) potential remedies to ensure equal access to workplace pensions.”—(John Milne.)

This new clause would require the Secretary of State to report on the Velux Pensions case.

Brought up, and read the First time.

[John Milne]

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

The new clause would require the Secretary of State to report on the Velux pensions case. It would require him to report within 12 months on how occupational pension schemes exclude certain employees based on job classification or their start date. The report would specifically

“examine…employees and former employees of Fife Joinery Manufacturing (a subsidiary of Velux)”.

It would review whether affected workers were genuinely offered the chance to join the pension scheme. The report would assess

“the adequacy of record-keeping and employer accountability”

and explore possible

“remedies to ensure equal access to workplace pensions.”

The measure addresses concerns from shop-floor employees who joined before 1998 and were denied pension access despite repeatedly asking for it. The workers dispute claims that they declined pension membership and say they were told that they were not eligible. Attempts to engage Fife Joinery Manufacturing management have been unsuccessful. Workers have been advised to consider approaching the ombudsman, although none has done so yet. The new clause would hold the Government accountable to investigate and push for fairness and transparency. It is supported by my hon. Friend the Member for North East Fife and my Liberal Democrat colleagues.

To summarise, the new clause is a key step to ensure fairness and equality in workplace pension access and to prevent similar exclusions in the future.

[Torsten Bell]

I am grateful to the hon. Member, as always, for raising those specific issues in this debate. It has been a good opportunity to raise such cases, as he regularly does.

The hon. Member will be totally unsurprised that the Government cannot support the new clause, because it is the Pensions Regulator’s role to regulate occupational pension schemes and, as he mentioned, it is the Pensions Ombudsman’s job to investigate individual complaints from members. We do not want the Government to step over the top of those organisations. I encourage those who think that they have a case to approach the ombudsman, if they have not already—given the hon. Member’s remarks, it sounds like they have not done so. I should add that I am not aware of the details of that individual case.

To be clear, if individuals have concerns about their workplace pension scheme that relate to their employer and the running of the scheme, they should take the issue to the Pensions Regulator, which will investigate. Individuals who think that they should have been a member of a pension scheme can also go to the Pensions Ombudsman, if that makes sense. Depending on the nature of an individual’s complaint, two routes are available. I ask the hon. Member to withdraw his new clause.

[John Milne]

I thank the Minister for his words. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Clause 98

Regulations: general

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 99 stand part.

Government amendment 241.

Clause 100 stand part.

--- Later in debate ---

[John Milne]

I feel I ought also to thank everyone, and the Minister especially for a superb performance. I think we can all agree that this is a very good Bill, with lots of really good things in it. I am particularly interested in the investment side of it, with the greater resources to invest in UK plc, which we certainly do need.

Sadly, I expect the Bill will not receive the publicity that many do—it has not been in the headlines so far—and that is a pity. Much more trivial and ephemeral stuff, frankly, gets all the headlines, while something that is interesting and dynamic, like the measures in this Bill, will probably be displaced by the latest resignation.

[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.

Pension Schemes Bill (Fifth sitting)

Debate between Torsten Bell and John Milne

Committee stage
Tuesday 9th September 2025 Public Bill Committees

[Torsten Bell]

I thank the hon. Members for Wyre Forest and for Aberdeen North. The main question raised is about the level of the fines. To provide some context, the answer is yes—that would need to be amended by further primary legislation; there is not a power in the Bill to change that. It is an increase on previous levels of fines for individuals and organisations—from £5,000 to £10,000 for individuals, reflecting the high inflation we have seen in recent years. On that basis, it gives us certainty that we have seen a substantial increase, and we would not need to change it in the near future, but I take the point that in the longer term, we always need to keep the levels of fines under review, and we will need to do that in this case. I hope that provides the answers to hon. Members’ questions.

Question put and agreed to.

Clause 30 accordingly ordered to stand part of the Bill.

Clause 31

Enforcement by the FCA

Amendment made: 41, in clause 31, page 29, line 38, leave out subsection (4) and insert—

“(4) For the purposes of this Chapter a person is ‘FCA-regulated’ if they are an authorised person (within the meaning of the Financial Services and Markets Act 2000) in relation to the operation of a pension scheme.”—(Torsten Bell.)

This amendment clarifies that the definition of “FCA-regulated”, in relation to a person, refers to the person being FCA-regulated in respect of the operation of a pension scheme (as opposed to in a capacity unrelated to small pots regulations).

Clause 31, as amended, ordered to stand part of the Bill.

Clause 32

Power to alter definition of “small”

[John Milne (Horsham) (LD)]

I beg to move amendment 4, in clause 32, page 30, line 12, at end insert—

“(4) The Secretary of State must, at least once every three years, review the amount for the time being specified in section 20(2) to consider whether that amount should be increased, having regard to—

(a) the effectiveness, and

(b) the benefit to members

of the consolidation of small dormant pension pots.”

This amendment would require the Secretary of State to review and consider increasing the level of small pension pot consolidation every three years.

The purpose of the amendment is to require the Secretary of State to review at least once every three years the threshold for small dormant pension pot consolidation. It aims to ensure that the level set in clause 20(2) remains effective and relevant over time. The Minister will be aware that we have already considered the right level at which to set the consolidation; we tabled amendment 262 as a probing amendment, which would have changed the small pot consolidation limit from £1,000 to £2,000. As we have discussed, industry has a very wide range of views on what would be the best figure.

However, this amendment asks for a review, not a particular figure. As before, we do not intend to push it to a vote. To us, a formal review process seems sensible, but whether it should be set at three-year intervals or any other figure is open to question. Given the lack of certainty about what figure industry would like, it seems a good idea to review the threshold after we have seen the measure working in practice.

The pensions landscape evolves quickly, with more job changes and rising numbers of small inactive pots. Therefore, a static threshold risks becoming out of date and undermining the policy’s effectiveness, whereas a regular review keeps the system responsive to members’ needs. It would consider effectiveness—whether consolidation is working to reduce fragmentation and improve efficiency, and the benefit to members, so whether savers are seeing clearer statements, reduced charges and better value for money. It would also simplify retirement saving by reducing the number of scattered small pots, would help members to keep track of their savings and avoid losing pensions altogether, and would improve efficiency for providers, which could reduce costs for savers.

I stress that the amendment does not dictate that there should be an automatic increase. It simply requires the Secretary of State to consider whether the amount is still appropriate. Therefore, in our view, it strikes the right balance between flexibility and accountability. To summarise, this measure would keep consolidation policy up to date, effective and beneficial for pension savers. A regular, three-year review is a simple, proportionate step to ensure that the system works as intended.

--- Later in debate ---

[Torsten Bell]

I thank the hon. Member for that comment. The nature of every piece of legislation means that a future Government can take a different decision. Thanks for the reminder of the nature of British politics—that is how it operates. I am slightly more relaxed than she is, because there will be significant pressure from the industry, and from everybody, to keep this under review. That is not a matter of controversy. It is conceivable that there may be a Government who are steadfastly against ever again looking at the small pots threshold, but having lived through the last 15 years, I would put that low down the list of uncertainties in British politics. However, I take the intention behind the hon. Lady’s point, and I promise never to assume that Labour will win every election from now until eternity.

[John Milne]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 33 to 36 stand part.

Government amendment 43.

Clause 37 stand part.

New Clause 36—Automatically amalgamated pension pots—

“(1) The Secretary of State must by regulations provide for the establishment of a scheme to ensure that an individual’s pension pot is linked to the person and upon a person’s change in employment the pension pot automatically moves into the pension scheme of the new workplace.

(2) All employees in the UK will be automatically enrolled into the scheme defined in subsection (1) upon its establishment but must be given the option of opting out.

(3) Where a person opts out, they are able to nominate their qualifying scheme of choice for pensions contributions.”

This new clause allows pension pots automatically to follow members from job to job, consolidating with each new workplace scheme rather than relying on a single lifetime provider.

Pension Schemes Bill (Sixth sitting)

Debate between Torsten Bell and John Milne

Committee stage
Tuesday 9th September 2025 Public Bill Committees

[John Milne (Horsham) (LD)]

To add briefly to the comments of my hon. Friend the Member for Torbay, I emphasise that with new clause 3 we are taking a non-prescriptive approach. It says that

“the Secretary of State must have regard to the need to identify and mitigate barriers faced by new market entrants in the defined contribution pensions market.”

It is a very gentle ask. We are all very aware of the issues today, but will they still be in everybody’s mind in the future?

[Torsten Bell]

I will come back on the question about the word “product” and definitions. I reassure the Committee that I will go away and make sure that is clear if it is not clear enough already.

The core Liberal Democrat question is, are we baking innovation in? It is a good question for us all to be asking. I think the answer is yes. To broaden the conversation out slightly, we want to see innovation from existing providers as well. We anticipate that there will still be 15 or so large providers in the 2030s. That is still a highly competitive market. Not just looking at costs but also at customer service and all the rest in the value for money regime should be a spur to that innovation. That is a key part of the set of clauses we were discussing last week.

I should explicitly note that the scale tests do not cover the most obvious innovation that is likely to come in the market in the coming years, which is CDC schemes. By their nature, if they are to be successful, they will get to scale anyway, but to make their path easier and to be clear that we do see a role for CDC innovation moving forward, those are not part of these requirements. The innovation pathway exists for exactly this reason, as we have discussed.

Several Members have raised a question about consultation. I confirm that there is a requirement for a public consultation, which should certainly learn lessons that go beyond the experience of the pensions industry to the wider financial services sector—lessons of competition entry. We talked about that in the banking sector earlier, but the same thing would apply, for example, to other parts of the insurance sector and others. We will take that away. We are very conscious at the moment, in our wider approach to regulation, of providing earlier authorisation, where that can be done. I suspect we may come back to that in the superfunds discussion later this week.

Amendment 112 agreed to.

Amendments made: 113, in clause 38, page 44, leave out lines 21 and 22 and insert—

“(a) the scheme in question has strong potential to grow so as to meet the scale requirement under section 28A,

(aa) the scheme in question has an innovative product design, and”.

This amendment ensures that the eligibility conditions for new entrant pathway relief are more precisely articulated.

Amendment 114, in clause 38, page 44, line 34, leave out from “of” to “(including” in line 35 and insert “ “strong potential to grow” and “innovative product design” ”.

This amendment is consequential on Amendment 113.

Amendment 115, in clause 38, page 44, line 36, leave out from “has” to end of line 37 and insert “strong potential to grow or an innovative product design”.

This amendment is consequential on Amendment 113.

Amendment 116, in clause 38, page 45, leave out lines 1 and 2.—(Torsten Bell.)

This amendment is consequential on Amendment 129.

Pension Schemes Bill (Third sitting)

Debate between Torsten Bell and John Milne

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Torsten Bell]

That is a factually accurate description of the situation. The hon. Lady is not the first person to have raised that point with me, and I understand the wish for greater certainty about how funds will be used. My view is that looking for that certainty through legislation is wishful thinking. Funding sitting within companies is fungible. The monitoring and enforcement of those things would not be practical in any sense. I am sure that part of the discussion between trustees and firms will be about exactly the kind of points that the hon. Lady is raising, particularly for open schemes, where there is a large overlap between employees and scheme. Members will be part of the discussion, but I do not think that that is practical for legislation. I am liberal enough, although I am certainly not a Liberal Democrat, to think that that is quite hard for legislation to manage, and that it is the role of trustees and employers to work through that.

On the hon. Lady’s wider point, I offer her some reassurance that the Pensions Regulator is taking very seriously its job of providing guidance for trustees about how they think about the questions of surpluses. I think that will offer her quite a lot of reassurance, particularly about how members benefit—she has focused on how employers benefit—from release.

Amendment 25 agreed to.

Amendments made: 26, in clause 8, page 8, line 2, at end insert—

“(4A) Any power to distribute assets to the employer on a winding up is to be disregarded for the purposes of subsections (2) and (3); and a resolution under subsection (2) may not confer such a power.”.

This amendment ensures that the scope of section 36B is confined to powers to pay surplus otherwise than on the winding up of the scheme.

Amendment 27, in clause 8, page 8, line 6, at end insert—

“(5A) Regulations may provide that this section does not apply, or applies with prescribed modifications, in prescribed circumstances or to schemes of a prescribed description.”—(Torsten Bell.)

This amendment, which inserts provision corresponding to section 37(8), allows for the application of section 36B to be modified in particular cases (for example, in the case of sectionalised schemes).

Clause 8, as amended, ordered to stand part of the Bill.

Clause 9

Restrictions on exercise of power to pay surplus

[John Milne (Horsham) (LD)]

I beg to move amendment 5, in clause 9, page 8, line 18, at end insert—

“(2AA) Without prejudice to the generality of subsection (2A), regulations made under that subsection must include provision that takes into account the particular circumstances of occupational pension schemes established before the coming into force of the Pensions Act 1995 which, prior to that Act, possessed or were understood to possess a power to pay surplus to an employer.”.

This amendment would allow schemes where people are affected by pre-97 to offer discretionary indexation where funding allows, with appropriate regulatory oversight.

--- Later in debate ---

[Torsten Bell]

I absolutely would. I have been making exactly those points to anyone who will listen.

[John Milne]

I thank the Minister for his comments. Over the coming weeks, as he will be aware, we will be discussing several amendments that relate to the same issue. It will be interesting to see whether we can reach a satisfactory solution. In the meantime, we will press our amendment to a vote, because we feel that the issue has remained unresolved for such a long time that it needs everything we can give it to get it across the line, but we hope that in the next couple of weeks of debate we can find the best possible solution.

Question put, That the amendment be made.

Pension Schemes Bill (Fourth sitting)

Debate between Torsten Bell and John Milne

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Torsten Bell]

I shall give a short speech, because there is a worrying habit developing of the hon. Member for Aberdeen North giving the Government Front-Bench speech for me. I should encourage that as we go on—she might be slightly traumatised by that, but we are where we are. Everybody in this room will agree on the importance of the principle that has been highlighted, and we have just heard a powerful point exactly along those lines.

Although the Government understand the intent behind amendment 3, there are two reasons why we will not support it. The first is a point of principle, which I have already set out: it is for trustees, not the Government, to decide how surpluses that benefit members should take place. We discussed the issue of discretionary benefits just now.

The second reason is less a point of principle and more a matter of reality. The amendment would provide advice only to existing members of specific schemes. I think we all agree, particularly in the light of the point made by the hon. Member for Aberdeen North, that the main problems are about the defined-contribution space and people coming up towards retirement. Lots of the people who are in schemes who would be coming forward for surplus release are already drawing down a very well-defined pension income.

It is not the ideal way to focus on the particular problem that we all agree exists, but we completely agree that robust guidance that assures that everyone has access to free and impartial advice is very important. That is the job of the Money and Pensions Service, but I completely hear what has been said about how it needs to go further. I am grateful for hon. Members’ contributions, but I urge the hon. Member for Horsham to withdraw his amendment.

[John Milne]

I thank the Minister for his reply, and I thank hon. Members for their contributions. One thing we all absolutely agree on is the importance and centrality of this issue. If there is one area in which I feel the Bill could have gone further, it is this one.

It is a scary thing to look to the future and see all the trends in where we are heading with pension adequacy. The number of people who will have zero or a very small pension is deeply frightening, particularly when we lay alongside that the fact that many of those people will not own their own house and will still be paying private market rent. The state pension is not designed for that.

It is a crucial issue. I appreciate both the Minister’s objection in principle and the practical objections from him and the hon. Member for Aberdeen North, but we will still push the amendment to a vote. That is more to lay a marker than anything else; I appreciate that our chances of winning the vote are small. We want to lay as much emphasis on the issue as possible. Whether or not it ends up as part of the Bill, perhaps under new clause 1, we want it highlighted.

Question put, That the amendment be made.

--- Later in debate ---

[John Milne]

I rise to support what my hon. Friend the Member for Torbay said. As has been emphasised, we are not talking about making things mandatory. It is about making things possible, because there have been cases in which managers take a rather narrow view of fiduciary duty and almost deliberately exclude other considerations. It is about removing that blockage. We feel that the requirement in the amendment is of value and hope that the Minister will consider it.

It is also worth saying that very often one cannot definitively say that one investment will be better than another. There are all the projections and estimates. If it was that clear, every single fund would have the same 10 investments and that would be the end of it, and it would be a very small industry. It is often a matter of assertion, or a calculation. It is often not a case of choosing a lesser return; any return is conjectural in the first place.

[Torsten Bell]

My support for the Welsh Government’s Well-being of Future Generations (Wales) Act 2015 is on the record, so I get to disagree with the hon. Member for Aberdeen North on something, which will be a relief for everybody.

I thank the hon. Member for Torbay for tabling the amendments. Clearly, addressing climate change is absolutely central to this Government’s agenda. It needs to be done in the right way. Pension funds hold significant capital, and I am pleased to say that at every conference and every session I hold with people involved in the industry I see that investors and pension schemes do now use their influence on companies to encourage them to take responsible action. That has been a big change over the course of the last decade. It can lead to better risk management and potentially also improve returns on investments, as well as helping companies to perform better in relation to environmental targets.

My overall argument, though, is that trustees must already consider financially material risks, including ESG factors. The statement of investment principles and the implementation statement are key tools that are already in place for disclosing a scheme’s approach to ESG issues, including climate change. Ultimately, the amendment is about disclosures; that is what it aims to achieve. Additionally, large schemes with assets above £1 billion, which in future will be the majority of schemes because of the scale measures that we will come back to, must also report on climate-related risks and opportunities, in line with the Task Force on Climate-Related Financial Disclosures.

We are looking to strengthen sustainability reporting, exactly as the hon. Member for Torbay wishes to see, through new UK sustainability reporting standards and our transition plan’s commitment, which the Government consulted on this summer. Taken together, our policy initiatives will modernise the UK’s framework for corporate reporting, giving pension schemes vital information about companies’ decarbonisation plans and about whether to escalate their engagement efforts with investee companies on environmental issues. The DWP is contributing to that work and will review the effectiveness of climate reporting requirements later this year, as part of our post-implementation review of the requirements of the Taskforce on Inequality and Social-related Financial Disclosures.

Given the existing reporting requirements, the Government’s position is that we will gently resist the amendments, to avoid duplication.

--- Later in debate ---

[Torsten Bell]

To ensure consistency, comparability and transparency of the value that arrangements provide, it is essential that all arrangements undertake the same process in the same way and that there is sufficient oversight of the process by the regulator. That is why clause 17 sets out the range of ways in which the regulator may make provision for ensuring compliance with the value for money framework.

The Pensions Regulator will be able to issue compliance and penalty notices to trustees, managers and third parties in breach of their VFM obligations. These notices enable the regulator to set out the steps that must be taken to ensure compliance with the VFM requirements. Financial penalties can be imposed, to a maximum of £10,000 in the case of an individual and up to £100,000 in other cases. Those figures align with other powers we have taken in part 2. There is also provision for the withdrawal of a penalty notice and for the Pensions Regulator to challenge an incorrect VFM rating.

Clause 18 makes it clear that the provisions in this chapter apply equally to pension schemes run by or on behalf of the Crown and to Crown employees. This is the standard approach in legislation to ensure that Crown-operated schemes are covered by the same rules, unless explicitly excluded. Clause 19 is the interpretation clause, which sets out the meaning of the terms used in the VFM clauses 10 to 17. I commend these clauses to the Committee.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill. 

Clause 18 ordered to stand part of the Bill.

Clause 19

Interpretation of Chapter

Amendment made: 35, in clause 19, page 20, leave out lines 13 and 14.—(Torsten Bell.)

This amendment is consequential on Amendment 28.

Clause 19, as amended, ordered to stand part of the Bill.

Clause 20

Small pots regulations

[John Milne]

I beg to move amendment 262, in clause 20, page 21, line 12, leave out “£1,000” and insert “£2,000”.

This amendment changes the value of small pot consolidation from £1,000 to £2,000.

The purpose of this amendment is to accelerate the consolidation of small, dormant pension pots and to enable more pots to be included. In other words, the amendment would support the Government’s intention to simplify retirement savings by reducing the number of scattered small pots and helping members to keep track of their savings and to avoid losing their pensions altogether. It would serve to improve the efficiency of providers, which in turn could reduce costs for savers.

--- Later in debate ---

[Torsten Bell]

That is for all regulations except for the setting of the threshold number.

[John Milne]

I thank the Minister for his response—

[Torsten Bell]

To being probed.

[John Milne]

Yes, it sounds rather unpleasant. We will think more about this subject, and I am sure we will discuss further, but I thank him for the clarification. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Mark Garnier]

I beg to move amendment 259, clause 20, page 21, line 23, leave out from “procedure” to end of line 29

This amendment would make all regulations on consolidation of small dormant pots in DC schemes to the affirmative procedure all times they were made rather than just after first use.

The hon. Member for Aberdeen North asked an interesting question about the application of the affirmative procedure to regulations on the pot size. Our amendment seeks to address the use of the affirmative procedure in the wider legislation that goes with this.

As we continue to table amendments urging extra parliamentary scrutiny, I feel myself becoming slightly depressed at the prospect of having to see too much of the Minister, even though he is undoubtedly a lovely chap, in Delegated Legislation Committees as we consider every single change. It is important though, because at the end of the day Parliament needs to scrutinise what is going on, so it is a good thing that the size of the pot is subject to the affirmative procedure.

It is okay, but not ideal that for anything that could be to do with the wider legislation, the negative procedure applies. Members having to look for a very material change going through in a written ministerial statement or whatever and then raise it is not necessarily such a good thing, given that this is fixing 13 million of these pots. That is an awful lot of them. If we increased the threshold to £2,000, would that number be 26 million? A lot of people that could be affected by this.

This was largely a probing amendment to see what the Minister has to say. We are unlikely to divide the Committee on it. None the less, I am very interested to hear what the Minister has to say about the affirmative procedure.

Pension Schemes Bill (First sitting)

Debate between Torsten Bell and John Milne

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Torsten Bell]

The question to the witness is to expand a bit more on that point. In reality, this provides a “comply or explain” power. In terms of the point Charlotte was just making there, it is absolutely right about the ability of the trustees to say, “This is not in the interest of our members.” It might be worth talking a bit about how when we move forward the consultation will allow us to set out how that would work in practice.

Charlotte Clark: It is an area that we would need to work through in terms of the road map. At the moment, our focus is very much on getting the value for money framework right. How the mandation would work and the process around it—as the Minister says, first, we would consult on it. We would have to have a look to see what information was given and how we would monitor it in the period from now to 2030 or 2035. We would have to work through all of those aspects of the process. We would do that in conjunction with the industry, making sure that what we were asking for was information that it could readily provide and that we felt confident that we could make a good assessment around.

Patrick Coyne: Our engagement with the marketplace so far already shows that many are considering investment strategies that have significant proportions of diversified investments, so the market is already responding based on some of the Mansion House accord commitments.

[John Milne]

Q Do you think that the finance industry has a clear understanding of how to apply its fiduciary duty? Do you think the Bill makes that clearer or muddies the waters, or somewhere in between?

Patrick Coyne: I think that fiduciary duty is a powerful force for good. Across the Bill, this is about giving those trustees the tools for the job. I think there are a number of areas where that is true. Within the value for money framework, at the moment, it is very difficult for employers or schemes to effectively compare performance. As an anecdote, I was speaking to a provider recently. They were pitching for new business. They came in and pitched their investment data, and the employer said, “You’re the third provider today that has shown us they are the top-performing provider.” That cannot be right.

Then, when you are looking across the Bill towards the DB space, because of the funding reality that many schemes are facing at the moment, there is choice in end game options—so, “How do I enhance member outcomes at the same time as securing benefits?” Actually providing a statutory framework for super-funds as another option is a good first step, as is allowing the release of surplus, if it is in the members’ best interests to do so.

Pension Schemes Bill (Second sitting)

Debate between Torsten Bell and John Milne

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Torsten Bell]

I was encouraging you to say that; you got there.

Helen Forrest Hall: Apologies; we are very, very supportive of the vast majority. This is basically the one substantive issue from our perspective. As Sophia has said, the value for money and consolidation elements in particular are incredibly helpful in removing some of the barriers that have existed, including for trustees. They technically have the ability to operate within their fiduciary duty, but sometimes the legislation and the structure of the industry get in their way. Things such as value for money and scale will really help with that. This Bill is incredibly enabling in the vast majority of its provisions. There are just a small number—mandation being one of them—where we have a bit of concern.

[John Milne]

Q Pension scheme funding ladders can go up, and they largely have done in recent years, but also they can go down. Do you think that the proposals and the framework in this Bill for surplus extraction have the right balance of risk versus actually achieving the objective?

Helen Forrest Hall: From a principles basis, yes, and just to address the funding point, they absolutely can. I know there will be a number of us in the room who have either experienced or been subject to the outcomes of what has happened when those significant events have taken place. In the context of where we are with DB now, a significant proportion of schemes are employing investment strategies that really do protect them against the kind of volatile market movements you might see.

The provisions in the Bill strike the right balance between, as I said earlier, giving trustees greater flexibility to exercise their fiduciary duty in discussion with employers, while also ensuring that they are considering the best interests of the members. One of the key considerations for trustees in that conversation is: how confident are we that our investment strategy would withstand significant market movements at the point when we might release a surplus? That is a key consideration.

We have seen that a number of pension schemes did not benefit from September 2022 in the way that others did, and that was because they had decided to protect themselves against that kind of market movement. There are things that schemes can deploy to give themselves that level of confidence.

Sophia Singleton: We were very pleased to see the stringent funding safeguards that are in the Bill in order to allow a surplus to be released. One thing I would say is that, as Helen says, it is giving the trustees the tools to properly exercise their discretionary power and, in a sense, fiduciary duty, but it has created an opportunity for trustees to negotiate and agree a win-win situation, in a sense. The conversations we are having with schemes is that they are now more likely to be able to feel comfortable in paying, and be able to pay out, discretionary benefits than they would have been before the Bill was in place. It gives schemes the opportunity to run on and for the employer to access the service, but also for members to have more access to discretionary benefits and to additional benefits.

--- Later in debate ---

[Torsten Bell]

Q We all have work to do; it is never all over. Chris, this question is mainly for you, as I am conscious that you have done lots of work over an extended period on the dashboard. Obviously, there are elements of the Bill that relate to that—mainly relating to the PPF—but not many. However, is there anything you want to tell the Committee about the lessons from it for when we come to the small pots work, which obviously is a central part of the Bill?

Chris Curry: I listened with interest to some of the earlier witnesses talk about dashboards, and there certainly are some lessons that we can learn from the pensions dashboards programme, as it has been evolving over the past few years, for small pots in particular.

There are two issues that I would pull out. The first is on the technology front. I think someone suggested that the next five years or so could be quite a tight timetable to build a technological solution and get it in place. You have to be very careful—you cannot underestimate just how much complexity there is and how long it takes to do these things—but I would say that the work that we have done on pensions dashboards is giving us a bit of a head start. That is not to say that we necessarily need to build on or use parts of the system that we have already built, but it has helped us understand a lot about, for example, how you can find pensions—the way you can use integrated service providers rather than having to go direct to all the schemes, and use a syndicated model to find where people might have their pensions.

It has helped the industry get a long way down the path to where it needs to be, as well. One of the big challenges for pensions dashboards is the quality of data. Enabling individuals to find their pensions means data quality: it needs not only to exist and be there; it needs to be accurate and it needs to be up to date. When you are thinking about an automatic consolidator or default consolidator for small pots, that is even more important. You are not just transferring information, but transferring money, so it is really important that the data is high quality. The work that is being done on pensions dashboards will get people in the industry a long way to having part of that in place as well.

There are definitely lessons that can be learned from how we progressed on the pensions dashboards programme. It has got us much closer to where we would be if we had had a completely blank page to start from, but there is still a reasonable amount of work to do, because it is working in a slightly different way.

[John Milne]

Q The Bill makes the notion of using pension money for macroeconomic benefit—investment in the UK—an explicit objective. Other countries seem to have done this already. Did they do so explicitly and deliberately, or was it just an accidental outcome of good investment decisions? Did it take a conscious effort to make it happen?

William Wright: I think it is a mix of both. It very much depends on what sort of assets we are talking about. For example, if we are thinking about the UK stock market or domestic equity markets, we tend to see that markets such as Canada and the Netherlands have an even lower allocation to domestic equities, whichever way you look at it, than comparable UK pensions have to the UK market.

Ultimately, this comes down to what you might call the accidental design of the UK system. It has evolved over 20, 30 or 40 years, whereas the systems with which we like to compare the UK system, or large parts of them, were actively designed anything from 30 or 40 to 50 or 60 years ago. We are now seeing the benefits of that active design in those systems. Their focus on scale enables them to invest in a far broader range of assets at a lower unit cost.

Going back to the value for money point, UK pensions have ended up in the worst of both worlds. Fee pressure, particularly in terms of winning and transferring new business between providers, is driving down fees, but the average fees on DC pensions today are very middle of the pack: 45 to 50 basis points a year. That is much higher than much larger schemes in Canada, such as the Canada Pension Plan Investment Board, the big Canadian reserve fund, and much higher than large UK schemes, such as the universities superannuation scheme, but they are stuck in the middle: they are actually paying higher fees, but because of the fee pressure they have a very vanilla, almost simple asset allocation. As Tim Fassam from Phoenix pointed out, that tends to steer people towards the lowest cost investment option. Active design, focusing on scale and sophistication, enables pension schemes to take a much longer term and much broader view of what they should invest in and where they should invest in it, whereas in the UK we have tended to accidentally move from one system to another.

Oral Answers to Questions

Debate between Torsten Bell and John Milne

Monday 12th May 2025 Commons Chamber

[Torsten Bell]

My hon. Friend raises an important point. Although we celebrate the success of auto-enrolment, as the hon. Member for Mid Bedfordshire (Blake Stephenson) has just done, we must complete the job. We need bigger and better pension funds that are better able to deliver returns for their members, support our economy and invest in infrastructure and private assets in the months and years ahead.

[John Milne (Horsham) (LD)]

10. What estimate her Department has made of the potential impact of changes to the eligibility criteria for personal independence payment on the number of people receiving that payment who will move into employment.