Labour has been forced into a humiliating climbdown over plans to assume power to tell pension funds where to invest money. Ministers backed down last night in a stand-off with the House of Lords, which has repeatedly refused to pass plans for mandation - letting them change the law so they can direct funds with the aim of encouraging economic growth in the UK.
Government Concessions
Pensions minister Torsten Bell confirmed that the proposal in the Pension Schemes Bill had been watered down so that the powers would only apply to a maximum of 10 per cent of assets, so it could pass the upper house. The Government will also be unable to use the power before 2028 and it will be repealed in full by 2035.
Opposition Criticism
Shadow pensions secretary Helen Whately said the original plan had been 'breathtaking' and would have allowed the government 'to steer private capital towards all manner of ministerial ambitions', with a pot of up to £400billion. 'I have yet to meet anyone who wants a politician managing their pension,' she said, adding that the Tories would repeal it if in government. 'The Chancellor spotted a shortcut to a positive headline about investment in the UK, underpinned not by better performance but by forcing the hand of pension funds and jeopardising people's retirement incomes.'
Government Defence
Mr Bell pointed to the Government's pensions review, which found the defined contribution pensions market 'is operating with an excessively narrow focus on cost'. The probe found that 'the excessively narrow focus can be detrimental to saver outcomes'. Under the watered-down proposal, the portion of funds covered by mandation would be limited to 10 per cent, by value, of all assets of the scheme in main default reserves, or 5 per cent of assets to be held in UK-specific description. This is in line with a voluntary agreement by 17 of the UK's largest defined contribution schemes in the Mansion House Accord last year.
Industry Reaction
Lisa Picardo, chief business officer at PensionBee, welcomed the government concession saying it offered 'some important guardrails and restrictions that have been agreed since the original clause appeared - caps aligned with the voluntary Mansion House Accord, limiting it to auto-enrolment defaults as opposed to entire schemes, a single-use restriction, an earlier 2032 sunset and a full repeal in 2035.' She added: 'Ultimately, the trustees and providers bear the responsibility for serving their members, and ensuring that they put their best interests above any others - this should continue to take precedence over any political persuasion.'
