Proposed government powers to mandate pension scheme investment have again been defeated in the House of Lords, as the impasse between the peers and the Labour majority in the Commons drags on.
On the evening of 22 April, the government lost a key vote on mandation in the House of Lords by 234 votes to 152, a defeat by 82 votes.
There remains a possibility that the whole Bill could fail to pass, if the Commons and Lords have not agreed on a final version before the end of the Parliamentary session next week (1 May).
Aside from mandation, the bill includes a range of other measures which have seen less opposition, such as consolidation of small pension pots, and rule changes which would allow the Pension Protection Fund to reinstate a levy if it needed to do so.
Other areas which have seen the Lords previously push back on within the Bill include changes to the proposed scale test for DC schemes, and the introduction of a Value for Money framework rating investment performance (also opposed by former pensions secretary Guy Opperman).
Steve Webb, pensions secretary from 2010-2015 and now a consultant at Lane Clark & Peacock, says: “Ministers should recognise that there is a reason for the continued and cross-party opposition to their plans, which is that mandation is a fundamentally flawed policy.
“There is so much that is good in the Pension Schemes Bill, it would be wholly unacceptable if the government’s stubbornness – on a power that they say they don’t even plan to use – put the whole Bill at risk. It is time that ministers stepped back from the brink and instead started listening to the legitimate concerns that are being raised”.
A number of large DB and DC schemes have previously made voluntary commitments to invest a set percentage of their portfolio into domestic private assets through the Mansion House Compact and the Mansion House Accord.
Following previous debate in the Lords, the Labour government had amended the mandation clause of the Pension Schemes Bill to more closely align it to the Accord.
Current pensions secretary Torsten Bell has previously defended mandation, arguing that previous fixations on cost in the pensions sector had reduced investments in private markets in spite of the possibility for higher returns.
In the current wording of the amendment, the Pension Schemes Bill makes clear that no more than ten per cent of a portfolio can be mandated within such “qualifying assets” such as private credit and private equity.
