Pension schemes trade body Pensions UK has urged the Government to withdraw the planned mandate power - allowing it to direct how pension schemes invest UK workers’ retirement savings - from its Pension Schemes Bill.
In its current form, the reserve power extends beyond the Government’s stated intention of supporting the Mansion House Accord.
The Mansion House Accord is a voluntary commitment by 17 of the largest workplace pension providers to invest at least 10% of their defined contribution (DC) default funds into private markets by 2030, with 5% of the total allocated to the UK.
Pensions UK claims that if the mandation power is exercised, it would ‘hamper free and open market competition’ aimed at driving better saver outcomes and put those outcomes at risk.
Julian Mund, chief executive of Pensions UK, said: “Decisions on how savers hard-earned money should be invested should not be a political choice.
“If the power remains in the Bill, given the significant risks to scheme members, it is essential that the legislation should allow no more direction by Government than the minimum necessary to deliver its stated intention.”
The membership body has called for three safeguards to be added if the mandate power is to remain:
- A cap on the percentage of investment that can be mandated, aligned with the 10% and 5% voluntary Mansion House Accord targets already supported by the Government
- Strengthening of the report that is required before the power can be introduced
- A reduction in the duration of the sunset clause from 2035 to 2032 to reduce the political risk to schemes
Pensions UK is a membership body whose members provide retirement income to more than 30 million savers in the UK and invest more than £2trn in the UK and abroad.
Pensions UK is not the only body concerned about the Pension Schemes Bill. Many leading bodies and figures want investment trusts to be specifically mentioned, including the Investment Association, the Association of Investment Companies and Baronesses Bowles and Altmann.
All want to see a 'product-neutral' approach to investing under the Pension Schemes Bill.
In January a bid to include investment trusts in the Pension Schemes Bill was met with resistance in the House of Lords debate on the Pension Schemes Bill. The Pension Schemes Bill is being debated in the House of Lords, discussing recent proposed amendments.