This has got a lot of people like me , getting pretty stressed out, but luckily this blog has got the likes of the Lord of Brixton , Bryn Davies, I really was grateful to him keeping us in the loop and hopeful of a Bill turning to an Act.
Proposed government powers to mandate pension scheme investment have again been defeated in the House of Lords, as the impasse between the peers and the Labour majority in the Commons drags on.
On the evening of 22 April, the government lost a key vote on mandation in the House of Lords by 234 votes to 152, a defeat by 82 votes.
There remains a possibility that the whole Bill could fail to pass, if the Commons and Lords have not agreed on a final version before the end of the Parliamentary session next week (1 May).
Aside from mandation, the bill includes a range of other measures which have seen less opposition, such as consolidation of small pension pots, and rule changes which would allow the Pension Protection Fund to reinstate a levy if it needed to do so.
Steve Webb, pensions secretary from 2010-2015 and now a consultant at Lane Clark & Peacock, says: “Ministers should recognise that there is a reason for the continued and cross-party opposition to their plans, which is that mandation is a fundamentally flawed policy.
A number of large DB and DC schemes have previously made voluntary commitments to invest a set percentage of their portfolio into domestic private assets through the Mansion House Compact and the Mansion House Accord.
Following previous debate in the Lords, the Labour government had amended the mandation clause of the Pension Schemes Bill to more closely align it to the Accord.
Current pensions secretary Torsten Bell has previously defended mandation, arguing that previous fixations on cost in the pensions sector had reduced investments in private markets in spite of the possibility for higher returns.
In the current wording of the amendment, the Pension Schemes Bill makes clear that no more than ten per cent of a portfolio can be mandated within such “qualifying assets” such as private credit and private equity.
Ros Altmann, a member of the House of Lords and another former pensions secretary, says: “There are needless dangers for members in the Government’s current insistence on mandation by 2030. The Lords have united against the present wording for good reasons and we would like to work with the Government to achieve better outcomes for members and the economy.”
Will Hutton
Reading all that was rubbish! But I’ll finish for the second time with Mr Stakeholder (Will Hutton). What with Bryn Davies, I have a sandwich of sanity from old heroes from the left wing of economics and actuarial sense!
Most people under 45 are not members of a pension fund that averages the good and bad luck of varying life expectancies and is large enough to invest across the gamut of great opportunities with their attendant risk to achieve good returns for pensioners. All is made worse by a derisory contribution rate matched by even more derisory contributions from employers, members ascribed their own little pension pot when they retire. Essentially, they face the ups and downs of investment and longevity risk by themselves. Employers, industry lobbyists and right-of-centre politicians plead it is trustees’ fiduciary obligation not to change anything – in effect, washing their hands of responsibility for a dysfunctional structure and indifferent returns. Millennials and zoomers don’t expect to be as well off as their parents; they are right.
Yet the attempt by the government to go some way to remedy the position in its proposed pensions bill is deadlocked in the House of Lords, a bone of contention being the government assuming a time-limited reserve power to mandate industry promises to invest – as Australian, Canadian, American and Dutch pension funds do – in promising homegrown private British companies.
Good for pensioners; good for the economy. As the pensions minister, Torsten Bell, explained last week, the industry makes promises and doesn’t act on them. With these already watered-down new powers, it just may. Yet to try to haul the pensions industry into the same investment universe that other capitalist countries and pensioners occupy is to be accused of statist Stalinism.
Will Hutton
Bryn Davies
Even if the Lords successfully reject the current Pensions Bill, the “Pension IHT” tax change is on a separate track and remains scheduled to take effect in April 2027.. This will be a topic in the next General Election Tax on Tax is not a loophole but changing the goalposts and theft.