Pension industry 1-0 Torsten Bell
We should be grateful that the absurd idea of a government-imposed cap on rent died less than 24 hours after it first reared its head, but another madcap Treasury scheme took far longer to bite the dust.
The government’s Pensions Schemes Act (which passed into law yesterday) contained plenty of sensible and interesting measures, including new rules for consolidating small pension pots and a new Value for Money framework, but one element of the proposed legislation, so-called mandation powers, sparked fierce debate and galvanised opponents in the House of Lords.
With time running out to get the Bill through before the end of the current parliamentary session, ministers finally gave into pressure and effectively dropped this contentious proposal, watering it down to what Helen Whately, the shadow work and pensions secretary, described yesterday as a “vestige of the original power.”
In its original wording, the mandation clause would have granted ministers a “reserve power” to direct how pension schemes invest in a bid to steer money into private markets and infrastructure projects.
The idea followed the Mansion House Accords, where pension funds agreed to a voluntary code that should see more money put into UK private markets. But for the government, and for zealous Treasury minister Torsten Bell in particular, this voluntary commitment wasn’t enough; and so the mandation power was cooked up as a way of giving ministers the power to force pension funds to back UK projects.
‘Government isn’t the expert on pension investments’
It’s true that UK pension funds are notoriously risk averse, and while parts of it are getting more innovative, the industry generally invests far less in domestic equities, startups and infrastructure than international peers.
But while this may be frustrating to ministers it is also entirely understandable and proper. As Baroness Bowles, a leading figure in the Lords’ campaign to block mandation, has maintained: “The Government isn’t the expert on pension investments…they want to choose what to do with retirement savings, rather than the experienced professionals and trustees who must operate in people’s best interests.”
Now, thanks to Baroness Bowles and Baroness Altmann in particular, along with Helen Whately on fighting form, Torsten Bell’s power grab has been defeated.
And if this ambitious minister feels aggrieved by the Lords’ spirited defence of savers and pension fund trustees, allow me to quote his own arrogant response to the concerns voiced by pension experts who challenged him at a recent conference: “chillax.”