Further updated wording to the Pension Schemes Bill regarding government powers to mandate pension scheme investment practices was not enough to persuade the House of Lords to pass the legislation.
This is now the third time the bill has failed to pass the Lords in the ongoing ‘ping pong’ legislation battle with the House of Commons and the Labour majority within it.
Even though mandation remains the primary sticking point, the entire bill covering widespread reforms to the pensions landscape is now under threat, with diminishing time for it to become law before the end of the parliamentary session, which must occur prior to 13 May.
Before the latest vote in the Lords, held in the evening of 27 April, the wording of the amendment covering legislation had been updated once again, namely that schemes could apply to the regulator for an exemption to mandation if it “would be likely” to cause financial detriment from mandation, as opposed to definitely “would”.
Previous changes to the clause following Lords debates had included revising the wording to align it to the private domestic assets targets of the Mansion House Accord, and bringing the sunset clause of the amendment forward to 2032 from 2035.
However, the Bill was again struck down, with a motion brought by Liberal Democrat peer Baroness Bowles to reject mandation passed by a margin of 197 votes in favour and 129 against.
During the Lords debate, Bowles says: “The (mandation) test still reverses the logic of fiduciary duty.”
Pensions secretary Torsten Bell has previously defended mandation, insisting it could only be applied to the provisions agreed in the Mansion House Accord and that it would be beneficial to member retirement savings long-term.
In the Lords debate Labour peer Baroness Sherlock echoed Bell’s positions on mandation. She says: “Pension schemes will drive better returns as well as tackling inefficiencies. Industry wants to get on with implementing the reforms. Our pensioners want to start benefiting. The other place (Commons) has expressed its view clearly repeatedly and by substantial margins. I do hope noble Lords will reflect whether it’s right to ask the elected House to vote for a fourth time on a question to which it has given the same answer.”
Further areas of the Pension Schemes Bill that have been pushed back against in the public sphere include the proposed Value For Money framework, with former Pensions Secretary Guy Opperman describing it as “basket case” legislation in its current form.
For most bills brought introduced in Parliament, if there is no agreement between the Houses as a last resort the Commons can use the Parliament Acts 1911 and 1949 to pass the proposed legislation within a year, in a process bypassing the Lords.
A well-known example of these Acts being implemented is to pass the Hunting Act, which became law in 2005 over the objections of the Lords and made the sport of fox hunting illegal.
Reacting to the ongoing deadlock regarding the Pension Schemes Bill, Jonathan Parker, head of defined contribution investment consulting at Gallagher, says: “With the Bill facing a genuine risk of failure, trustees will certainly be feeling a sense of legislative fatigue after so many months of discussion.
“For schemes that have signed up to the Mansion House Accord, this parliamentary ping-pong shouldn’t derail their planning though. A more pressing question amidst this back and forth is whether there is actually enough high-quality UK investment opportunity for schemes of this size to deploy capital confidently while still meeting their duty to members.”
