Torsten Bell MP: speeches

Speeches

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  Clause 29 will make the small pot consolidation framework work in practice, through allowing the small pots regulations to cover a range of operational, administrative, data protection and consumer protection matters. It enables the Pensions Regulator to charge a fee for authorisation and gives applicants the right to appeal if their application is refused. Regulations will be able to require trustees and scheme managers to maintain and improve records, and they will protect members from high transfer fees. The clause enables the delegation of functions and powers to the Pensions Regulator, the FCA and the small pots data platform operator. It ensures that data protection and privacy obligations are respected, while allowing necessary data processing to support the scheme’s efficient operation. The clause will allow the Government to amend existing legislation to support the small pots consolidation framework. Examples of uses of the power include giving the Pensions Ombudsman new powers to investigate member complaints, and ensuring that the small pots data platform is properly funded through the general levy. Pensions law is complex and technical, and needs to evolve with time, so the Government need the flexibility to respond to those changes and regulators’ operational experience without having to table a new Bill every time. The Bill clearly sets out the multiple default consolidator framework. With targeted amendments, the clause will allow us to fine-tune the framework over time, ensuring operational effectiveness. Any use of so-called Henry VIII powers will be subject to the affirmative procedure. The clause is essential for the practicality, reliability and integrity of the small pots consolidation framework to ensure it is fit for purpose now and for the future. The Government amendments to the clause are purely technical drafting improvements. Amendment 36 clarifies that appeal rights for schemes are not limited solely to decisions regarding an application for authorisation, so one could appeal on other grounds. Amendment 37 provides further clarity on the liability framework that will be established to ensure that members are protected. It makes it clear that the small pots data platform operator or the trustees or managers of a relevant pension scheme can be made responsible for paying compensation to an individual who has suffered a loss as a result of a breach of the small pots regulations. Amendments 38 to 40 take account of the Data (Use and Access) Act 2025, which was passed by Parliament subsequent to the introduction of this Bill. The amendments do not alter the policy, and I ask the Committee to support them.

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  I beg to move amendment 70, in clause 38, page 37, leave out lines 39 and 40 and insert— “(b) what it means for assets of a pension scheme to be managed under a "common investment strategy" (including in particular provision defining that expression by reference to whether or how far the assets relating to each member of the scheme are allocated in the same proportion to the same investments).” This amendment provides more detail as to how the power to define “ common investment strategy” may be used.

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  I will be brief. The link between the definition of a main scale default arrangement and the common investment strategy is key to ensuring that the scale requirements apply to the correct elements of a pension scheme. Amendments 70 and 84 provide more detail on how the power to define a common investment strategy may be used to provide further information on the Government’s meaning when referring to that term. Amendment 97 removes the “common investment strategy” element from the definition of default funds to avoid confusion with how that term is used in the main scale default arrangement approval in new sections 28A and 28B. I commend the amendments to the Committee. Amendment 70 agreed to. Amendments made: 71 in clause 38, page 38, leave out lines 32 to 38 and insert— “(d) permitting the Authority to impose, on a person who fails to comply with a requirement under paragraph (c), a penalty determined in accordance with the regulations that does not exceed £100,000;”. This amendment ensures that the penalties language used in section 28A is consistent with that used in new section 28B. Amendment 72, in clause 38, page 39, leave out lines 1 to 4 and insert— “(12) In this section ‘main scale default arrangement’ means an arrangement— (a) that is used for the purposes of one or more pension schemes, and (b) subject to which assets of any one of those schemes must under the rules of the scheme be held, or may under those rules be held, if the member of the scheme to whom the assets relate does not make a choice as to the arrangement subject to which the assets are to be held.” This amendment defines “main scale default arrangement” for the purposes of new section 28A. Amendment 73, in clause 38, page 39, line 7, leave out “relevant”. This amendment removes an unnecessary tag. Amendment 74, in clause 38, page 39, line 10, after “requirement” insert— “by reference to the main scale default arrangement”. This amendment clarifies how the concept of a main scale default arrangement fits into the approval framework under section 28B. Amendment 75, in clause 38, page 39, line 12, after “requirement” insert— “by reference to a main scale default arrangement”. This amendment clarifies how the concept of a main scale default arrangement fits into the approval framework under section 28B. Amendment 76, in clause 38, page 39, line 16, leave out “subsection (6)” and insert “subsections (5) and (6)”. This amendment adds a further cross reference to new section 28B(4). Amendment 77, in clause 38, page 39, line 17, leave out “held in funds”. This amendment removes some unnecessary wording for the sake of consistency. Amendment 78, in clause 38, page 39, line 18, at end insert— “(ia) are held subject to the main scale default arrangement, and”. This amendment clarifies how the concept of a main scale default arrangement fits into the approval framework under section 28B. Amendment 79, in clause 38, page 39, line 20, leave out “held in funds”. This amendment removes some unnecessary wording for the sake of consistency. Amendment 80, in clause 38, page 39, line 24, at end insert— “(ia) are held subject to the main scale default arrangement, and”. This amendment clarifies how the concept of a main scale default arrangement fits into the approval framework under section 28B. Amendment 81, in clause 38, page 39, line 27, leave out “held in funds”. This amendment removes some unnecessary wording for the sake of consistency. Amendment 82, in clause 38, page 39, line 27, leave out— “one (and only one) relevant” and insert “a qualifying relevant”. This amendment corrects a reference to a relevant Master Trust in new section 28B(4)(c) to take account of new section 28B(8). Amendment 83, in clause 38, page 39, line 30, at end insert— “(ia) are held subject to the main scale default arrangement, and”. This amendment clarifies how the concept of a main scale default arrangement fits into the approval framework under section 28B. Amendment 84, in clause 38, page 39, leave out lines 38 and 39 and insert— “(b) what it means for assets of a pension scheme to be managed under a ‘common investment strategy’ (including in particular provision defining that expression by reference to whether or how far the assets relating to each member of the scheme are allocated in the same proportion to the same investments).” This amendment provides more detail as to how the power to define “common investment strategy” may be used. Amendment 85, in clause 38, page 40, line 3, leave out from “(4)” to end of line 6 and insert— “(a) a group personal pension scheme is ‘qualifying’ in relation to the GPP if the provider of the GPP is also the provider of the group personal pension scheme; (b) a relevant Master Trust is ‘qualifying’ in relation to the GPP if the provider of the GPP is also the scheme funder or the scheme strategist in relation to the relevant Master Trust (within the meaning of Part 1 of the Pension Schemes Act 2017).” This amendment clarifies the circumstances in which assets held by connected Master Trusts and group personal pension schemes can be counted for the purposes of the application of the scale test to a group personal pension scheme. Amendment 86, in clause 38, page 40, line 19, leave out “relevant Master Trust or”. This amendment removes an unnecessary reference to a relevant Master Trust. Amendment 87, in clause 38, page 40, line 25, leave out— “managers of the GPP that their” and insert— “provider of the GPP that its”. This amendment replaces a reference to the “managers” of a GPP with “provider” (reflecting normal usage in relation to personal pension schemes). Amendment 88, in clause 38, page 40, line 27, leave out “the managers” and insert “the provider”. This amendment replaces a reference to the “managers” of a GPP with “provider” (reflecting normal usage in relation to personal pension schemes). Amendment 89, in clause 38, page 40, line 35, leave out— “considered by the Authority to have failed” and insert “who fails”. This amendment ensures consistency with the new language in section 28A. Amendment 90, in clause 38, page 40, line 38, at end insert— “(e) providing for the making of a reference to the First-tier Tribunal or Upper Tribunal in respect of the issue of a penalty notice or the amount of a penalty.” This amendment ensures that regulations can make provision for appeals to the Tribunal in respect of penalties under regulations under new section 28C(9)(c). Amendment 91, in clause 38, page 40, line 42, leave out from beginning to end of line 3 on page 41 and insert— “(12) In this section ‘main scale default arrangement’ means an arrangement— (a) that is used for the purposes of one or more pension schemes, and (b) subject to which assets of any one of those schemes must under the rules of the scheme be held, or may under those rules be held, if the member of the scheme to whom the assets relate does not make a choice as to the arrangement subject to which the assets are to be held.” — (Torsten Bell.) This amendment defines “main scale default arrangement” for the purposes of new section 28B.

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  We now come to the sections of the Bill that bring in the pensions investment review measures, particularly those on setting minimum scale levels required by schemes. Before I briefly describe these amendments, I remind the Committee of the purpose of clause 38, which we will probably be discussing for a substantial period. The clause will insert new scale requirements, which we do intend to use, and asset allocation conditions, which we do not, into the Pensions Act 2008. Specifically, it inserts them into section 20, which deals with the quality requirements in UK money purchase schemes for master trusts, and section 26, which provides equivalent requirements for group personal pension schemes.

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  I thank the hon. Member for Wyre Forest for tabling these amendments. We all recognise the importance of innovation in the pension landscape, but I respectfully oppose the inclusion of the amendments in the Bill. One point that is at risk of being lost from the discussion so far is the central insight that is the motivation for this clause, which is that scale really is important. Scale really does matter. It has the potential to unlock a wide range of benefits, from better governance to lower costs, to access to a wider range of assets. All of those are integral to improving member outcomes, and if we provide many carve-outs, every scheme will say it is a specialist provider that should not be covered because its members value its inherent difference from every other, and we risk undermining the premise that I think has cross-party agreement, which is that we need to move to a regime of bigger schemes. One of our aims in this Bill, which is relevant to the asset allocation discussion we just had, is to provide clarity that the change will happen, people will not duck and dive around for years attempting to litigate what is and is not a specialist provider and so on. Innovation is really important, as is competition in the market, but we need to do this in a way that does not undermine the purpose of the scale requirements, which I think is a matter of cross-party consensus. Having said that, while innovation in the market is important, the Government’s view is that it is not an alternative to achieving scale. That is why we have provided for a new market entrants pathway. There, the innovation grants a temporary exemption from scale requirements, not a permanent exemption as the amendments would enable. That is because scale is very important indeed. Applicants to the pathway will be able to enter the market if they can demonstrate they have strong potential to grow to scale, and if they have some kind of innovative design. That is not a permanent exemption from scale requirements, and there should be cross-party consensus on avoiding that. To provide reassurance on some of the points that have been raised, I emphasise that the scale requirements apply only to providers’ default offers. Providers of specialist offers and the rest, and self-invested personal pensions, are all able to continue to offer those specialist services, but the main offer in the workplace market does need to meet scale requirements. I hope with that explanation, hon. Members will not press the amendments.

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  Let me first respond to the thrust of the comments from the Opposition; I will then come directly to that question. I am conscious that, having sat through Second Reading, most hon. Members have heard my views, and the Government’s views, on this, but let us set out the facts. It is the industry itself that set out the case for change. That is what the Mansion House accord does: it says that a different set of asset allocations is the right way to go in the longer term. I support the industry’s judgment. The previous Conservative Pensions Minister has welcomed its judgment. I think it is the view of every senior Conservative ex-Minister sitting on the Opposition Back Benches that that change needs to come. [ Interruption. ] I am not speaking for the Opposition Front Bench; the hon. Member for Wyre Forest has just spoken eloquently for himself. I am speaking for former Conservative Ministers, including former Chancellors. If anything, they accuse me of being too timid—I am not sure what the characterisation of their current Front Bench would be in that regard. That is the status of the debate on this. Why is there consensus? Leaving aside some of the points that have been raised, it is because this is in savers’ best interests. That is the motivation and the goal. It is also wrong to set out the conflict in terms as broad as the hon. Member for Wyre Forest has just used, because there is a clear savers’ interest test within the Bill that enables trustees or scheme managers to say that proceeding in a certain way would not be in the interests of their savers, and the asset allocation requirements would not bite. Turning directly to the question about unreasonable Ministers—I have heard rumours of such things. They can exist, and there are protections against them: there are the usual judicial review protections, but in the Bill there are specific requirements to provide a report justifying any use of the reserve power and how it would play out. There are significant limits on the assets—it is broad asset classes—that can be set out in an asset allocation and there are limits to which assets can be covered. There is the savers’ interest test, and importantly, there is a sunset clause for exactly the reason that we cannot predict what 2040 looks like today. I recognise that hon. Members will not support that part of the clause, but I hope they recognise that the goal is the same, which is that a change in investment behaviour is in savers’ interests. That is what the industry is telling us. As I said last Tuesday, the danger of a collective action problem—the problem that saw commitments made by the industry and the previous Conservative Government not delivered—is partly what this reserve power helps to overcome. I have absolutely heard the points made about the volume of amendments. They are on the record, as will be all the points made during this process. To answer the question directly, the reason there are so many is that we had lots of useful feedback from industry over the summer, and I wanted to provide more clarity through the clause and make sure that we had the best version of it. We did not want to leave it until Report, so people have had a chance to see it as we go through Committee. I absolutely recognise the points made, and the specific point about the drafting choice of a large number of amendments versus an additional clause. I am sure the drafters will have heard that comment. Amendment 44 agreed to. Amendments made: 45, in clause 38, page 34, line 32, leave out “Conditions 1 and” and insert “Condition 1 and Condition”. This amendment makes a minor verbal change to facilitate differential commencement of the scale and asset allocation conditions. Amendment 46, in clause 38, page 34, line 37, leave out “of that scheme”.— (Torsten Bell.) This amendment reflects the fact that a main scale default arrangement may be used by multiple schemes.

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  I am reassured that our agreement that scale is the desirable outcome is clear. It is great to have that on the record. I also put on the record that there is agreement about the value of innovation and about new entrants. I think that the only distinction is between a new entrant that then grows and a new entrant that does not. Our approach is to allow new entrants, but they need to be ones with a plausible sense that they can get to scale. Inherent to most of the innovation in the market—for example, in collective defined-contribution schemes—is that they would have to operate at scale to be effective. I think that the banking analogy is actually quite apt.

• 9 Sept 2025 · Pension Schemes Bill (Fifth sitting) · Hansard source

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  I shall speak briefly because I am conscious that we need to adjourn shortly for Treasury orals, which I know everybody will be joining us for. I will not rehearse the arguments I have already set out against the purpose of amendments 248 and 249, other than to note that I do not agree with the characterisation by the hon. Member for Mid Leicestershire. Amendment 275 seeks to prevent the Government from designating securities in UK water companies as qualifying assets for the purpose of the asset allocation requirement. I recognise the points that the hon. Member for Wyre Forest made, and I am not surprised to hear that Reform has not thought through its policies in this regard. The Government have set out the safeguards we have put in place around the use of this power. We do not think we should single out a particular sector in primary legislation, so I ask Members not to press their amendments. I thank the hon. Member for Horsham for introducing new clause 4. The investment he references is exactly the kind that we think would raise financial returns and improve quality of life at retirement. That is the purpose of these changes. He rightly raises the bringing together of the demand side—that is, the Mansion House accord and the change in investment behaviours—with the supply side. That is exactly what the Government are doing via planning permissions and everything else, to ensure that the pipeline of projects is there, including via the British Growth Partnership work, which is intermediating all of that. On that basis, we think that the new clause is unnecessary, but I completely agree with much that it contains.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  That is an important question. The communication to members will be standardised, by providing the key information that has to be provided and the option of an opt-out—so it will be explicit that they have the option to opt out of the consolidation process—as well as their alternative options, for example moving their fund into another consolidator. I hope that that answers the question. The notice is of high importance, because receiving that key information is basically the only point at which the member is informed about what is happening to the financial transaction—the Government are not generally in the business of legislating to change people’s financial arrangements without their consent. Clause 22 will ensure that schemes are bound by regulations to send prescribed information that will enable a member to make the decisions, for exactly the reasons that the hon. Lady set out. Clause 23 will introduce an important safeguard in the broader framework for consolidating small dormant pension pots. It recognises that although automatic consolidation will benefit the majority, it may not be right for everyone and in all circumstances. The Bill aims to streamline pension savings and reduce fragmentation across the industry, but the clause ensures that members’ interests remain at the heart of the process. Under the clause, a small dormant pension pot may be designated as exempt from automatic transfer if two key conditions are met. First, the pot must satisfy certain prescribed conditions, which will be set out in regulations. Secondly, the trustees or managers of the scheme must determine that it is in the best interests of the individual or a class of individuals in their scheme for the pot to remain where it is. That is a vital member protection and safeguard. It recognises that although consolidation is generally beneficial, because it reduces administrative costs, there will be circumstances in which transferring a pot may not be in the member’s best interest. The clause provides the ability for the scheme to make that clear and not to transfer in those circumstances.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  On we go! I was going to thank the hon. Member for Torbay for his words on his amendments, but I shall move on to them anyway, and to clause stand part. Ultimately, value for money is a much-needed member protection measure for savers enrolled in a defined contribution scheme. I should remind the Committee why we have it and why it is so important: because the risk of poor value for money now lies in the defined contribution market to such a large extent with individual savers. That is what the Bill is ultimately, most importantly, about. It is important to remember that members of defined benefit pension schemes already have protections and benefit from the sponsor employer shouldering all that risk, as was mentioned earlier by the hon. Member for Aberdeen North. Those employers also have greater agency to deal with the value-related issues, such as the effective administration of their pension schemes. Clause 10 sets out that certain pension schemes and arrangements will be in scope for the value for money framework. The clause provides regulation-making powers to specify the types of schemes and arrangements that will be in scope of the value for money requirements. We envisage that those initially in scope will be default occupational pension schemes offering defined contribution benefits. That is fundamental, given that the vast majority of defined contribution savers are saving into exactly those kind of pension schemes. To spell out what that means, we are not talking about non-workplace defined contribution pensions—that is, personal pensions. There is a regulatory power to extend in future if required, but initially we are talking about workplace defined contribution pension schemes. With that explanation, I hope that the hon. Member for Torbay will not press his amendment, and I commend clause 10 to the Committee.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  In response to the hon. Member for Torbay, I should say that I have already set out the case for the value for money framework not covering defined benefit pension schemes, which is what the effect of the amendment would be. To the questions raised by the hon. Member for Aberdeen North, broadly, the answer is yes: the regulations will be published in detail as part of the consultation. Significant consultations have already gone on with a very wide range of stakeholders, both by the TPR and by the Financial Conduct Authority. There are further consultations, and then draft regulations, to come. It is worth thinking about how a lot of the changes in the Bill reinforce each other. It is important that we make reasonably swift progress on the value for money regulations, because the value for money regime is a requirement for us to be able to then make progress on some of the other bits that we will come to discuss, such as contract override and, indeed, small pots. Amendment 28 agreed to. Clause 10, as amended, ordered to stand part of the Bill. Clause 11 Publication etc of metric data

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  I beg to move amendment 28, in clause 10, page 11, leave out line 9 and insert— “an occupational pension scheme that provides money purchase benefits.” This amendment ensures that the value for money framework is capable of applying to hybrid schemes (that is, schemes that provide both money purchase benefits and other benefits).

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  The answer to the hon. Lady’s question is that that conversation is going on to a huge degree. Because there are so many lessons to be learned from abroad and so many technical questions to be worked through, including about the provision of data—these are important technical questions for the scheme to work and be operationalised—there is a high level of consultation on the value for money framework. It is absolutely an ongoing conversation. It was happening for some time under the previous Government, and it is continuing now. Another phase of that discussion will be launched in the near future and will continue as we move to the operational phase. Amendment 29 agreed to. Clause 11, as amended, ordered to stand part of the Bill. Clause 12 VFM assessments

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  Clause 15 details the actions that may be required when an arrangement falls into an intermediate rating. That could be an arrangement that is at risk of not delivering value, or one that provides a certain level of value, but needs more work to improve the value it offers. It allows for regulations to detail the actions required of trustees and managers for schemes or arrangements rated intermediate. That could include producing an improvement or action plan, outlining their planned steps towards improved value for members or informing the employers currently paying into the arrangement of its value for money rating and ensuring that the arrangement does not take on new employers until it improves the value rating. That last point was raised at the evidence session on Tuesday. As clause 14 provides the ability to set a number of sub-categories of rating within the intermediate category, clause 15 enables different consequences to be attached to those sub-categories depending on the value being provided. We are proposing to give schemes in the intermediate rating a period of up to two value for money assessment cycles to make the improvement needed to provide value to their savers. It is important to differentiate between the intermediate and the “not delivering” rating. Schemes rated as not delivering are essentially not providing value to savers, with no identifiable improvements within a reasonable amount of time. Those schemes will be required to make an assessment of their next steps, which will most likely be to transfer the savers to a scheme that is providing value. That is the ultimate sanction within this framework. Schemes that are rated intermediate will have identified where improvements can be made and will be required to complete an improvement plan. This would outline the proposed changes to improve their VFM rating within two years. As well as providing definitions of employer and participating employer in the context of the clause, it also allows for the content of an improvement plan to be included in secondary legislation.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  The hon. Lady’s last point is basically the right one. The policy objective is that where someone is not actively engaging in their pot, that is available for consolidation. The kind of minor administrative engagement—trying to access the website—is not what is envisaged by the clause. It is to make sure that somebody who has taken active choices about how their pot is invested is not treated as being disengaged when they have done something that is, it turns out, very unusual. Question put and agreed to. Clause 20 accordingly ordered to stand part of the Bill. Clause 21 Small pots data platform Question proposed, That the clause stand part of the Bill.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  Thank you, Sir Christopher. A central part of assessing whether a pension scheme or arrangement is providing value to the saver is how it performs in terms of investment, the quality of the service provided and costs. Having standardised performance metrics and a consistent measure of value will allow for easy and better comparisons across arrangements, which in turn will drive schemes to address poor value. That is why clause 11 provides the powers necessary to ensure that schemes disclose value for money data on areas such as investment performance, including the types of assets being invested in, the quality of the service provided and charges on members. This information will have to be submitted within specified timescales. It is crucial that the metric data is open to public scrutiny, so clause 11 provides powers to require that the metrics are published and available on an electronic database. To ensure standardisation, regulations may also require the Pensions Regulator to set out the format that information should be submitted in. The powers taken in this clause will enable the creation of consistent, transparent and comparable VFM data to allow us to better understand which schemes are providing best possible value. I turn to new clause 11, which will be inserted into chapter 1 of part 2. It provides clarity on the use of the electronic database mentioned at clause 11. Where the Financial Conduct Authority has made rules for contract-based schemes that correspond to VFM regulations, it will be permitted to use the electronic database. The new clause therefore facilitates the work of the FCA by facilitating schemes to provide that data to the electronic database. It provides for regulations to permit the use of the electronic database for the publication or sharing of information relating to contract-based schemes. The regulations will be subject to the negative procedure. The context is that we have been clear from the outset that, for the value for money framework to work effectively, it must apply consistently across both trust-based and contract-based sides of the market. The new clause enables that to happen. It is purely technical in nature and will ensure that value for money data is treated consistently across both those two parts of the market. It does not alter the policy. I commend it to the Committee. I turn to Government amendment 29, which introduces a change to chapter 1 of part 2. The amendment ensures that information on the database can be made available to, for example, the Secretary of State for Work and Pensions for the purpose of internal review. A large amount of high-quality data is being collected via that process, and it will be able to be made available to the Secretary of State or others, as well as being used for its main purpose under the Bill, which is obviously publication. The amendment is of a minor and technical nature and does not alter the policy. I commend clause 11 and the amendment to the Committee.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  The clause, as we have just discussed, will ensure that the Government have the power to introduce regulations to secure the consolidation of eligible small pots into an authorised consolidator scheme. The Bill enables us to address the growing problem of pension fragmentation, where individuals accumulate multiple small pension pots as they move between jobs. Fragmentation can lead to inefficiencies, higher costs for providers and savers, and poor retirement outcomes. As we have just discussed, the clause creates the eligibility conditions for small pots to be consolidated, including the £1,000 limit. The pot must be classed as dormant, which means that contributions have not been paid into it for at least 12 months, so the individual is not actively saving into the scheme. In addition, there is a requirement that the individual has not, subject to any prescribed exceptions, actively expressed how the pension pot is to be invested. The prescribed exceptions are in part to ensure that the scope specifically targets those who are unengaged savers in default funds, but this will enable us to broaden the scope to include individuals such as those in sharia-compliant funds, who would otherwise be excluded from the automatic consolidation process. We estimate that these eligibility criteria will bring into scope 13 million dormant pots. This multiple default consolidator approach will support improved retirement outcomes for savers, not least by lowering the charges that they pay on those pots over time, as well as reduce the administrative hassle for pension providers, alongside supporting our vision for a pensions market with fewer, larger schemes that provide greater value. Our impact assessment demonstrates that this solution is estimated to generate greater overall net benefits over the period than other options, including pot follows member.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  I understand why the hon. Member tabled the amendment. I think amendments like this one should be tabled in most Bill Committees by all Oppositions, as they have been over the years. Let me make one general point and one specific point about the Bill. The general point is that there is always a trade-off between maximum scrutiny of every single part of any change that comes through secondary legislation and the risk of putting undue pressure on parliamentary time for what will be quite minor changes. In the case of the Bill, the pot size requirement is crucial. Lots of what the rest of the regulations deal with will, in fact, be very practical and detailed. I am not sure that the Committee’s concern that we will be spending our lives together would be allayed by having our time clogged up by all of that detail coming through whenever anything is amended, but I understand the good, democratic reasons why the hon. Gentleman tabled the amendment. I hope that he accepts that as reassurance.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  Central to the value for money framework is the assignment of value for money ratings. We discussed that briefly during the evidence session on Tuesday, and some hard questions were asked of me by the hon. Member for Wyre Forest; this clause will help to explain more about it. Rating or scoring a scheme’s value is a major cornerstone of the VFM policy. It is essential to helping savers and employers make informed decisions; they would otherwise have to analyse a very large amount of data. The finer details behind the ratings, such as the conditions under which each rating will apply and when they should be used, will be provided in full in regulations. That will provide clarity and allow the framework to evolve with the market. After a VFM assessment, trustees or a manager will be required to assign a VFM rating. The clause describes the three categories of ratings that will be used in the VFM regime: fully delivering, intermediate and not delivering. As I pointed out on Tuesday, there are multiple levels available within intermediate—it is not a one-size-fits-all box. Arrangements rated as fully delivering are those deemed to be providing best value for their members. At the opposite end of the scale, we have the “not delivering” grade. For those arrangements rated as not delivering, trustees will have to draw up an action plan of next steps to move pension savers to an arrangement that is providing value, thus avoiding persistent underperformance affecting members for long periods of time. Arrangements given an intermediate rating will be those that require more work to improve their value to members. They may be required to inform employers of a “not delivering” rating and to produce an improvement plan that outlines the steps they plan to take towards improvement. That, in turn, will help employers to be better informed of the status of the schemes or arrangements that their staff are enrolled in and allow businesses to make better informed choices when it comes to workplace pensions. The clause provides flexibility for multiple subcategories of the intermediate rating, meaning that the rating system is not limited to three ratings. To help tackle potential gaming of the VFM regime, we will tighten the rules on how some schemes choose comparators, so that schemes are not able to self-select the comparators they are able to use. That will be done by defining what a scheme should be comparing itself against and detailing the metrics that will determine whether a scheme is providing value. We will of course consult on the draft regulations.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  Let me directly address that point, and then I will turn to the Government amendments. The answer is yes. I did not respond, but I should have, to the related point raised by the hon. Member for Wyre Forest in the previous grouping. The experience in Australia was that there was a binary cut-off, but with a very high-stakes outcome if people fell on the wrong side of it. That did lead to herding behaviour. That is one of the most well-established lessons from the Australian experience, and it is certainly central to the evidence that we have heard in the consultations. I can absolutely provide the confirmation that we will be avoiding that outcome, not least via these multiple levels of intermediate ratings. Government amendments 30 to 34 introduce other changes. These amendments are of a minor and technical nature and clarify the policy intent. Amendments 30, 31 and 33 make drafting corrections. Amendment 32 clarifies that the Pensions Regulator’s assessment of a transfer solution is to be based on the trustees or managers’ assessment carried out for the purposes of the action plan. Finally, amendment 34 removes a power that we no longer need. Clause 16 details the actions that must be undertaken when schemes or arrangements are rated as not delivering value for money. This is necessary to help protect pension savers from lingering in arrangements that are “not value” and allow them to be moved into arrangements that do provide value. These actions may include submitting an action plan to regulators, informing employers currently contributing to the arrangement of its “not value” rating and closing the arrangement entirely to new employers. Clause 16 also enables regulations to set out further actions that will be required of trustees or managers, including the conditions under which a “not value” arrangement may not have to be closed to new members. The clause also allows the Pensions Regulator to require trustees or managers to initiate the transfer of members from the “not value” arrangement into another that does offer value. It outlines the conditions when this would apply. Question put and agreed to. Clause 15 accordingly ordered to stand part of the Bill. Clause 16 Consequences of a “not delivering” rating Amendments made: 30, in clause 16, page 16, line 20, leave out “the responsible trustees or managers to transfer”. This amendment corrects an error. Amendment 31: in clause 16, page 16, line 21, leave out “(all or” and insert “all (or”. This amendment corrects an error. Amendment 32: in clause 16, page 16, line 31, leave out sub-paragraph (i) and insert— “(i) based on the assessment carried out by the responsible trustees or managers under section 14(6)(a) in the action plan of the scheme or arrangement, transferring the benefits of all (or a subset of) the members of the scheme or arrangement to another pension scheme (or arrangement under a pension scheme) could reasonably be expected to result in the generality of the members of the scheme or arrangement receiving improved long-term value for money, and” This amendment clarifies that the Pensions Regulator’s assessment of a transfer solution is to be based on the trustees or managers’ assessment carried out for the purposes of the action plan. Amendment 33: in clause 16, page 16, line 34, leave out “the measures” and insert “any other measures”. This amendment makes a minor clarification. Amendment 34: in clause 16, page 17, line 8, leave out subsection (5). —(Torsten Bell.) This amendment removes a power which is no longer needed. Clause 16, as amended, ordered to stand part of the Bill. Clause 17 Compliance and oversight Question proposed, that the clause stand part of the Bill.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  Clause 9 will amend the safeguards on the sharing of surplus. The details will be set out in regulations, the parliamentary procedures of which we have just discussed. These safeguards will place the safety of members’ benefits at the heart of the policy. Proposed new subsection (2B) of section 37 of the Pensions Act 1995 sets out the requirements, which are there to protect members, that must be set out in regulations before trustees can pay a surplus to the employer—namely that before a trustee can agree to release a surplus, they will first be required to receive an actuarial certification that the scheme meets a prudent funding threshold, and that members must be notified before surplus is released. The funding threshold will be set out in regulations, which we will consult on, as discussed. We expect that release of the surplus will be permitted only when a scheme is fully funded on a low-dependency basis. Trustees are already required, through existing legislation, to set a long-term funding and investment strategy that targets exactly this funding level. These funding conditions will be set out in regulations made under the affirmative procedure and debated when first introduced. Proposed new subsection (2C) will provide the ability to introduce additional regulations aimed at further enhancing member protections, where considered appropriate. Superfunds will be subject to their own regime for profit extraction; I am spelling this out, because we will come to it later in the Bill. The proposed new subsection will allow regulations to be made that are consistent with those provisions. Regulations may prevent payments from superfunds for a period, if surplus regulations come into force earlier than the superfund legislation, which we will debate later in the Bill. Crucially, decisions to release any surplus will remain subject to trustee discretion. I also note the removal of the statutory test in section 37(3)(d) of the Pensions Act, on the grounds that it does no more than reflect trustees’ existing duties. The technical and consequential amendments at subsections (4) to (7) of clause 9 are to ensure that the new measures sit correctly in existing legislation but do not affect the overall policy. In summary, the clause will ensure that the release of a surplus is subject to strict safeguards. I commend it to the Committee. Question put and agreed to. Clause 9 accordingly ordered to stand part of the Bill. Clause 10 Relevant schemes: value for money

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  I always aim to provide words of wisdom—say one in 100. Let me engage directly with the points about the nature of the arrangement. The honest answer is that lots of it will be in regulations, but the exact issues raised by both main Opposition parties are ones that we have thought a significant amount about. The hon. Member for Wyre Forest is right to say that risk aversion generally can be dangerous within the system, in just the same way that excessive risk-taking can be dangerous. He raised two specific issues. One was how short-term market developments affect ratings—that is why the benchmarking is a relative process. Relative benchmarking deals with the ups and downs of the stock market or other asset valuations—we are assessing the relative performance, not the absolute performance. The hon. Gentleman raises a separate question on the nature of the investment we want to look at, where there may be returns over different timescales. That is why we need to look at different measures and metrics, some of which are backward looking—for example, more standard measures of value for money—and some of which might be forward looking—for example, looking at the costs and asset allocation strategy to come to a view about what forward-looking returns might look like relatively. We have thought about that in some detail. We then had a useful discussion about life stages—when someone moves from higher risk, because they are confident that they will not be retiring in the middle of a 1987-style downturn. That is exactly what we should be thinking about. One of the objectives of the Bill as a whole is to drive higher returns on average. Later lifestyling, as it is called, into safe assets means that someone can be exposed to some growth potential for longer over their life. When we come to discuss the default pension solutions, that is exactly why, on average, that approach will drive safer outcomes. At the moment, defined-contribution pension schemes often put people into very safe assets—almost entirely bonds—in the run-up to their retirement. That would not be necessary if we knew that they were heading for a default solution with annuitisation or lifetime income coming in their 70s or 80s. That is exactly the benefit of the changes that we will discuss later. I hope that was a useful discussion of the important points that hon. Members have raised. Question put and agreed to. Clause 14 accordingly ordered to stand part of the Bill. Clause 15 Consequences of an intermediate rating Question proposed, That the clause stand part of the Bill.

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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

• 4 Sept 2025 · Pension Schemes Bill (Fourth sitting) · Hansard source

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  I shall give a short speech, because there is a worrying habit developing of the hon. Member for Aberdeen North giving the Government Front-Bench speech for me. I should encourage that as we go on—she might be slightly traumatised by that, but we are where we are. Everybody in this room will agree on the importance of the principle that has been highlighted, and we have just heard a powerful point exactly along those lines. Although the Government understand the intent behind amendment 3, there are two reasons why we will not support it. The first is a point of principle, which I have already set out: it is for trustees, not the Government, to decide how surpluses that benefit members should take place. We discussed the issue of discretionary benefits just now. The second reason is less a point of principle and more a matter of reality. The amendment would provide advice only to existing members of specific schemes. I think we all agree, particularly in the light of the point made by the hon. Member for Aberdeen North, that the main problems are about the defined-contribution space and people coming up towards retirement. Lots of the people who are in schemes who would be coming forward for surplus release are already drawing down a very well-defined pension income. It is not the ideal way to focus on the particular problem that we all agree exists, but we completely agree that robust guidance that assures that everyone has access to free and impartial advice is very important. That is the job of the Money and Pensions Service, but I completely hear what has been said about how it needs to go further. I am grateful for hon. Members’ contributions, but I urge the hon. Member for Horsham to withdraw his amendment.