An amendment to the Pension Schemes Bill limiting the reserve power allowing the Government to direct the way pension funds invest is a welcome change as the Bill reaches its final stages.
The Bill enables vital reforms that stand to reduce the cost of administering pensions, remove complexity for savers and help ensure schemes are maximising the value they provide.
The Government has published an amendment to the Bill that limits the extent to which it can ‘mandate’ how defined contribution pension schemes invest. This is limited to no more than 10% of total assets held in default funds and by no more than 5% in UK-based assets.
The values are in line with the amounts prescribed in the Mansion House Accord, a voluntary agreement signed by 17 of the UK’s largest DC pension providers to invest more of their assets in unlisted investments both globally and in the UK.
Pensions UK has consistently opposed the introduction of powers to direct how pension schemes invest, arguing it is the duty of trustees to determine how assets should be invested in their members’ interests.
We have made it clear that should the powers remain, they should be tied closely to the standards set by the Mansion House Accord and are pleased that the Government has listened to this ask.
Julian Mund, Chief Executive of Pensions UK, said: “Pensions UK firmly supports the passage of the Pension Schemes Bill, which enacts a series of critical reforms in savers’ interests.
“The amendment to the reserve power which mandates DC pension schemes’ asset allocation addresses our most serious concern and brings the legislation in line with the Government’s stated intention of acting only as a backstop to the Mansion House Accord.
“We would like, in addition, to see the sunset clause brought forward to lessen the political risk attached to the power.
“These are changes that Pensions UK has consistently called for, should the reserve power remain in the Bill, and we are pleased that the Government is listening.
“Pensions UK remains opposed in principle to the Government directing how DC schemes invest savers’ money, and concerned by the precedent set by the inclusion of any reserve power.
“While we do not expect the power to be used, we are clear that asset allocation decisions must rest with trustees acting in their members’ best interests.
“Schemes are already committed to delivering the Mansion House Accord.
“We will be sharing thoughts on how delivery can be further supported by Government and related agencies via a publication later this Spring.”
