The House of Lords has today voted in favour of amending the Pension Schemes Bill to remove the government’s reserve power to mandate where defined contribution (DC) pension schemes invest.
In a vote held in the Lords today, 217 members voted in favour of the amendment, while 113 voted against it. It comes as a blow to pensions minister Torsten Bell, who has been adamant about keeping the power to encourage major pension providers to invest more in the UK and private assets.
The amendment will now go back to the House of Commons, where Bell – who has strongly defended the decision to include the reserve power in the bill – will have to decide how to proceed.
Bell has argued having the power in the bill will help overcome “collective action challenges” and encourage the industry to “do what it said it would do”. 17 of the biggest pension providers agreed in the voluntary Mansion House Accord to aim to invest 10% of their DC assets into private markets, with 5% in the UK, by 2030.
But critics have strongly opposed the idea because they believe scheme trustees should ultimately decide where savers’ funds are invested – not the government – and trustees have an obligation to act in members’ best interests and should not have to meet investment quotas that could potentially go against that obligation.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “The Lords’ amendment to remove the power in the Pension Schemes Bill for government to direct how retirement savings are invested is a win for savers.
“Having the power on the statute book would expose millions of workers’ retirement savings to political cycles and undermine the duty of pension trustees to act at all times in the interests of savers.
“Pensions UK’s preferred method to drive investment in UK markets is a voluntary approach supported by improvements to the investment environment. The Mansion House Accord shows there is already strong support.”
