A Step Back? Lords block move towards clearer guidance on Trustee investments

On 23 March 2026, the House of Lords voted against the proposed Government amendment 156 to the Pension Schemes Bill. This amendment would have required statutory guidance to be issued on pension scheme trustee investment duties. 

The amendment was tabled as part of a commitment given by Pensions Minister Torsten Bell in December to “bring forward legislation that will allow the Government to develop statutory guidance for the trust-based private pensions sector”. The promise came in response to a long-running debate within the pensions industry as to the scope of trustees’ fiduciary duties in relation to investments, which we have written about a number of times previously (including here). Opposition parties had previously tabled a number of amendments to the Pension Schemes Bill which would have gone further towards clarifying trustee duties in relation to pension scheme investments in legislation but these provisions were not agreed.

What were the proposed amendments?

The Bill has recently concluded the report and third reading stages in the House of Lords, where members had the opportunity to examine and propose amendments to the Bill. 

Baroness Sherlock, who proposed the Government’s amendments in the House, put forward a new clause that would require the Secretary of State for Work and Pensions to issue guidance on pension scheme trustee investment duties within 12 months of that clause coming into force (draft commencement provisions provided for this to be two months after the Bill receiving Royal Assent).

The explanatory statement to the proposed amendment said that the guidance may clarify key concepts such as what counts as “financially material considerations” (including “environmental, social and governance considerations”) and what acting in the “best interest of members” means in practice. It may also include examples to illustrate how the law applies to particular scenarios. 

In anticipation of the requirement to publish statutory guidance, the DWP has already convened a technical working group comprised of senior professionals from across the industry to draft the guidance. The group had its first meeting in early March and Baroness Sherlock shared some of its agreed objectives with the House of Lords during the debate. They include:

• providing clarity and confidence to trustees without imposing undue prescription; and

• translating existing law into practical expectations supported by real-world examples e.g. how trustees might assess long-term financial risks linked to climate change and biodiversity loss.

She also said that the group aims to include case studies showing how schemes of different sizes can meet the same principles in different ways. 

The draft clause provided that trustees and fund managers to whom discretion had been delegated would be required to “have regard to” the statutory guidance. In debate, Baroness Sherlock made clear this meant they must consider it and be able to show they have taken it into account, but are not required to follow the guidance where they have rational reasons to depart from it. The guidance would be for occupational trust-based pension schemes only.

Why has this amendment been rejected?

Some in the pensions industry have lobbied hard for greater clarity on trustee fiduciary duties and to many, the Lords' rejection of the amendment will be both unexpected and disappointing. A number of trustees may have welcomed this amendment to feel more confident when investing in line with member values, including ESG (Environmental, Social and Governance issues) considerations. 

Baroness Sherlock explained trustees and advisors ‘want confidence that the law gives them the room to take proper account of long-term, financially material risks, such as climate change, biodiversity loss and evolving economic conditions when determining how best to invest in members’ interests.’

Some in the pensions industry however already regard fiduciary duties as flexible enough to accommodate the necessary consideration of a wide variety of factors and concerns raised by those opposing the amendment included "if the Government are given the power to define what is in the members’ best interest, what is to prevent that definition shifting over time to reflect political priorities". The amendment was described as a ‘step in the wrong direction’ and it was argued that this amendment is ‘"oliticising what should remain independent fiduciary judgments." There was also a suggestion from those opposing the change that the guidance requirement risked opening the door to “mandation by the back door”.

Despite reassurance from Labour Peers that the proposed guidance would not and could not change the law, but instead would operate only to “explain how the law can be applied”, when put to a vote, the amendment received 202 votes in favour and 225 votes against. 

What happens next?

Any amendments the Lords have made will now need to be considered by the House of Commons through the ‘consideration of amendments’ stage. This is scheduled to begin on 15 April. However, at this stage the role of Commons is limited to reviewing the amendments the Lords have agreed – it cannot propose new clauses of its own unless these are consequential to what is already in the Bill.

Any changes made by the Commons will then return to the Lords for consideration in the usual “ping‑pong” process until both Houses reach agreement.

We will be keeping a close eye on how the Government responds to the rejection of this amendment. With the working group already convened to prepare draft guidance, and a consultation promised for the Spring, those seeking clarity have reason to be optimistic that the Lords’ rejection of this provision will not mean the end of the road for the clarification of investment duties that so many are eager to see. 

More information 

For more information on navigating the developing landscape of ESG compliance, view our ESG focused tool.

If you would like to discuss balancing ESG compliance and trustee duties please contact Kate Granville Smith, Suzanne Padmore or your usual Burges Salmon contact.

This article has been co-authored by Emma Mitchell, Apprentice Solicitor. 

"Trustees and others tell us that, although their duties are well established in law, they lack practical tools to apply them in today’s complex investment environment. These amendments respond to that need by requiring the Secretary of State to issue statutory guidance explaining how these duties operate within the existing legal framework. ... " (Baroness Sherlock)