The UK pensions minister said the government will ensure the reserve power in the Pension Schemes Bill is only used to “backstop” Mansion House Accord goals.
Speaking at the Pensions UK conference in Edinburgh today, pensions minister Torsten Bell, said: “The only purpose of the reserve power in the Pension Schemes Bill is to backstop the [Mansion House] Accord goals.”
Reserve power is a controversial clause in the Pension Schemes Bill that allows the UK government to mandate how pension funds invest.
The minister has repeatedly told the industry that the government does not intend to use the power, admitting that Accord signatories are already delivering on their commitments.
Under the Mansion House Accord, signatories have committed to allocate 10% of a default to private markets, with 5% of that specifically directed to UK private markets, by 2030.
And while the industry has repeatedly called on the government to remove the clause or amend the sunset clauses which currently extend beyond the current government, the minister has only now confirmed that as legislation enters its final phases in the House of Lords, where the power was hotly debated over recent months, the government will ensure it is “clear that the reserve power is only for this one purpose”.
However, the minister has not made any commitments to update the sunset clause. Instead, he joked: “How do we avoid it ever being in anyone else’s hands, is never losing an election”.
He added: “It is not just on me making sure the bad people don’t turn up and do bad things. You have to stop the bad people doing bad things.”
Pensions Management Institute (PMI) and Society of Pension Professionals (SPP) were among many who have called for the powers to be removed, giving evidence to Parliament’s Pension Scheme Bill Committee.
Helen Forrest Hall, chief strategy officer at PMI, said: “This is a positive step that reflects concerns that we and others have consistently raised about its impact on trustees’ fiduciary duty. We look forward to reviewing the amendment in detail as the Bill progresses.”
Sophia Singleton, SPP president, added: “We are pleased that our longstanding campaign to get the mandation power brought into line with the Mansion House Accord has proved successful and that the minister has listened to the industry on this vitally important issue.”
Steve Hodder, partner at LCP, welcomed strong reassurance from the minister that there is no intention to mandate pension funds on how to invest.
However, he raised concerns about the lack of commitment regarding the sunset clause, which points to the risk that “creating this power is perhaps lighting a long fuse”.
