Helen Whately: Pension Savings Belong to Savers, Not the State
In a critical intervention, Helen Whately, the shadow work and pensions secretary, has declared that pensions belong to savers, not the state, as the government faces sustained resistance over the Pension Schemes Bill. The legislation, which has encountered a series of defeats in the House of Lords, includes contentious powers allowing the government to direct investments in default auto-enrolled pension schemes.
Government Powers Under Scrutiny
The original draft of the Bill granted sweeping authority to mandate how pension funds invest, but ministers have since scaled back these provisions. The latest version permits the government to require up to 10 per cent of assets to be invested in private markets, with up to five per cent allocated specifically to the UK. While these concessions have made the Bill less objectionable, Whately emphasizes that this does not equate to making it a good piece of legislation.
Conservatives acknowledge the understandable aims of increasing investment in the UK and boosting returns for savers, which could lead to higher retirement incomes. However, the core objection from Parliament centers on the means, not the ends. Whately asserts that no government should have the power to direct where individuals' pension savings are invested, as this undermines the fundamental principle of fiduciary duty.
Fiduciary Duty at Risk
Pension fund trustees are tasked with safeguarding people's life savings, not fulfilling political agendas or manifesto commitments. Mandation forces trustees to make investment decisions that may not align with the best interests of pension fund members, potentially to their detriment. Whately highlights that while the Mansion House Agreement includes government commitments to enhance investable opportunities, the Pension Schemes Bill lacks similar assurances for the implementation of mandation powers.
The pensions minister has attempted to justify these powers by comparing them to voluntary agreements, arguing they are merely reserve powers or solutions to collective action problems. Whately counters that a voluntary agreement backed by legal threats is no longer truly voluntary, and mandation is an inappropriate fix for industry hesitancy to be first movers toward higher-return investments.
Alternative Solutions Proposed
Instead of heavy-handed state intervention, Whately advocates for market-based solutions already embedded in the Bill. The pensions dashboard will provide savers with greater visibility over their funds, while the Value for Money framework will assist employers in selecting better-performing schemes and justifying these choices to staff. This approach prioritizes informed choice and healthy competition, making the market work more effectively for all stakeholders.
Whately also refutes claims that mandation was part of the Labour Party manifesto, noting that while it promised to boost UK investment and improve returns, it did not propose granting government powers to direct fund investments as outlined in the Bill. She suggests that the government could make the UK more attractive for pension fund investment and shift performance assessments toward returns rather than low cost.
In conclusion, Whately warns that the government's instinct to seize more power is misguided, urging a reconsideration even at this late stage to protect savers' interests and uphold fiduciary responsibilities.
