The FT are clear that the Government has won a victory over opposition to an aspect of its Pension Schemes Bill
Of course the campaign that Rachel Reeves was helping to launch last week went further than pensions but workplace pensions are the easiest way to get money invested in Britain.
Whether by “workplace pensions” we mean DC. CDC or DB plans, there is much that can be done and yesterday was a good day for DB workplace pensions with the PRA coming down hard on insurers shipping off our pensions to be invested in America via reinsurance treaties mostly written in Bermuda.
I met an old friend who is now at the Bank of England but who I last saw on Lady Lucy eight years ago. She congratulated me for our work in setting up a CDC , reminding me that I was part of a movement to invest more of people’s money in growth (and that we’d be mindful of the Mansion House Accord – we will).
It is not enough to say that workplace pensions are one or other , they are a class of pensions that cover almost all employers in the private sector and a few in the public (LGPS being the best known).
The FT are well known , through Jo Cumbo, for dissent against mandation. I like Jo as I like Ros Altmann and John Hamilton who have all stood out against Government interference in what they see as a fiduciary process. I see trustees having a lot of codes to follow and this is simply an extension. I am glad that the FT have less ferocious opposition though I sense they have some unease. Test for yourself…
Chancellor Rachel Reeves on Tuesday finally won her battle with the House of Lords over legislation that will give ministers the power to force pension funds to invest a minimum amount in UK companies and private assets.
But parliament’s upper chamber agreed to approve the pension schemes bill only after ministers made a series of last-minute concessions that put safeguards around any use of the controversial “mandation” power.
Reeves insisted that ministers be given a “backstop” power to ensure that pension funds comply with a voluntary accord to put billions of pounds of extra investment into the UK economy.
We of course see this Pensions Schemes Bill as the Pension Minister’s but that won’t be the way it’s seen by those outside our bubble. For the FT the capacity of pension schemes to reflate our economy is a Treasury matter and driven by the Chancellor. We have for the first time since Osborne and Webb, a pensions minister who speaks as if he were a Chancellor the two ministers have been as one on this.
There have been concessions as the opposition played ping pong with the Pension Schemes Bill to the final evening of this parliamentary session. Had this agreement (some would say “fudge” not been agree this week, we would not have a bill or an act on pensions. Here are the fudges listed by Alan Livsey and George Parker
Bell said the mandation power would now be “capped, time-limited . . . and subject to a savers’ interest test that has been materially strengthened”.
The contentious power would expire via a so-called sunset clause in 2032, while pension funds would be able to appeal if they felt ministers were telling them to invest in a way that was “likely not to be in the best interests of [scheme] members”,
Bell added. One new concession will require regulators to make an assessment of any ministerial direction to pension funds and that ministers will have to take account of their judgments.
Bell had already issued a clause to prevent ministers from mandating investment in any particular asset class.
In another compromise, pension funds will be able to use investment companies as a way to access their target assets such as infrastructure and private equity.
I must perform ocular gymnastics over the Lords, one eye is cast down in indignation that they used coercion to get unnecessary concessions, in another I raise my eyes to the Upper House for clearing investment companies to be included. I will pick out Sharon Bowles and Ros Altman for the latter and Bryn Davies for keeping us sane in the past few days.
In conclusion, I did not think we needed this row which seems more political than practical. I am not going to stand on principal – especially fiduciary principles .
The argument over mandation will linger; I dare say some of this Government’s opposition will promise to abolish it in their next manifestos; but I doubt it. This really was a storm in a teacup.