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, according to industry body Pensions UK.
The amendment had previously faced criticism for being overly broad, and that it could lead to government exerting wide power over the investment decisions of national pension schemes.
Following debate in the House of Lords where the initial amendment was rejected, the government has proposed to amend the legislation to ensure that mandation is more closely aligned with conditions set out in the previous Mansion House Accord, namely the encouragement for DB and DC schemes to invest in private markets.
The amendment is now limited to no more than 10 per cent of total assets held in default funds and by no more than 5 per cent in UK-based assets.
Pensions UK had 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.
Julian Mund, chief executive of Pensions UK, says: “This body 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.”
Mund also urged the sunset clause element of the amendment, which requires the mandation clause to expire if unused by 2035, to be brought forward to “lessen the political risk attached to the power.”
The Bill returns to the House of Commons next week for a final vote. Pensions UK has also committed to sharing thoughts on how delivery of the Pension Schemes Bill can be further supported by Government and related agencies via a publication later this spring.