The Pension Schemes Bill is set to become law after the House of Lords agreed to final watering down plans from the government, ending the long-standing deadlock between the two houses. The legislation had run into multiple walls amid consistent back and forth between the lower and upper house, after neither side refused to back down over Clause 40, which was known as the controversial mandation power.
The power would have granted the government the authority to compel private pension schemes to invest a minimum proportion of assets into specific areas. However, the opposition benches and figures from across the City voiced concerns over the power, arguing it meant that pension schemes could not act in saver’s best interests and could be used to fund political “pet projects”. Pensions minister Torsten Bell was accused of “wasting everyone’s time” after finally backing down following multiple sessions of trying to push the bill through with the clause intact.
Game, Set, Match
After four rounds of ping-pong between the two parliamentary chambers, the government finally conceded and tabled further amendments weakening the power to soothe peer’s concerns. The amendments meant that saver’s best interests would elbow out mandation while restrictions were also placed on when the power could be used. The new text states that the government would have to publish a report identifying barriers to UK and private markets investment, and to set out the steps it has taken to “address any such barriers”.
The House of Lords finally accepted the bill and waved it through on Tuesday night, despite both the Conservatives and Liberal Democrats vowing not to let any sort of mandation power exist in the legislation. Speaking in the House of Lords, Baroness Sharon Bowles, who has led the opposition, said: “I am still no fan of mandation, but we have now got it suitably under control. There are reasonable guardrails to make sure that it does not go wrong, that we, I hope, never use it, and that we get the additional investments that we all agree in principle are needed.”
Helen Whately, shadow work and pensions secretary, also voiced her approval at the “U-turn on this fundamental flaw”. She said: “Rachel Reeves wanted unfettered control over more than £400 billion of private pension savings. But we have cut Labour’s pensions power grab off at the knees.”
Beating the Clock
The government had already introduced other moves to compromise. Bell had agreed to cap the power at 10 per cent of total assets and backed a ‘sunset clause’ repealing the power in its entirety by 2035. The power is also restricted to apply only to default auto-enrolment funds rather than entire pension schemes.
Meanwhile on Monday night, the government also confirmed pension schemes looking for an exemption would only have to persuade the regulator that complying “would be likely” to cause material financial detriment, rather than the original wording that complying “would” cause detriment. But while neither side achieved what they truly wanted, the legislation passed before the end of the parliamentary session, ending fears from the industry over whether the bill would make it in time.
Zoe Alexander, executive director of policy and advocacy at Pension UK, said on LinkedIn: “Thrilled to see the Pension Schemes Bill go through tonight after its fraught final stages. It’s a critical piece of legislation that will build value in the system and in turn deliver better retirements.”
