‘Highly constrained’: New government pension reform plan remains deadlocked over ‘mandation’ rules
Parliamentary impasse over the Government’s pension reforms continues after MPs voted to pressure the Lords to pass new laws on the Government’s ability to direct pension investments.
The House of Commons supported by 272 votes to 149, with a majority of 123, an amendment to send the Pension Schemes Bill back to the House of Lords, which includes legislation that could allow the Government to tell pension funds how they should invest a certain proportion of their funds; this was called “authority”.
Changes made by the government limit the share of pension funds in line with the voluntary agreement of 17 of the UK’s largest defined contribution schemes in last year’s Mansion House Agreement.
These will be limited to 10% by value of all assets of the scheme in the main default reserves, or 5% of the assets to be held under the UK-specific definition.
This comes amid ambitions to increase the amount of investment in the UK, which we hope will lead to economic growth.
Treasury secretary Torsten Bell said the law was “designed to make it clear on the bill that energy can only be used in the direction that the industry has committed to”.
He added: “The cap prohibits any movement beyond the agreement targets.
“The neutrality requirement eliminates the possibility that any government could direct any investment towards a particular asset or asset class.”
Mr Bell told MPs the rule was “extremely limited and narrowly focused”.
He said: “The government cannot direct investments and this clearly only applies to the main default funds, more clearly matching the language used in the agreement.”
Shadow work and pensions minister Helen Whately criticized the move, saying: “She said this was a natural extension of the Mansion House Agreement, which it is not.
“A voluntary agreement between willing participants is one thing, a legal requirement imposed on the entire industry is another.
“Secondly, he said it was merely a reserve power that the Government had no intention of using.
“Reserve power does not sit harmlessly on a shelf, it shapes behavior.
“I think the minister actually accepts this, he told me before that he would achieve his goal without even needing to provoke the government.”
Labor MP and former Treasury secretary Liam Byrne said: “If we are to look after the long-term interests of pension savers in this country, the measures the minister has laid out this afternoon are really important, because it is in their fundamental interest to live and retire in a faster-growing economy for years to come.
“The only way we can collectively achieve this is if we increase the rate of investment in this country.”
