The government has proposed an additional change to the controversial mandation power in the Pension Schemes Bill, requiring it to set out its own actions to improve UK investment before imposing any asset allocation requirements on defined contribution (DC) schemes.
In a fresh amendment published this morning (28 April), Pat McFadden, the work and pensions secretary, has put forward changes to part of clause 40 setting out what the government must do before implementing the reserve power to require specific asset allocations.
The new text states that the government would have to publish a report identifying barriers to UK and private markets investment for master trusts and group personal pensions.
It also requires the government to set out the steps it has taken “to address any such barriers”.
The latest amendments come after previous changes to bring the reserve power into line with the 2025 Mansion House Accord and to give affected schemes greater ability to push back if mandation takes effect.
MPs will consider the latest amendment this afternoon before passing it back to the House of Lords. It has yet to be added to the official agenda for the Lords.
Parliament will be prorogued in the next few days ahead of the King’s Speech on 13 May, meaning there is significant time pressure on the government to get the bill passed.
What the industry wants from government
Since the Mansion House Accord was announced almost a year ago, signatories have been urging the government to uphold its side of the agreement.
The accord states that its aims of 10% allocation to private assets and half of this in the UK are “subject to fiduciary duties and the Consumer Duty and dependent on supporting actions by government”.
It also specifies “critical enablers”, including “a pipeline of UK investment opportunities, which the government has agreed to facilitate”, as well as the successful delivery of the Value for Money framework – which itself forms part of the Pension Schemes Bill.
Speaking after the accord was signed last May, Lorna Blyth, managing director of Aegon UK’s investment proposition, said: “Realistic timeframes and a steady supply of high-quality UK investment opportunities across all private asset classes are crucial for ensuring success.”
‘Tinkering at the margins’
Late last night, peers voted against amendments tabled by the House of Commons earlier in the evening that proposed further limitations on the mandation power, including strengthening schemes’ ability to apply for exemptions to the mandation power.
Conservative MP Helen Whately, shadow work and pensions minister, said during the debate yesterday that mandation “risks conflicting with the duties that trustees and pension providers owe to savers”.
“The right to appeal, enhanced through today’s amendments, demonstrates that ministers accept that mandation may force schemes away from doing what is in their members’ best interests,” Whately said.
“Under the amended bill, schemes must still prove likely financial harm before they are allowed to do what is best for savers. That misunderstands the principle at the heart of fiduciary duty. Trustees should not need state approval to act in the best interests of their members. These amendments just tinker at the margins; they do not fix the flaw in the policy.”
