Pension Schemes Bill

Viscount Thurso Excerpts

Monday 23rd March 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

My Lords, I shall speak to my Amendment 155, and I am grateful for the support of the noble Viscount, Lord Thurso. This amendment and the noble Viscount’s own Amendment 162, to which I have added my name, deal with the same point, which is something we talked about in Committee. They aim to secure provisions that were made in the Pensions Act 2004 which would allow schemes to be extracted from the Pension Protection Fund if there were a new opportunity; for example, for the pension scheme members to be treated to better pensions than those available in the Pension Protection Fund itself.

That provision, in Section 169(2)(d) of the Act, has never been commenced. That provision means that if an employer had two or three workers in a pension scheme, had a company which fell on hard times and became insolvent—at which point the members’ pensions went into the PPF—then had a particularly fortunate experience and found himself or herself in a position where they could try to remedy the shortfalls of the members’ pensions and wanted to be able to take the scheme back out of the PPF, then that would be possible. Currently, that would be against the law because the provision has not been commenced, even though it is in the Pension Act 2004.

These amendments seek to ensure that this is at least a possibility, especially now that employers may start to be more attracted to running pension schemes, given the different financial situation that surrounds pension schemes now that we no longer have quantitative easing, with schemes finding themselves more often in surplus. Therefore, I hope that the Minister might accept that this is a possibility. These amendments would not commit the Government—or anyone—to spending any money; they would merely bring into force a provision that was already provided for in 2004.

[Viscount Thurso (LD)]

My Lords, I support Amendment 155 from the noble Baroness, Lady Altmann, and will speak briefly to my Amendment 162, which seeks to achieve exactly the same effect. Since the noble Baroness has explained it so well, I do not have to repeat the arguments in favour of it. Amendment 162 was tabled shortly after I tabled Amendment 161, when I was looking for remedies for the problem that was being created around Amendment 161. As most of the arguments for that should properly be deployed when we get to Amendment 161, I will not make them at this point, which I hope the Minister will understand to be appropriate. However, I give notice that if we get to that point and we have not had anything helpful—you can always hope—then I will seek the opinion of the House on Amendment 162.

[Lord Palmer of Childs Hill (LD)]

My Lords, people often wonder, speak and write about whether the House of Lords performs a valid function. This group of amendments justifies the House of Lords in one fell swoop. In this group, the Government are proposing 20 amendments to their own Bill, which shows that it had not been thought out properly in the beginning and we are now trying to amend it in your Lordships’ House—and amend it correctly, I add. I am not speaking against the amendments but noting that things are coming to us ill prepared; that there are 20 amendments makes that clear to see.

This group has amendments that raise an important issue of fairness for members of the Pension Protection Fund and the Financial Assistance Scheme, particularly in relation to pre-1997 service, as well as technical government amendments, to which I just referred. There are amendments probing whether members should, in some circumstances, be allowed to move to a better supported arrangement or receive more meaningful redress where historic indexation has been lacking. On these Benches, our instinct is that member protection must remain the starting point, but protection should not become an unnecessary rigidity. There is a secure and properly funded route to a better outcome for members. The Government should at least be willing to consider this, and I hope that the Minister will say some positive words on it.

On pre-1997 rights in particular, Parliament is entitled to ask whether the proposed remedy is full enough or whether fairness is justified. The noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, referred to Amendments 155 and 162, which both seek to do a similar thing. As I said, we are going to vote on the amendments with high numbers later; which one we will vote on, or whether we will vote on both, I do not know. However, we on these Benches agree with the principle of both. We shall see later whether we have had some success in persuading the Government to support these amendments.

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[Viscount Thurso (LD)]

My Lords, briefly, I support the noble Baroness in her amendments, to which I have added my name. As usual, she has done a splendid technical exposition of the amendments. More importantly, as the noble Lord, Lord Hain, said, she outlined the immense emotional damage that was done to so many people. We should all look for a way to remedy that. Therefore, the noble Baroness has my full support.

[Lord Wigley (PC)]

My Lords, I strongly support the objectives of Amendments 124, 128 and 154, as well as the similar provision made for Northern Ireland in Amendments 132 and 136. I thank the noble Baroness, Lady Altmann, for all the work she has done, and continues to do, on this matter. I hope she will continue until this has been won.

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Let us say that we went a little bit further and said, “Okay, we’re going to stop these defined benefit pension plans right now. We’ll secure your benefits, as of now, that we promised you, but from now on those contributions you put in will be given to a defined contribution scheme, not a defined benefit scheme, as has had to happen in the private sector, because that is all we can afford”. If we did that, if we kept the promises we made so far—

[Viscount Thurso (LD)]

Might I ask the noble Lord what the notional employer’s contribution is that he is putting into his calculation?

[Lord Moynihan of Chelsea (Con)]

I am putting the same contribution in that is made by employers—by the Government—right now. If you carry on doing it, you have a bunch of obligations for past promises. In the future everybody has a defined contribution scheme but you have the defined benefit scheme up to now. By 2060, as my noble friend Lady Neville-Rolfe told us, those obligations will result in £130 billion of annual payments, even if we stop now. If the economy grows by a considerable amount more than it has been growing in the past few years, those will amount to 3% of GDP being paid to pensioners of the public sector.

If you think that a £58 billion black hole is bad enough, fancy that £130 billion black hole that you have left to future generations because we failed to act—and because we refused even the reasonable request of the noble Baroness to have an inquiry. If we go beyond that and keep on with these schemes each year, that £130 billion will be dwarfed by a far larger amount. We are paying civil servants more, we have more civil servants and they are living longer, so the payments each year will rack up until at some point it will be like Greece or Ireland.

Right now, the bond markets are not at all impressed with us. Both the 10-year rate and the 30-year rate are well above those rates that noble Lords opposite claimed were evidence that Liz Truss crashed the economy. If she did, then goodness, they have crashed it much more. The bond markets are saying, “We’ve got you on watch and, if this goes on and you keep on with the deficits that you’ve got, you’re going to get into considerable trouble”.

We have the opportunity to think about this and, at least, to look at it. I hope that noble Lords will agree to this amendment. I also hope, by the way, that, if there is an inquiry, it is headed by somebody who is not in receipt of such a pension. In the private sector, we have a rule. If you have a great employee and they come to you and start talking gibberish, strangely, you think, “Oh, it’s going to be about their remuneration”. When it comes to their own remuneration, people find it very difficult to be realistic, logical and fair. So I hope not only that the Government will accept this amendment for an inquiry but that they will put somebody in charge of it who is not a captive of that public sector pensions system.

[Viscount Thurso (LD)]

My Lords, very briefly, I will support our Front Bench and the noble Baroness, Lady Neville-Rolfe, because it is quite a wise thing to have an inquiry. I wholly reject the argument the noble Lord, Lord Moynihan, just made: his maths is suspect and his conclusions are wrong. I have a son who is a special constable—until very recently he was a constable—a daughter-in-law who is a constable and another son who is a primary school teacher. As I said to him then, I say now: tell it to them that their pensions are not part of their remuneration, and I say you will be looking for teachers, policemen and nurses until kingdom come.

[Viscount Younger of Leckie (Con)]

My Lords, I begin by welcoming the amendment in the name of my noble friend Lady Neville-Rolfe, because it addresses a matter of real and enduring importance: the long-term affordability, intergenerational fairness, fiscal sustainability and accounting treatment of public service pension schemes. We heard a powerful speech from her in Committee and another from my noble friend Lord Moynihan, and they gave two further powerful speeches just now.

Fundamentally, this amendment asks the Government to examine how very large sums of public money are being managed, how liabilities are being accounted for, and what this means for the sustainability of public spending over the long term. These schemes represent a significant and growing commitment, and it is entirely right that Parliament should have a clear and transparent understanding of their implications, both for today’s taxpayers and for future generations.

The figures seem to be stark, as set out by the movers of the amendment, and some strong arguments have been put, backed up by evidence, but I very much noted the remarks from the noble Viscount, Lord Thurso, and perhaps some further debate and discussion should go on about the veracity of the figures after this debate.

Indeed, when the Government are choosing to place additional burdens on private pension saving through measures such as the national insurance changes and restrictions on salary sacrifice, in part to sustain these very substantial public sector commitments, the question of balance, fairness and sustainability becomes more and more pressing. For these reasons, we strongly support my noble friend’s amendment and we will support her should she seek to divide the House on it when it is called.

The other amendments in this group, including those in our names, seek to address two further fundamental issues: first, the question of pensions adequacy, ensuring that reforms are judged by their real-world impact on the retirement incomes of individuals, and, secondly, the question of why pension funds are not investing more in the United Kingdom. This is a critical issue, which was covered in Committee, not least by the noble Lord, Lord Vaux. If the Government wish to see greater domestic investment, the answer surely is not to reach instinctively for the levers of mandation but to understand and to address the underlying barriers, whether regulatory, tax-related or rooted in fiduciary duties. This point was made when we discussed the issue only last week, after which, I am glad to say, we voted to remove this dangerous power from the Bill. The point was repeated today by the noble Lord, Lord Lucas.

This is essential work that needs to be done. The Government are planning to intervene in the system without first properly understanding why it is behaving as it is. There is a risk that they are seeking to correct the symptoms of a problem that they have not even diagnosed, rather than addressing its causes. We have been clear from the beginning that the Government must not mandate investment, but we have also been clear that we should understand why we are not seeing the investment we need in our country. Our amendment allows the Government to do that work and then take the responsible and necessary steps to start promoting investment in a responsible way.

I close by speaking to Amendment 170A in my name and that of my noble friend Lady Stedman-Scott. I am grateful to the noble Lord, Lord Lucas, for his work on this amendment, as well as grateful for the—perhaps unusual—support from the noble Lord, Lord Davies of Brixton, for having a review, which is our wish, on member engagement on rights in pension schemes. Amendment 170A raises a fundamental question of agency: namely, the extent to which members of pension schemes are able to influence the governance and decision-making of the schemes to which they belong. We believe this is an important issue, and it invites the Government to reflect on whether pensions savers truly have a meaningful voice in shaping their financial futures. It is right that we consider not only the existence of engagement mechanisms but whether they operate effectively in practice, particularly in relation to investment decisions and scheme governance. I will therefore listen very carefully to the Minister’s response on these points.

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Moved by

[Viscount Thurso]

161: After Clause 117, insert the following new Clause—
“Review: AEA pension scheme(1) The Secretary of State must, within three months of the day on which this Act is passed, commission an independent review into—(a) the pension losses incurred by former employees of AEA Technology who transferred their accrued pension benefits out of the UK Atomic Energy Authority (UKAEA) public service scheme to AEA Technology (AEAT) on privatisation in 1996;(b) the financial losses suffered 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 adequacy of safeguards provided at the time of privatisation,(d) potential mechanisms for redress or compensation, and(e) the estimated financial cost of any such mechanisms.(3) The review must provide adequate mechanisms for redress and compensation for affected individuals and their dependents—(a) in line with the Third Report of Session 2023-2024, of the House of Commons Work and Pensions Committee;(b) in line with the Fifty-Seventh Report of Session 2022-23, of the Committee of Public Accounts; or alternative redress and compensation that may be developed through the process outlined under subsection (2).(4) 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.(5) The panel must report its findings and recommendations to the Secretary of State and lay a copy of its final report before Parliament within three months of its establishment.(6) The Secretary of State must, within three months of the publication of the report under subsection (5), lay before both Houses of Parliament a statement setting out the Secretary of State’s response to the report.”Member’s explanatory statement
This amendment seeks to require the Secretary of State to commission an independent review into the pension losses incurred by former employees of AEA Technology.

[Viscount Thurso (LD)]

My Lords, as I move my Amendment 161, I can hear the Minister saying, “Not another review”. I apologise. I say to her at the outset that I recognise how much the Government have done in many of the areas that we have been pushing. Notwithstanding my ingratitude sometimes, that is greatly appreciated. I also appreciate the talks that she has had with me, although I think I am still in the tea and sympathy department and no further forward.

This amendment seeks to give effect to recommendation 2 of the PAC report of 2023. The PAC wrote:

“The former civil servants who transferred their pensions to AEA Technology … when it was privatised were badly informed by government at the time, with some losing considerable sums”.


Its recommendation was:

“The government should ensure that members’ complaints about the AEAT pension case can be independently reviewed, for example by a relevant ombudsman”.


There is no relevant ombudsman. It would have to be reviewed by somebody else.

When I raised this matter in Committee, the Minister said:

“I will not go into this in detail, but I am advised that the Government Actuary’s Department note offered to members at the time did not imply a guarantee. The GAD note referred specifically to a risk that the AEAT pension scheme could fail and did not seem to compare levels of risk across the different options. The note was not intended as advice and made it clear that the information provided was not intended to suggest that any one course of action was better than another, and it did not take into account people’s individual circumstances. The note indicated that people should seek their own independent advice”.


Since then, I have had the opportunity to get hold of a copy of the GAD note as well as the two brochures that were issued at the time by the UKAEA HR fund. I will go through the points that the Minister made.

First, she said that the note did not imply a guarantee. It is correct that the note did not offer a guarantee but, far more importantly, it made no mention of the material change implied by the loss of the guarantee for anything that was transferred into the new scheme. Every professional I have spoken to has said that this is a material and relevant factor that should have been in the GAD note and its omission is surprising.

The second point the Minister made was that the GAD note referred specifically to a risk that the AEAT pension scheme could fail. I can find no specific reference to failure in that note other than a statement at paragraph 3.2.3 which says:

“The effect of preserving your UKAEA benefits is that your total benefits will be payable from two independent sources. Whilst it is unlikely that the benefit promise made by either UKAEA Scheme or the AEAT Scheme would ever be broken, it is still more unlikely that both promises would be broken, and this could be viewed as a reason to opt for preservation. However, this consideration should not normally outweigh those in relation to salary and inflation”.


I would suggest that no one reading that note would consider that a specific reference to a risk of scheme failure.

Furthermore, the Minister went on to say that the note

“did not seem to compare levels of risk across the different options”. 

The note sets out clearly the pros and cons of every option and in doing so makes it very clear how special the special transfer option was. Further, it makes it clear that the personal pension option would be more costly and risky, and at paragraph 3.1.1 specifically advises that transferring to the new AEAT closed scheme was likely to offer the best financial result. It does so in such strong terms that I feel I must quote them:

“The main advantage of opting for the special transfer terms are that benefits based on transferred service in the AEAT Scheme are likely to be higher than preserved UKAEA Scheme benefits. This is because the former will be based on your earnings at the time you leave the AEAT Scheme, whilst preserved UKAEA Scheme benefits will be based on your final earnings in the UKAEA Scheme, plus cost-of-living increases thereafter. There are two reasons why your earnings at retirement are likely to be greater than your current earnings plus cost-of-living increases. Both of these reasons apply more strongly the further away from retirement age you are currently. The first reason is that, over the long term, as standards of living increase, general pay levels increase faster than price levels. The second reason is that your pay level may increase further still as the result of performance and promotional awards”.


The Minister said that

“the information provided was not intended to suggest that any one course of action was better than another”.—[Official Report, 23/2/26; col. GC 306.]

It is true that that statement is made at paragraph 1.1.3. However, notwithstanding that statement, if we read the note as a whole, we see that it is pretty obvious that the transfer scheme, which was time-limited, would be the way to go.

Finally, the note indicates that people should seek their own independent advice. Again, at paragraph 1.1.3, the note states that

“if you are unsure of the most suitable course of action you should seek Independent Financial Advice which would take into account your particular circumstances”.

But given that the note had been prepared by the Government Actuary’s Department, was verified by the UKAEA and has pretty unambiguous advice regarding the transfer, I would submit that that statement being qualified by “if you are unsure” renders it meaningless.

Having read the documentation, it seems to me that this is a straightforward case of mis-selling. It would not happen today, we know that. The rules have changed—everything has changed. But at the time, insufficient advice was given and people made choices that they are paying for today. The fact that they are paying for those choices is because AEAT went bust, and they should not be treated any differently to everybody else.

The fact is that people transferred their pensions. In one case, as I told the Minister, a doctor who worked at the UKAEA and was transferred out to AEA Technology had previously been in the National Health Service. So assured was she by what she had heard that she took her pension from the NHS and put it into AEA Technology, because it was part of the civil service club and remained in it until, I believe, 2002 or 2003.

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[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Viscount, Lord Thurso, for moving his Amendment 161, and for the conversations that we have had on this and other things. I have a lot of respect for him and the way that he approaches issues, and it has been a pleasure to talk. As we heard, the noble Viscount’s Amendment 161 would require the Secretary of State to establish an independent review into the pension losses incurred by former employees when AEAT went into administration and its pension scheme went into the Pension Protection Fund. It also seeks to explore mechanisms for redress or compensation.

The Government’s position was set out by me in Committee and subsequently by the Minister for Pensions during an Adjournment Debate in the other place at the end of February. I regret that I am not in a position to accept the noble Viscount’s amendment. I put on record my sympathy for all those who accrued public sector pensions and transferred their benefits into private sector schemes, only to end up, through no fault of their own, experiencing losses and not getting the full value that they were expecting from their pensions as a result.

In this specific case, AEAT has a very long history. It is not straightforward to turn the clock back 30 years and revisit decisions that were made then or look at the conditions that obtained at the time. Since 2013, through revised Fair Deal guidance, employees who are compulsorily transferred from the public sector into the private sector are offered continued access to a public service pension scheme, so the situation that AEAT members found themselves in could not happen now.

The fact is that these issues have spanned many years and Governments of all colours. AEAT was privatised in 1996 under a Conservative Government; the pension scheme entered the PPF in 2012 under the coalition Government; and, following the pension scheme’s entry into the PPF, AEAT members raised complaints to a number of bodies under successive Governments. There have been opportunities over the years for different Governments, and their Ministers, to provide redress or to address the issue, but, due to the impracticality of trying to go back all that time, none have done so.

One of the bodies that the noble Viscount mentioned as having looked into the matter is the Public Accounts Committee. The first recommendation from the committee’s inquiry was that the Government should consider introducing pre-1997 indexation within the PPF. This Government are taking action on that. We have brought forward legislation to introduce annual increases on compensation from the PPF and FAS that relate to pensions built up before 6 April 1997, where schemes provided for this. I am grateful to the noble Viscount for acknowledging that. Sometimes, when one gives something, it is simply banked, and then everything else is asked on top of it, so I really appreciate his grace in having acknowledged that. I also point out that if previous Governments had made that change sooner, it would have made much more of a difference to AEAT members, who would have found their pensions building up over that time. But we are introducing it now through this Bill, and AEAT members with pre-1997 accruals will benefit.

I recognise that I cannot offer everything that noble Lords want on this and other cases that have been brought to me and the Minister for Pensions. We are offering the concrete changes that we can, and that is all that I can offer. For that reason, I hope that the noble Viscount will withdraw his amendment.

[Viscount Thurso (LD)]

My Lords, I am very grateful to all noble Lords who have spoken, particularly the noble Lord, Lord Davies, for his support. As an actuary himself, his words were of great comfort and support. I am also grateful to the noble Baroness, Lady Altmann, who has worked on this case before and knows it through and through, and the noble Baroness, Lady Stedman-Scott, on the Conservative Front Bench. I am also grateful to the Minister for at least hearing me out.

I realise that I am probably asking the wrong ministry. Given that this mis-selling was presumably done by UKAEA in the first instance, I think the sponsor department at that point would have been the DTI—probably with the shareholder executive’s paw prints in it somewhere. The responsibility probably lies somewhere in there. I have listened to the mood of the House and realise that this is not something we should divide on, but I hope that the Government will continue to listen. Maybe, some time in the future, there will be an ability to do something to right the wrong for these poor people. With that, I beg leave to withdraw.

Amendment 161 withdrawn.

Moved by

[Viscount Thurso]

162: After Clause 117, insert the following new Clause—
“Discharge of liabilities in respect of compensation: commencement(1) The Secretary of State must, within three months of the day on which this Act is passed, make regulations to commence the provisions laid out in section 169(2)(d) of the Pensions Act 2004 (discharge of liabilities in respect of compensation: cash sum).(2) The regulations under this section are subject to the negative procedure.”

[Viscount Thurso (LD)]

I beg to move.