Lord in Waiting/Government Whip (Lord Katz) (Lab)

My Lords, it is a pleasure to be opening for the Government on the second day of Committee on the Pensions Schemes Bill. Once again, for the sake of the record, I am not sure whether it is otiose but I repeat that I am a former councillor in Camden and, as such, a member of its councillors’ pension scheme—but for four years, so I am not going to retire rich on it. I am grateful to all noble Lords who spoke in the debate on this probing stand part question on Clause 6. I recognise the intention to scrutinise the process to be followed if compulsory mergers of LGPS funds are undertaken. As noble Lords are no doubt aware—and I hope this answers the question that the noble Baroness, Lady Noakes, raised about the history and rationale for including the clause—Schedule 3 to the Public Service Pensions Act 2013 confers powers on the Secretary of State to make regulations about the administration, management and winding up of any pension funds. Clause 6 amends the 2013 Act to clarify that, in the case of the LGPS, the Secretary of State’s existing powers include the power to make regulations about the merger of two or more LGPS pension funds, and this includes compulsory merger. At this point, I reassure the Committee that the Government do not currently have any plans to require the merger of LGPS funds and that their strong preference is that mergers take place by agreement between administering authorities. However, it is essential that the Government have sufficient powers in place to be able to fulfil their stewardship role towards the scheme. The purpose of the clause is to ensure that sufficient powers are in place to facilitate the merger of pension funds if needed—for example, as a consequence of local government reorganisation, something that the noble Lord, Lord Fuller, spoke about. He referred to this in slightly less positive terms, but the Committee will be aware of the Government’s ambition to simplify local government by ending the two-tier system. A consequence of this is that in some areas a new administering authority, as he said, will need to be designated to administer Local Government Pension Scheme funds, because the existing administering authority will no longer exist. One potential solution to this may be the merger of two or more pension funds. These decisions are local ones, but any such change will require agreement from the Secretary of State to make legislation for transferring the pension assets and liabilities of the previous administering authority and other councils involved in unitarisation to the new administering authority. MHCLG will write to affected local authorities with guidance on what they should consider when deciding on their preferred approach to designating a new administering authority for their pension fund. The power may also be used in the unlikely event that an independent governance review finds particularly grave issues with an administering authority’s governance of their pension fund. This intervention will be considered by the Secretary of State only in exceptional cases, as an option of last resort after discussions about governance and compliance with the administering authority, and where there is no credible action plan for improvement.