House of Lords (HoL) peers have raised concerns over the scope of government powers, the treatment of the Local Government Pension Scheme (LGPS), and the Pension Schemes Bill’s reliance on secondary legislation on the first day of committee-stage scrutiny.

Opening proceedings, peers debated a proposed new ‘purpose clause’, tabled by Viscount Younger of Leckie and supported by peers including Lady Stedman-Scott and Baroness Bowles, which aimed to set out clear objectives for the bill.

These included delivering higher and more sustainable returns for savers, improving value for money, addressing fragmentation, enabling the responsible use of pension scheme surpluses, and strengthening transparency and consistency across the system.

Supporters of the amendment argued that the bill was a “framework” or “skeleton” piece of legislation, containing extensive regulation-making powers but limited detail, making it difficult for parliament to assess how those powers would be used in practice.

They warned that without a clear statement of intent on the face of the bill, trustees, regulators and schemes could be left uncertain about the direction of travel for pensions policy.

In particular, several peers expressed unease around provisions relating to value for money, surplus extraction, asset allocation, and the potential future mandation of investments, arguing that these issues would largely be determined through secondary legislation with limited parliamentary scrutiny.

However, responding on behalf of the government, the Department for Work and Pensions (DWP) Minister of State, Baroness Sherlock, rejected the need for a purpose clause, arguing that it could create legal uncertainty and that the bill already set out clear policy intentions through its individual clauses, explanatory notes, and impact assessments.

The minister stressed that the legislation was consistent with previous pensions acts and was not a framework bill, but rather a package of targeted reforms designed to improve outcomes for savers and support economic growth.

The amendment was subsequently withdrawn.

Attention then turned to the LGPS, where peers from across the house raised concerns about clauses that allow the Secretary of State to direct administering authorities to participate in or withdraw from specific asset pool companies.

Critics warned that these powers risked undermining local accountability and the fiduciary duties of scheme managers, with some describing the LGPS as a ‘British success story’ that was being subjected to unnecessary central interference.

Peers also questioned how asset pooling would work in practice, particularly during transition, and whether forced consolidation could disrupt long-term investment strategies or create unintended consequences for employers and taxpayers.

Others expressed concern that new duties to co-operate with strategic authorities could place pressure on funds to prioritise local or political objectives over members’ best financial interests.

However, government whip, Lord Katz, said the direction-making powers were intended as a backstop, to be used only in exceptional circumstances, and that fiduciary responsibility would remain with scheme managers.

Katz and Sherlock argued that pooling would enhance scale, governance and capacity, enabling greater investment in productive assets, including UK infrastructure and growth projects, while still allowing funds to set their own investment strategies.

Peers also debated amendments that would explicitly allow LGPS assets to be used more to support social and affordable housing.

While there was broad agreement that housing could be a suitable long-term investment for pension funds, ministers resisted calls to specify asset classes in the bill, reiterating that investment decisions must remain for funds and pools to determine within their fiduciary duties.

Further scrutiny focused on the bill’s extensive use of delegated powers, with calls for a “super-affirmative” procedure to allow greater parliamentary oversight of future regulations.

Critics argued that the scale of regulation-making powers limited effective scrutiny, while the government defended the approach as consistent with past pensions legislation and necessary to allow flexibility and industry engagement.

These amendments were also withdrawn.

The opening day concluded with further probing amendments on asset allocation and investment vehicles, reflecting ongoing concern among peers about government influence over investment decisions and the risk of unintended market distortion.

Committee stage scrutiny of the Pension Schemes Bill is set to continue over several days, with the next debate session scheduled for 14 January.

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