IPE UK Briefing: ​Serious concerns remain on Pension Schemes Bill proposed ‘mandation’ powers

In June the UK government introduced the Pension Schemes Bill, which aims to transform the £2trn (€3.6trn) pensions industry to ensure savers receive good returns for each pound they save, and drive investment into the economy, through a suite of measures.

While the Bill has been widely welcomed by the pensions industry, serious concerns remain regarding the government’s proposed powers to mandate pension investment in private markets.

Ahead of the Parliament returning from summer recess and the first Public Bill Committee meeting on 2 September, the pensions industry has called for the removal of the mandation powers, or at least to amend the sunset clause, which extends beyond the current Parliament, being set at 2035.

These concerns were repeated during the Bill’s evidence session on 2 September, which saw pensions minister Torsten Bell claim that the UK pensions industry has failed in its fiduciary duty by not investing in private markets before, and criticising the lack of development in fiduciary duty in the past.

Bell has also refused to reconsider the ‘reserve power’ element of the Bill claiming that it is there to ensure that the commitments the industry have made under the voluntary Mansion House Accord, which states that a minimum of 10% of default scheme assets should be invested in private markets, half of which (5%) is in the UK by 2030, are delivered. 

Surplus extraction

For defined benefit (DB) schemes, the UK government is looking at allowing well-funded pension schemes to share surplus with their sponsoring employers, marking a significant shift in DB scheme regulation, where previously the focus was on securing accrued benefits above else.

And while the surplus extraction element of the Bill has been well received by the industry, as it currently stands, Jos Vermeulen, head of solution design at Insight Investment, claimed some corporates might still find it “difficult” to release surplus because trustees will see it as a reduction in a pension fund’s security.

He suggested that one way to make the decision simpler for trustees would be to increase Pension Protection Fund (PPF) protection for everyone. The UK government has previously scrapped the idea of voluntary PPF underpin; however, it has not explored other ways in which the PPF could play a role in encouraging trustees to allow surplus to be extracted.

LGPS

At the beginning of August, seven of ACCESS pool partner funds – Cambridgeshire, East Sussex, Essex, Hertfordshire, Kent, Northamptonshire and West Sussex – signalled their intent to join investment pool Border to Coast Pensions Partnership.

The announcement followed a move in April by UK ministers giving the green light to six out of eight UK local authority pension investment pools’ proposals for meeting new minimum standards set out by the government, rejecting plans put forward by Brunel Pension Partnership and ACCESS. It meant 21 local government pension schemes (LGPS) would need to find new pooling partners, with a final decision required by 30 September 2025.

The remaining ACCESS partner funds – Hampshire, Isle of Wight, Norfolk, and Suffolk – have formally declared they wish the local authority pension funds to join LGPS Central.

At the end of last month, Wiltshire Pension Fund became the first of the 21 ‘orphaned’ pension funds to publicly announce its preferred pooling partner – LGPS Central – after being told to find a new home for its pooled assets. 

Items to note:

• The IPE Conference & Awards 2025 is taking place on 4 December at the Palacio de Congresos de Sevilla in Spain.

Pamela Kokoszka

UK Correspondent