Skip to content
ADVERTISEMENT
News

Pensions UK welcomes Pension Schemes Bill but warns against investment powers

Zoe Alexander said: “The best way of ensuring good returns for members is for investments to be undertaken on a voluntary, not mandatory basis.”

3 min read
Share
Pensions UK welcomes Pension Schemes Bill but warns against investment powers
ADVERTISEMENT

Pensions UK welcomed the Pension Schemes Bill and said most of the measures would help pension schemes deliver better value for members, cut admin costs and make things easier for savers. 

In its submission to the Pension Schemes Bill Public Bill Committee, Pensions UK said it supported the introduction of guided retirement products, statutory rules for superfunds, action on small pots, the value for money regime and new rules for trustees on defined benefit surpluses. 

These were changes Pensions UK said it had called for and helped shape.

However, Pensions UK said there were concerns about new Government powers to direct how pension schemes invest, warning this could risk members’ savings now and in future. 

Pensions UK added that the sector should be led by fiduciary duty to savers and open market competition, not Government interventions.

ADVERTISEMENT

On defined contribution (DC) mandation, Pensions UK noted that the Government had taken a reserve power to set investment rules for DC master trusts, with a sunset clause to 2035. 

Pensions UK said this power was not needed and the voluntary Mansion House Accord was a better approach. 

Additionally, Pensions UK said the sunset clause should run only to 2032 and that rules on minimum investment should match the Accord, with at least 10% in private markets and 5% in the UK.

ADVERTISEMENT

On local Government pension scheme (LGPS) mandation, Pensions UK said the Bill gave the government wide powers to set how LGPS pools operate, including how they invest. 

Pensions UK said these pools managed money for over 7 million savers and were already large, sophisticated investors, so the Government should not interfere. 

ADVERTISEMENT

Pensions UK called for the Bill to be clearer about what was intended.

ADVERTISEMENT

On superfunds, Pensions UK welcomed the long-awaited statutory regime and said it hoped this would bring more choice for schemes. 

Pensions UK said some current rules cut across fiduciary duty and were anti-competitive. 

Furthermore, Pensions UK said only trustees and their employer should choose the end-game for their scheme and called for the rule that ceding schemes must show they cannot buy out to be removed.

On surpluses, Pensions UK said trustees should have more flexibility to access extra funds from well-funded schemes, with proper safeguards. 

ADVERTISEMENT

Pensions UK noted that it supported rules giving trustees the power to decide how surpluses can be used. 

Pensions UK also said it would back changes so trustees could use surpluses to boost defined benefit member benefits, increase DC contributions, or set up CDC schemes, without a 25% tax penalty.

On value for money and guided retirement products, Pensions UK backed the moves but said more detail was needed.

Pensions UK said it was not clear how grading for value for money would work, which mattered for who could operate in the market. 

On guided retirement products, Pensions UK said the process for moving members into default arrangements was not fully clear.

ADVERTISEMENT

Zoe Alexander, director of policy and advocacy at Pensions UK, said: “Pensions UK welcomes the introduction of the Pension Schemes Bill which introduces important reforms that are positive for long-term retirement outcomes.

“However, we are concerned that broad new powers to direct investment introduce avoidable risks to savers and must be approached with significant caution. 

“The best way of ensuring good returns for members is for investments to be undertaken on a voluntary, not mandatory basis.”

Related