Pension ping pong: Now government backtracks on mandation powers
The government has been forced to water down controversial mandation powers in the Pension Schemes Bill after prolonged uproar from the pensions industry and opposition MPs and peers.
Pensions minister Torsten Bell has tried to push through the bill with a clause that gives ministers the power to force funds to invest in UK infrastructure projects, as part of what is being viewed as a Westminster power grab dictating where pension funds can allocate capital.
But the industry demanded the clause be wiped out of legislation, raising concerns money would be used to fund politicians’ pet projects, such as HS2 and Northern Powerhouse Rail, meaning that scheme trustees would be forced to make investments against what they deemed to be in investors’ best interests.
The bill was twice rejected by the House of Lords, with Baroness Stedman-Scott calling it “dangerous and unjustified”, and pensions secretary Pat McFadden has now submitted amendments to the mandation clause.
Submitted changes
The changes will mean the power can only be used once, after which the government cannot force pension funds to invest any more into UK projects.
The power would also be automatically repealed in 2035.
A further amendment has been added requiring the government to publish 50-year cash flow projects for public sector pensions within the next 12 months, but this excludes local government worker pension schemes.
But peers have already warned the upper house could once more reject the bill despite the changes.
Holding out on pension mandation
Torsten Bell is still clinging to mandation despite the latest backpedalling, including passing an alternative wording of the values to limit no more than 10 per cent of assets to be held in qualifying assets, and no more than half in the UK, in a bid to quell anger.
Bell has been adamant the power would remain in reserve and did not expect to use it, a claim that has been reiterated on numerous occasions by the government.
But Conservative MPs remain staunch in their opposition to the powers, with shadow chancellor Mel Stride slamming the government for making savers “fund the pet projects of Rachel Reeves”.
The industry has also argued the bill fails to boost investment and instead hold back funds’ abilities to make decisions in the best interest of their savers.