Pension Schemes Bill

Viscount Younger of Leckie Excerpts

Report stage
Thursday 19th March 2026 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I think that everybody in your Lordships’ House wants good investment, whichever side of the House we are on. If you are investing, with apologies, sometimes faith is not enough—you have to see what happens in the market. It is about the choices that are made.

These amendments would allow pension schemes to demonstrate a strong investment performance or innovation in members’ services and administration to be exempt from the scale requirements set out in the Bill, and would introduce greater flexibility on how scale is assessed, including recognising assets held across multiple arrangements.

The amendments reflect concerns that the Bill places disproportionate emphasis on size rather than outcomes, risks disadvantaging smaller or newer entrants and may reduce competition and innovation in the pensions market without clear evidence that larger schemes consistently deliver better returns for members. Amendment 77 would allow exemptions to scale requirements if the regulator deemed that there was no evidence of improved outcomes for members in the case of a proposed merger to meet the scale requirements. This would make sure that members’ interests are protected. On these Benches, we support Amendment 77, and if it comes to a vote, we will support it.

[Viscount Younger of Leckie (Con)]

My Lords, I thank all noble Lords who have amendments in this group, which broadly seeks to refine the Government’s scale requirement as set out in the Bill to reflect the fundamental principle that size is not everything. We have heard a lot about that in this short debate. For the sake of brevity, I shall limit my remarks to my Amendment 77. The scale requirement as currently framed is too blunt an instrument. It risks prioritising size over quality, process over performance and structure over outcomes—in other words, it risks innovative and high performing funds merely because they are small. These remarks have been echoed by the noble Baroness, Lady Altmann.

The central question we must always ask in pensions policy is: does this improve outcomes for savers? This was the essence of my noble friend Lord Fuller’s remarks. If the answer is no, then we should think very carefully before proceeding. When this power comes into force, it will bring into scope schemes that are already delivering strong outcomes—schemes that are well run, well governed and performing effectively for their members. In such cases, forced consolidation is not just unnecessary but may be actively harmful. It risks disrupting successful investment strategies, increasing costs and ultimately undermining the very outcomes that we are seeking to improve.

This amendment would introduce a vital safeguard. It would give the regulator the discretion to recognise where consolidation would not benefit members and to treat such schemes as meeting the scale requirement. It would ensure that the policy is applied intelligently and does not run roughshod over schemes that are already doing what the Government want. Crucially, it would also reinforce fiduciary duty: trustees and managers must act in the best interests of their members, not in pursuit of arbitrary thresholds set by the Government. This amendment would ensure that they are not compelled to take actions that run counter to that duty.

Scale should be a means to an end, not an end in itself. Where scale improves outcomes, it should be encouraged, but where it does not, where schemes are already delivering for their members, we should not force change for its own sake. This amendment would simply ensure that savers remain at the centre of the policy, and therefore when this amendment is called I will seek to test the opinion of the House.

[Baroness Sherlock (Lab)]

My Lords, Clause 40 delivers the Government’s commitment to ensure that DC workplace pension savers benefit from the advantages that flow from scale and consolidation. The framework that the Bill establishes for scale is integral to securing better member outcomes, improved access to productive investment and stronger in-house capability. Evidence shows that scale can bring the ability to invest in diversified assets as well as lower member fees and investment costs. There is also evidence that scale can enable greater investment and governance capability in running a scheme. As DC schemes become more complex, these things will drive improved member outcomes and support the delivery of an income in retirement.

We had a debate on various issues in Committee, and one of the questions was about scale and competition in the marketplace. I reassure the House that the Government have considered this. Our analysis suggests that, once the scale measures have taken effect, there will be 15 to 20 master trusts and GPP megafunds operating.

There are a number of amendments in this group, and I will try to say something briefly about each. First, on the amendments that seek to add further exemptions to scale, the Government’s policy in this area is to allow day one exemptions that are based on a scheme’s permanent design characteristics. In other words, it should be as clear as soon as the regulations are in place whether a scheme meets an exemption, rather than it being subject to regular assessment. That is important because it is about providing certainty and stability for members and employers.

Amendments 55 and 60, from the noble Baroness, Lady Noakes, would create an exemption to allow master trusts and GPPs to be excluded from the scale requirements where they deliver investment performance that exceeds the average achieved by all master trusts or GPPs that meet the scale conditions. While I hear the noble Baroness’s arguments, I am concerned that this would undermine the Government’s objective: a market of fewer, larger and better-run schemes where economies of scale deliver sustained benefits for members.

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Moved by

[Viscount Younger of Leckie]

77: Clause 40, page 45, line 31, at end insert—
“28BA Exemption from scale requirement(1) The Secretary of State may by regulations provide that the Regulator may determine that a relevant Master Trust or a group personal pension scheme is to be treated as meeting the scale requirement in section 28A or 28B if the Regulator is satisfied that the condition in subsection (2) is met.(2) The Regulator must be satisfied that there is no reasonable evidence that consolidation of the scheme into another arrangement would be likely to improve outcomes for members.(3) In determining whether the condition in subsection (2) is met, the Regulator must have regard to—(a) net risk-adjusted investment performance;(b) governance quality and operational capability;(c) whether the scheme benefits from integrated, pooled or cross-scheme investment arrangements not reflected solely in the total value of assets counted under section 28A(4) or 28B(4); (d) whether the scheme invests wholly or substantially in a default arrangement operated by another scheme or manager meeting the scale requirement;(e) whether the scheme derives material investment benefit from participation in a wider asset management group of substantial scale.(4) Regulations under this section may make provision about—(a) the duration, renewal and withdrawal of a determination under subsection (1);(b) reporting and disclosure requirements.”

[Viscount Younger of Leckie]

My Lords, I have spoken to my amendment and as warned in my remarks, I wish to test the opinion of the House.

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[Lord Palmer of Childs Hill (LD)]

My Lords, this degrouped set of amendments is very narrow in drafting but, we believe, important in principle. Amendments 105A, 114 and 115 would require the Secretary of State and the reviews and regulations under these clauses to have regard to innovation and competition in the design and operation of pension schemes and in the treatment of non-scale default arrangements.

On these Benches, we strongly agree with the proposition that pension legislation should not inadvertently—this is the problem—freeze the market in favour of the largest existing players. Whenever the Bill pushes schemes towards fewer, larger structures, we believe that Parliament must ask what happens to specialist providers, digital entrants, more tailored propositions and competitive pressure generally. A market that is tidy—tidy is not always right—for Ministers but closed to challengers does not necessarily serve savers well.

This concern was expressed repeatedly in Committee. The critique of the Bill’s scale provisions has been not simply that small is beautiful but that innovation can come from schemes that do not yet meet an arbitrary threshold and that competition itself is one of the mechanisms by which member outcomes improve. I have spoken in this vein on earlier parts of this Bill, warning against an overemphasis on size, which may crush newer entrants and reduce competitive discipline in the market.

There is nothing radical about asking Ministers to have regard to innovation and competition. It is a modest discipline, not a veto. It would not prevent consolidation where consolidation is justified; it would simply ensure that regulations and reviews must notice what might be lost as well as what might be gained. In our view, it is an entirely reasonable request. A well-functioning pensions market should be safe, well-regulated and member-focused, but—this is important—it should also remain open to new ideas and new providers. These amendments would do something to help that balancing view, which is why we on these Benches support them.

[Viscount Younger of Leckie (Con)]

My Lords, I thank my noble friend Lady Noakes for her amendments in this group and I am grateful for the helpful remarks made by my noble friend Lady Neville-Rolfe and the noble Lord, Lord Palmer.

These amendments recognise an important point: a rigid, one-size-fits-all approach risks crowding out innovation, flexibility and ultimately better outcomes for savers. Schemes are not identical, nor are their members, and it is entirely right that providers should be able to design different default arrangements to meet different needs.

Amendment 105A is especially important in this regard. It would require regulations concerning the operation of the scale provisions in Clause 40 to have regard to innovation and competition. The Government have said time and again that they are pursuing a growth mission and that growth will underpin their ability to fund day-to-day spending. Yet what we have seen instead is very different: an ever-greater reliance on taxation to plug the gap, something that is not only economically damaging but ultimately unsustainable for the country.

The noble Lord, Lord Palmer, put it well. If the Government are serious about growth, then they must be serious about fostering innovation and competition in sectors such as pensions. Recognising and ensuring that innovation is not stifled is a practical and constructive way to support that mission.

This amendment does exactly that. It ensures that, in shaping the regulatory framework, the Government actively consider the importance of a competitive and innovative market—one that delivers for savers and contributes to wider economic growth. For those reasons, the Government should accept this amendment. Should my noble friend Lady Noakes wish to test the opinion of the House, we would be glad to support her.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Noakes, for introducing her amendments. The Government think it essential that pension schemes remain competitive post scale and we expect that schemes with scale, as well as market disruptors, will continue to innovate and drive competition. We actively encourage competition through the provision of the new entrant pathway to allow new innovative schemes to enter the market.

The scale measures place a requirement for a main scale default arrangement at the centre of the scheme, to deliver scale and the benefits that that can bring. Amendments 114 and 115 relate to measures on consolidation and addressing fragmentation within schemes that are in the market. There is currently significant fragmentation within the market, with high numbers of default arrangements that do not ultimately serve member outcomes.

While I recognise that much of the fragmentation is a product of history in contract-based schemes, we have seen that the number of default arrangements is increasing across the market and in a number of master trusts. We do not want to see the same issues arising over time as exist in GPPs, where members are in too many default arrangements that do not offer value.

Let me be clear: the measures in Chapter 4 do not cap or limit the number of default arrangements, nor do they impact on the ability of a new entrant to enter the market. What we want to see is default arrangements being created where this meets and continues to meet genuine member or employer need in tandem with the scale measures. That is why we are introducing measures to prevent new default arrangements from being operated without regulatory approval and carrying out a review into current arrangements to establish where they should be consolidated or the reasons for them to continue.

Amendment 114 seeks to require the review of default arrangements to consider the extent to which arrangements contribute to innovation and competition. I agree with the spirit of this amendment, but I do not think that it is necessary. The review must already consider the circumstances where it is appropriate for non-scale default arrangements to continue operating and it is right that competition and innovation will be part of that work. The review will consider how competition and innovation have driven the operation of non-scale default arrangements and what they are expected to deliver for members.

Amendment 115 seeks to require that regulations under Clauses 42 and 44 will have regard to competition and innovation. Again, I agree with the intention behind the amendment, but it is unnecessary. I shall explain why. It is reasonable to expect that the regulations that set out the criteria in which regulators can approve new default arrangements will include innovation and competition. Indeed, we expect these arrangements to meet a specific need or offer something different to the market. It is also reasonable that these will be considerations in setting out where non-scale default arrangements will have to be consolidated. However, as the Bill sets out, those regulations already have to take into account the conclusions of the review, and that will consider competition and innovation.

Amendment 105A seeks to require regulations across the scale measures to have regard to innovation and competition. I reiterate the Government’s support for an innovative market, and we expect providers to continue to innovate. The amendment is not needed to achieve that but, although well-intentioned, the duty that the amendment would introduce ignores the policy objectives of the scale measures and the benefits they are expected to bring. To be clear, the benefits of scale include lower charges, diversified investments and improved governance. We are already creating space in the market for innovation through the new entrant pathway and, as previously outlined, we still expect the market to be competitive.

More than that, though, we need to remember something crucial about the nature of the DC market. A competitive market is vital but we also have to recognise that the ultimate beneficiaries—the members—do not select their scheme. That is done by the employer. Employers are the decision-makers on pension provision. They are the buyers in this market and they will try to do the best for their workforce, but ultimately, of course, their focus will be on current rather than past employees. We therefore need to drive schemes to deliver for all members, not just those who are actively contributing, and too narrow a focus on competition and innovation will not do that. The needs of members should be paramount.

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Moved by

[Viscount Younger of Leckie]

107: Clause 40, page 54, line 18, after “28B,” insert “28BA,”
Member's explanatory statement
This amendment is connected to another amendment in the name of Viscount Younger to insert new section 28BA into the Pensions Act 2008.

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[Baroness Altmann (Non-Afl)]

My Lords, Amendments 112 and 113, which I shall not press to a vote, are designed to ensure that we try to keep the needs of pension scheme members at the heart of all the policy changes that we make. For me, pensions have always been about people; they are not just about money.

In relation to the clause that concerns restricting the creation of new non-scale default arrangements, these amendments seek to permit default arrangements below scale—for example, where a company seeks to identify different types of member and put together a default arrangement that is specifically suited more to that type of member than to the traditional one-size-fits-all policy that pension schemes so often seem to be based on, and that certainly do not suit many of the members who are put into them.

I hope that the Minister will help me understand why the Government want to have just one default arrangement—potentially with just one common investment strategy—rather than encouraging more of a pension market that can serve individual groups of members with different needs. That could include those who are in poor health and who might need a different approach, or those who may not know when they are going to retire and therefore a life-styling fund that takes them out of higher return investments would not be appropriate for them.

The idea of pension companies asking members about themselves, beyond just looking at their chronological age, seems to be rather alien. However, I hope it could become much more common, given the digital enabling that is available to pension companies. That would allow them to ask two or three relevant questions, including about someone’s health or whether they have a final salary pension alongside this scheme that they could rely on instead. That is the intention behind these amendments, and I look forward to the Minister’s response.

[Viscount Younger of Leckie (Con)]

My Lords, this amendment speak to a principle that we on these Benches have returned to throughout our consideration of the Bill: the framework we are putting in place must reflect the reality of outcomes, not simply a rigid set of predetermined requirements. This amendment recognises that many schemes quite properly design different default arrangements for different cohorts of members. That is not a weakness; it is a strength. It reflects an understanding that savers are not all the same, and that good outcomes often require a degree of tailoring.

Where such schemes are performing well and delivering strong outcomes for their members, they should not be penalised simply because they do not conform to a single uniform model. In that sense, this amendment is important. It does not undermine the objective of improving scale where that is beneficial, but it ensures that we do not lose sight of the ultimate goal, which is—returning the same theme—better outcomes for savers.

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baroness, Lady Altmann, for introducing her amendments. I covered quite a bit of this ground in my response to the previous group, which was quite long, so I will not repeat that—I hope that the noble Baroness will not mind.

As I set out in the previous group, Chapter 4 of the Bill relates to default arrangements and the fragmentation in schemes that are in the market. To reiterate, the measures in this chapter do not cap or limit the number of default arrangements, nor do they impact on the ability of a new entrant to enter the market. I previously mentioned innovation, which features in the new entrant pathway, but what we want to see is default arrangements being created to meet member needs. That is why we are introducing a range of measures for them to need regulatory approval before they begin to operate.

On Amendment 112, I understand that the intent is to allow a scheme to have

“several non-scale regular arrangements”.

However, it is not clear what is meant by a “regular” arrangement in the description, as it is not defined.

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[Baroness Altmann (Non-Afl)]

My Lords, I have the pleasure of supporting these amendments. I am very pleased that the Government have made the decision to improve flexibility and help the working of these new superfunds. We do not yet know quite how they will go, so I thank the Government and fully support the amendments.

[Viscount Younger of Leckie (Con)]

My Lords, I shall speak briefly to this group of amendments. At the outset, I recognise that a number of these amendments are either technical or consequential. It is entirely right that the Bill should be internally consistent and operable in practice.

However, Amendment 117 raises a more substantive issue on which I would be grateful for some clarification from the Minister. This amendment alters the way in which the protected liabilities threshold for superfunds is determined, moving to a model in which the threshold is defined as a percentage set out in regulations. I know that we are on the cusp of closing proceedings on the Bill today, but I am afraid that I have a number of questions on this.

First, will the Minister set out clearly what problem this amendment seeks to address? What deficiency has been identified in the current approach? Secondly, what assurance can the Minister give that this change will not weaken the level of protection afforded to members? Is there any scenario in which this more flexible, percentage-based approach could permit lower funding levels than would otherwise have been required? Thirdly, how does the Secretary of State intend to determine the appropriate percentage? Will there be a minimum floor or is this entirely to be left to future regulations? Finally, given the importance of this safeguard, can the Minister explain why it is not being set out in the Bill and what level of parliamentary scrutiny will apply to the regulations that determine it?

Flexibility can be valuable, but when it comes to member protection it must be accompanied by clarity and by robust safeguards. I look forward to the Minister’s response.

[Baroness Sherlock (Lab)]

I am grateful to the noble Baroness, Lady Altmann, for her support. I know that she recognises the problem that this is designed to solve and why the Government have done this.

In response to the noble Viscount, Lord Younger, obviously I completely failed, but I thought that my speech explained the problem that this was designed to solve. Let me try again. If I say it again slowly, that might help—that is a comment on my speed, not on his comprehension, if I may say so.

The Bill is establishing a permanent supervisory framework for superfunds—there is only an interim arrangement at the moment. There are two different issues. A breach of the technical provisions threshold can result in the scheme’s buffer being released to the trustees, whereas on the other hand, if you breach the protected liabilities threshold then that can result in the superfund being wound up. If those end up being breached in not the traditional order, the superfund could end up being obliged to wind up, when in fact it could meet its liabilities other than because of this issue. That is the problem. I have tried to explain it more simply, and I apologise that I did not do so more clearly at the start. We discussed the problem in Committee, when the noble Baroness, Lady Bowles, tabled an amendment and we had a conversation about it. That is the problem we are trying to solve.

I said at the time that it cannot necessarily be in members’ interests to force a superfund to wind up when its technical provisions are lower than its protected liabilities, if it could otherwise meet its liabilities. I said that there was an option to use a clause in the Bill to deem that a threshold had not been breached, but if it is potentially going to be a more common problem, it makes more sense to deal with that in the way we have. The way we have set the threshold is about providing flexibility to make sure that schemes are not wound up unnecessarily.

We currently do not expect to set the threshold below PPF levels of benefits—I suspect that that is what the noble Viscount was aiming at. That is not what we intend. The focus is on ensuring the best possible member outcomes and protecting the PPF. Until the evidence gathering is complete, it would not be appropriate for me to speculate on precisely where that will be set, but I can say to him that that is the case.

On how it will be provided, there will be regulations. The superfund regulations will therefore be subject to the affirmative procedure. When those come back here, there will be every opportunity for the House to discuss them. I hope that answers the noble Viscount’s questions. If there is nothing else, I beg to move.

Pension Schemes Bill

Viscount Younger of Leckie Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, we again understand the intention behind this amendment from the noble Viscount, Lord Thurso, supported by the noble Lord, Lord Palmer. We also recognise the strength of feeling that exists on the question of pre-1997 indexation; I listened carefully just now to that strength of feeling behind the noble Viscount’s remarks. It is an issue that has been raised in this House and, separately, we have had discussions ourselves with representatives of a number of the campaigns that have taken a close interest in this matter. We have heard the arguments that they have put forward and understand clearly where this amendment is coming from and why it has been tabled.

However, we feel that there is an important principle at stake here. The noble Viscount said that his amendment was not perfect, but I will continue. The foundation of the occupational pensions system is fiduciary duty. Trustees and scheme managers are entrusted with the stewardship of pension funds on the basis that they must act in the best interests of scheme members and beneficiaries. That is the basic and fundamental point on which the entire system operates. It is also the basis on which people engage with the system in the first place: members can have confidence that those responsible for managing their pension savings are legally bound to act in their interests.

Once we begin to qualify or redefine what those best interests are, however well-intentioned the objective may be, we risk undermining that principle. If Parliament starts directing or reshaping how that duty should be interpreted in particular circumstances, we may end up tying the hands of the very people who are trusted to make those judgments. Trustees could find themselves placed in a position where they are, effectively, required to act in a way that they themselves do not believe is in the best interests of members, based on their professional judgment and their understanding of the scheme’s funding position.

I believe that would represent a concerning precedent. The strength of the current framework lies precisely in the fact that those decisions are taken by trustees exercising their fiduciary responsibilities, not by central direction or legislative qualification of what those responsibilities ought to mean in practice. We will, of course, hear more about the point that I am making on Thursday.

For these reasons, although we recognise the concerns that have given rise to this amendment and the sincerity with which they are held, we are cautious about moving in a direction that could weaken the clarity and independence of fiduciary duty within our pensions system. We regret that we are therefore not in a position to support this provision becoming a feature of the pensions landscape. I am sorry to disappoint the noble Viscount to that extent.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to the noble Viscount, Lord Thurso, for introducing his Amendment 22. Many members of defined benefit, or DB, schemes have seen inflation erode the value of their pensions, as he said. That is especially true where any uplift on older benefits depends on decisions made at the level of the scheme. I want him to know that I hear those concerns loud and clear. I have heard them expressed by affected pensioners, as many Members will, and I understand the strength of feeling among them.

As the House will know, schemes take different approaches to indexation: some schemes have to provide increases under their rules; some do not require them at all; and a significant number allow discretionary increases, but usually only where both trustees and the sponsoring employer agree. This amendment focuses on the role of trustees in relation to pre-1997 discretionary indexation. The fact is that, in many schemes, such indexation can be awarded only where the sponsoring employer provides consent, which reflects the scheme rules. It means that trustees may be unable to award uplifts where employers are unwilling to agree, even in well-funded schemes.

I recognise why many schemes give employers a central role. Employers ultimately stand behind the scheme and may have legitimate concerns about future affordability and their long-term liabilities. But the result is that when employers are unwilling to support discretionary increases, even when the scheme is in a strong funding position, trustees are, effectively, prevented from acting. I understand that that limitation creates concern, especially in schemes that appear well-funded and may be running surpluses but are not providing discretionary uplifts on older benefits.

However, although I understand the challenge, we cannot accept Amendment 22 because—the noble Viscount identified this himself—it would require a statutory review of trustees’ fiduciary duty in a complex area. Fiduciary duties underpin trustees’ responsibilities to protect all members and ensure the long-term solvency of their scheme. Changes that go beyond trustees freely acting in line with their fiduciary duties on this issue and removing trustee discretion, or removing the employer from any decisions, could have significant consequences for scheme funding, employer sustainability and member security. In any action they take, the Government have to consider all schemes, not only those that are well funded or have historically paid discretionary increases. Mandating a statutory review thus risks creating uncertainty for all trustees and employers, while we are undertaking wider work on surplus and helping schemes make endgame choices.

The key point, as I know the noble Viscount, Lord Thurso, recognises, is that the difficulty in the hard cases is not typically that trustees lack the willingness or the legal ability to act. They are often acutely aware of the pressures their members are experiencing. However, I agree it would be helpful to develop a clearer understanding of the factors that prevent some well-funded schemes awarding discretionary increases, particularly where employer consent is not forthcoming. I am aware that the Pensions Regulator has been considering how it might build its evidence base in this area, and any insights from that work would be helpful in informing future thinking.

The Government recognise the importance of this issue. As I indicated in earlier debates, the wider package on surplus, including giving trustees the ability to agree surplus payments to employers, is intended to support more balanced negotiations so that both members and employers can benefit. I hope that has given at least an explanation to the noble Viscount, Lord Thurso, as to the position that the Government are in but, for all those reasons, although I recognise the concerns he has raised, I hope he can withdraw his amendment.

Pension Schemes Bill

Viscount Younger of Leckie Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, first, I have to declare an interest because after 28 years as a councillor in the London Borough of Barnet, I am in receipt of a modest local government pension. I sometimes forget to declare that and I do so now. We have been lucky to have incisive speeches from the noble Lord, Lord Fuller, the noble Baroness, Lady Noakes, my colleague and noble friend Lady Bowles and the noble Baroness, Lady Altmann. After them, I almost want to ask, “Is there anything else one should say?”, but as a politician, I will do so.

This has been a useful debate on the future governance of the Local Government Pension Scheme, and there is a common theme running through it: the need to protect fiduciary responsibility while ensuring that governance is modern, credible and transparent. The amendments in this group range from consultation requirements to the possibility of participation in more than one asset pool, and to the important question of whether Ministers should be able to steer investments towards particular assets and places. I hope that Amendment 4 will be moved at the end of this debate; I would certainly want to support that amendment, if the noble Baroness decides to move it.

We on these Benches recognise that pooling can bring efficiencies and expertise, and we generally welcome the provisions on the Local Government Pension Scheme in the Bill, but bigger is not always better simply because it is bigger. Flexibility matters: if one pool has genuine expertise in a special asset class, there is an argument for allowing schemes to benefit from that knowledge, rather than being locked into a single route for all purposes. Equally, if powers are to be used over asset pools, proper consultees matter. It is hard to object to hearing from bodies such as the Government Actuary’s Department and the Pensions Regulator before directions are given. These are basic disciplines of good administration; I only hope that the Local Government Pension Scheme uses those provisions.

Our wider concern remains the same one raised repeatedly in Committee: that the Bill is too ready to create broad powers first and to explain the practical boundaries later. On the Local Government Pension Scheme, that is particularly sensitive because we are dealing with very large sums, long-term liabilities and members who expect prudence—that was probably why they went into local government in the beginning—not improvisation. So our test is straightforward: does the provision strengthen scheme governance, preserve proper fiduciary decision-making and protect members from political or poorly evidenced intervention? Where it does, it deserves support; where it does not, Ministers still have work to do.

The amendments in this group are pretty modest. As we go through the Bill, we will come to other amendments that would go further. The Minister and her colleagues should think again about whether these amendments improve the Bill. They are not against the Bill or the Government; they are prudent. They would provide fiduciary powers and the power to use them. I invite Ministers to take a step back and consider giving their support to these early amendments and asking their colleagues in the other House to do so. These are reasonable amendments. As I say, later in this debate there will be other amendments that go further. I would like to hear that Ministers feel there is some credibility in the amendments in this group, particularly Amendment 4.

[Viscount Younger of Leckie (Con)]

My Lords, I want to start by thanking my noble friend Lord Fuller for commencing our discussions on this important Bill, which is now on Report. We on these Benches look forward to an effective and constructive Report and hope that we can work with noble Lords across the House to make the improvements to the Bill that, in our view and that of many in the pension sector, are desperately needed.

Towards the end of my remarks, I will speak to the important Amendment 4, in the name of my noble friend Lady Noakes, but first I will speak briefly in support of Amendment 1, in the name of my noble friend Lord Fuller, and Amendments 2 and 5, in the names of my noble friend Lord Fuller and the noble Baroness, Lady Altmann. Taken together, these amendments would make constructive improvements to the Bill.

Amendment 1 would ensure that both the Government Actuary’s Department and the Pensions Regulator are formally consulted before directions are given in relation to asset pool companies. This seems an eminently sensible and proportionate safeguard. The provisions in the Bill give the Government significant powers to direct changes relating to LGPS pooling arrangements—changes that, in practice, may reshape the investment structures of some of the largest pension funds in the country.

Decisions of that magnitude should not be taken without the benefit of the best available expertise. Requiring consultation with the Government Actuary’s Department and the Pensions Regulator would ensure precisely that: actuarial and regulatory oversight would be brought to bear before such directions are issued. This would help to ensure that decisions that could materially affect the funding, governance and investment strategy of the LGPS are taken with expert input. That seems an entirely reasonable expectation when we are dealing with funds that collectively safeguard the retirement incomes—we must not forget this—of millions of public servants.

Amendment 2 addresses another important point. As the Bill stands, regulations may prohibit a scheme manager from participating in more than one asset pool company at the same time. This amendment would remove that provision. Doing so would give scheme managers greater independence in determining how best to structure their investments. If, as was mentioned earlier, one asset pool develops particular expertise in, say, infrastructure, private markets or another specialist asset class—akin to a centre of excellence, perhaps—there may well be circumstances in which it is entirely sensible for multiple schemes to participate in that pool for that purpose.

The noble Baronesses, Lady Bowles and Lady Altmann, put it very eloquently. Preventing scheme managers accessing such expertise simply because they already participate in another pool risks imposing unnecessary rigidity on the system and is unnecessarily prescriptive and inflexible. By removing that restriction, this amendment would allow scheme managers greater freedom to act in the interests of their members—which, as the Government sometimes forget, must remain the central principle guiding all decisions in the management of pension assets.

Amendment 5 follows a similar logic. It would remove wording that restricts how asset pool companies can undertake investment management activities, thereby allowing investment opportunities created within one pool or by one scheme manager to be accessed more widely across the LGPS. In practical terms, this would facilitate cross-pool collaboration within the scheme. Rather than forcing each pool to operate in isolation, it would allow expertise and opportunities to be shared, broadening the menu of options open to scheme managers when determining how to allocate assets and pursue long-term returns. At a time when the Government are encouraging greater scale and collaboration within pension investment, it seems entirely sensible that the legislative framework should not inadvertently constrain that collaboration if that is the choice of the scheme manager, to the ultimate benefit of members of that scheme.

More broadly, these amendments recognise an important principle. As structural changes are made to the way that LGPS operates that could significantly reshape the pensions landscape as a “coherent system”—as the noble Baroness, Lady Bowles, well put it—it is essential that those responsible for managing pension funds retain the flexibility to exercise their judgment in the interests of their members. Pooling can bring benefits, but it should not come at the expense of professional discretion or fiduciary responsibility. These amendments strike a reasonable balance: they would strengthen oversight where central powers were exercised, while preserving the ability of scheme managers to make decisions that best served the members whose pensions they are entrusted to protect.

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Moved by

[Viscount Younger of Leckie]

12: After Clause 7, insert the following new Clause—
“Interim reviews of employer contributions rates in the Local Government Pension Scheme(1) The Secretary of State must by regulations made under section 3 of the Public Service Pensions Act 2013 (scheme regulations) amend the Local Government Pension Scheme Regulations 2013 (S.I. 2013/2356) as follows. (2) After regulation 58(4) (funding strategy statement), insert—“(5) The funding strategy statement must comply with regulation 64A(2) and be published in a form accessible to non-specialist readers.”(3) Regulation 64A (revision of rates and adjustments certificate: scheme employer contributions) is amended as set out in subsection (4).(4) For paragraphs (1) and (2), substitute—“(1) The administering authority may obtain a revised rates and adjustments certificate where the funding strategy statement sets out the administering authority’s policy on revising contributions between valuations and one or more of the following conditions is met—(a) there has been a significant change in the liabilities arising or likely to arise since the last valuation;(b) there has been a significant change in the employer’s ability to meet its obligations to the Scheme, consistent with that employer’s obligations to deliver value for money and services for local taxpayers;(c) the employer requests a review and agrees to meet the reasonable costs of that review.(2) The funding strategy statement must include a clear and accessible policy on revising contributions between valuations, including—(a) the process and evidential requirements for employers to request a review,(b) indicative timescales for the administering authority to determine such a request,(c) the criteria the administering authority and fund actuary will apply (including risk appetite and prudence levels), and(d) the approach to apportioning reasonable costs of any review.(3) Where an employer makes a request under paragraph (1)(c), the administering authority must—(a) acknowledge the request within 10 working days,(b) determine the request within 12 weeks (or such longer period as is agreed with the employer), and(c) provide written reasons for its decision.(4) For any review under this regulation, the fund actuary must prepare an Actuarial Methods Statement which—(a) explains, step by step, the models and methodologies used to project liabilities, assets and funding needs,(b) sets out all material assumptions, including discount rates, inflation, salary growth, mortality, longevity improvements and any smoothing or damping mechanisms,(c) specified the level of prudence applied and how that prudence has been determined, and(d) provides sensitivity and scenario analysis showing potential outcomes under varying market conditions and employer covenant assessments.(5) The administering authority must publish the Actuarial Methods Statement alongside the decision under paragraph (3)(c), subject only to the redaction of information which is commercially sensitive or relates to individuals.(6) The Secretary of State must issue statutory guidance on—(a) how councils and other employers may make requests under paragraph (1)(c), (b) the matters administering authorities should take into account when considering such requests, including the balance between Scheme solvency and local taxpayers’ interests in the continued delivery of core services, and(c) the minimum standards for actuarial transparency under paragraph (5).(7) Administering authorities must have regard to guidance issued under paragraph (6)(a).(8) The Secretary of State must publish the guidance within six months of the day on which the Pension Schemes Act 2026 is passed.””Member's explanatory statement
This new clause aims to strengthens regulation 64A of the Local Government Pension Scheme Regulations 2013 to make interim reviews of employer contribution rates more accessible and transparent.

[Viscount Younger of Leckie (Con)]

My Lords, I will address Amendment 12, which stands in my name and that of my noble friend Lady Stedman-Scott. This amendment addresses an issue that sits at the very centre of the concerns we have raised throughout the passage of the Bill: how contribution rates in the Local Government Pension Scheme are set, reviewed and scrutinised. This debate will take us further than the previous debate on a related issue.

Throughout the passage of the Bill, we have returned repeatedly to a central concern about the Local Government Pension Scheme: whether the system as it currently operates is truly striking the right balance between prudence and responsibility to members. We touched on that during the last debate. Prudence is essential; no one disputes that. Pension promises stretch across decades and it is entirely right that those responsible for safeguarding them adopt a careful and responsible approach—I feel sure that when or if he chooses to speak, the noble Lord, Lord Davies, will have something to say on this matter—because prudence must also be proportionate, transparent and sustainable.

A pension system must not only protect members’ benefits; it must also operate in a way that is affordable for those who are required to fund it. That balance is fundamental to the long-term health of the scheme and a key consideration for many admitted bodies considering if they should remain a member of it. The noble Lord, Lord Katz, alluded to this in a previous debate, but at present employer contribution rates are set through the actuarial valuation cycle which takes place, as he may have said, every three years—note: every three years. That process is well established and plays an important role in maintaining the long-term stability of the scheme. But it also means that once those rates are set, employers can find themselves locked into them for a considerable time, even if the financial circumstances of the scheme or of the employer itself change significantly during that interval. We believe that rigidity is increasingly difficult to justify.

We know that financial conditions can change quickly. Employer finances can change, liabilities can change and market conditions can shift. We know that from recent experience, yet, under the current framework, the mechanisms for reviewing contribution rates between valuation cycles are limited and, in practice, often opaque. Amendment 12 seeks to address that problem by creating a clearer and more transparent framework for reviewing employer contribution rates earlier when circumstances change.

Under this amendment, administering authorities would be able to carry out an interim review of contribution rates where there has been a significant change in scheme liabilities or in an employer’s financial position, or where an employer formally requests a review and agrees to cover the reasonable costs of undertaking it. We believe this is a very reasonable and sensible change. It makes the process more accessible to employers who believe that the contribution rates they are being asked to pay no longer reflect reality. It recognises that financial circumstances do not move neatly in three-year cycles—and nor do they—and allows the system to respond when material changes occur.

However, the amendment goes further than simply enabling reviews. It also strengthens transparency around the actuarial assumptions that underpin those decisions. That level of transparency is essential, as was again debated in the previous group. Contribution rates have few real consequences for employers participating in the scheme, whether local authorities, academies, housing associations or many others. Those organisations must plan budgets, allocate resources and deliver services on the basis of the costs they are required to meet. They should therefore be able to understand the assumptions and methodologies that determine those costs, so this amendment helps to ensure that contribution rates can respond to changing financial circumstances. It would ensure that employers are not locked into potentially outdated rates for three years at a time and that the actuarial assumptions underlying those decisions are transparent and, very importantly, open to scrutiny.

Ultimately, this is about responsibility. We all expect public bodies to act responsibly when they handle public money, and pension funds are no exception. As we have heard, they manage very substantial sums of money, and the decisions taken within those systems have consequences for not only scheme members but employers and taxpayers. With responsibility must come transparency and accountability, and where contribution requirements change or are reviewed, the assumptions behind those decisions should be visible and understandable.

However, crucially, this amendment would not undermine the role of actuaries; nor would it weaken the prudence that underpins pension funding. It would ensure that the system remains responsive and more flexible, transparent and accountable to those who are required to fund it. For those reasons, this amendment represents a constructive and necessary improvement to the framework governing the Local Government Pension Scheme, and I urge the Government to adopt it. I will, of course, listen very carefully to the upcoming debate, short or long, but I give notice that I am minded to test the opinion of the House. I beg to move.

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[Lord Katz (Lab)]

I thank the noble Viscount, Lord Younger of Leckie, for his amendment, and I share the interest in ensuring that interim valuations are accessible and transparent for all employers in this scheme.

Amendment 12 proposes changes to Regulation 64A of the Local Government Pension Scheme Regulations 2013, which concerns valuations carried out outside of the triennial valuation cycle. In Committee, I committed that the Government will consult on changes to Regulation 64A this year, and we will consider the matters raised as part of that consultation.

I reiterate the point I made in Committee: any changes to regulations need to be properly considered to avoid unforeseen consequences. The views of employers, funds and other sector groups are vital to this process, and amending legislation now would prevent them contributing to the policy design and therefore ensuring our ability to get the best possible outcome. There is clearly value in having a mechanism that allows employers to review contribution rates, especially where employer covenants or liabilities change significantly, but this must remain consistent with the triennial valuation and be workable for all participants across the sector.

Amendment 12 aims for additional transparency, in a similar vein to the other amendments we have discussed this afternoon. The noble Viscount should note that the policy on interim valuation contribution reviews is set out in the funding strategy statement, on which employers are consulted.

The noble Baroness, Lady Altmann, spoke in detail about the time lag of valuations and the impact of events in the financial cycle. As everyone will be aware from geopolitical events, markets can vary from one day to another. Simply requesting a valuation on the basis of a change in the day’s markets would be excessive, and indeed many funding strategy statements state this. The current regulations provide for interim valuations on the basis of changes in liabilities or covenant. The risk of liabilities not being met is that the burden goes up not for the Government but for the council tax payer, as a council that may not be in a good financial position, as the noble Baroness says, needs to increase council tax to cover liabilities. The Government do not underwrite the scheme. Your Lordships’ House should remember that 50% of LGPS employer contributions are not from local authorities, so we are not talking about a situation where it is exclusively local authorities that would cope with the change.

I said in Committee—and I could have said this in response to the previous group as well—that it is marvellous to see the Benches opposite show concern now about the funding of local authorities. We are concerned about it, and we were concerned about it for the previous 14 years when the Benches opposite were in government and had a differing view of imposing austerity on local government. I will say no more, and I apologise to your Lordships’ House—I could not help myself, having been very good on the previous group.

I hope my response demonstrates that the Government have considered the points raised through this amendment carefully. I therefore ask the noble Viscount, Lord Younger of Leckie, to withdraw Amendment 12.

[Viscount Younger of Leckie (Con)]

I am grateful to the Minister and to my noble friend Lady Altmann for her supportive remarks. This amendment raises a simple but important question: how do we ensure that the Local Government Pension Scheme remains responsive, transparent and accountable when the financial circumstances surrounding it change? It sounds to me very reasonable.

I have taken note of the remarks made by my noble friend Lady Altmann, from her long experience. It was interesting that she pointed out that the timeframe of three years could easily be four years for the delays that necessarily have to be there, and she made further powerful points. By accepting this amendment, the Government could have a greater chance of achieving their growth targets with a domino effect—they might like to take that point on board.

Across the country, as my noble friend Lady Stedman-Scott said in the previous debate, many local authorities and other participating employers are operating under immense financial pressure. We know that councils are already struggling to balance their books, and some are being forced to seek emergency support simply to maintain basic services. In that context, the ability to review contribution rates where circumstances have materially changed is surely a matter of responsible governance.

The amendment is simple. It would establish a clearer framework through which contribution rates could be reviewed when there is a good reason to do so. For those reasons, I believe this amendment represents a sensible, reasonable and proportionate improvement to the current framework. It would reinforce the principles of transparency, accountability and responsible stewardship of public funds. I therefore stick to what I said at the beginning: when my amendment is called, I will wish to test the opinion of the House.

Finally, I do not think that the Minister is correct. He said the policy should “remain consistent”, which shows a great lack of understanding of what many in the industry are actually saying and a great inflexibility from this Government. I wish to test the opinion of the House.

Universal Credit (Removal of Two Child Limit) Bill

Viscount Younger of Leckie Excerpts

2nd reading & Committee negatived & 3rd reading
Thursday 12th March 2026 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, in winding up for the Opposition, I say that we have had three remarkable maiden speeches this afternoon. I will make a few comments about each.

I am so pleased that the noble Baroness, Lady Teather, has recovered and regained her voice. I have no doubt that we will be hearing much of it. I hope that she will rejoin the Parliament Choir; I declare my interest as a tenor in the choir.

I applaud the clear energy, entrepreneurship and communication skills of the noble Lord, Lord Walker of Broxton. I acknowledge that he provides employment to many in the retail sector. I have no doubt that he will have much to offer from his high street experiences and, as he said himself, a fresh way of thinking, however that can be defined.

The noble Baroness, Lady Antrobus, delivered an excellent maiden speech. She will be invaluable in using her experience and knowledge of the Armed Forces, both in the air and terrestrially, in contributing to the House. We have been very lucky this afternoon.

I thank all other noble Lords who contributed to this debate and set out their views with such conviction on what is—in my view and in our view on this side—a deeply mistaken policy. I say that as someone who is proud of the compassion that defines this country. The British people are generous, fair-minded and instinctively willing to help those in genuine need. That spirit of neighbourliness and of looking out for one another is something we should always cherish and protect. The noble Baroness, Lady Teather, is right: handling language and collaboration and getting these matters right are important factors in communities, where matters can be extremely sensitive.

However, compassion must also be balanced with fairness, as my noble friend Lady Jenkin alluded to. I am afraid that this policy tips that balance too far the other way. It asks those who work hard, pay their taxes and support the system to shoulder ever-greater burdens while expanding reliance on the state in a way that risks undermining the very foundations that sustain it.

It would be easy for me to say that raising the cap would be the right thing to do, and I was very pleased to note that the right reverend Prelate the Bishop of Leicester and, indeed, my noble friend Lord Redwood acknowledge that we all want to reduce child poverty—I personally want to, we all want to, but how we do it continues to divide opinion; that much I think we can agree on.

I was struck by the remarks from the noble Lord, Lord Bird, in his powerful speech. I believe his clarion call for greater social mobility is a key point: a hand up, perhaps, to a better future—or, indeed, to any future for those who are really wallowing in poverty, particularly children. The noble Lord, Lord Watson, echoed this sentiment.

As my noble friend Lady Stedman-Scott set out, it cannot be right that parents who do the responsible thing, who go out to work, contribute to our economy, and carefully manage what they can afford for their families, are expected to fund a system in which others face far fewer of those same constraints. At its heart, that is the problem with the Bill: it seeks to address a serious issue but does so in the wrong way. In trying to demonstrate compassion, it risks undermining fairness and, without fairness, surely public confidence in the welfare system itself will begin to erode. Is it any wonder that an overwhelming majority of the country oppose this policy, as my noble friend Lady Stedman-Scott said?

This policy comes at a time when our welfare system is facing what can be described only as a mounting crisis. At the Spring Statement, the OBR confirmed that welfare spending is set to rise by £74 billion over the next five years. Forecasts also show that spending on health and disability benefits alone will be £1.3 billion higher than previously expected. At the same time, the economic outlook is deteriorating. The OBR now forecasts unemployment reaching 5.3%, higher than the 4.9% peak predicted only at the time of the Budget.

Despite the Chancellor’s repeated claims of responsible fiscal management and careful stewardship of the public finances, the reality is that welfare spending continues to surge. The total welfare bill will rise by £18 billion this year alone, then by roughly £15 billion every year across the forecast period. In total, the OBR expects the Government to spend £333 billion on welfare this year—10.9% of our entire economy. By 2030-31, that figure is projected to reach £407 billion—11.7% of GDP. The think tank Onward has warned that on this trajectory welfare payments will, in effect, cost individual taxpayers around £3,000 a year by the end of the decade as Britain’s benefit system edges towards becoming unsustainable.

The noble Baroness, Lady Sherlock, stated in her opening remarks that some think it is all about cost. Cost is a big factor, but it is not the only one, and I make the point that other benefits are there, including for larger families, to help with essential household needs, such as the household support fund directed through local authorities.

I understand the points the noble Lord, Lord Babudu, and the noble Baroness, Lady Sherlock, made about those being in work making decisions at that time about family size and then finding themselves out of work—that is an obvious and important point—and the need, which I feel strongly about, to support single-parent families.

My noble friend Lord Redwood eloquently iterated that there are other reasons why children wallow in poverty, such as dysfunctional family life and, as he said, which is very important, a lack of love. The noble Lord, Lord Sikka, made the very important point about the need for better pastoral help for parents. Handouts are not just the key. In short, the system is lurching in the wrong direction. Costs are already enormous and continue to climb at the same time as unemployment is expected to rise. This is simply not a sustainable position.

We must remember who ultimately bears that cost. An additional £3,000 a year does not fall on some abstract entity called the taxpayer, but on ordinary working people—teachers, nurses, those who work in the retail sector and families who rise early, work long hours and try to balance their household budgets without the benefit of generous state support. These are not the super-rich; they are the people who make up the backbone of our country. Before we expand the welfare state still further, we should at least ask ourselves what burden we are asking them to carry. I am not convinced that the Government have asked a question more searching than how they can placate their Back-Benchers for another few weeks. My noble friend Lady Stedman-Scott was absolutely right to point that out. It has to be said, although I see the Minister shaking her head.

My noble friend Lady Stedman-Scott set out clearly the fundamental flaw in the Government’s logic. Ever-increasing welfare spending does not solve poverty; it helps conceal it. A welfare offer of this scale risks doing something else far more damaging. It will begin to erode the very foundations on which the welfare system depends. The system ultimately relies on a balance—a word we have heard this afternoon. Those who can work do so, and through their work they support a safety net for those who genuinely cannot.

However, that balance is now under real strain. Welfare spending is forecast to rise by around a fifth over the next five years, at the same time as one in five working-age adults is not in work. We are well aware of those statistics. That trajectory should concern all of us. The welfare state was never intended to become an alternative to work. If too many people come to rely on benefits rather than the rewards of employment, the model will simply cease to function. I was struck by the strong points made by the noble Lord, Lord Walker, in this area. The system depends on contribution as well as support.

Yet instead of confronting that challenge, the Government’s response has been to step away from reform and move in the opposite direction, expanding spending commitments that the public finances can scarcely sustain. A welfare system that discourages work does not reduce poverty in the long term but risks entrenching it. If we are serious about giving people the best chance of a secure and independent life, that is a reality we cannot afford to ignore. This policy tips that balance even further in the wrong direction and the Government should be really concerned about the long-term effects that it risks having on our public finances and the welfare system as a whole. Labour Back-Benchers, I fear, are too wedded to the idea of the welfare state. It is akin to somebody inching their way along the branch of a tree further and further until it snaps.

When we step back from the detail of this debate, the question before us is very simple: what kind of welfare system do we want for this country? Do we want a system that is fair to those who fund it, sustainable for the long term and focused above all on helping people into work and independence, or do we want a system that grows ever larger, more expensive and more detached from the principle that work should always pay? The British people instinctively understand that balance. My noble friend Lady Stedman-Scott pointed out the statistics and polling. They are compassionate, but fair. They believe in helping those who genuinely need support, but also that those who can work should do so and that the system should never place the greatest burden on those already doing the right thing. For that reason, and in the interests of fairness, sustainability and the long-term health of our welfare state, I cannot support the Bill and I firmly believe that the cap should be reintroduced as soon as possible.

Pension Schemes: Ministerial Powers

Viscount Younger of Leckie Excerpts

Wednesday 11th March 2026 Lords Chamber

[Baroness Sherlock (Lab)]

I thank the noble Lord for an excellent question; with his background I would expect no less. The simple answer is yes. To be clear, the power does not direct schemes into any specific assets or projects. What it does is set a broad framework. It talks about private investment as a whole, not about specific assets. Crucially, the safeguards are really clear. If the power ever comes to be used, a number of things have to happen. First, there has to be a report commissioned and published before the power is used, so as to make sure that the conditions are right, and to show the impact on savers’ interest and on growth. Secondly, there is a savers’ interest test. If the trustees believe that it would not be in the interests of their beneficiaries to follow the direction, not only can they, but one would expect their fiduciary duties to guide them to, make an application for an exemption under the savers’ interest test; that is there to do that job for them. There is also parliamentary scrutiny of any regulations. I hope that that reassures the noble Lord.

[Viscount Younger of Leckie (Con)]

As the Minister herself has just said, the signatories to the Mansion House Accord signed up to a voluntary agreement to invest in UK assets. Does she agree that they were not aware that the reserve power, the so-called mandation element, was going to be in the Bill? Does she therefore agree with me, with many of the signatories themselves, and with those in the pensions industry that mandation goes well beyond the Mansion House Accord?

[Baroness Sherlock (Lab)]

My Lords, to be clear, the Government designed this power specifically to backstop the Mansion House Accord, and that is our intention. I am always open to suggestions of ways to make that clearer than we have tried to do so far. I had a great opportunity to talk to many Members of the House about this and many other issues, and I am happy to carry on doing that. There is a very simple way for any of the Mansion House signatories to make sure that this power is never used: to keep to the voluntary commitments that they have already made. If that happens, there will be no need for the power ever to be used and the Government will not bring it in, so everybody will be happy. That is the simple way forward.

Rent Officers (Housing Benefit and Universal Credit Functions) (Modification) Order 2026

Viscount Younger of Leckie Excerpts

Tuesday 3rd March 2026 Grand Committee

With those few words giving a local example and saying what happens where I am, I hope that I have illustrated the case that my noble friend was making. I know, because I can see the Minister’s face, that she feels the same way about this as we do: it is finding the solution that is the difficulty.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Thornhill, for opening this short debate. Let me say at the start that His Majesty’s Opposition support the principle behind the instrument before us. It reflects a careful exercise of the Government’s statutory powers. The order will ensure that local housing allowance rates, which determine the housing support paid to universal credit and housing benefit claimants, remain at the level set on 31 January 2024 for the 2026-27 period.

While we believe that the decision behind the order is sensible—and I would argue, the only way—we also recognise that concerns have been raised, including by the Secondary Legislation Scrutiny Committee, about the impact of freezing rates in a context of rising rents. Both noble Baronesses put that case very eloquently. According to figures from the DWP, rents have increased by 14% since the LHA was last increased in April 2024, and over 50% of people in receipt of either housing benefit or universal credit see a shortfall between the cost of their rent and housing support. I say again that the noble Baroness, Lady Thornhill, eloquently set out her case and the noble Baroness, Lady Pinnock, added her own facts and interesting anecdotes. She went on to say that we cannot carry on spending as much as we are, with which we all agree.

The question that we all come back to is what to do about this. I will refer later to the two-child limit, which is perhaps a black cloud hanging over us all, but can the Minister set out what other measures of help are available for households facing squeezed budgets? Can she explain, particularly for me, the thinking and the policy behind the crisis and resilience fund—the so-called CRF—which will, as I understand it, incorporate the old discretionary housing payments, though not in Wales? I would like to understand the difference here between the CRF and the DHPs, or how they interrelate. By what mechanism will those who are most in need be targeted from now on? What role is there for local authorities?

In her speech, the noble Baroness, Lady Thornhill, referred to houses and homes. She is quite right, because lowering rental levels is surely a priority to help with this particular issue. The Government have said that homes, and building more homes, are a priority. They have stated publicly and clearly that they need and wish to build 1.5 million homes by 2030. If that were the case, it would increase supply, which would, in turn, decrease rents. With that, comes decreased demand, and I suppose the theory is that each house will therefore demand less rent. Where are these new homes? We are more than 18 months into this Government. What progress is being made? This strikes me as being a vital element of this order. The evidence shows that fewer homes are being delivered per year now than the maximum that the last Government managed in a year, which I happen to know was 240,000. I look forward to the Minister’s response to these and other points outlined by the Committee.

This order must be seen in a wider context. We must bear in mind public spending and the welfare policy under this Labour Government. Since 2010, successive Conservative Governments have sought to reform and target welfare so that it acts as a genuine safety net and encourages people into work. With the introduction of universal credit, the central focus was ensuring that the welfare bill was affordable to the taxpayer. We have now set out a plan to deliver £47 billion-worth of savings over the next Parliament; around £23 billion of that will be from non-pensioner welfare reforms, reducing waste and tackling the rising debt. I must make it clear that we will and we must continue to protect those who are genuinely and most in need.

This Government’s approach has been rather different. They have dramatically increased welfare spending, including the breaking of fiscal promises and presiding over higher public debt and taxes. More worryingly, their decisions seem to have been shaped by short-term political pressures, rather than by clear and disciplined fiscal frameworks.

The most notable example of this is the Government’s decision to remove the two-child benefit cap—a policy against which they previously whipped their own MPs. As the Committee will be well aware, this cap was introduced by the previous Conservative Government in 2015 as part of a broader effort to ensure fairness in the welfare system. Indeed, Labour’s own leader initially refused to scrap it, even withdrawing the Whip from MPs who voted to end it and treating it at the time as a tough but necessary choice. Yet in an abrupt reversal, the current Chancellor and Prime Minister abolished the two-child limit in the 2025 Budget at an estimated cost of more than £3 billion, stating:

“We on the Labour Benches do not believe that the solution to a broken welfare system is to punish the most vulnerable”—[Official Report, Commons, 26/11/25; col. 397.]


children. Those are well-meaning words, but that is a stark departure from Labour’s earlier position and one that flies in the face of its own fiscal constraints.

The U-turn came at a time when the Prime Minister’s net favourability happened to be at its lowest. This is irresponsible decision-making. The Government’s expansion of welfare spending has led to higher taxes and long-term pressures on the public finances, with the UK continuing to borrow well over £100 billion per year to fund day-to-day spending. The noble Baroness, Lady Thornhill, might bear this figure in mind because reducing it is surely a massive challenge and a must do to make a real difference through massive savings, which will, ultimately, feed through into alleviating local pressures to help the least well-off. Surely this is one thing that must be looked at with more urgency.

To be clear, we do not believe it is fair to raise the two-child limit. This is because many families in work make the decision to live within their means, including making decisions about the size of their families. These same families lose out when additional funding is provided to those out of work who decide to have more than two children. I am aware that the Bill will soon come before the House and that we will have the opportunity to debate this matter all too soon—it might even be next week—and we will continue to press the Government to ensure that housing support, and welfare more broadly, are sustainable and fair. We must make every effort to support individuals and families into well-paid work and not increase dependence on benefits.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Thornhill, for introducing her Motion. If that was the first time she has done so, I commend her on how clearly she set out her case. I thank her for giving us the opportunity to debate the incredibly important subject of housing support. I also thank the other noble Lords who have contributed. For clarity, the order sets local housing allowance rates from April for 2026-27. In his Written Ministerial Statement on 26 November last year, the Secretary of State confirmed that LHA rates would not increase for 2026-27 but would be maintained at their current levels.

The noble Baroness, Lady Thornhill, and the noble Viscount, Lord Younger, have come at this from the perspective of fiscal inheritance. The fiscal inheritance is not a defence, but it is a reality. I remind the noble Viscount that this Government, when they arrived, were not immediately able to make choices to tackle many of the problems that had been left. Frankly, this was a target-rich environment; there were challenges right across the environment. Our public services were falling apart, our roads and houses had not been supported, and benefits had been frozen or put below inflation for many years, from the coalition Government all the way through until this Government took over. So there are some really significant challenges. That is at the heart of what the Government had to do: we had to make some very difficult choices across the piece on spending, and I will try to explain why.

A key driver of high rents is the lack of housing supply, which is an issue for the whole country, not just for those who get help for their housing from the social security system. The noble Baroness, Lady Pinnock, set out the challenge that we are all facing: a significant amount of money is being spent. The Government are prioritising action in the longer term; if we focus only on the short term, we will never be able to address this issue. I will come back later to some of the specifics that have been asked about.

We have therefore committed to build 1.5 million homes in England this Parliament, which includes the biggest increase in social and affordable housebuilding in a generation. We aim to build 300,000 social and affordable homes, and the whole programme is backed by a record £39 billion investment. We know that in many cases it takes a long time to build the homes we need, so we are committed to a whole-system approach to unblock the barriers to building and to address productivity in the housebuilding sector. The noble Baroness, Lady Thornhill, is right: people need housing support now.

To illustrate the point made by the noble Baroness, Lady Pinnock, the DWP continues to spend around £37 billion a year on housing support, and over £13 billion of that is support in the private rented sector. She is right that these are huge sums, even in the context of the social security budget. The Committee may be aware that the last LHA increase in April 2024 cost £7 billion over five years. These are significant sums, so when the Government have to make choices, they have to look very carefully at each individual element of the choices in front of them.

LHA rates are reviewed every year by the Secretary of State, and a range of factors were considered before he decided not to increase rates. He looked at the rental markets across Great Britain. The noble Baroness, Lady Thornhill, is right that rental inflation is slowing: it was over 9% in November 2024 and, by last January, it was down to 3.5%. But the fact is that there are still housing affordability challenges, which are particularly acute in some areas of the country.

Given the challenging fiscal context, the Secretary of State also considered broader social security and wider cross-government priorities, including on homelessness, ahead of Budget decisions. He chose—and he was right—to prioritise certain measures that had a key impact on poverty and living standards. Reducing child poverty is a core manifesto pledge for this Government, and we intend to deliver on it. Removing the two-child limit—we will debate this in more detail next week, and I look forward to debating it with the noble Viscount—will lift 450,000 children out of poverty in the final year of this Parliament. That will rise to around 550,000 alongside other measures set out in the child poverty strategy, such as the expansion of free school meals.

I take the points made by both noble Baronesses about the challenges. If people have gaps in their rent, something else has to go. However, people’s incomes have to be seen in the round. Their incomes are formed not just by the amount of money being given for housing but the amount of money being given to support their children and whether they have to pay for all meals or can get free school meals. Therefore, the Government are making choices, and all these things have to be seen in the round.

--- Later in debate ---

[Baroness Sherlock (Lab)]

The 300,000 target is for both social and affordable housing. I would be very happy to share the noble Baroness’s views with my colleagues at MHCLG to make sure that they reflect on them, if that is okay with her, as that policy is probably above my pay grade.

On the question asked by the noble Viscount, Lord Younger, the real challenge is that, if we do not get a whole-system approach on this, we are never going to unblock the barriers to building and addressing the productivity issues in the housebuilding sector. We are, therefore, working really closely with industry—including developers, housing associations and local authorities—to try to get a step change in this area. We have already taken some significant steps to address the planning issues that were holding back the supply of housing. Within months of coming into government, we published our revised National Planning Policy Framework, and, in December, we launched a consultation on further reforms to the framework to unlock additional housing supply.

The noble Viscount also asked about what will happen to vulnerable people. Let me explain what is happening there. At the moment, there is something called the household support fund, and, separately, there are discretionary housing payments. Both of these are short-term funds; the DWP gives the money to local authorities to pay them out. The household support fund was only ever done for six months at a time, and it was never clear that it would be done again for the following six months. DHPs, however, were set for a year at a time. There were, therefore, two separate, short-term discretionary schemes with different purposes and different sets of rules. Just to complicate things, they also often went to different tiers of local government.

Instead, we are creating the crisis and resilience fund, which is a single, multi-year, streamlined fund. It will eventually replace both the household support fund and DHPs in England from 1 April 2026. The key is that people can plan for crisis and resilience support longer down the line. To ensure that there is a transition from where we are now to where we are going, discretionary housing payments will be replaced by the housing payment strand of the crisis and resilience fund, which will, for the first two years, simply mimic what discretionary housing payments do now; it will carry on in the same way. In Wales, DHPs will continue to be maintained and delivered, while Scotland has developed its own alternative for that—as this is a devolved issue—which it launched in 2024. So our intention is that that is what will happen.

The £1 billion includes the element for the housing strand but we are working closely with local authorities so that, by the time we get to year 3, we can look at how that can be done. Also, they will be able to top this up if they want. I recognise, in the context of all the challenges they have faced, that some local authorities do this at the moment because they want to put more into housing.

I hope that that is helpful. I would be very happy to answer any other questions.

[Viscount Younger of Leckie (Con)]

Thank you; that was very helpful. May I have some further clarification? Will the CRF, therefore, combine the needs around housing with the needs around budget expenditure for those individuals who are targeted for help? I am thinking that local authorities—if it goes through them—will want to look at each case as it comes up. They will want to look at the housing issues and the expenditure issues and combine the two, which would make sense if that were the case.

[Baroness Sherlock (Lab)]

Of course, there are still issues about tiers and responsibility. One of the challenges is that local government reform is going on, which is one of the reasons why we need to make sure that we work with local authorities so that, by the time we get to that point, we have taken account of that. But this is the housing strand within the CRF—the CRF does other things too; it does not deal only with housing. The housing strand, however, is there to deal with support for those whose housing needs are supported through the social security system. I hope that is okay.

The noble Viscount also asked me who makes the decisions, and it is the local authorities. We believe they are best placed to make informed judgments about relative priorities and needs in their area, but we engage with them regularly through regular forums and we publish guidance on both schemes.

I hope that has picked up the questions that all noble Lords have asked. I am always very happy to be interrupted. If I have not, I will look through Hansard, and I will be happy to write if I have missed anything.

To conclude, we really must continue to provide support towards rent costs for those who need it, including the most vulnerable. However, we will have to balance that with challenges in other areas and with the needs of the taxpayer. In the current challenging fiscal environment, measures with the greatest impact on government goals in the area of poverty have been prioritised. That is why we are investing in social and affordable housing, as well as removing the two-child limit to lift children out of poverty—which, by the way, I do not regard as a cloud hanging over anyone; it is a wonderful opportunity to lift children out of poverty, and I am proud that the Government are doing it. That was a little parenthesis. We are also fixing the work disincentive for vulnerable people living in temporary accommodation and supported housing.

Once again, I thank the noble Baroness, Lady Thornhill, for giving us the chance to discuss this important issue, and I hope that she and the Committee can understand the reasons for the choices we made.

Child Poverty Strategy

Viscount Younger of Leckie Excerpts

Monday 2nd March 2026 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I am happy to raise that with colleagues in the DfE, but I reassure the right reverend Prelate that a lot of work has been and is going on in relation to free school meals for children on universal credit, making sure—whether it ends up being auto-enrolment or whether it is about communication or identification—that we get this out to all children. Free school meals are really important and are crucial to children: not only do they get to eat but hungry children struggle to learn, so it is a win-win all round. We think this is an incredibly important measure and we want to make sure that it works.

[Viscount Younger of Leckie (Con)]

My Lords, no child should grow up in poverty, and we agree that reducing child poverty must be an absolute priority for any Government. The surest answer to helping reduce child poverty is to ensure that more families can access the security and dignity of work, which I do not believe the noble Baroness mentioned. There are many young parents among the current high level of youth unemployment—16.1%—so what steps are the Government taking to engage directly and urgently with this cohort to enable them to secure work and optimise the chances of giving their children a better future?

[Baroness Sherlock (Lab)]

My Lords, I absolutely agree with the noble Viscount, and I have said many times from this Dispatch Box that, for many families, work is the best route out of poverty. Of course there will always be those who cannot work, and they deserve a welfare state that supports them, but this Government have invested considerable sums and will invest considerably more in supporting families to work. We already know that parents are actually more likely than average to be in employment. They want to work—they want to support their kids, they want to be a good role model and they want to show them that that is what adult life looks like—but many of them will need extra help, so we are investing heavily in those who have barriers to work. The noble Viscount mentioned young people. The Government have done so much on young people. He will know that Alan Milburn is doing a report for the Government looking at why so many of our young people—one in eight—are not in employment, education or training. That figure is a disgrace and we have to tackle that.

Pension Schemes Bill

Viscount Younger of Leckie Excerpts

Committee stage
Monday 23rd February 2026 Grand Committee

Moved by

[Viscount Younger of Leckie]

207: After Clause 117, insert the following new Clause—
“Review of impact of this Act on retirement incomes(1) The Secretary of State must, within five years of the passing of this Act, carry out a review of the impact of the provisions of this Act on actual and projected retirement incomes.(2) Further reviews must be carried out at intervals of not more than five years thereafter.(3) Each review must consider—(a) the impact of the provisions of this Act on actual and projected retirement incomes, and(b) whether additional measures are required to ensure that pension scheme members receive an adequate income in retirement.(4) The Secretary of State must prepare a report of each review and lay a copy of that report before Parliament.”

[Viscount Younger of Leckie (Con)]

I hope noble Lords have had a restful recess. It is a pleasure to open the first debate on the final day in Committee on this Bill, and I look forward to hearing further and final contributions from noble Lords on this stage of the Bill.

Today, we continue to discuss important issues relating to pension schemes which of course ultimately matter greatly to the millions of individuals who are saving for, or who have saved for, their pensions, and who rely hugely if not wholly on these funds until the end of their lives. With that thought in mind, I turn first to Amendment 207, tabled in my name, which calls for a review of the impact of this legislation on retirement incomes.

When one reflects on the debates we have had in recent weeks, it is clear that they have been concerned not with procedure for its own sake but with the underlying architecture of the pensions system. The question before us has been whether the framework we are constructing will in practice enable schemes to deliver outcomes for their members. The provisions in this legislation are intended to change behaviour and outcomes: if they were not, there would be little purpose in legislating. The Government do not bring forward measures of this scale merely to rearrange, streamline or clarify administrative detail; they do so because they believe the system can and must function better.

So the objective, surely, should be clear: pension schemes should deliver stronger, more reliable outcomes for their members over the long term. Costs should be considered, but they must not become a proxy for value. The true measure of success is whether savers receive adequate and sustainable incomes—for example, the tax decisions by the Government of the time, or for inflation. Above all, schemes must operate with a single disciplined focus to act in the long-term interest of those whose savings they are entrusted to manage. If the Bill, on becoming an Act, succeeds in that ambition, it will deserve praise; if it falls short, as some noble Lords have cautioned it might, we must be able to say so clearly and respond accordingly. Amendment 207 would therefore simply ensure that we have the opportunity to assess whether the legislation has improved adequacy of income in retirement, and if not, to consider what further measures may be required.

I hope noble Lords will agree that this is a measured and sensible provision. It simply asks Ministers and departments to assess objectively what is working, to identify where improvement may be required, and to report their conclusions transparently to Parliament. In a policy area as long term, complex and consequential as pensions, that degree of accountability is essential.

I now turn to Amendment 211, which is more technical but no less important. It would require Ministers to undertake a full and transparent review of why employee and employer pension contributions are treated differently for the purposes of income tax and national insurance. If two forms of pension contributions are treated differently by the tax system, the Government should be able to explain why, clearly, publicly and with evidence. Tax design should be intentional, not simply the accumulated product of historical accident or, indeed, incremental drift.

The truth is that drift is not unique to any one Administration; it is often perceived as a feature or function of government itself. Complex systems evolve over decades; measures are introduced for sound reasons at the time, adjusted in response to fiscal pressure, amended again in the light of political compromise, and gradually layered one upon the other. In essence, “It seemed the right approach at the time” is a mantra, or even a cliché, which Governments in general find difficult to scrutinise as time marches on.

Reflection in government is not easy. Departments are occupied with immediate pressures, and many probably agree with me that those pressures have never been as great as they are at present. Chancellors face short-term fiscal constraints and Ministers must respond to events. In such circumstances, stepping back to ask first-principles questions can be difficult, yet it is precisely that discipline that Parliament should require.

In truth, we are all susceptible to accepting inherited structures without always interrogating whether the original rationale still holds. That is not a criticism; it is a recognition of institutional reality. But where differential tax treatment affects incentives, savings behaviour and long-term retirement outcomes, we have a responsibility to ask why the distinction exists and whether it remains justified. Amendment 211 offers a challenge to this Government: a transparent review would simply ensure that the current approach rests on deliberate policy choice.

At present, employer contributions receive more favourable treatment for national insurance purposes than employee contributions. That differential treatment shapes behaviour. It affects how remuneration is structured, how salary sacrifice operates and ultimately how pensions are accumulated. Pension saving is not a loophole; it is a public good. It reduces future dependency on the state, supports long-term investment and reflects the principle that income saved for retirement should not be taxed more heavily than income spent today. A structured review would require Ministers to demonstrate the behavioural impacts of the current system, its effect on savings rates and its interaction with automatic enrolment. It would ensure that we are not driven by short-term revenue considerations at the expense of long-term saving and fiscal sustainability.

This issue is especially relevant in light of the National Insurance Contributions (Employer Pensions Contributions) Bill, to which my noble friend Lady Neville-Rolfe, who is not in her place, and my noble friend Lord Altrincham have been responding on behalf of His Majesty’s Opposition. Many of the arguments advanced in that debate bear directly on the substance of this amendment. Recent decisions to increase the tax burden associated with pension saving, including the reduction in the availability and attractiveness of salary sacrifice arrangements, will have consequences across this space. These measures do not operate in isolation: they alter incentives, shape behaviour and affect the very architecture of workplace saving.

It is immediately apparent to pension providers, employers and practitioners that such changes do not, in practice, fall solely on the highest earners. They bear down on those in the middle of the income distribution and, in some cases, below it. Those impacted include young professionals in high-cost cities and mid-career workers seeking to close gaps in their retirement provision, typically earning between £30,000 and £60,000 a year. Given that the average salary in the United Kingdom is just over £37,000, it is difficult to describe individuals within that range as high earners. They are lower-income and middle-income earners, doing precisely what successive Governments have encouraged them to do: to save consistently and prudently for their retirement.

If we reduce the incentives for employer pension contributions through national insurance changes, we must, at the very least, understand the wider implications for pension accumulation, automatic enrolment participation and long-term adequacy of retirement incomes. We should not allow pension policy to become a vehicle for short-term fiscal expediency, nor should we undermine confidence in long-term saving through uncertainty or opacity. Stability and clarity are essential if individuals are to commit a meaningful share of their income to retirement provision over decades.

So Amendment 211 does not seek to dictate an outcome; it seeks an explanation. It asks the Government to set out clearly the rationale for differential treatment within the pensions framework and to consider whether that treatment remains justified in light of our shared objectives: retirement adequacy, fairness between different earners, and sustainable economic growth.

A natural extension of that argument is my Amendment 213, which calls for a review of employment rates and pension adequacy. With the Pensions Commission, under the chairmanship of the noble Baroness, Lady Drake, reporting in 2027, we recognise that the Government have chosen then to opine and report on the structure of the pensions market before turning to questions of pensions adequacy as a stage two exercise. That is their sequencing decision. However, adequacy cannot remain a secondary consideration indefinitely. If the commission is to revisit the long-term sustainability of the system, it must also grapple with who the system is working for and who it is not. During previous discussions in Committee, the Minister pledged to write about the timeliness of stage two and adequacy. How is she getting on with that reply, and where are we on the timeline on adequacy?

Amendment 211 would specify that the review must consider the pension adequacy of workers who are in part-time or insecure work, the pension adequacy of those who take career breaks and parental leave, and the impact of regional labour market disparities on pension outcomes. If pension policy continues to assume linear, full-time, uninterrupted employment, it will systematically underserve large sections of the population.

In conclusion, adequacy matters. I will not rehearse the statistics relating to those who are not saving enough, but the figures are stark. I have spoken at length, as have others in this Committee, about the risks of drifting into a system that is technically sound in structure but insufficient in outcome. A pension system that does not deliver adequate retirement incomes will, in time, recreate the very pressures on the state that automatic enrolment was designed to reduce.

We believe that these amendments are modest. They ask for transparency, analysis and review, not prescription. They aim to ensure that fairness and adequacy sit alongside structural reform. For these reasons, I commend these amendments to the Committee and I beg to move.

[Lord Kirkhope of Harrogate (Con)]

My Lords, I will intervene briefly in support of my noble friend’s amendment—not on the specifics but because, having read again the 42nd report of the Delegated Powers and Regulatory Reform Committee, which refers directly to this legislation, it has become ever more obvious that this skeleton, which has taken up an enormous amount of time and is in itself highly complex, leaves an enormous number of question marks. It leaves an enormous number of doubts and concerns, most of which the Government are placing at their own disposal through secondary legislation, which is at this point equally uncertain.

Therefore, it seems absolutely essential that, when there are proposals such as those we have just heard from my noble friend—to review the commencement of the legislation, or to have reviews on a five-yearly basis, or indeed in any other ways, of some of the more complex areas—the Government should concede that that is appropriate in a Bill of this kind. I do not think I have ever read in my time here such a clear statement as that made by the Delegated Powers and Regulatory Reform Committee about the nature of legislation. It would be serious enough if it were dealing with a Bill with very few clauses and of little import, but this is of such a substantial nature. The report we have read condemning the nature of the Bill for not having the flesh around those skeletal bones is notable and important. The Government should therefore be much more amenable to the sort of sensible proposals being made in the amendments of my noble friend.

I do not wish to speak further on this, but it seems terribly important that—whether it is dealt with now or at a later stage—there be an understanding that the Bill is entirely dependent upon future secondary legislation. Standing alone is, I am afraid, an unacceptable set of provisions.

--- Later in debate ---

This has been a very interesting debate but, given all that, I thank the noble Viscount and hope that he feels able to withdraw his amendment.

[Viscount Younger of Leckie (Con)]

My Lords, I am very conscious that I spoke at some length in my opening speech, so I will be brief in closing and do not intend to question the Minister too much on the points that she made. I will say only that, as my noble friend Lord Kirkhope rightly said, pensions are complex and need to be well thought through. This is a skeleton Bill, which we have pointed out in many of the debates, but I understand that, as the Minister said, it is important to look long term.

I have only one question. I may not be the only one who is confused about the timings of the commission. I think the Minister said that an interim report is being produced by the commission this spring and leading through to early 2027 pensions adequacy will be included in that report and the commission will set out options for the Government to comment on. I am putting words into the Minister’s mouth. I wonder whether she can confirm exactly where we stand on pensions adequacy. It may be that that will be in the letter that is being written, which might come my way.

[Baroness Sherlock (Lab)]

A letter is being prepared and will be sent after Committee. I want to put on record the timings and to be very clear about them. The interim report will be published this spring, and the aim is for the final report to be in early 2027. I will put any further detail in the letter to the noble Viscount.

[Viscount Younger of Leckie (Con)]

I am sorry to labour this like a long-playing record, but will pensions adequacy be included in that report? Or are we looking for something further?

[Baroness Sherlock (Lab)]

The Pensions Commission is there to look at the adequacy and sustainability of the pension system; that is its job.

[Viscount Younger of Leckie (Con)]

I would be grateful if the Minister would let me look at the letter, anyway; it is important to see that in detail.

To conclude, I want to pick up on Amendment 214 in the name of the noble Lord, Lord Palmer, concerning a universal pension advice entitlement. The context for this amendment is certainly well understood. The structure of pension provision has altered fundamentally over recent decades, and most private sector workers are now members of defined contribution schemes rather than defined benefit schemes. As we know, defined benefit schemes provided a predictable income for life; by contrast, defined contribution schemes require individuals to determine contribution levels, investment choices, consolidation of pension pots and the manner and timing of drawing retirement income. The risks associated with investment performance and longevity now rest primarily with the saver rather than the sponsoring employer.

In that environment, the case for improved engagement is compelling. Without appropriate support, individuals might under-save, remain invested in default arrangements without appreciating the degree of risk involved or make irreversible decisions at retirement without a full understanding of the consequences. There are also wider public policy implications. Inadequate retirement provision can increase reliance on means-tested benefits, intensify pressure on the state pension and contribute to intergenerational fiscal strain. In that sense, the noble Lord, Lord Palmer, has identified a matter of genuine structural importance.

However—this chimes with the Minister and the noble Lord, Lord Davies—there are practical considerations that cannot be ignored. The amendment refers to free and impartial pension advice. In regulatory terms, advice is distinct from guidance. Regulated advice requires authorisation by the FCA, entails suitability obligations and carries legal liability. To extend personalised regulated advice as a universal entitlement would require significant capacity, funding and oversight, and it would not be a modest undertaking. I reiterate that I agree with the noble Lord, Lord Davies of Brixton, and the Minister. The complexity of the system is real but so too are the operational and financial implications of delivering such an entitlement at scale, although I appreciate the noble Lord, Lord Palmer, bringing this up; it has been a valuable debate.

With that, I will dwell on what has been said in this debate in Hansard to work out what we might bring back on Report but, for now, I beg leave to withdraw my amendment.

Amendment 207 withdrawn.

Moved by

[Viscount Younger of Leckie]

208: After Clause 117, insert the following new Clause—
“Review of pension communications and financial promotion rules(1) The Secretary of State must, within 12 months of the day on which this Act is passed, conduct a review of all legislation and regulatory rules governing marketing, financial promotion and member communications in relation to occupational and personal pension schemes.(2) The review must consider whether existing rules unduly restrict pension providers from—(a) communicating risks, warnings, and comparative information to scheme members;(b) providing guidance on fund choice, consolidation, and value for money;(c) supporting informed member decision-making without constituting regulated financial advice.(3) The Secretary of State must lay a report of the review before both Houses of Parliament.”

[Viscount Younger of Leckie (Con)]

My Lords, I shall speak to the two amendments in this group, Amendments 208 and 210, tabled in my name. The proposed new clause in Amendment 208 would create a permissive power for Ministers to help employers to understand and navigate the different pension options available to them, including the choice between salary sacrifice and ordinary contributions.

Since the introduction of automatic enrolment, employers must provide workplace pensions as a default. This comes with an opt-out for employees, although opt-out rates are very low, happily. This reform has rightly been regarded as a success: participation has increased dramatically and millions more people are now saving for retirement. But although participation has improved, the structure through which those pensions are delivered remains complex. Employers may offer standard employee and employer contributions; operate salary sacrifice arrangements, whereby pension contributions are made before tax and national insurance; choose between different occupational schemes; use master trusts; or establish single-employer schemes. Each of those options carries different financial implications, administrative consequences and regulatory requirements.

For large firms with human resources departments and access to professional advisers, navigating these choices is manageable. However, for small and medium-sized enterprises, often it is not. This amendment simply gives Ministers the power to publish comparative guidance, provide decision-making tools, issue best practice principles and clarify regulatory compliance requirements. It does not mandate a particular scheme, it does not impose a new burden; it equips employers with information, and in short, reduces confusion.

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

My Lords, I am grateful to the noble Lord, Lord Palmer, for his remarks and support, and to the Minister for the details she provided in her response, which I appreciate. While I am of course disappointed that the Government are not able to accept these amendments today, I recognise that this is a matter of balance and practical implementation, rather than fundamental disagreement.

On Amendment 210 in particular, I appreciate that there is already a careful line between acting in members’ best interests and avoiding what might be construed as advertising or product steering. The noble Baroness made that distinction too. This is precisely why I believe that a structured review would be valuable, to ensure that we are getting that balance right as the system evolves. Picking up on an offer—I think it was an offer—from the Minister, I would be happy to work with her and the Government between now and Report to consider how this might be framed in a constructive and proportionate way, but I acknowledge what she said in her closing remarks.

More broadly, on helping employers, particularly smaller firms—the Minister also mentioned this—to navigate pension arrangements with greater clarity, I accept that work is under way through regulators and guidance bodies, but as the system grows more sophisticated, there is merit in ensuring that political focus and strategic direction remain strong. If employers are central to delivering retirement security, then supporting them effectively is surely not optional but integral to the success of the framework. However, with that, and in the spirit of continued engagement, I beg leave to withdraw the amendment.

Amendment 208 withdrawn.

--- Later in debate ---

[Lord Davies of Brixton (Lab)]

I urge the Minister in her reply to stress the need for caution in this area. I am afraid I understand what the noble Baroness, Lady Coffey, is saying: we do seem to have been waiting a long time for the dashboard. However, I have always had questions about the private sector dashboard, and I think they can be answered only as and when the MaPS dashboard is up and running. The problem at heart—and it may be a caricature—is about the point of a private sector dashboard. It could all too easily be a way of getting hold of data. It is the old saying that you are not the customer, you are the product. That is the fear with the private sector dashboard, which is why we have to get the public sector dashboard up and working. We know what the issues are. It may be necessary to have private sector dashboards, but I am still not totally convinced.

[Viscount Younger of Leckie (Con)]

My Lords, I will speak in broad support of Amendment 218D, tabled by my noble friend Lady Coffey.

Let me start by recording my thanks to the Minister, the Pensions Dashboards Programme team and MaPS for the recent briefing session afforded to noble Lords, which was thorough; I felt that it was constructive, and, if I may say so, reassuring in so many respects. We heard that some three-quarters of workplace and personal pension memberships—that is, around 60 million people—are now connected to the ecosystem. This is no small achievement; we should acknowledge that. We were told that the October 2026 connection deadline remains on track, which is of course welcome.

Connecting schemes to the system is one stage, while ensuring that the dashboard operates effectively for consumers is another. Delivering the money helper dashboard, important though that is, is not the same as establishing a fully functioning marketplace that includes private sector dashboards. These are separate phases of the programme and ought to be treated as such.

In that context, we were taken through the money helper dashboard and its intended customer journey. It is a significant and necessary first step—no one disputes that—but it is explicitly designed to be the foundation, not the finished structure. The question that therefore arises is a straightforward one: what is the clearly defined pathway from that foundation to the wider ecosystem that Parliament was originally invited to envisage?

As my noble friend Lady Coffey said, the Government have confirmed, most recently in October 2024, that the money helper dashboard will be made available to the public before any private sector dashboards are permitted to launch. I understand this sequencing to some extent. It is sensible to test the system, assess customer behaviour and ensure that it is secure and reliable. To that extent, I understand the approach that the noble Lord, Lord Davies, has taken; he used the word “caution”. However, mine is a slightly different point—it chimes with those from the noble Baroness and my noble friend Lady Coffey—which is that there should be at least a plan and a timetable.

The Government have stated their commitment to private sector dashboards in principle. A commitment in principle must now be matched by clarity in practice, which is why I think that my noble friend’s amendment is very much necessary. When do the Government expect private dashboards to be authorised? If a firm date cannot yet be provided, can the Minister at least set out the framework within which that decision will be taken? What are the stages? What are the criteria? What is the intended sequence of regulatory approvals? Over what period do the Government expect those steps to be completed?

We are told that private dashboards will proceed only once the service is judged to be reliable, safe and secure, and once, of course, it has satisfied the FCA, the Department for Work and Pensions, the Pensions Regulator and MaPS. This is entirely proper, but does that mean that no indicative timetable can be offered until every test has been passed? Surely not. Is there no internal planning assumption or projected window? How are industry participants expected to prepare if there is no sense of when authorisation might realistically occur? Is there not a risk that the programme becomes defined solely by the October 2026 connection deadline? What sits beyond that date? What is the Government’s intended next milestone? Without a clear forward plan—this is my point—how can Parliament assess progress?

My noble friend’s amendment does not seek to override safeguards. It simply seeks clarity and discipline. The proposal that the FCA should open the gateway to private dashboard operators within six months of the public dashboard going live would establish a reasonable and clear expectation. If the Government disagree with that period, what alternative do they propose? What is their preferred timetable?

There is also a practical issue, which cannot be ignored, because the successful introduction of private dashboards will depend heavily on data quality; that has been mentioned. What is the Government’s current assessment of the accuracy and completeness of data across connected schemes? Where are the known weaknesses, and what remedial action is under way? How frequently is data quality being tested and reported?

I know that this is a familiar question that has been asked as we have been taken through the progress on the dashboards programme—I have been very grateful for the updates—but what engagement is taking place with schemes and providers to ensure that preparation extends beyond technical connection and moves towards operational readiness? Are the communications with industry focused only on meeting connection deadlines, or do they also address the standards required for a competitive, consumer-facing environment?

In conclusion, this programme has significant potential, but potential must be matched by a structured plan. Parliament is entitled to understand not only where the programme stands today but where it is going and on what timetable. My noble friend Lady Coffey is right to press for that clarity and, unapologetically, I have asked a lot of questions that chime with her. I await the Minister’s response with interest.

Pension Schemes Bill

Viscount Younger of Leckie Excerpts

Committee stage
Thursday 5th February 2026 Grand Committee

[Lord Palmer of Childs Hill (LD)]

My Lords, I wish only to say that I agree with the comments from the noble Baroness, Lady Altmann, and the lengthy exposition from the noble Lord, Lord Davies. I give them my support.

This group deals with technical amendments in the main, but they go to a question of basic fairness for pensioners whose schemes have failed. There are eight amendments in the Minister’s name, which shows that Bills can be amended, because the Government are amending their own Bill. Their amendments are no less important than those proposed on this side of the Room or those proposed by the noble Lord, Lord Davies, on the other.

The Government have accepted the principle of restoring inflation protection for pre-1997 service in the PPF and the FAS. These amendments ensure that the policy operates as intended, covering cases where the schemes technically add indexation rules that did not apply to all pre-1997 service.

The concern here is consistency and completeness. As has been said by other speakers, without these clarifications, some pensions will fall through the cracks due to historic scheme design quirks, rather than any distinction of principle. Any schemes that were and will be proposed will have quirks that are going to be found out in due course. I ask the Minister to confirm that the Government’s intention is to deliver equal treatment for those with equivalent service histories and that no group will be excluded because of technical anomalies.

[Viscount Younger of Leckie (Con)]

My Lords, I will mainly speak to and concentre on the government amendments in this group. I start by thanking the Minister for setting them out so clearly. We welcome the additional clarity that they provide.

In particular, these amendments ensure that the Financial Assistance Scheme and the PPF payments are treated consistently where a pension scheme formally required pre-1997 indexation but where that requirement did not in fact apply to the specific pre-1997 service for which financial assistance is being paid. Put simply, this is a technical clarification to ensure that indexation under the FAS reflects a member’s actual scheme entitlement, even where a scheme nominally provided for pre-1997 indexation but did not apply it to the service being compensated. We believe that this is a useful and sensible point of clarification—one that helps to ensure that the system operates as it should do.

However, I would be grateful if, when she closes, the Minister could confirm that it is now the Government’s view that these amendments are sufficient to close what may previously have been a gap in the original drafting. In particular, can she confirm that the Government are satisfied that these changes are enough to avoid confusion, to avoid the risk of legal challenge and to ensure that the Financial Assistance Scheme remains, in essence, what it should be—a safety net—rather than becoming an unintended upgrade?

I want also to make a broader process point, because these changes emerged relatively late in proceedings in the other place. I would welcome assurances from the Minister that the relevant stakeholders have been properly consulted and that the Government do not anticipate the need for further amendments on this issue in the Commons—or, indeed, as the Bill continues to go through Parliament. The Minister for Pensions, Torsten Bell, has previously stated that this change will affect around 250,000 members of the PPF, increasing their pension payments by an average of around £400 a year. The Minister cited that figure in her opening remarks, but is that still the Government’s firm and final assessment of the scale and impact of this measure? Perhaps the Minister could clarify that for us.

I also note the comments made by Sara Protheroe, the PPF’s chief customer officer, who said:

“While implementing this change will be no small task”—


that is probably an understatement—the PPF is

“fully committed to delivering this at the earliest opportunity if and when it becomes law”.

That welcome commitment raises an important practical question for the Government, does it not? What assessment has the Minister made of the extra resources that might be required? What support will be provided to the PPF to ensure that delivery can take place smoothly and without delay? Have the Government assessed whether additional resources, which could come via capacity or funding, will be required to implement this change effectively? If so, how do they intend to provide that support?

Regarding Amendment 203ZB, in the name of the noble Lord, Lord Davies, I will have more to say in subsequent groups. As the noble Lord said, there are amendments on the FAS and PPF in three different groups today. I hope that the Committee will forgive me if I delay my brief comments. I also listened carefully to the remarks from the noble Lord, Lord Palmer, and the noble Baroness, Lady Altmann. It is best that I make comments in later groups.

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[Lord Palmer of Childs Hill (LD)]

My Lords, I will briefly speak in support of the amendments. I emphasise that they look at how to do this by lump-sum payments, rather than by increasing pensions. That is important. It is what we in my profession used to call “creative accountancy”. It seeks to achieve a result by lump sums, more or less off the Government’s balance sheet. There has been some blending of the funds in the past. It is a way of doing it in a creative accountancy way, largely getting rid of the problem by lump-sum payments. I hope that the Government will look at this in a creative way in order to provide some justice without incurring an ongoing debt.

[Viscount Younger of Leckie (Con)]

My Lords, I will speak to Amendments 187A, 188A, 189A and 203ZA tabled by the noble Baroness, Lady Altmann. She has long been a formidable and principled advocate for pension savers and much of the Committee will be sympathetic to the underlying concerns that she raised in her remarks. In particular, her consistent focus on member protection, governance and long-term security has materially shaped the debate on pensions policy over many years—and rightly so.

However—the Committee might expect me to say this—while I share the noble Baroness’s objectives, I am not persuaded that the amendments, as drafted, strike the right balance in this instance. I listened carefully to her remarks and her constructive suggestions as to how such payments could be made in the form of lump sums, whether through several lump sums or another way. As ever, she is constructive and positive, and I accept that. These amendments would use the Pension Protection Fund and the Financial Assistance Scheme to make retrospective lump-sum payments to compensate for unpaid historical indexation. We think that that would represent a significant shift in principle.

I listened carefully, as I always do, to the remarks from the noble Lord, Lord Davies of Brixton, who called retrospection a red herring. I was not absolutely sure what he meant by that. As I see it, retrospection is just that: retrospection. I think that it describes the payments in the way that it is meant to do. However, the PPF was designed as a forward-looking safety net, not as a mechanism for reopening past outcomes or making retrospective compensation payments. The Minister, to be fair to her, made this clear in her closing remarks in previous groups.

Such an approach would raise serious concerns about cost, complexity and consistency. Although we are somewhat clearer about costs from the helpful remarks from the Minister in the previous group, I am still uncertain—as, I think, other Members of the Committee are—about what the overall costs would be and what the impact would be on the levy and on other contributors. That uncertainty makes me cautious about supporting these amendments, which risk turning a clearly defined insurance mechanism into an open-ended compensation scheme. I suspect that the Minister—without wanting to steal her thunder—may take a similar view in her response, judging from her remarks in the previous group.

[Baroness Altmann (Non-Afl)]

The noble Lord just said that this would impact on the levy, but if there is a one-off payment, it would not affect the scheme going forward. Therefore, it should not impact the levy at all; it is a lump-sum payment rather than an increase in the base pension payable going forward.

[Viscount Younger of Leckie (Con)]

As ever, that is a very helpful clarification, but I will leave it up to the Minister to answer that. I stick with my view that we are not persuaded by these amendments. Perhaps there is more debate to be had. I have said all that I need to say; I am afraid that I am unable to support these amendments.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Baroness for introducing her amendment and all noble Lords who have spoken. I am afraid the noble Viscount has given a spoiler regarding my response, because I articulated many of the arguments on this in the previous group in response to my noble friend Lord Davies.

The Government recognise that pre-1997 indexation is an important issue for affected PPF and FAS members. That is why we listened and took the action that we did. The changes proposed by Amendments 186A, 187A, 188A and 189A would, essentially, award payments of arrears for PPF and FAS members who have missed out on pre-1997 increases up to now. As the noble Baroness described, that would mean a one-off lump-sum payment to be made from the PPF reserve. Amendment 203ZA would require the Secretary of State to determine how those additional payments would be funded in FAS.

I acknowledge the impact on members. This has been a long-running issue and, for reasons that noble Lords have clearly articulated, members will want to see their increases quickly now that we have made a decision to act. As I said, we expect that the first payments will be made to eligible PPF and FAS members in January 2027, which is the earliest possible opportunity to do so, and we are working closely with the PPF on implementing that. I recognise that prospective increases do not restore the erosion of the real-terms value of members’ retirement incomes. However, the Government’s reforms will make a meaningful difference to affected members while balancing the impact on levy payers who support the PPF, taxpayers who pay for FAS and affordability for the Government.

In response to the question from the noble Baroness, Lady Altmann, any payment that comes out of the PPF reserve will reduce the size of that reserve and therefore, in our judgment, must make it more likely that there may be a need for a levy to be reintroduced at some point. I shall come back to the arguments in a moment, as I said to my noble friend, but I have noted the importance of responsible management of the PPF reserve following the introduction of our reforms. The noble Baroness’s proposal—creative though it is, and I acknowledge that—would clearly also reduce the reserve. Although the reserve is forecast to grow, without a really substantive PPF levy the PPF will depend on its reserves and its investment returns to manage the risks from existing liabilities and future claims across the £1 trillion DB system.

Historically, the PPF has supported nearly £10 billion in claims, funded in part by the amount collected through levies. Without future levies, the reserve has to cover upcoming claims. The reserve offers protection against future risks, such as new claims and longevity risks, and, as I have said, avoids the need for a significant levy reintroduction. I also noted the significant public finance implications of changes in my earlier remarks.

The Government have not made an assessment of the noble Baroness’s proposal because we considered carefully what we thought it was appropriate to do. We worked with the PPF and fully considered the broader context of introducing pre-1997 indexation in both the PPF and FAS. In the end, it is the responsibility of the Government to strike an affordable balance of interest between all parties. We believe our reform achieves that. This measure is a fundamental shift in the level of protection afforded by the PPF and FAS to their members, but we think that is right and the appropriate balance. In the light of that, I hope the noble Baroness will feel able to withdraw her amendment.

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[Viscount Younger of Leckie (Con)]

My Lords, I will speak to Amendment 203 in the name of the noble Lord, Lord Davies of Brixton, and I am grateful to him for his tour d’horizon on the history behind this issue with the uprating, going back through several parties and Parliaments. Like the noble Baroness, Lady Altmann, I fully understand why members find this proposal attractive. The idea that pensions should keep pace with inflation feels intuitively fair, of course, but we think that mandating inflation increases for all pre-1997 service in live defined benefit schemes would be a step too far.

This amendment would dictate in statute how trustees and employers must use scheme resources and any surplus. We believe that this is overly prescriptive and risks being actively anti-business. Many employers are already using DB surpluses constructively, and that includes improving DC contributions for younger workers, supporting intergenerational fairness, and strengthening scheme security through insurance-backed arrangements and special purpose vehicles. We think that these are sensible negotiated outcomes, reflecting the needs of both members and sponsors.

It is also important to remember that employers have carried DB risk for decades. When funding assumptions proved wrong, when markets fell or when longevity rose faster than expected, it was employers who stepped in, often for many years, through additional contributions and balance sheet strain—that might be an understatement. I choose to use a casino analogy, not to make light of a serious subject but to illustrate the basic logic of risk sharing. Here goes.

In a defined benefit scheme, the employer and members effectively walk into a casino together. Trustees place bets on behalf of the scheme on how much risk to take in the investment strategy, what funding assumptions to use, how quickly to de-risk, how to price longevity and inflation exposure. Members benefit if those bets perform well because the scheme is safer and more likely to deliver the promised pension in full. But, crucially, if those bets go wrong—that is, if markets fall, inflation spikes, people live longer than expected or the assumptions prove too optimistic—the bill lands not on members but on the employer. The sponsoring employer is legally on the hook to repair the damage, often through years of additional contributions, cash calls at the worst possible moment and significant strain on the balance sheet. That is what the employer covenant means in practice: it is the backstop when the world does not behave as forecast, which, as we know, it often does not.

So, if we accept that the employer is the party that must cover the losses when the scheme is underwater, surely it cannot be right to argue that, when the scheme comes in above water—when investment returns are strong, funding improves and a surplus emerges—the employer must be barred in principle from any share of that upside. That is not risk sharing; it is risk asymmetry. Heads, the members win; tails, the employer loses. In any rational system, if one party is compelled to underwrite the downside, that party must be permitted—subject, of course, to trustee oversight and member protection—to share in the upside. If we legislate for a system where the sponsor carries all the risk but is denied any benefit when outcomes are good, surely we distort incentives. We make sponsorship less attractive and encourage employers to close schemes faster, de-risk more aggressively or avoid offering good provision in the first place.

This is a crucial point. The fair outcome is not that employers take everything or that members do. It is that surplus is discussed and allocated jointly by trustees and employers, balancing member security, scheme sustainability and the long-term health of the sponsoring employer. That is partnership. Legislation should support that balance but not override it; that is a crucial point.

Mandating automatic inflation uplift would also have wider consequences: higher employer costs; increased insolvency risk, ultimately borne by the PPF; knock-on effects on wages, investment and employment; and, potentially, higher PPF levies. For PPF schemes, uplift is manageable because the employer covenant has gone and Parliament controls the compensation framework. Imposing similar requirements on live schemes, however, risks destabilising otherwise healthy employers. In short, uplift should be an option, not a statutory obligation. As I said earlier, decisions should rest with trustees and employers together and not be compelled by legislation.

That said, focusing on choice does not mean ignoring power imbalances, because in some schemes genuine deadlock leads trustees to sit on surplus and de-risk further. That may be understandable, but I think it is fair to say it is inefficient. Government should be looking at how to enable better use of surplus by agreement, not mandating outcomes. Much more needs to be done on breaking deadlocks, but we believe that Amendment 203 is not the right way to do it.

[Baroness Altmann (Non-Afl)]

May I just correct the record? I believe that the Goode committee may indeed have recommended limited price inflation up to 5%, and I apologise to the Committee.

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Moved by

[Viscount Younger of Leckie]

205: After Clause 117, insert the following new Clause—
“Review of pension awareness and saving among young people(1) The Secretary of State must, within 12 months of this Act being passed, carry out a review into—(a) levels of pension awareness and understanding among young people, and(b) the effectiveness of existing measures to support young people to begin saving into a pension.(2) The review must consider—(a) barriers to pension saving faced by young people, including low earnings, insecure work, and gaps in financial education,(b) the impact of the automatic enrolment age and earnings thresholds, and(c) options to improve engagement, participation, and long-term retirement outcomes for younger savers.(3) The Secretary of State must lay a report of the review before Parliament.”Member’s explanatory statement
This amendment requires the Government to review pension awareness among young people and to consider how existing policy could better support earlier engagement and saving into pensions.

[Viscount Younger of Leckie (Con)]

My Lords, Amendment 205 in my name would require the Government to review levels of pension awareness among young people and to consider how existing policy might better support earlier engagement with pension saving. Members of the Committee will have noticed that I have included certain steers as to what the review should focus on; I hope that this brief debate will enable Members to agree largely with what we are trying to do here.

For many people in their 20s and 30s, pension saving is driven almost entirely by automatic enrolment. In one respect, this is a success story: it clearly illustrates the impact that automatic enrolment has had, with around 71% of young people in full-time employment now contributing to a pension and often benefiting from employer contributions, tax efficiency and the long-term advantages of compounding. Of course, there are opt-outs, but I am pleased to say—I hope that the Minister will confirm this—that opt-out rates remain relatively low.

Progress is, therefore, welcome. However, it still leaves nearly one-third of young people not saving at all. Starting to contribute at a younger age makes an enormous difference. Compound interest, where returns build, not only on contributions but on previous returns, means that early saving is particularly powerful. Small amounts saved early can matter more than much larger sums saved later.

Yet, the reality facing young people is difficult. Surveys consistently show that younger generations face an uphill financial struggle. For many, and I remember how I felt in my early 20s, retirement feels distant and abstract, something to worry about later, rather than now. Unsurprisingly, confidence among those aged 25 to 44 about their later life savings is among the lowest of any age.

We need to understand why this is the case. It is not enough for policy bodies to list familiar explanations, such as behavioural bias, lack of knowledge or low trust, and then publish discussion papers. The Government need to know in detail what is actually preventing young people engaging with pensions. If automatic enrolment is still leaving out around one-third of eligible workers, more work clearly needs to be done. As with most things in pensions policy, the answer will be complicated, but complexity is not an excuse for inaction.

We should be clear that automatic enrolment alone is not sufficient to deliver an adequate income in retirement. Of course, I am very aware that the pensions review will be looking at this as its stage 2 focus, and I will talk more about that later. Will the pensions review properly examine these barriers to saving among the young? If not, why not? I ask the Government to give a response on this.

Young people are often focused on more immediate priorities: for example, saving for a house deposit, building an emergency fund or paying off student loans understandably come first and spring to mind; pensions, as I said earlier, are seen as something for later life. But time does not pause and there are real benefits to saving early. Early contributions help smooth out market volatility and allow savers to benefit fully from compounding over decades. Most young people will be in defined contribution schemes, where these effects matter greatly.

There is also a deeper issue of confidence. Nearly half of Gen Z believe that the state pension will not exist by the time they retire. This is a generation shaped by repeated economic shocks, from the financial crisis to the pandemic and the cost of living crisis triggered by the war in Europe. For them, pensions can feel less like a promise and more like a relic. The question is, what do we do about it? I am disappointed, as I said earlier, that pension adequacy appears only in the second stage of the review. In my view, and many people’s views, this should be a priority. Your Lordships should be asking whether lowering the automatic enrolment age, removing the lower qualifying earnings band or increasing minimum contribution rates would deliver better outcomes.

We should be asking what more can be done to reduce the barriers that discourage young people from saving at all. This is why the amendment seeks to require the Government to move faster to review pension awareness among young people and how existing policy would better support early engagement—that is, to move now and not wait until stage 2.

Finally, reverting to the barriers that I alluded to, I will make one final point, which is on the question of compulsion—just to get my oar in on this before the end of today’s proceedings. Mandation, or even the threat of it, will fall most heavily on younger savers, a point made powerfully by my noble friend Lord Fuller earlier in the week. It risks burdening a generation who are 30 or 40 years away from retirement and who already face significant disadvantage within the system. There is already generational unfairness in pensions policy and we believe that mandation would only entrench this. It should have no place in the Bill, but we have rehearsed those arguments before. Without further ado, I beg to move.

[Lord Sharkey (LD)]

My Lords, I will speak briefly but enthusiastically in support of Amendment 205. The case for a review was eloquently put by the noble Viscount, Lord Younger, and its merits are surely obvious. I hope the Minister will be able to agree with that.

In particular, I hope the review will take a close look at the situation that many Gen Z people find themselves in. Many work in the gig economy or are self-employed. The Gen Z average savings are small: 57% have pots smaller than £1,000 according to PPI data, and half of them cannot estimate their pots in any case. Perhaps alarmingly, 45% of Gen Z people rely heavily on social media for financial information—presumably delivered by animated cats. The proposed review could and should examine this in much more detail.

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We share a desire to ensure that young people are saving enough for the future, but I hope that the noble Viscount will understand that, while I share his enthusiasm to address this issue, I do not think that this is the best way forward. Let us allow the commission to complete its vital work, which will explore the important questions of pension adequacy and how to improve outcomes for future generations. I look forward to receiving its recommendations and discussing them in detail with interested noble Lords; I assume they will affect everybody in the Room. In the meantime, I hope that the noble Lord will feel able to withdraw his amendment.

[Viscount Younger of Leckie (Con)]

My Lords, I will make just a few rounding-up comments. I am very pleased to have the support for my amendment from the noble Lord, Lord Sharkey, from my noble friend Lady Neville-Rolfe in particular, and from the noble Baroness, Lady Altmann. It was very helpful to hear from my noble friend Lady Neville-Rolfe the information she received directly from the review that she undertook into retirement age.

The Minister referred to the importance of education; I took note of her very helpful answers on what is happening at the sharp end of schools. I also took note of the comments from the noble Baroness, Lady Altmann, and the helpful suggestions that the regulators could perhaps play a more proactive role in this area.

I believe that Amendment 205 is modest but necessary. If we are serious about improving retirement outcomes, we must start by understanding why so many young people are disengaged and by shaping policy that meets them where they are, rather than where we wish they were.

I am delighted to see that the noble Baroness, Lady Drake, is in her place. We are all very keen to know what will come out from the Pensions Commission.

One question I put to the Minister now is about the timings. My understanding is that stage one will report in early 2027—one year’s time—but stage two, which is on this subject of pensions adequacy, will be at a later stage. Can the Minister clarify those timings, as they are still a bit unclear? I understand that she is undertaking a huge amount of very important work, but that would be very helpful.

[Baroness Sherlock (Lab)]

I will simply say that there will be a report early next year. I am very happy to write to the noble Lord to confirm any future timings.

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[Viscount Younger of Leckie (Con)]

I appreciate the answer to that. In the meantime, I beg leave to withdraw my amendment.

Amendment 205 withdrawn.

Pension Schemes Bill

Viscount Younger of Leckie Excerpts

Committee stage
Tuesday 3rd February 2026 Grand Committee

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank everyone for their contributions. It might take 300 years to get it right, but we do not have 300 years; we are trying to get it right in the course of a few meetings, as the noble Lord, Lord Fuller, pointed out. The noble Lord, Lord Kirkhope, gave us the view from the coalface with regard to the decisions that trustees have to take and about trustees working on behalf of their members. The key concern, which is why I support these amendments, is that the default should be shaped around members’ needs and outcomes, not regulatory convenience or market consolidation by default.

The amendments in this group emphasise the importance of competition, innovation and transparency. They highlight the need for clear member communication before defaults are subject to mandation, for a value-for-money framework to be in place first and, I am afraid, for Ministers to justify why mandation is limited to automatic enrolment defaults. The amendments seek to put some meat on to what this Bill is meant to do. They are, I think, necessary to make sense of the precautions that are needed if this Bill goes forward.

[Viscount Younger of Leckie (Con)]

My Lords, I hope that the Committee will think that it makes sense if I begin with the four amendments in this group tabled in my name. I start with our probing stand-part question on Clause 45. This is a short clause, but an important one. It makes changes to the Financial Services and Markets Act 2000. The purpose of the question is simply to understand the practical effect of those changes, particularly in the context of the wider programme of consolidation and reform of assimilated European Union law.

My noble friend Lady Neville-Rolfe, who I am pleased to say is in her place and has spoken so eloquently, may feel a certain sense of déjà vu, having spent a considerable time on the Front Bench examining precisely these issues. My questions to the Minister are therefore straightforward. What, in practical terms, does Clause 45 change in the operation of the Act?

I start with some fairly basic questions for clarification. Will further secondary legislation be required to give effect to these provisions? If so, do the Government have a timetable over which they envisage this process taking place? How does this clause interact with the statutory instruments recently considered by the Grand Committee as part of the wider reform programme? This is a live and important area. As assimilated European Union law becomes domestic law and increasingly interacts with our financial institutions, the FCA and other relevant regulators, it is essential that Parliament has clarity on how these changes fit together and where accountability lies.

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[Lord Palmer of Childs Hill (LD)]

My Lords, I have just a short comment. The Minister needs to explain why existing protections are insufficient and how this power will be constrained in practice. The concern is that lowering the evidential bar for intervention risks undermining legal certainty, which we have before intervention, and then trust in the scheme governance. An override of contractual terms should be firmly evidence-based and used sparingly. When there is a contract and we are saying that the contract could be overridden, we need to know with some facts in what circumstances it can be overridden for some wider purpose which the Government think is needed. I do not think that is proven as yet.

[Viscount Younger of Leckie (Con)]

My Lords, I speak briefly to Amendment 175, tabled by my noble friend Lady Noakes and supported by the noble Baroness, Lady Bowles. This amendment relates to new Section 117D, the best interests test as set out in Clause 48. This new section establishes the test that must be satisfied before a unilateral change can be made. It requires a provider to reasonably conclude that such a change is reasonably likely to lead to

“a better outcome for the directly affected members … (taken as a whole)”

and to

“no worse an outcome for the other members of the scheme”,

also taken as a whole.

Many of the questions that my noble friend and the noble Baroness have raised reflect concerns that have been put to us during scrutiny of the Bill. In particular, there remains uncertainty about what, in practice, is meant by a better outcome, and how that judgment will be assessed, evidenced and challenged. I say again, as we have said on different parts of the Bill, that we believe we need definitions and clarity.

We will listen carefully to the Minister’s response on this point. The clarity and robustness of the best interests test are critical, particularly where changes may occur without the explicit consent of individual members. If that clarity is not forthcoming, this may well be an issue to which we will need to return.

[Baroness Sherlock (Lab)]

I am grateful to the noble Baroness, Lady Noakes, and others for their contributions. Clause 48 inserts new Part 7A, on

“Unilateral changes to pension schemes”,


referred to as “contractual override”, into the Financial Services and Markets Act 2000. As has been clear, that will enable providers of FCA-regulated DC workplace pension schemes to override the terms of a pension scheme without the consent of individual members. To be clear, that will mean that providers will be able to transfer members to a different pension scheme, to make a change that would otherwise require consent, or to vary the terms of members’ contracts. The Bill provides important protections around the use of such powers, which I will come on to.

The noble Lord, Lord Palmer, asked why we want to do this—why change anything? I will explain. Providers can have thousands of DC arrangements for different employers, which will include a large number of legacy schemes that predate the introduction of auto-enrolment. Some of those arrangements will be delivering poor value for members but, due to the challenges of engaging with members, there is often little that providers can do about it. That is because, currently, providers have to gain individual consent from each member of the scheme to enact the changes that will be allowed under this part. That is time-consuming, costly and often simply impractical. In many cases, members will not even have kept their contact details updated.

Contractual override aims to address that issue and, in doing so, it would establish broad equivalence with the trust-based market, where trustees already have the power to conduct bulk transfers. The measure is necessary to help drive better outcomes for members and help to establish fewer larger pension schemes that are delivering value for money, supporting the scale measures and value-for-money framework also implemented by the Bill.

We want to protect consumers, so the Bill introduces a number of important safeguards, including the best interests test, which must be met and certified by an independent person with sufficient expertise before a contractual override can occur. That test is the focus of the amendments. Amendment 175 from noble Baroness, Lady Noakes, probes the test to assess whether this should proceed. She asked about the relationship to the FCA’s consumer duty—I think she asked why we need it at all if we have the FCA consumer duty. The answer is to provide an additional and clear safeguard. We believe that that is necessary given the nature of what is being provided for here.

However, the Government are committed to making sure that this works well. We will continue to work closely with the FCA as it beds in the consumer duty, and to engage with stakeholders about their experience of the duty and its impact. The FCA will develop its rules for contractual override in its usual manner and will consult on that, so there will be an opportunity for people to respond to the way that engages and to identify any of the issues that have been raised.

Amendment 175A from the noble Baroness, Lady Bowles, would alter the threshold for the best interests test from requiring that a change is “reasonably likely” to achieve a better outcome to requiring that “there is evidence” that the change will achieve a better outcome. I will explain why the Government believe that our test strikes the right balance between providing robust consumer protections and still making it practical for schemes to carry out a contractual override where it is the right thing to do. The test itself allows for a contractual override to take place only when the provider has reasonably concluded that the change is reasonably likely to lead to a better outcome for directly affected members and no worse an outcome for the other members of the scheme. I will break down some of the specific requirements that must be met for it to be satisfied. First, the provider must conclude that it is “reasonably likely” that the contractual override will lead to a better outcome for directly affected members, taken as a whole, and no worse an outcome for the other members taken as a whole.

The provision accounts for the fact that, although no provider can predict the future with certainty, they must conclude based on the information available, with a reasonable level of certainty, that the outcome is better for the directly affected members taken as a whole and no worse an outcome for the other members taken as a whole. That means that the provider must clearly evidence this assertion in order to proceed. We believe that changing the test from “reasonably likely” to “there is evidence”, as in the amendment, would lower the threshold of the test and reduce consumer protection, because the alternative wording provides no requirements about the strength of the evidence and leaves open the possibility that decisions could be taken on the basis of limited or poor evidence. By contrast, the existing wording requires providers to demonstrate that the outcome is a real prospect.

Secondly, a provider must reasonably conclude that the test is met. This requirement is deliberately included to address the risk of a provider reaching a conclusion that is not based on valid evidence or reasoning. The FCA, as the regulator responsible for contract-based workplace pensions, must make detailed rules regarding contractual override. That includes rules about the considerations and information that providers must take into account in determining whether the best interests test is met. As I have said, the FCA will develop those rules in its usual manner, which will include consultation.

Finally, new Section 117E requires that an independent person, with expertise to be defined in FCA rules, has to certify that the best interests test has been met, providing a further safeguard.

Overall, the contractual override policy establishes broad equivalence with the trust-based market and, in doing so, it delivers on a long-requested industry ask, promotes better member outcomes—which is key—and helps to achieve the wider goals for DC pensions that this Bill will deliver. We believe it strikes the right balance, and I hope that noble Lords will not press their amendments.

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Moved by

[Viscount Younger of Leckie]

176: Clause 49, page 68, line 4, leave out subsection (3)
Member’s explanatory statement
This is a probing amendment which seeks to test the definition of “default pension benefit solution”.

[The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)]

I should inform the Committee that, if this amendment is agreed to, I cannot call Amendment 177 for reasons of pre-emption.

[Viscount Younger of Leckie (Con)]

My Lords, it is a pleasure to speak to this group of amendments on guided retirement. Perhaps I should begin by saying that we welcome the direction of travel set out in the Bill in this area. The Minister will perhaps be pleased to hear that.

Poor outcomes at decumulation have long represented one of the most persistent weaknesses in the defined contribution system, and there is a strong and widely accepted case for providing better support to savers who do not or cannot make active and confident choices at the point of retirement. We will continue to engage constructively with the Government to ensure that these reforms succeed. However, their success will depend not on intent alone but on whether the framework is workable in practice, sufficiently clear in its operation and properly aligned across regulatory regimes. It is in this constructive and probing spirit that I have tabled Amendment 176, together with clause stand part notices on Clauses 49, 50, 51 and 57, which I will take together for the sake of brevity.

Amendment 176 seeks to probe the definition of a default pension benefit solution, and in particular how such defaults will be framed in practice. The Bill recognises, rightly, that default solutions will not be suitable for everyone, and it therefore requires trustees to consider members’ circumstances, needs, interests and characteristics when designing them, including the possibility of different defaults for different cohorts of members. That principle is sound, but it immediately raises an important practical question: how, in reality, are trustees expected to carry out these assessments in a consistent, proportionate and defensible way?

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[Baroness Sherlock (Lab)]

I do not know who we had in mind when we were designing this measure, but I am pretty confident that it was not the noble Baroness. If she were to ring up and say, “I want to take my pension pot”, and we said, “Here is a solution”, she would absolutely be able to say, “Do you know what? I don’t want to do that, thank you very much. I already know what I want to do with it”, or to have a conversation about the alternatives. This is really aimed at and concerned with those who would not be in a good position to make these complex decisions.

However, the consultation will explore these things. We have already talked about what kinds of thing trustees might have to take into account. There will be a range of things. If there is anything specific on which I can write to the noble Baroness, I will do so, but the intention is to consult on the nature of how this will work in practice and all of the design requirements. That is one of the reasons for keeping so much in regulations: to keep it flexible.

We are already finding, though, that providers are coming up with interesting, innovative solutions. Some schemes are offering flex then fix, which would give some flexibility in the years ahead. There are schemes that are doing different things, and we do not want to shut those down because we want there to be alternatives. I do not want to give the impression that we are forcing people into it, that they have to do only one thing before being allowed to take their pension or that their pension freedom has been taken away; none of that has happened because that is not what we are trying to do. I thank the noble Baroness for giving me the opportunity to clarify that.

Amendment 180 would remove regulation-making powers to enable the charging of fees for transfers to be prohibited or limited. The Government recognise that pension schemes rely on the charges they impose on members to operate the administration of the scheme effectively. There is an existing cap on charges, which can be placed on default funds under auto-enrolment, whose purpose is to shield individuals from high and unfair charges that could significantly erode their savings. The guided retirement measures were very conscious. They will introduce the concept of a default route and were, therefore, alive to the risk that individuals placed in a default plan may not scrutinise the costs involved. Therefore, we expect to consult on any detailed policy set out in regulations; we would test any assumptions about the impact of introducing a cap or a prohibition, including for transfers, as part of that consultation.

The Clause 51 and 57 stand part notices from the noble Viscount, Lord Younger, seek confirmation that Clause 51 will provide members with clear and consistent information. I am very happy to provide that assurance. The Government understand the power of communications and the importance of members understanding the default pension plan provided by the scheme, alongside the other options. Through this clause, the Government have the power to specify the format and structure of communications. There is also a requirement that all communications issued by schemes are in clear and plain language to help members make better decisions regarding their retirement income when they wish to do so.

As the noble Viscount mentioned, Clause 53 requires the development of a “pensions benefit strategy” by relevant pension schemes, which will be expected to include details of how the scheme will communicate its default pension plans to its members. Schemes will have to make these strategies available to scheme members and to the regulator for effective scrutiny; the Bill includes corresponding arrangements in respect of FCA-regulated providers. As a minimum, we expect the strategy to present the evidence base for the chosen default or defaults to give the member the opportunity to compare their circumstances and those on which the default is based.

Clause 57 is the corresponding provision in relation to FCA-regulated schemes. This inserts into the Financial Services and Markets Act 2000 a new section that will deliver default pension benefit solutions to FCA-regulated pension schemes, ensuring that members on both sides of the market benefit from default solutions. Clause 57 requires the FCA to make rules, having regard to the rest of Chapter 6 of the Pension Schemes Bill, to make default plans available to members of FCA-regulated pension schemes. This helps ensure that regulatory frameworks are aligned and that members experience broadly equivalent outcomes; it also maintains fairness and consistency across the market. Clause 57 also requires the FCA to aim to ensure, as far as is possible, that the outcomes to be achieved by its rules in relation to this chapter achieve the same outcomes as the rest of this chapter achieves in relation to schemes regulated by TPR.

The noble Viscount asked how schemes will be supported rather than forced into defensive behaviour. The regulator will issue guidance for all trust schemes. DWP officials have been engaging, and will continue to engage, with industry ahead of introduction, including through formal consultation.

The noble Baroness, Lady Neville-Rolfe, asked why the negative procedure and why the affirmative one. The affirmative procedure has been used for certain delegated powers where the power touches on a central aspect of the policy. For example, the power in Clause 49(4)(d) can be used to influence the defaults designed and offered by a scheme, so the affirmative procedure is used.

I have tried to answer all the questions that were asked. I hope that those explanations have been helpful and that noble Lords will feel able to withdraw or not press their amendments.

[Viscount Younger of Leckie (Con)]

My Lords, before I conclude on this group, I thank in particular my noble friend Lady Noakes for her probing amendments, which ask a number of important questions.

I will make a few points and rounding-up comments but, before I do, I want to pick up on my noble friend Lord Trenchard’s remarks. I must admit that I was very surprised to hear the remarks made by the noble Lord, Lord Davies, on his view of the pensions landscape; they were fairly forceful. As he will expect, I entirely disagree with his comments. I just make the point that our party brought in improvements to auto-enrolment and introduced the dashboard system; I pay tribute to my noble friends Lady Coffey and Lady Stedman-Scott. I have more to say but I will give way.

[Lord Davies of Brixton (Lab)]

I just want to pick up the noble Viscount’s point about auto-enrolment. It was a Labour Government and a Labour Bill that introduced automatic enrolment. The only change that the coalition made was to delay it, thereby reducing people’s future pensions.

[Viscount Younger of Leckie (Con)]

We brought this into effect. Of course, that takes us back to the coalition in 2010-15, but so much has been done since then. I will not go on but, if the noble Lord feels so strongly about this, why does he not probe his own Government more on why there is nothing in the Bill about saving more for retirement? I have not even mentioned the points in the Budget on salary sacrifice. I just wanted to get that in, as the noble Lord has become quite political.

Moving on swiftly, Amendment 177 probes whether all default pension benefit solutions are required to provide a regular income and whether that income must necessarily be for life. Here, I pay some respect to the noble Lord, Lord Davies, because he rightly used the expression “pathways for people”, which are what this is all about. I am grateful to the Minister for providing some clarification on this point. She used a very good expression, “freedom to choose”, which is key in our discussion on this particular group.

However, given the significance of this issue for members’ retirement outcomes, it is vital that this clarity is communicated, not just within this Committee but clearly and consistently to those whom these reforms are intended to serve. My noble friend Lord Fuller spoke about the importance of personalisation, which I think is a very good expression.

Communication will be especially important in the context of guided retirement, where members may reasonably assume that a default implies a particular structure or guarantee unless told otherwise. The use of the word “default” is more than semantic, as I know the noble Baroness, Lady Altmann, has laid out in the past—I note she is not in her place. Ensuring that expectations are properly set will be central to building confidence and avoiding confusion at the point of retirement. Again, my noble friend Lord Fuller raised the importance of ensuring that certain cohorts must be particularly noticed and properly treated.