Baroness Bowles of Berkhamsted (LD)

My Lords, I am introducing Amendment 219A on behalf of the noble Baroness, Lady Altmann. She regrets that she is unable to be here, but I think she is somewhere on a plane at the moment, and I know she considers this a matter of great importance. The amendment seeks to enhance the framework for defined benefit pension schemes by ensuring that regulations under the Bill align with the Financial Reporting Council’s technical actuarial standards. The current version of those is TAS 300, version 2.1. However, the amendment does not identify a specific technical standard but explains what the required standard covers in order to ensure that future versions of the standard which produce the prescribed calculations would also be covered by the wording of the amendment. The wording of the particular technical actuarial standard, particularly paragraph 5, requires trustees to compare key strategies, such as bulk annuities, superfunds and run-on approaches, before making irreversible decisions about scheme assets and members’ pensions. Annuity buyouts are no longer necessarily risk-free, as official warnings regarding the lack of Treasury underpin for the Financial Services Compensation Scheme and the rise in offshore takeovers of annuity companies have highlighted. My remarks today reflect upon the thoughtful contributions from noble Lords in earlier debates on similar amendments. I will first address the points raised previously. I appreciate the concerns expressed about avoiding unnecessary legislative intrusion into actuarial professional standards. Indeed, far from diminishing the role of actuaries, this amendment recognises their crucial expertise in guiding trustees. TAS 300 sets out robust principles for actuarial work, including requirements for clear advice on bulk transfers, risk assessments and the impact on member benefits. It covers essential areas such as whether a scheme can afford discretionary increases, how much surplus might be distributed and whether members might be better off with a run-on strategy rather than buying annuities. By embedding alignment with these standards in regulations, we would simply ensure that this high-quality actuarial insight is carefully considered by trustees to make better-informed choices without mandating outcomes. The noble Lord, Lord Davies, rightly highlighted the FRC’s independent role in enforcing standards through disciplinary measures. The amendment does not seek to duplicate or override that. It would better align the actuarial advice with trustee decision-making. Currently, the FRC’s oversight seems weak and generally unenforced. The FRC plays a vital role in setting and enforcing standards, but its resources are too stretched across a broad remit. Only a small fraction of its annual budget, estimated at £200,000, is allocated to actuarial professional supervision, with no dedicated budget for investigations. This is at a time when we are expecting the profession to advise trustees on matters affecting the proper stewardship of £1.1 trillion of the national wealth in pension assets. Existing trustee discretion does not seem to provide sufficient safeguards. Actuarial reports under TAS 300 are apparently not always presented to trustees unless specifically requested. Even when they are, they can sometimes become routine exercises rather than the rigorous analyses intended. This is not a criticism so much as a recognition of practical realities in a busy field. By making consideration of these reports a regulatory requirement before irreversible commitments, such as surplus payouts or buyouts, happen, trustees would gain a valuable tool to weigh options thoroughly, aligning with the Bill’s goals of better governance and better member outcomes. The real power of this amendment lies in the potential value it could unlock for stakeholders, particularly scheme members, unions and workers. Defined benefit scheme surpluses exceed £240 billion on prudent measures. Independent financial modelling indicates that, for every £1 billion transferred to insurers via buyouts, expected excess cash flows of £150 million to £250 million accrue over 10 to 15 years—value that would bypass members and sponsors entirely. A run-on approach rather than a buyout could instead share these gains between employers and members. The Stagecoach pension scheme offers another example. Its trustees developed and used TAS 300 reports to evaluate options for the scheme. This resulted in them seeking to run on and ultimately replacing the original sponsor, Stagecoach, with a stronger sponsor in Aberdeen Group plc. The analysis supported and enabled the use of a run-on strategy, which enhanced member benefits with an immediate 1.5% pension uplift and stronger inflation protection worth over £50 million for members, all within supported risk and investment guardrails. In addition, Aberdeen Group plc agreed that two-thirds of future surpluses will go towards further improving pensions, directly benefiting bus drivers and other workers. This ground-breaking transaction has attracted widespread attention and support across the pension industry. It has also ignited greater expectations among many schemes that endgame considerations must properly include serious focus on improving member outcomes, shifting the narrative towards more equitable and productive use of surpluses. This amendment would improve the Bill by embedding a proven standard into its framework, ensuring that actuarial expertise illuminates decisions that safeguard retirements and support growth. It respects the profession while empowering trustees, members and unions. The stakes, potentially billions in additional pensions for hardworking people, demand that we act. I urge the Government to support it, and I beg to move.