Ministers have been urged to heed cross-party opposition after the Labour Government was handed a substantial defeat in the House of Lords on Wednesday evening over pension scheme mandation powers.
Peers voted against the Government by 234 to 152, a margin of 82 votes, on proposals that would enable ministers to compel defined contribution schemes to invest according to Government priorities.
Steve Webb, former Pensions Minister and partner at LCP, warned that without concessions, the entire Pension Schemes Bill risks collapsing before the parliamentary session concludes next week, as the Commons and Lords would fail to reach agreement on a final version.
The Bill encompasses numerous provisions that have received broad support across the pensions industry.
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These include establishing frameworks for releasing defined benefit surplus funds safely and creating a legal structure for DB superfunds.
Additional measures would require DC trustees to establish default retirement pathways for members, whilst also seeking to increase scale within workplace pension provision.
The legislation also introduces a new value for money assessment framework and addresses the mounting problem of small, abandoned pension pots.
Further provisions would permit the Pension Protection Fund to reintroduce its levy if necessary, having previously reduced it to zero to relieve pressure on employers.
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All these elements face delay should the Bill fail to complete its parliamentary passage this session.
Mr Webb characterised the mandation policy as “fundamentally flawed,” pointing to sustained opposition from across the political spectrum as evidence that ministers should reconsider their approach.
He argued that the Government’s attempt to legislate enforcement of commitments made voluntarily through the Mansion House Accord process represents a breach of good faith.
The former pensions minister shared: “Mansion House signatories are clear that they will strive for these targets provided that they think doing so is in members’ interests, and trustees and providers will rightly resist any attempt to override that judgment.
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“It is time that Ministers stepped back from the brink and instead started listening to the legitimate concerns that are being raised.”
Jonathan Parker, the managing director and head of DC for Investment Consulting at Gallagher, added: “With the Pension Schemes Bill facing a genuine risk of failure if the mandation power debate isn’t resolved, trustees will certainly be feeling a sense of legislative fatigue after so many months of discussion.
“For schemes that have signed up to the Mansion House Accord, this parliamentary ping-pong shouldn’t derail their planning though.
“Those that have committed have clearly done the research about how they get to the required thresholds, and there is no shortage of private market opportunity to get there.
“A more pressing question amidst this back and forth is whether there is actually enough high-quality UK investment opportunity for schemes of this size to deploy capital confidently while still meeting their duty to members.”