‘Highly constrained’: New government pension reform plan remains deadlocked over ‘mandation’ rules

The parliamentary stalemate over the Government’s pension reforms continues, after MPs voted to press the Lords to accept new laws on the Government’s ability to direct pension investments.

The House of Commons backed an amendment by 272 votes to 149, majority 123 to send the Pensions Scheme Bill back to the House of Lords containing laws that could allow the Government to tell pension funds how they should invest a certain amount of their funds, so-called “mandation”.

Amendments by the Government limit the portion of pension funds in line with a voluntary agreement by 17 of the UK’s largest defined contribution schemes in the Mansion House Accord last year.

They would be limited to 10%, by value, of all assets of the scheme in main default reserves, or 5% of assets to be held in UK-specific description.

It comes amid aims to increase the amount of investment in the UK, which it is hoped will lead to economic growth.

Treasury minister Torsten Bell said the law is “designed to make clear on the face of the Bill that the power can only be used in line with what the industry itself has committed to”.

He added: “The cap prohibits any move beyond the accord targets.

“The neutrality requirement rules out the possibility that any government could direct any investment into a particular asset or asset classes.”

Mr Bell told MPs the rule is “highly constrained and narrowly focused”.

He said: “The Government cannot direct investments, and it explicitly only applies to main default funds, more explicitly matching the language used in the accord.”

Shadow work and pensions secretary Helen Whately criticised the move and said: “He said this is a natural extension of the Mansion House Agreement, it is not.

“A voluntary agreement between willing participants is one thing, a legal requirement imposed across an entire sector is another.

“Secondly he has said that it is merely a reserve power, one the Government has no intention of using.

“A reserve power does not sit harmlessly on the shelf, it shapes behaviour.

“I think in truth the minister accepts that, he has said as much to me before that the power will achieve its ends without even needing to be turned on.”

Labour MP and former Treasury minister Liam Byrne said: “The measures the minister has set out this afternoon really are essential if we are to pursue the long-term interests of pension savers in this country, because it is in their fundamental interest that they live and retire in an economy that is growing faster in the years to come.

“The only way in which we are going to collectively achieve that is if we raise the investment rate in this country.”