Pension Schemes Bill
House of Lords · Lords Chamber · 16 Mar 2026 · 42 speeches · Official Report
Report (1st Day) (Continued)
Clause 10: Restrictions on exercise of power to pay surplus
Amendment 14
Moved by
14: Clause 10, page 11, line 12, insert- “(2AA) Without prejudice to the generality of subsection (2A), regulations made under that subsection must include provision that takes into account the particular circumstances of occupational pension schemes established before the coming into force of the Pensions Act 1995 which, prior to that Act, possessed or were understood to possess a power to pay surplus to an employer.”Member's explanatory statement This amendment would allow schemes where people are affected by pre-1997 arrangements to offer discretionary indexation where funding allows, with appropriate regulatory oversight.
My Lords, I wish to test the opinion of the House.
Amendments 15 to 20 not moved.
Amendment 21
Moved by
21: Clause 10, page 12, line 7, after “76” insert “of the Pensions Act 1995” Member's explanatory statement This amendment corrects a mistake in a cross-reference to the Pensions Act 1995.
Amendment 21 agreed.
Amendment 22
Moved by
22: After Clause 10, insert the following new Clause- “Report on fiduciary duty and discretionary indexation of pre-1997 benefits(1) The Secretary of State must, within 12 months of day on which this Act is passed, publish a report on whether the fiduciary duties of trustees of occupational pension schemes should be amended to permit discretionary indexation of pre-1997 accrued rights, where scheme funding allows.(2) The report must consider-(a) the impact of current fiduciary obligations on trustees’ ability to award discretionary increases to pre-1997 pension benefits;(b) the potential benefits of permitting such discretionary indexation for affected pensioners;(c) the funding conditions and thresholds under which discretionary indexation could be considered sustainable;(d) the appropriate level of regulatory oversight and guidance required to ensure that discretionary increases are granted in a fair, transparent, and financially responsible manner;(e) international approaches to indexation of legacy pension benefits;(f) the legal and actuarial implications of amending fiduciary duties in this context.(3) In preparing the report, the Secretary of State must consult-(a) the Pensions Regulator,(b) the Financial Conduct Authority,(c) representatives of pension scheme trustees, members, and sponsoring employers, and(d) such other experts or bodies as the Secretary of State considers appropriate.(4) The Secretary of State must lay a copy of the report before both Houses of...
My Lords, as the Minister indicated earlier, we left much of the meat for this debate around pre-1997 indexation to this group, not anticipating the events that happened outside, which I know we all regret. Knowing who was involved, who was a friend, I very much hope that the outcome is the best it may be. This amendment, which is similar to one we moved in Committee, basically looks at the situation of those people who, for one reason or another, have not had their pensions uprated for inflation. Basically, it sets out that: “The Secretary of State must, within 12 months of day on which this Act is passed, publish a report”. When I discussed this with the Minister, I think we agreed that having a review is not necessarily the best way forward, but the problem is finding a way to bring this to the attention of government in a manner that might result in some sort of outcome for those affected. The problem we were discussing around surpluses was very much around how a surplus is made, who can have it, and so on. I would just like to go back to the argument I was making in relation to the fact that defined benefit schemes to me are a contract between the employee and the employer. I know that in Committee, on a different group much later on, one of the noble Lords present commented that, in his view, a DB scheme is just a giant Ponzi scheme. I thought that comment was a bit uncalled for and indicated that he neither fully understands the evil impact of a Ponzi scheme nor the...
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...
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...
My Lords, I am grateful for the comments of the noble Viscount, Lord Younger, and only sorry that I was not persuasive enough to get him to join my side. I am also grateful to the Minister, because the tea and sympathy has actually gone further than I might have expected. What she said in her response is very encouraging. It indicates that the Government are very much in listening mode on this. If we can find a way to encourage some of those schemes, particularly the BP scheme which I mentioned in Committee, to share those surpluses, and if the Government have a mind to perhaps put a bit of a wind behind that then that would be very good. In the light of that, I beg leave to withdraw my amendment.
Amendment 22 withdrawn.
Amendment 23 not moved.
Clause 11: Relevant schemes: value for money
Amendment 24
Moved by
24: Clause 11, page 14, line 7, at end insert- “(14) Value for money regulations must include criteria relating to member service quality, including-(a) accuracy of recorded contributions;(b) reliability of valuation data;(c) efficiency of administration;(d) jargon-light communications in plain English;(e) availability of education or guidance for all members;(f) specific support for vulnerable members.”Member’s explanatory statement This amendment seeks to ensure that value for money assessments consider the quality of member services and communications, as well as data and administrative accuracy.
My Lords, I will speak to various of my amendments in this group. We have moved on now to value for money. Of course, I fully support the Government’s aim of moving from talking about cost as the only arbiter of whether a scheme is good, and low cost being the measure of good, to looking at a much wider area of benefits for members in terms of value for money. The particular amendments that I tabled, which I also tabled in Committee, focus on language in particular. I am grateful to the noble Baroness, Lady Bowles, for her support for Amendments 24 and 25. These amendments are trying to outline more clearly what criteria a scheme that is good value for money should be able to fulfil, so that it is much clearer what “value for money” means beyond whether it is low cost, and indeed beyond the aims of just saying whether a scheme has been performing well. Ultimately, when we are discussing the value of a pension scheme with members, one thing that has in the past not typically factored into the thinking of the industry is the idea that the scheme might encourage members to understand pensions and give them a better idea of what the pension fund does and the benefits it can bring to them. So often in the past, there has been a reliance on member inertia, where they do not have to do anything and the pension is done for them. The aim of the various requirements I suggest in Amendment 24 is to make the accuracy of contributions important. At the moment, schemes are generally...
Amendment 32 is really important, and I hope the Government and the Minister might consider its merits. The Bill currently suggests that, if a scheme receives an intermediate rating, its trustees or the provider itself suddenly must do all kinds of things that will be pretty expensive and probably quite scary: notifying members that the scheme is intermediate value-whatever that will be called-and notifying the employer, as if there is something fundamentally wrong with the scheme. However, with any investment product there can be one or two years in which it does not perform terribly well, but that does not mean that anything is wrong. These are long-term investments and the aim is a long-term outcome, and if you are investing with a longer-term strategy then you will have years where perhaps performance is not so good or managers change. Rather than all these draconian requirements set out in the Bill being required immediately, I suggest that the intermediate rating needs to be maintained for at least three consecutive years. At that stage, the big costs of writing, reporting and planning how you will improve would kick in.
As I say, I will not press these amendments. However, I hope the discussion and thought processes behind what I suggest can be taken on board by the Minister as a genuine attempt to try to help members understand pensions better and ultimately improve pension outcomes.
My Lords, I rise briefly to offer support from these Benches, particularly for Amendments 24 and 25 and more broadly across all the amendments that the noble Baroness indicated. In particular, I was taken by Amendment 24 and the idea that value for money regulations should include, among other things, the “accuracy of recorded contributions … reliability of valuation data” and the “efficiency of administration”. As any poor civil servant who is currently trying to get hold of a pension administered by Capita is finding out, these things are not a given. Making sure that the small number of quite large firms in the marketplace actually deliver with the necessary competence is a really important part of whether pensioners get value for money. As I say, I broadly welcome and support the amendment.
My Lords, it is a long time since I was managing big pension funds in the 1980s. In those days, we were in the happy position of considering it a bit underweight if you had less than half your money in British stocks; now, it is 5%. It is extraordinary for politicians to have done that to the economy-and it is because of us that it has dropped. The way we have framed our regulations and organised how pension funds are assessed has, over time, resulted in that extraordinary diminution. This has left us with a stock market that is cash negative and a City that is immensely weaker than it would be. We will address this later, but the solutions to that problem perhaps lie in this part of the Bill. If we communicate better with pensioners and say to them, “Do you really trust the country you live in, are part of and benefit from so little that you want only 5% of your pension in it?”, I think we would get a positive response to the idea that perhaps that figure should be higher. Through the mechanisms in this part of the Bill, we could ask pension fund managers to respond to that, and I hope that we would be able then to get away from the bits in the Bill about compulsion and direction that are causing difficulty to my noble friends, whose concerns I share. I think we would get a good response if we informed members of pension funds, as my noble friend said, so that they could take good decisions, and then empowered them to say that they want to back their own, with a good chunk...
I have three points. First, I profoundly disagree with the noble Lord, Lord Lucas. To pin the blame just on politicians lets everyone else off scot-free. It is more like Murder on the Orient Express -everyone had a hand. My particular favourite is the accountants, who had a big hand; the way they defined accounting for pension costs was pernicious. Let us not blame just the politicians. Secondly, one cannot not be in favour of value for money. Obviously, we are all in favour of people getting value for money from their pension schemes. However, I think the Government underestimate the difficulty of providing something useful. As the noble Baroness, Lady Altmann, pointed out, there are more than two or three factors to be taken into account. It is particularly difficult when one starts including prospective factors-how are these to be judged? It is very difficult, and it is not just the factors. The pension holders’ circumstances vary so widely. How can there be a simple, straightforward way of assessing whether someone has had value for money when their needs are so different from those of other people who are saving for their pension? Thirdly, I apologise for not being present in the Chamber to support the amendment in the name of the noble Viscount, Lord Thurso, in the previous group. I realise I am cheating here, but I was elsewhere. I had not realised that one of the groups had disappeared; otherwise, I would have been here and supported his amendment.
My Lords, I begin by thanking the noble Baroness, Lady Altmann, for her opening remarks, which set the scene effectively on an important part of the Bill. She has done so at the close of what has been a long first day on Report-longer than we would have thought. She has once again brought clarity to a set of issues that are central to the operation of the reforms before us. The amendments in this group are, in large part, concerned with ensuring that the value-for-money framework works well-both in how it is constructed in legislation and how it is communicated to and understood by those who will ultimately be operating under it. If this framework is to achieve its objective of improving outcomes for savers, it must be both robust in its design and clear in its application. Amendment 24, in the names of the noble Baronesses, Lady Altmann and Lady Bowles, is both welcome and important. Throughout our discussions today and, indeed, in Committee, we have spoken a great deal about fiduciary duty: the principle that those responsible for managing pension schemes must act in the best interests of their members. Amendment 24 would help ensure that this vital principle is properly reflected within the value-for-money framework. It would require the regulations underpinning the framework to include explicit criteria relating to the quality of service provided to members. It would include matters such as the accuracy of recorded contributions; the reliability of scheme data; the...
My Lords, I am grateful to all noble Lords who have spoken this evening. I am grateful to the noble Baroness, Lady Altmann, for her support on the principle of the shift to value for money. Before I move on to the detail of her amendments and others, I say to the noble Lord, Lord Lucas, that I am not going to get in between him and my noble friend Lord Davies in fighting it out on who got us here. Of particular relevance to this debate is that we would probably all agree on the need to move from cost to value-and that is only one of the things that has been going wrong. If we have pension funds competing for business with employers on cost rather than value, we are never going to move to the kind of scale that we want to see, which is a consolidated pensions market with large and better-performing pension schemes, improving the opportunity to invest in a wider range of assets and, I hope, taking us in a direction that would make the noble Lord happy. I start with Amendment 24. I recognise the consistent commitment of the noble Baroness, Lady Altmann, to improving outcomes for members, particularly through better service quality and clear communications for vulnerable members. The Government entirely share these aims. Where we differ is that we think that the Bill already provides the necessary powers to deliver them. Let me explain why. Service quality is a core part of the VFM framework. The Bill ensures that these metrics remain central to assessments, while allowing...
My Lords, I thank the Minister for her remarks. I also thank all noble Lords who have spoken in support of my amendments, in particular Amendment 24, which I had hoped the Government might be a little more favourable towards than they seem to have been. I understand that the Minister says that the Government have consulted industry and that has fed into the production of the Bill. I hope that the Government will also consult consumer groups and members because it is they who really need to understand the value-for-money framework. It is those groups that I was addressing with my proposals because from the point of view of industry it looks rather different, perhaps, from how it does from that of the ordinary workers who are having their money put into the pension. I understand that the Government do not wish to accept Amendment 24 but it will, I hope, still help provide a framework for some further discussions as we develop the value-for-money framework. I beg leave to withdraw the amendment.
Amendment 24 withdrawn.
Amendment 25 not moved.
Clause 12: Publication etc of metric data
Amendment 26
Moved by
26: Clause 12, page 14, line 40, leave out “specified” and insert “determined” Member’s explanatory statement This amendment corrects a consistency mistake.
Amendment 26 agreed.
Consideration on Report adjourned.
House adjourned at 8.40 pm.