Conservatives pledge to repeal mandation clause from Pension Schemes Bill

Shadow chancellor Sir Mel Stride said in a statement: “Under a Conservative government, your pension pot will be there for you and you alone, not for Rachel Reeves to bail herself out of the economic mess she has created.”

The Pension Schemes Bill was discussed in parliament on 15 April, with the government using its majority to re-insert the controversial mandation clause into the legislation after it was removed by peers in the House of Lords.

A reworded mandation clause was published last week, aligning it closely with the Mansion House Accord, as promised by pensions minister Torsten Bell last month.

“Labour needs to tread carefully; if people lose confidence in pensions, they may opt out of auto-enrolment altogether and end up with even less in retirement.”

Helen Whately, shadow work and pensions secretary

The Conservative Party has described mandation as “indefensible” and argued that the power to direct investments made by defined contribution master trusts “puts people’s future retirement incomes at risk by allowing government ministers to require that funds are invested in specific ways, even if this leaves savers worse off”.

Helen Whately, shadow work and pensions secretary, added: “Labour wanted to seize control over £400bn of private pension savings. But that money is not theirs to spend.

“Under pressure, they have scaled back their power grab – but that’s not good enough. Pensions belong to savers, not the state.

“This is another attack by this government on savers who do the right thing. Labour needs to tread carefully; if people lose confidence in pensions, they may opt out of auto-enrolment altogether and end up with even less in retirement.”

Speaking in parliament on 15 April, Whately stated: “To be clear, if Labour succeeds in forcing this measure through, we will repeal mandation when the Conservatives are back in government, because your pension belongs to you, not the chancellor.”

Industry remains opposed to mandation

Despite the government’s concession on the clause’s wording, bringing it in line with the Mansion House Accord, many in the industry maintain that it is not necessary.

David Brooks, head of policy at Broadstone, said the changes were “a welcome acknowledgment of the progress being made through voluntary industry action”, but added that the policy seemed to be “moving too quickly towards regulation before giving that voluntary approach time to prove itself”.

Brooks said the focus of government “should be on building the right conditions for investment rather than holding regulatory powers in reserve to compel outcomes”.

“Capping the power may limit how far it can go. It does not resolve the underlying question of who decides how pension savings are invested, or whose interests are being prioritised when that decision is made.”

Daniela Silcock, independent researcher

Pinsent Masons pensions partner Stephen Scholefield said: “Restricting the government’s power to mandate how DC pension schemes invest their savers’ assets is better than giving the government a wider power. But the fact remains that pension scheme trustees are best placed to decide what is in the best interest of their savers and forcing them to invest against their assessment of what that requires would be a regrettable step, undermining the long-established fiduciary duty that trustees owe to their members.”

Daniela Silcock, an independent researcher, added: “DC savers already bear investment and outcome risk, and this approach extends that further without offering any form of risk sharing.

“Capping the power may limit how far it can go. It does not resolve the underlying question of who decides how pension savings are invested, or whose interests are being prioritised when that decision is made.”

However, Joe Dabrowski, director of policy at Smart Pension, argued that the reworded clause was “a good compromise”.

He said: “In their revised format, we think the amendments work in the short term, but we expect the market will move quickly to meet its commitments anyway. Dovetailing these measures makes sense and makes the proposal of a 2030 sunset clause a sensible option, by which point the justification for a regulatory intervention will have fallen away.”