Sharon Bowles

The Lords has been looking at the lot of DC pension investors, investors who could be invested in CDC before too long. We start with the most important amendment that is needed.

Investment companies (trusts) should be on the shopping list for any DC scheme (including CDC schemes) looking to improve pensions for members.

The argument in the Upper House on reform of how we are invested in our DC pensions

Here is the argument as put forward to fellow members of the Upper House. Baroness Altmann. I am amazed that we have not an amendment to the Pension Schemes Bill so that from 2027 when UMES CDC’s go live, we have an opportunity to invest in investment companies rather than plough contributions into the standard trackers which we are restricted to (by charge caps and regulation).

Baroness Maeve Sherlock presented the pensions schemes bill for its second reading in the House of Lords on Thursday (December 18).

Ahead of the reading, the Lords Delegated Powers committee published a report on the bill which claimed it had not given parliamentarians a sense of how delegated powers could work.

The paper, published on Wednesday (December 17), called the bill a “skeleton bill”.

Baroness Jane Ramsey, chair of the House of Lords Delegated Powers and Regulatory Reform committee, said:

“The pension schemes bill is a very bare skeleton with little flesh for parliamentarians to get their teeth into.

“Pensions law is highly complex so there will always be need for secondary legislation in this area but the committee feel the government have not done enough in this bill to explain how they will use the powers they are asking parliament to approve.”

Presenting the bill in the House of Lords, Sherlock said the reforms outlined would make money invested in pensions work harder for investors.

However, she set out that some default arrangements for workplace pensions result in poor outcomes for members.

She said the bill introducing a power to make regulation for default arrangements could reduce fragmentation.

“At its core, this bill is about making sure that people’s hard earned savings work as hard for them as they have worked to save, while galvanising the untapped benefits that private pensions can offer the economy at large,”

added Sherlock.

Baroness Ros Altmann raised concerns with the bill and raised the exclusion of closed-ended funds, like investment trusts.

She said:

“I warmly welcome many of the bill’s provisions, but I do believe that some of the assumptions underlying these reforms could prove dangerously false, and there is a real risk.”

She warned there could be a lack of future innovation as smaller entrants could drop out of the market or not enter at all.

“I do have concerns that the bill will stop new competition coming in, stop new entrants coming in and an oligopoly is not normally the best way for a market to succeed.

“I am particularly puzzled also by the explicit exclusion of closed-ended listed companies within this bill.”

You can read Ros Altmann’s article on my blog on this subject in December of last year, by clicking here.

I look forward to hearing the fate of the  amendment to let investment trusts onto the shopping lists of our DC and CDC default funds.

Ros Alt5mann