Chancellor Rachel Reeves’s attempt to overhaul the pension system faces another vote in the House of Lords following a recent vote by MPs in the Commons.
The deadlock between Parliament’s two chambers over the Labour Government’s pension reform proposals showed no signs of resolution today after the House of Commons voted to return contested legislation to the Lords.
MPs backed the amendment with 272 votes in favour against 149 opposed, a majority of 123, insisting peers accept provisions within the Pensions Scheme Bill that would grant ministers powers to direct how pension funds allocate a portion of their investments.
The practice, referred to as “mandation,” would enable the Government to instruct pension providers on where to channel certain assets, marking a significant shift in how retirement savings could be managed.
The Chancellor is attempting to get her pension reforms through the House of Lords
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The proposed legislation would restrict the Government’s investment direction powers to a maximum of 10 per cent by value of assets held in a scheme’s main default reserves, with a separate five per cent limit for UK-specific investments.
These constraints align with commitments already made voluntarily through the Mansion House Accord, an agreement struck last year involving 17 of Britain’s largest defined contribution pension schemes.
Labour ministers have cited their broader objective is to boost domestic investment levels, with ministers hoping increased capital flows into UK assets will stimulate economic growth.
Treasury minister Torsten Bell defended the proposed powers as “highly constrained and narrowly focused,” telling MPs the legislation was “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”.
Rachel Reeves under pressure | GETTY
Torsten Bell spoke to the Work and Pensions Committee to confirm its future | PA
He emphasised that built-in safeguards would prevent any overreach, stating: “The cap prohibits any move beyond the accord targets.”
Mr Bell further reassured the Commons that ministers would be barred from steering money towards particular assets.
The pensions minister shared: “The neutrality requirement rules out the possibility that any government could direct any investment into a particular asset or asset classes.”
Shadow Treasury minister Helen Whately rejected the Government’s characterisation of the measures, arguing: “A voluntary agreement between willing participants is one thing, a legal requirement imposed across an entire sector is another.”
The House of Lords is preparing to vote once again on the ‘mandation’ rule change
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PAShe dismissed claims the power would remain unused, warning: “A reserve power does not sit harmlessly on the shelf, it shapes behaviour.”
Ms Whately suggested the minister privately acknowledged this reality, adding: “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.”
Former Treasury minister Liam Byrne backed the reforms, arguing they were essential for pension savers’ long-term interests and would help raise Britain’s investment rate.