Pension Schemes Bill (Third sitting)

Debate between Torsten Bell and Mark Garnier

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Torsten Bell]

Before I turn to the amendments, I should briefly outline the reform of the local government pension scheme, for which chapter 1 provides the legislative underpinning. The LGPS is the largest pension scheme in the UK, with £400 billion of assets under management, projected to rise to almost £1 trillion by 2040. However, I think it is a matter of cross-party consensus that the LGPS has not realised its full potential, not least because it is too fragmented.

The first chapter of the Bill sets out the legislative basis for reform to modernise the LGPS’s investment framework and governance arrangements, setting robust new standards that all pools must meet, including Financial Conduct Authority authorisation, the capacity and expertise to manage 100% of their partner authorities’ assets, and the ability to deliver on local investment mandates. As part of the reforms, the LGPS will move from eight pools to six. We have set a deadline for the new pool partnerships to be agreed in principle by the end of this month, with new shareholder arrangements in place by March 2026.

The clauses in chapter 1 would mean that by this time next year we will see a world-class LGPS, made up of large pools of professionally managed capital, held to account by authorities who have confidence in robust and transparent governance structures, and who together are delivering the best value for members. I remind the Committee that LGPS members’ benefits are guaranteed in statute, and nothing that we discuss today will affect any of those benefits.

These amendments will extend the LGPS provisions to Scotland. There is a wide range of amendments, but they all have the same objective: to take the matters relating to England and Wales and ensure that those are provided for in the case of Scotland. The Government are making this provision following a formal request from the Scottish Government, and I have written again to the Scottish Government this morning for the legislative consent motion that they will need to put in train to go alongside it. Amendments will be needed in respect of clauses 1, 2, 4 and 7 to give effect to that objective, and that is what the Government amendments in this group do. I commend them to the Committee.

[Mark Garnier (Wyre Forest) (Con)]

It is great to be starting what I hope will be quite a quick canter through today’s work, Sir Christopher. The Opposition welcome the broad grain of this entire Bill; it seeks to do a lot of very useful things in the pension industry across the UK. We have some contentious points, but those will not come up today.

Regarding clause 1, we welcome the creation of asset pool companies. These are sensible and pragmatic steps towards modernising the local government pension scheme, and much of the work had already been done under the previous Government. Consolidating funds represents a responsible approach that should deliver more effective management and investment of pension assets. The LGPS, as we have heard, is among the largest pension schemes in the UK, with 6.7 million members and £391 billion of capital. Before pooling, of course, it was 86 separate local authorities, which caused huge inefficiency, inequality of opportunities and, in some cases, poorer outcomes for pension beneficiaries.

I should mention at this point, Sir Christopher, that I am a member of the LGPS and also that, as a councillor on Forest of Dean district council, I was responsible for looking after some of this activity in terms of pension management. It was not an efficient way of doing things, so pooling is an incredibly good idea. We welcome the Government’s continuing our work to make these pension funds work more efficiently and deliver better returns for members, and ultimately we all want to see improved returns and lower employer contributions. Small funds, whether in local government or elsewhere, are rarely fit for purpose in the global investment environment.

We have some concerns. The broad framing of the powers contained in chapter 1, clause 1 could allow for the mandation of certain investments by Government. Pools should be investing in line with the investment approach set out by their underlying asset owners in order to deliver against the fiduciary duties of LGPS funds. Governments should not take powers that would erode fiduciary duty.

There are concerns about the costs of the Government’s decision to reduce the number of asset pools from eight to six. This is an administrative cost. We have heard from one council, Wiltshire, which is one of 21 LGPS funds in England now looking for a new pooling partner. Jennifer Devine, head of the Wiltshire pension fund, has said that the cost of closing its asset pool could come to as much as £100 million. There will be some costs incurred, but, none the less, the general thrust of the whole process is one that we support and we certainly would not stand in the way of these amendments.

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[Torsten Bell]

We turn now to three technical amendments concerning the powers to direct asset pools, which I mentioned in my previous speech.

Amendment 9 ensures that a pool must comply with the use of the power to direct administering authorities to join a particular asset pool, matching powers brought forward in clause 1 of the Pensions Bill. These are powers of last resort. Amendment 13 responds to feedback and removes the power to issue directions to asset pool companies relating to specific investment management decisions. It was never the Government’s intention to intervene in those decisions by pools, so we are removing that sub-paragraph to provide clarity. Amendment 14 adds a duty for Ministers to consult the affected parties before issuing directions more generally. I commend the amendments to the Committee.

[Mark Garnier]

In the interest of speed, I will not speak to these amendments, other than to say that we have no objection to them.

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[Torsten Bell]

I beg to move amendment 15, in clause 1, page 2, line 34, leave out from “company” to end of line 40 and insert

“limited by shares and registered in the United Kingdom which is established for purposes consisting of or including—

(i) managing funds or other assets for which its participating scheme managers are responsible, and

(ii) making and managing investments on behalf of those scheme managers (whether directly or through one or more collective investment vehicles),

and whose shareholders consist only of scheme managers, and”.

The amendment revises the definition of asset pool company to clarify (a) that the company should be limited by shares held by scheme managers only and registered in any part of the UK and (b) that the mandatory main purposes described in sub-paragraphs (i) and (ii) need not be the only purposes of the company.

The amendment revises the definition of an asset pool company to clarify that they can be established anywhere in the UK and that only LGPS administering authorities can be shareholders of those pools. The amendment also removes limits on the purposes of an asset pool company, making it clear that asset pool companies are free to provide advisory services and perform other functions in addition to their primary purpose of providing management services. The Government do not want to stifle innovation from asset pool companies as they continue to evolve from strength to strength. The amendment makes sure that that is not the case. I commend the amendment to the Committee.

[Mark Garnier]

I have just one question for the Minister. How are the shareholdings to be decided? Will they be determined based on the size of the investment, and how will the Government decide between councils having shareholders or contracting with asset pool companies? That is my only comment.

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[Torsten Bell]

It is for those forming the pooling companies to agree their own arrangements. The hon. Member rightly raises the question whether people are shareholders or clients of a pool. There is only one current administering authority that is a client rather than a shareholder of a pool, so in the overwhelming majority of circumstances we are talking about shareholders. However, the legislative basis for the pooling allows for that in future, if for some reason that was the way forward that some administering authorities and pools chose. Broadly, the same picture applies to most questions in this space: we expect administering authorities and pools to work together to agree their governance arrangements, and that is what they are doing.

Amendment 15 agreed to.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2

Asset management

Amendments made: 16, in clause 2, page 3, line 5, leave out “for England and Wales”.

The amendment would secure that Clause 2 applies to scheme regulations relating to pension scheme for local government workers for Scotland, as well as scheme regulations relating to a scheme for local government workers in England and Wales. Clause 1 does not extend to Northern Ireland (see Clause 100).

Amendment 17, in clause 2, page 3, line 23, at beginning insert

“in the case of a scheme for local government workers for England and Wales,”.—(Torsten Bell.)

The amendment would secure that, despite the general extension of the scope of application of Clause 2 to Scotland (see Amendment 16), subsection (2)(c) will remain of relevance only to scheme regulations relating to England and Wales.

[Mark Garnier]

I beg to move amendment 246, in clause 2, page 3, line 33, at end insert—

“(4A) Scheme managers must publish a report annually on the local investments within their asset pool company.

(4B) A report published under section (4A) must include—

(a) the extent, and

(b) financial performance,

of these investments.”

This amendment provides for scheme managers to report back on the financial performance of any local investments that they might make.

Clause 2 places important requirements on pension scheme managers regarding how they manage pension funds for local government workers, requiring formulation, publication and review of investment strategies. The Bill encourages investment through asset pool companies and emphasises local investments. However, the Opposition’s key concern is that the primary purpose must remain the delivery of strong financial returns for pension funds. Those returns ultimately belong to the pension fund members, but council tax payers also have a responsibility, as they support these schemes. Investment decisions must prioritise financial performance that ensures sustainable pensions while safeguarding public funds.

Although we acknowledge that local investments can bring benefits to local communities and local economies, they should only be a secondary focus and should not compromise returns. Local investment should be considered as an additional benefit, but the overriding duty of scheme managers is to act prudently and in the best financial interests of the scheme members and taxpayers. We caution against overweighing local investment priorities if that risks undermining the long-term financial health of these pension funds. In short, financial returns must come first; local investments can follow, but must not take precedence.

Pensions UK has questioned the need for these new powers and believes that they are too far-reaching. LGPS reform is already progressing at pace, and pools and funds are collaborating in line with the direction set by the Government. Pensions UK would like to understand what specific risks the Government are seeking to manage through the introduction of these powers, and it is seeking amendments to the Bill to ensure that if these powers remain in the Bill, they will only be exercised after other avenues have been exhausted, to guard against adverse outcomes for the pools, funds and scheme members.

The Pensions Management Institute has highlighted that the administering authorities will be required to take their principal advice on their investment strategies from the pool. Given that an administering authority is required to invest all of its assets via the pool, this is a major conflict of interest and puts a significant burden on the administering authority or scheme manager to ensure that the pool is performing effectively, with no independent checks and balances.

The Bill makes it clear that co-operation with strategic authorities, such as regional combined authorities, on appropriate investments will be required. However, there is a risk of investment decisions being influenced by political and local interests. The fiduciary duty should always prevail when local investments are considered. We do not oppose the clause, but we call on scheme managers to maintain discipline in prioritising sustainable returns, with local investments as a welcome but secondary consideration.

We are considering three amendments with this clause. There is uncertainty about what qualifies as a local investment for LGPS funds, how such investments are defined and what assets or projects will meet the requirements under the new rules. In addition, we do not want to shift the focus away from the fiduciary duty of trustees to local investments that might not deliver the best-value returns on schemes. Amendment 246 provides for scheme managers to report back clearly on the financial performance of any local investments that they might make. Scheme managers at local councils should charge the asset pool companies with finding the best value.

Although we are not opposed to local investment, the focus of trustees must clearly remain on achieving best value, and the better performance of a pension fund means that local councils can already use their powers under regulations 64 and 64A of the Local Government Pension Scheme Regulations 2013. Consequently, we can argue that LGPS megafunds with a focus on best returns can lead to more a fully funded council and therefore to employer contribution holidays.

Sir Christopher, would it be helpful for me to speak to the other amendments?

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[Torsten Bell]

I will try to confine my remarks to the amendment and the points made about it; I am not going to encourage us to focus on the grouping provided. I thank the hon. Member for Wyre Forest for the amendment. I agree with him on many points he made, including that the LGPS is a success story for local investment, with authorities and pools already playing a major role in their communities. We are committed to ensuring that continues, but we also need to ensure it is done in the right way, delivering the right returns for each scheme.

As I said, every LGPS authority will be required to set out its approach to local investment in its investment strategy, providing some of the transparency that the hon. Member for Aberdeen North just set out, including their target allocation. They will need to have regard to existing local plans and priorities. I want to offer the hon. Member for Wyre Forest some reassurance—this goes directly to the point made by the hon. Member for Aberdeen North—that via regulations and guidance, we will already require each pool to report annually on local investments made on behalf of their authorities. The intention of the amendment will be delivered via those regulations and that guidance. On that basis, I am glad that he intends to withdraw his amendment, but I recognise his point.

On the wider question of pool advice, and whether there is a risk of pressure from strategic authorities to make investment decisions that are not consistent with their fiduciary duty, the hon. Member for Wyre Forest should see these reforms as supporting in that respect. Remember that these pools will now all be FCA-authorised. There are significantly improved governance arrangements. If anything, this should provide certainty. It should already not be the case legally, anyway, but the stronger governance arrangements will support that.

The hon. Member for Torbay rightly asked about how administering authorities and pools will think about the balance, weighing the impact on their local economy. As he will be aware, the fiduciary duties are clear about what the objective is, and the Bill is clear on the respective roles, both of the administering authorities in setting their strategic asset allocation, including to local investments, and of the pools in making those decisions, taking into account the available returns. I think that provides much of the balance that he rightly pointed out is an inevitable issue within this. I should also be clear that the LGPS will invest not just across the whole of the UK—rather than just in individual areas—as the hon. Member for Torbay talked about, but also around the world. That is what the LGPS does today and will continue to do.

[Mark Garnier]

I am reassured by the Minister’s comments. I beg to ask to leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Torsten Bell]

I will give a very short speech because the hon. Member for Aberdeen North has just made every single point that I was going to make. I understand the motivation behind the amendment, but we do not support it because it would prevent investments that straddle boundaries—for example, investments in transport and infrastructure that would benefit people living in both Wales and neighbouring English counties. We have heard other examples as well. It would be wrong to limit authorities in where they could invest in this way. I ask the hon. Member for Wyre Forest to withdraw the amendment as it unnecessarily limits the remit of local investment.

[Mark Garnier]

I thank the Minister and wish him many happy returns. I hope that he has a happy birthday. We are satisfied with the Minister’s comments. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[The Chair]

With this it will be convenient to discuss new clause 31— Guidance on utilising surpluses—

“(1) The Secretary of State must publish guidance on the utilisation of surpluses within the Local Government Pension Scheme.

(2) Guidance must include—

(a) information about maintaining scheme members’ financial security;

(b) how the surplus can best support local fiscal needs.”.

This new clause requires Secretary of State to publish guidance on how surpluses can be deployed to balance member security with local fiscal needs.

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[Torsten Bell]

That is the only way that I have seen taken up by local authorities, and it is the main one that local authorities are discussing, although, as I have said, that is a decision for them. I hope that at least partially answers the hon. Lady’s question. I commend clause 2 to the Committee, and ask the hon. Member for Wyre Forest to withdraw his new clause.

[Mark Garnier]

On new clause 31, as we have heard, the local government pension scheme in England and Wales has reached a record surplus of some £45 billion, which is 112% of funding levels, as of June 2024, with some estimating that it will rise to more than 125% by the end of 2025. Despite that strong funding position, no measures have been introduced to make it easier to allow councils or employers to reduce contributions or take contribution holidays. The surplus could be used to create contribution holidays for local authorities, as we have heard, or potentially to reduce council tax or increase the money available for spending on local services.

The current Government focus remains on asset pooling and local investment strategies, rather than enabling the more immediate and flexible use of surplus funds. Councils can already reduce employer contributions under regulations 64 and 64A of the Local Government Pension Scheme Regulations 2013. The problem is that, in practice, actuaries and administering authorities hold the cards, and the guidance has been used to shut down reviews even when funding levels are strong.

The Minister needs to consider issuing better guidance to councils to make the process more transparent, to rebalance the power between councils and funds, and to ensure that actuaries properly consider reductions when the funding position justifies it. The mechanisms that are currently in place mean that the assumptions are overly prudent, reviews come only in cycles, and councils have no leverage in disputes.

New clause 31 seeks to introduce provisions to allow employers within the local government pension scheme to take contribution holidays or reduce employer contributions when surplus funding is confirmed, with actuarial valuations, subject to maintaining the security of member benefits. It would also require the Secretary of State to issue guidance on how surpluses could be prudently deployed to balance member security with local fiscal needs. That would enable councils to better manage budgets, support local services and stimulate local economies without compromising pension schemes.

However, the Minister seems to be working with the Opposition on trying to find ways to move all this forward, so for the sake of brevity we will seek to withdraw new clause 31.

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[Torsten Bell]

I am happy to give that commitment. I am not aware of any administering authorities in Scotland that would be affected, but I am happy to take that point away.

Question put and agreed to.

Clause 4, as amended, accordingly ordered to stand part of the Bill.

Clause 5

Mergers of funds

[Mark Garnier]

I beg to move amendment 244, in clause 5, page 6, line 6, at end insert—

“(2) In the case of merger of schemes for local government workers, the Secretary of State must consider the geography of scheme areas and ensure these areas align with strategic authority boundaries before implementing the merger.”

This amendment requires the Government to explicitly consider the geography of new LGPS areas in any reorganisation.

The amendment would amend the Public Service Pensions Act 2013 to explicitly empower the Secretary of State to make regulations if there was a merger, including a compulsory merger, of two or more LGPS-funded schemes. The change in clause 5 would support flexibility for structural consolidation to enhance fund management and efficiencies; however, there is uncertainty about how the Government will confirm geographical boundaries for the local government pension scheme asset pools amid local government reorganisation.

Currently, LGPS reform aims to consolidate assets and strengthen local investment, but concerns remain about the implementation timescales and risks of disruption. Stakeholders highlight the need for clarity on new geographical boundary definitions and on alignment with new or existing local authority boundaries. Potential challenges exist in meeting asset-pooling and Government deadlines if changes coincide with wider local government changes.

Amendment 244 would require the Secretary of State to explicitly consider, for any LGPS scheme merger, the geography of scheme areas, and ensure alignment with strategic authority boundaries. This would help to provide clarity, promote smoother transitions and reduce disruption from concurrent local government reorganisations. The amendment emphasises the importance of integrating pension scheme boundaries with local government structures to support effective government and investment strategies. We hope the Government will reflect on this issue as the Bill progresses through the House.

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[Torsten Bell]

I thank the hon. Member for Wyre Forest for the amendment and for the points he raised. Amendment 244 would amend clause 5 to allow fund mergers only if the two funds are in the same strategic authority, so it would be a highly constraining power. I recognise the logic, but our view is that it is far too constraining.

I emphasise to Members that the Government do not have any plans to require the mergers of LGPS funds, and that our strong preference is that when mergers take place, that happens by agreement between the administering authorities. The Government would use the power to require a merger of pension funds only as a last resort, if local decision making failed to deliver satisfactory arrangements.

I reassure Members that during the reform process Ministers and officials have looked carefully at how local government reorganisation, which is ongoing and very important, as the hon. Member for Wyre Forest rightly pointed out, maps on to the existing LGPS geography, and we will continue to do so. There should not be any friction between the emerging unitary structures and the LGPS. I reassure the Opposition that the administering authorities that were in the Brunel and Access pools are already carefully considering their choice of a new pool in the light of local government reorganisation.

In summary, it is important that local government pension funds and Ministers retain flexibility in their decision making so that decisions can be taken in the best interests of the relevant scheme. I ask the hon. Member to withdraw amendment 244.

[Mark Garnier]

I am reassured by the Minister’s comments and appreciate that he wishes to make the measure work in the interests, geographically, of local government or local authorities as they undergo a transition through the reorganisation of local authorities. Obviously, this provision needs to work concurrently with that process, but I appreciate that it is up to the authorities in the first instance. We wanted to be reassured, and the Minister has made the point that there will be no or little Government interference unless they really do disagree with themselves. I am reassured.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

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[Torsten Bell]

Thank you, Sir Christopher, for the progress through the local government pension schemes part of the Bill. We now move on to the defined-benefit clauses. Clause 8, which amends the Pensions Act 1995, enables trustees of private sector defined-benefit schemes to modify their schemes to safely share surplus funds with the sponsoring employer. Through that change, trustees will also be better placed to negotiate with sponsoring employers to get additional benefits from surplus for scheme members.

I know that Members here—that is, hon. Members rather than scheme members—are keen to ensure that the security of pensions is not impacted by these changes. We have consulted on this point and several restrictions are in place that are outlined in clause 9. I will outline the core protections.

First, trustees will remain in the driver’s seat, deciding whether to modify scheme rules to allow surplus release from their individual schemes in line with their duty to the interests of the beneficiaries. Secondly, a prudent funding threshold for surplus release will be set out in regulations, on which we will consult. Surplus will be released only where a scheme is fully funded at a low dependency, which means that the scheme funding is sufficiently high to allow trustees to meet future liabilities with a very low risk of future employer contributions. Thirdly, trustees must obtain actuarial certification to demonstrate that the scheme meets these funding requirements and members must be notified before surplus funds are released.

The amendments clarify two points. First, the treatment of particular cases, such as sectionalised schemes—schemes that have multiple parts to them—is usually set out in regulations. Amendment 27 enables regulations to specify how the new powers to modify by resolution will apply in such cases—for example, to ensure that each section in a sectionalised scheme is treated as a scheme in its own right for the purposes of this power specifically.

Secondly, the power in the clause is not intended to affect schemes in wind up where the majority of schemes will have existing rules about how surplus should be distributed at the point of wind up. The amendment clarifies that when trustees consider the exercise of the power to modify, any separate power to repay surplus on winding up is disregarded. Equally, the new power in clause 8 cannot be used to introduce a power or to modify an existing power to release surplus on winding up.

[Mark Garnier]

I thank the Minister for his comments. We agree that the law needs to be updated to reflect current circumstances, and it makes sense to ensure that companies that have not made pre-2016 resolutions are not unfairly penalised. We broadly support the update to the law because it corrects an important imbalance. However, it is crucial, as we move forward, that we maintain the necessary guardrails and uphold the independence of trustees to protect scheme members’ interests. These important aspects will be further discussed in relation to clause 9.

I will raise a couple of points made by people we have been engaging with while looking at the Bill. First, the Pensions Management Institute highlighted its disappointment that the Government did not take the opportunity of this legislation, which broadly talks about defined-benefit funds, to make it easier and more tax efficient for employers and schemes to use scheme surpluses to fund contributions under defined-contribution arrangements, including those not held in the same trust. That would have opened up possibilities for many entities that have long since moved their ongoing DC provisions to a master trust or contract-based arrangement.

The Phoenix Group also highlighted an issue. To protect funding levels after surplus release, schemes may adopt more cautious investment strategies, reducing allocations to private and productive assets. That could undermine the Government’s growth objectives. Aside from those points, we are happy with the clause.

Pension Schemes Bill (Fourth sitting)

Debate between Torsten Bell and Mark Garnier

Committee stage
Thursday 4th September 2025 Public Bill Committees

[Mark Garnier]

As we have heard, the amendment authorises the use of surplus pension funds to contribute to the provision of free, impartial pension advice and guidance services to scheme members. The age of 40 is very important, and I hope that the Minister, on his 42nd birthday—

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

Forty-third.

[Mark Garnier]

Forty-third! He looks 28. None the less, I hope he is getting plenty of pension advice; who knows when he may need it?

This is a very good provision. The more informed people are about their retirement opportunities, the better. I suppose I have to declare a bit of an interest, inasmuch as I will retire in five years’ time, hopefully. It is incredibly important that people are well prepared for their retirement, and the more information a member of a pension fund has, the better it is. If the amendment is pressed to a vote, we will support it wholeheartedly.

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[Mark Garnier]

That is a very good question. Ultimately it means, “What is the performance of the fund?” Members’ best interests can include a lot of different things, but ultimately we need to see the fund grow with the best performance it possibly can, given all things brought together. When members start to receive their pensions, they will therefore get the best terms they possibly can.

We run the risk of trying to look at the wrong definition. For example, there has been an argument recently about the local government pension scheme—this came up earlier this week—with the Reform party talking about the fact that the scheme is charging 50 basis points. The argument is that reducing it to 10 basis points would save money. However, as I was discussing with a Government Back Bencher the other day, one of the problems is that if fees are too low, that reduces the ability of the managers to assess more complicated financial opportunities. If fees are kept at 50 basis points, the capacity to start analysing unlisted investments is retained. If fees are reduced to 10 basis points, the ability and skill of the managers to look into more than investing in other people’s funds or into simple listed equities is reduced. If we start to look at it as a cost-based issue only, we miss out the fact that we get quite a lot of extra expertise if slightly higher management fees are paid.

The Australian framework incorporates additional core metrics including service quality, investment performance and outcomes. There is a concern that the UK value for money framework overemphasises costs and risks discouraging investment in asset classes, as I discussed, that historically produced higher returns but that might have higher shorter-term fees or complexities. This narrow focus could also dampen innovation in pension scheme design and reduce member engagement, ultimately harming long-term retirement outcomes for scheme members. It may be valuable to learn from the Australian approach by developing a value for money framework that balances cost transparency with metrics that encourage good investment strategies and quality services, aligning regulators’ and trustees’ incentives with members’ long-term financial interests.

Our amendment tries to broaden the definition of value for money using the Australian model as a template. It would require the assessment of net benefit outcome, investment performance, quality of service and long-term member outcomes, not just cost. It would introduce a requirement for schemes to report and benchmark across these holistic measures, thereby enabling a more balanced and meaningful comparison of value.

[Torsten Bell]

I think there is more agreement than the hon. Member for Wyre Forest set out, because we all agree that we want to focus not just on cost and charges. I remind everybody that we were discussing the local government pension scheme this morning—

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[Torsten Bell]

Thank you, Sir Christopher. A central part of assessing whether a pension scheme or arrangement is providing value to the saver is how it performs in terms of investment, the quality of the service provided and costs. Having standardised performance metrics and a consistent measure of value will allow for easy and better comparisons across arrangements, which in turn will drive schemes to address poor value.

That is why clause 11 provides the powers necessary to ensure that schemes disclose value for money data on areas such as investment performance, including the types of assets being invested in, the quality of the service provided and charges on members. This information will have to be submitted within specified timescales. It is crucial that the metric data is open to public scrutiny, so clause 11 provides powers to require that the metrics are published and available on an electronic database. To ensure standardisation, regulations may also require the Pensions Regulator to set out the format that information should be submitted in. The powers taken in this clause will enable the creation of consistent, transparent and comparable VFM data to allow us to better understand which schemes are providing best possible value.

I turn to new clause 11, which will be inserted into chapter 1 of part 2. It provides clarity on the use of the electronic database mentioned at clause 11. Where the Financial Conduct Authority has made rules for contract-based schemes that correspond to VFM regulations, it will be permitted to use the electronic database. The new clause therefore facilitates the work of the FCA by facilitating schemes to provide that data to the electronic database. It provides for regulations to permit the use of the electronic database for the publication or sharing of information relating to contract-based schemes. The regulations will be subject to the negative procedure.

The context is that we have been clear from the outset that, for the value for money framework to work effectively, it must apply consistently across both trust-based and contract-based sides of the market. The new clause enables that to happen. It is purely technical in nature and will ensure that value for money data is treated consistently across both those two parts of the market. It does not alter the policy. I commend it to the Committee.

I turn to Government amendment 29, which introduces a change to chapter 1 of part 2. The amendment ensures that information on the database can be made available to, for example, the Secretary of State for Work and Pensions for the purpose of internal review. A large amount of high-quality data is being collected via that process, and it will be able to be made available to the Secretary of State or others, as well as being used for its main purpose under the Bill, which is obviously publication. The amendment is of a minor and technical nature and does not alter the policy. I commend clause 11 and the amendment to the Committee.

[Mark Garnier]

This seems like a very technical clause, and we certainly have no objections to it. I also have no doubt that we will not be voting against the Government amendment. I think we are very happy with it.

[Kirsty Blackman]

I have a similar question to the one I had earlier. We need to ensure that those responsible for generating the data are kept in the loop and that they have enough of a timeline to create the correct data. The Government must listen if they say, “We’re very sorry, but we can’t this bit of data in the way that the Government want.” I seek reassurance from the Government that this would be a conversation, so that the Government get the data they want, but that an unreasonable burden will not be placed on the trustees or managers who have to provide that data. That conversation needs to continue as time goes on.

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[Torsten Bell]

To ensure effective comparability across arrangements, it is necessary to have a clear and standardised assessment of how value is determined. Clause 12 will enable those undertaking the assessment to be clear about the method that they should follow and the criteria to be used. It will allow regulations to detail how a VFM assessment is to be made, the factors that need to be taken into account when making comparisons, the metrics to be used and, importantly, how such comparisons should be made. The clause also gives the flexibility for VFM regulations to introduce benchmarks that schemes should compare their arrangements against. That is necessary to improve comparability and transparency, and to help drive competition among schemes. That will help improve returns for members.

I turn to new clause 42, tabled by the Liberal Democrats; I am grateful to them for their contributions to the debate. Measuring the quality of services provided to members is an important aspect of the VFM framework—I support that entirely. It ensures that we assess not only the quantitative value provided by pension schemes, but the qualitative. Under the VFM framework, the Secretary of State will have the power to require schemes in scope to report on and assess the quality of the services provided to their members; I just made the point about the absence of that in Australia but the fact that it will have a role within our framework. Clause 11 provides for categories of information that schemes may be required to disclose to include

“the quality of services provided to members of the scheme”.

Further detail on the metrics for measuring quality of services will be set out in regulations. It is crucial that metrics are set out in the regulations so that we have flexibility to respond to changes in the pensions market and to learn from operational delivery—again, that is something we have seen in Australia. For that reason, we believe that the current legislative framework is sufficient. I ask the hon. Member for Torbay not to press the new clause.

[Mark Garnier]

Clause 12 seems fairly reasonable in its approach. Liberal Democrat new clause 42 seems in the broadest sense to follow our amendment 254 in respect of the Australian model; should it be pressed to a vote, we would be happy to support it. I have nothing more to add.

[Steve Darling]

As I stated earlier, one of our key drivers is making sure that people are able to make quality, informed decisions about their financial long-term future. The debate on the new clause drives that agenda. I am sure that the Minister has the best intentions, but what we are discussing is still within regulations that have yet to break cover. We would be more comfortable if it was in the Bill rather than tucked away in regulations. We will seek to press the new clause to a vote when the time comes.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13

Member satisfaction surveys

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

[Torsten Bell]

It will be a great relief to everybody to hear that clause 13, although vital, is relatively small. Importantly, it enables requirements relating to member satisfaction surveys, of a kind that I know hon. Members are supportive of, to be set out in the value for money regulations. As I have just argued, quality of service is one of the key pillars of the value for money assessment, and member satisfaction is a key aspect within that pillar. These surveys will allow schemes to better understand their members’ experience and to gauge just how good a service they are providing for scheme members. Members’ experiences and views on the quality of service will provide inputs to the holistic assessment of value that this entire part of the Bill aims to offer.

[Mark Garnier]

We are very happy with this measure. One of the important points, which has been made on a number of occasions, is to do with the wider financial education piece. One would hope that the satisfaction surveys would ask not only whether members of pension schemes are being given sufficient information, but whether they are being taught how to understand what that information means. That is quite important. It is more of a cultural thing than something that should go into the Bill. When we start talking about the complexities of pension funds, it does not necessarily mean a huge amount to the vast majority of people out there, and customer satisfaction surveys should be constructed on that basis. We need to ensure action on that financial education piece, but aside from that, we are very happy to support the clause.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

VFM ratings

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

[Torsten Bell]

Central to the value for money framework is the assignment of value for money ratings. We discussed that briefly during the evidence session on Tuesday, and some hard questions were asked of me by the hon. Member for Wyre Forest; this clause will help to explain more about it. Rating or scoring a scheme’s value is a major cornerstone of the VFM policy. It is essential to helping savers and employers make informed decisions; they would otherwise have to analyse a very large amount of data. The finer details behind the ratings, such as the conditions under which each rating will apply and when they should be used, will be provided in full in regulations. That will provide clarity and allow the framework to evolve with the market.

After a VFM assessment, trustees or a manager will be required to assign a VFM rating. The clause describes the three categories of ratings that will be used in the VFM regime: fully delivering, intermediate and not delivering. As I pointed out on Tuesday, there are multiple levels available within intermediate—it is not a one-size-fits-all box.

Arrangements rated as fully delivering are those deemed to be providing best value for their members. At the opposite end of the scale, we have the “not delivering” grade. For those arrangements rated as not delivering, trustees will have to draw up an action plan of next steps to move pension savers to an arrangement that is providing value, thus avoiding persistent underperformance affecting members for long periods of time.

Arrangements given an intermediate rating will be those that require more work to improve their value to members. They may be required to inform employers of a “not delivering” rating and to produce an improvement plan that outlines the steps they plan to take towards improvement. That, in turn, will help employers to be better informed of the status of the schemes or arrangements that their staff are enrolled in and allow businesses to make better informed choices when it comes to workplace pensions.

The clause provides flexibility for multiple subcategories of the intermediate rating, meaning that the rating system is not limited to three ratings. To help tackle potential gaming of the VFM regime, we will tighten the rules on how some schemes choose comparators, so that schemes are not able to self-select the comparators they are able to use. That will be done by defining what a scheme should be comparing itself against and detailing the metrics that will determine whether a scheme is providing value. We will of course consult on the draft regulations.

[Mark Garnier]

In a broad sense, we are very happy to support the clause. There are, though, a number of issues, and the point about benchmarking and what performance is being valued against can be rather complicated. We heard from the Liberal Democrat spokesman, the hon. Member for Torbay, a little earlier about his father’s experience of putting money aside and finding himself wanting to take it out in October 1987—I remember it well; I had been a dealer on the floor of the London stock exchange, so a stock market crash was a pretty hideous thing. However, if we look at a chart of the FTSE 100 from the early 1980s up to now and the 1987 crash, although I think it was down 37% at one point, looks like the smallest of blips in what was otherwise a very long-term bull market that continues to this day.

The one thing we do know for sure is that those wanting better performance are likely to be investing in slightly more volatile assets. That can come from investing in equities or higher-growth businesses. There is no doubt that some higher-growth businesses will go bust, because they are taking risks, but ultimately, how many of us wish we had put more money into Amazon, Google or Apple back in the late 1990s? At the time it was not necessarily seen as a brilliant thing, but some of these businesses have done unbelievably well. That said, how can anybody understand how a company like Tesla, which is really a battery manufacturer, is worth more than General Motors, Ford and Chrysler? It does not necessarily make a huge amount of sense, and yet people are still investing in it.

We can find ourselves looking at the value for money framework and come up with a load of benchmarks, which brings us to the point about the intermediate rating. We could find that an intermediate rating is done at a time when there are particular problems in the stock market, yet, looking at the long term, we could have what could turn out to be a stunning performance. We have to be very careful and not find ourselves throwing out the good in favour of the perfect. This will be something quite complicated; I do not necessarily think it is something for the Bill to worry about, but, as we continue the discourse of pensions performance and adequacy, we need to be very careful that we do not become obsessed with ruling out risk.

There is a big argument about risk in our economy at the moment, which, again, is not for this place, but we could find ourselves ruling out risk. The other thing worth bearing in mind is that, by ruling out risk, we could stop money being invested into businesses that may look absolutely bonkers today, but turn out to be the next Apple, Amazon or Google. We just have to be careful about that.

I suspect we shall have lots of debates over this. The Pensions Minister is on such a meteoric career progression at the moment that I am sure he will find himself as Chancellor of the Exchequer before very long—probably quicker than he imagines—but this is something that we need to keep an eye on. As I say, it is about making sure that we do not rule out the good in pursuit of the perfect.

--- Later in debate ---

[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.

[Torsten Bell]

I understand why the hon. Member tabled the amendment. I think amendments like this one should be tabled in most Bill Committees by all Oppositions, as they have been over the years.

Let me make one general point and one specific point about the Bill. The general point is that there is always a trade-off between maximum scrutiny of every single part of any change that comes through secondary legislation and the risk of putting undue pressure on parliamentary time for what will be quite minor changes. In the case of the Bill, the pot size requirement is crucial. Lots of what the rest of the regulations deal with will, in fact, be very practical and detailed.

I am not sure that the Committee’s concern that we will be spending our lives together would be allayed by having our time clogged up by all of that detail coming through whenever anything is amended, but I understand the good, democratic reasons why the hon. Gentleman tabled the amendment. I hope that he accepts that as reassurance.

[Mark Garnier]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Torsten Bell]

The clause, as we have just discussed, will ensure that the Government have the power to introduce regulations to secure the consolidation of eligible small pots into an authorised consolidator scheme. The Bill enables us to address the growing problem of pension fragmentation, where individuals accumulate multiple small pension pots as they move between jobs. Fragmentation can lead to inefficiencies, higher costs for providers and savers, and poor retirement outcomes.

As we have just discussed, the clause creates the eligibility conditions for small pots to be consolidated, including the £1,000 limit. The pot must be classed as dormant, which means that contributions have not been paid into it for at least 12 months, so the individual is not actively saving into the scheme. In addition, there is a requirement that the individual has not, subject to any prescribed exceptions, actively expressed how the pension pot is to be invested. The prescribed exceptions are in part to ensure that the scope specifically targets those who are unengaged savers in default funds, but this will enable us to broaden the scope to include individuals such as those in sharia-compliant funds, who would otherwise be excluded from the automatic consolidation process.

We estimate that these eligibility criteria will bring into scope 13 million dormant pots. This multiple default consolidator approach will support improved retirement outcomes for savers, not least by lowering the charges that they pay on those pots over time, as well as reduce the administrative hassle for pension providers, alongside supporting our vision for a pensions market with fewer, larger schemes that provide greater value. Our impact assessment demonstrates that this solution is estimated to generate greater overall net benefits over the period than other options, including pot follows member.

Pension Schemes Bill (First sitting)

Debate between Torsten Bell and Mark Garnier

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Mark Garnier]

Or, indeed, when they first start to work. As somebody once said, compound interest is the eighth wonder of the world.

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

Q I definitely agree about the eighth wonder of the world. Thank you for coming this morning. This is the Committee’s first sitting, and it is great to have both of you before us. One of the features on the DC side of our pension landscape is the two different regimes that we are operating. The Government’s policy intent is that, from the experience of the saver, they do not see a difference between the trust and the contract regime in so far as possible. That will certainly be true for their experience of the measures in the Bill on value for money and decumulation. Could you share a bit about how the FCA and the TPR are working together to make sure that is the case?

Patrick Coyne: Over a number of years, we have worked closely with the Financial Conduct Authority to ensure that when we deliver interventions within the pensions landscape, the outcomes are consistent. One way we have done that is through an update to a joint strategy. We also have almost daily calls with one another to ensure that when we consider interventions and how to enable the system to provide value for money and support people at retirement, we do so in a coherent and comprehensive way. We must really understand the different constituents of our marketplace, whether they be workplace versus non-workplace pensions, or, in the People’s Pension space, pensions analogous to the master trust offer.

Charlotte Clark: To add to Patrick’s point, we meet fairly regularly. There are various different forums and working groups. As you say, Minister, there is that sense that it does not matter where you save. Most people are probably saving in both the contract-based side and the master trust side, given that people have pots in lots of different places. It is important not that people understand where the regulation is, but that the regulation is consistent and there is no arbitrage between the two systems.

--- Later in debate ---

[Mark Garnier]

Q Christopher, do you have any thoughts on that, quickly?

Christopher Brooks: We do not work on final salary pensions, so I do not take a view on it.

[Torsten Bell]

Q As we have just heard, there is some cross-party agreement that the main purpose of the changes is ensuring that we drive up the returns to members—particularly financial returns, but also more generally. What do you think will make the most difference, from the perspective of the returns, particularly to DC savers? Balance between VFM; scale metrics; decumulation changes; small pots—all of these are about driving up returns for members. What are you most excited about?

Christopher Brooks: I think they all work together, so I would say it is a combination of them, but scale seems to be one of the main drivers. I am thinking about NEST in particular, which has been leading the way in terms of investing in private assets. It is able to negotiate a good deal, because of its scale. If you can drive that with similar outcomes across the marketplace, it will be really beneficial to members.

Pension Schemes Bill (Second sitting)

Debate between Torsten Bell and Mark Garnier

Committee stage
Tuesday 2nd September 2025 Public Bill Committees

[Mark Garnier]

That is very helpful; thank you very much.

[Torsten Bell]

Q Thank you both for joining us today. I want to ask you to reflect on the internal consistency of some of what you have said. Implicit in what you are saying is that pension schemes should have been investing in a wider range of private assets over the course of the past 10 years, and that that is what they should want to be doing in future—so in some ways we have not been living up to our fiduciary duties in the past, and we are now making changes to do that.

Given that that is your logic, the question is why that has not happened. If you go and ask actual pension providers why that has not happened, they will tell you they have a collective action problem and an industry focused exclusively on cost and not on returns, and that they struggle to deliver against that. If you have a collective action problem, you need to ask how we resolve that.

You then get to the fact that the Mansion House accord is entirely industry led, with numbers set by them—it is not about distortion to the market; you might want to reflect on that, given the comments you have just made. You also spoke about a lack of clarity, but the Mansion House accord provides clarity about the objectives: everyone can see them and they are set by the industry. When it comes to savers’ interests, you know that the Bill includes a carve-out for trustees to say, “This isn’t in my members’ interests, so we won’t be doing it.” Reflect a bit on the consistency of the argument you have made about the real progress you want to see on investment in a wider range of assets—because it is in savers’ interests and should have happened in the past but did not—and the changes in the Bill. I would gently suggest you might want to think about the consistency of that.

Sophia Singleton: We are not a mature industry—the defined contribution industry—and in the past we have not invested in these assets because there have been operational barriers, including the focus on cost.

--- Later in debate ---

[Mark Garnier]

Q I completely agree: I think it is absolutely right that the more money you have, the more negotiating power you have and the more you can diversify risk and all the rest of it. But part of what I am worried about is this: how is anybody going to prove to the regulator that they will have £25 billion of assets under management by 2035? Surely that is an incredibly difficult thing to prove.

Patrick Heath-Lay: I do not want to be flippant in my response, but our scale already means that we are over that limit, so I have not really put too much thought into how they will do it. I believe that there is enough, within the business plans of entities that might be affected, to be able to make some reasonable assumptions as to what ongoing contributions will be coming through the door and how they will respond to some of the opportunities that may arise in this market over the next few years, from organisations that are choosing to move because of the extent of change that is coming.

I emphasise that I still think that the package of measures and that scale test is the right thing to instil that movement, because I think savers will be better off, provided that it is harnessed in the right way. That is why I come back to this: value for money is the proof point, and we need to make sure that we centre on that as an industry. Being able to evaluate how these changes have created a more competitive market in key areas going forward is really quite important.

[Torsten Bell]

Q This morning we heard from Legal and General and from Aviva on how they are planning to operationalise the requirements in the Bill on default drawdown products. I thought it would be good to give you the opportunity to answer the same question: how are you thinking about that within your organisation?

Ian Cornelius: It is one of the elements of the Bill that we very much welcome. I think guided retirement solutions are overdue. Certainly, our members have been opted into a retirement savings scheme, and they end up with a pot of money rather than an income. I think their expectation is an income. In fact, in the research we have done with our members, they say that the most important things for them are to have a sustainable income, confidence that it will not run out and an element of flexibility, because their circumstances can change very quickly in retirement. I think the guided retirement solution moves us in that direction.

At NEST, we have been working on this for some time, as we recognise that it is a core issue for our members. We therefore want to introduce a guided retirement solution—it is very much a work in progress—that delivers that sustainable income, but also gives them a guarantee that it will not run out. That will be some sort of deferred annuity, purchased probably when they are 75, to kick in when they are 85. We are actively working on that and will be looking to introduce it in 2027, aligning with the expectation in the Bill.

Patrick Heath-Lay: It is very similar from our perspective. We should not underestimate how much onus the shift from final salary to DC has put on individual savers, in terms of the decision that they have to make, in a very complex world that they really do not understand. Even if you surface a lot of information, your constituents will still struggle to navigate those decision points. We also should not underestimate the onus they have taken on, in terms of the risk of their own fund, when you think about the productive finance agenda and other things here. I think it is absolutely the right move. It is a good development for us to bring about guided retirement journeys in a way that is either “Do it for me” or “Do it with me” for policyholders.

Similarly, we are thinking about drawdown and how we can facilitate or help people to understand the implications of the actions they may take with accessing their funds, and then, when they get to later life, some sort of deferred annuity as an approach. The really important aspect is the guidance and how we can help, but have certain obligations on ourselves, as providers, to make sure that we are accountable for the help that we are giving as we go through the process.

--- Later in debate ---

[Mark Garnier]

If I remember rightly, the Bill allows for the detail to come in afterwards, so we will have a bit of work to do when this is all over. Thank you very much.

[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.

--- Later in debate ---

[Mark Garnier]

Q This is tricky, though, is it not? Because there is no geographical definition of those six pools, Cornwall could, as I mentioned earlier, find itself investing in Leeds. That would be lovely for you in Leeds, but it would not be so great for people down in Penzance.

Rachel Elwell: Border to Coast, if we do have those 18, will stretch from the Scottish border to the southern coast. Even today, we have partner funds who are right across England, which is brilliant because those are people who have actively chosen to come together, form a partnership and work together.

Time permitting, if it is of interest to the Committee, we could talk a bit more about local investment and the way of getting investment that is truly local for each individual fund but also a way of crowding investment from other people into the slightly larger opportunities that might be in a region. Every investment we make is local—it impacts local people.

You do not need to only have, for example, Durham council investing in Durham. You want all of the LGPS and all asset owners to feel that they can do that. Some of the ways that we are working through doing local investment with our partner funds have really got an eye to the different ways in which you can crowd in versus something very specific that needs to be addressed in the region or locality.

[Torsten Bell]

Q It is lovely to see you again, Rachel. Thanks for making the time today. A few people have asked questions about the LGPS through the lens of member engagement. There are obviously some implications with the move into greater pooling for that. Given that you are running that and seeing it up close, it would be good to hear your reflections on how that currently operates, as you have seen it over the last few years.

Rachel Elwell: Again, for all of us working in the LGPS, that sense of purpose is really important. I know my partner funds do a huge amount to make sure they are engaging directly with members, running events, as well as the importance of member representation on the pensions committees and on the pension boards, whether that is through union representation, pensioner representation or other scheme member representation.

We also have two fantastic scheme member representatives on our joint committee, which is the body that comes together across all of the partner funds to oversee and engage with what we are doing on their behalf. They are really bringing that voice into our considerations as a board and the wider organisation—the wider partnership.

Oral Answers to Questions

Debate between Torsten Bell and Mark Garnier

Monday 1st September 2025 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Mark Garnier (Wyre Forest) (Con)]

Thanks to our Conservative winter fuel payments campaign, thousands of pensioners have signed up to pension credit, and millions more pensioners will receive winter fuel allowance, now that the Labour party has admitted that its policy on winter fuel payments was wrong. However, the Social Security Advisory Committee recently concluded that the Government’s winter fuel plans fall short of delivering their objectives of fairness, administrative simplicity and targeted support. It seems that the Government have prioritised civil service bureaucracy over helping frozen pensioners. Does the Minister agree with the Social Security Advisory Committee’s conclusion about their policies?

[Torsten Bell]

I thank the hon. Member for his question, and I congratulate Members on all sides of this House who have run campaigns to drive up pension credit uptake. That is very important, and it is why we have seen 60,000 extra awards over the course of the year to July 2025 compared with the previous year. That work, which is very welcome, has been done by not just Members but civil society organisations and local authorities.

On the points that the hon. Member raised about the process for winter fuel payments this winter and going forward, I do not agree with the characterisation he chose to present. Particularly on the tax side, the process will be automatic. Nobody will be brought into tax or self-assessment purely because of that change; the vast majority of people will have their winter fuel payments automatically recouped through the pay-as-you-earn system; and anyone who wants to can opt out. I remind Members that the deadline for that is 15 September.

Draft Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025

Debate between Torsten Bell and Mark Garnier

Wednesday 25th June 2025 General Committees

[Mark Garnier (Wyre Forest) (Con)]

It is an absolute joy to serve under your very professional and diligent leadership and chairmanship of this Committee, Mr Stuart. I also congratulate the Minister on his debut in a Delegated Legislation Committee. He does it masterfully.

These buy now, pay later measures, as colleagues will recall and as pointed out by the Minister, were consulted on extensively by the previous Government. As the Minister also pointed out, there was an unfortunate general election, which got in the way of us actually—

[Torsten Bell]

Fortunate.

[Mark Garnier]

That rather depends on one’s point of view. I think it was fortunate for everyone in this room apart from Conservative Members.

Moving on, we are absolutely supportive of bringing these products within the scope of financial regulation. As we have heard, the sector has seen rapid growth. Because the products are now used by millions of people, the last Government rightly acted to protect consumers from harm—or wanted to act. The proposed regulations require FCA authorisation, affordability checks and clearer information for consumers, which are all measures that we absolutely support. An ability to access the Financial Ombudsman Service will also give consumers an avenue to escalate any issues.

However, as these regulations have been developed, several concerns have been raised by businesses operating in the BNPL market, and I hope that the Minister may be able to address those issues today. First, the exemption for merchants offering their own BNPL products could create inconsistencies and consumer risks. I appreciate the sentiment for keeping an exemption, and Conservative Members do not want to expose small businesses to burdensome regulation. For example, the local gym should not be required to undertake the FCA approval process to provide a 12-month membership; I am sure that many people would agree with that. However, a potential loophole still exists. A large e-commerce website, such as Amazon, could offer BNPL directly and not come under these regulations. That is because there is no way in the Consumer Credit Act to distinguish between a large e-commerce site and a small or medium-sized enterprise. Currently, no online retailer is operating its own version of BNPL, as opposed to using a third party provider. However, I am sure that the industry would welcome reassurance from the Minister today that the Government will be looking at any knock-on effects that these regulations might cause.

Opposition Members also welcome the Treasury’s saying that work is under way to review and reform the Consumer Credit Act, but I hope that the Minister will confirm that the review will specifically address the issue of definitions, ensuring that there is a way to distinguish between the largest retailers and small businesses. Will the Government also provide further details on how they will go about monitoring the prevalence of retailer-provided BNPL services, and at what point they will intervene once they see evidence of such activity taking place?

Secondly, short-term lenders have highlighted the fact that although interest-free agreements under 12 months will fall under a new regime, longer or interest-bearing agreements remain subject to older rules. A 10-month interest-free instalment agreement and a 14-month low-interest agreement may be economically and structurally similar, but one will benefit from modern disclosure rules while the other will not. I hope that the Minister can address whether that has the potential also to be reviewed as part of the review of the CCA.

Finally, the regulations do not address late fees, which can disproportionately impact vulnerable consumers, so again I would welcome the Minister’s setting out today whether the Government will also keep that under constant review.

The Opposition support the intent of these regulations, but call for the Government to address some of the outstanding points raised by the industry in order to ensure robust consumer protection and a level playing field for everybody participating in this market.