The government is expected to press ahead with a revised version of its controversial pension investment “mandation” power, despite peers voting to remove the clause from the Pension Schemes Bill earlier this month.
The Financial Times (FT) reported late last week that ministers plan to bring back the reserve power when the bill returns to the House of Commons after Easter, but with a cap designed to tie it more closely to the Mansion House Accord. According to the FT, mandation would be capped at 10% of assets in private markets, with at least half of that invested in the UK.
This reflects the position pensions minister Torsten Bell set out earlier this month, when he said the clause would be clarified so it could only be used to backstop the Mansion House Accord rather than give ministers a broader power to direct investment.
“A reserve power would only be used where trustees… have determined that investment in the way government favours would not be appropriate. By definition, that must be a bad thing.”
Stephen Scholefield, Pinsent Masons
However, the reported compromise is unlikely to settle industry concern, which has focused less on the level of any cap than on the principle of government retaining the power to override trustee decision-making.
Stephen Scholefield, pensions lawyer at Pinsent Masons, said: “Any threat to trustees being able to invest assets in the way they consider to be in the best interests of their members is bad for pension savers and risks undermining confidence in the system.
“A reserve power would only be used where trustees, who are duty-bound to invest in the best interests of their members and overseen by the Pensions Regulator, have determined that investment in the way government favours would not be appropriate. By definition, that must be a bad thing.”
That objection has run through industry criticism of the clause since the bill was first published in June 2025. Even in a narrower form, opponents argue that keeping the power in the bill risks undermining confidence in trustees’ fiduciary independence and exposing pension investment to political pressure.
Ian Bell, head of pensions at RSM UK, added: “There are many good and necessary reforms in the Pension Schemes Bill, but the inclusion of the investment mandation powers in clause 40 always seemed a step too far. The challenge from the House of Lords will not surprise many in the pensions industry that already felt its inclusion was unnecessary.
“If the government produces investment opportunities that are suitable and attractive for private pension scheme investment, pension scheme trustees will join the queue, to the benefit of their members. Opening the door to government intervention, irrespective of investment suitability, would do nothing to improve public trust in the pensions system.”
Pushing ahead is unlikely to allay opposition from the industry or the House of Lords. Baroness Sharon Bowles, who led the opposition, told the FT that “any narrowing of the bill would be an improvement”, but added: “We think any mandation is bad news. Ministers should not be overriding trustees. It is anti-competitive and economically illiterate.”
Speaking to Pensions Expert and the Always A Pensions Angle podcast earlier this month, Conservative MP and shadow pensions minister Helen Whately explained: “Fundamentally, government should not be taking such an active role in directing where people’s savings should be invested…
“I want more investment in the UK, but it shouldn’t be done if it would be to the detriment of the future incomes of those people whose hard-earned money is in these pension funds.”
