Pensions UK warns of political risk of keeping mandation powers until 2035
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Uncertainty about where the UK is heading politically means trustees are feeling particularly nervous about keeping the government’s proposed reserve power to mandate investments until 2035, with Pensions UK saying the power should end in 2032.
The power the government is looking to give itself via the pension schemes bill would allow it to mandate defined contribution schemes how to invest, for example if it thought that, in its view, not enough of savers’ money was flowing towards UK private market assets.
Pension trustees fear their fiduciary duty is being undermined, but there is another problem – although many agree with investing more in the UK, it is not clear that this will remain the goal because it is uncertain who will be the decision makers in future.
“We don’t know politically where we’ll be in 2035. We don’t know what government will be in place. It pushes us potentially into another government, another parliament,” Pensions UK’s director of policy and advocacy, Zoe Alexander, told the Public Bills Committee examining the pension schemes bill on Tuesday.
She said there was clear consensus among trustee members of Pensions UK that the date should be brought forward by three years, adding: “We don’t want it too early because that pushes government to make a decision, it might pre-empt a decision that doesn’t need to be taken. But 2035 felt too long.”
Pensions UK also wants to see the mandation power limited to what was committed to in the Mansion House Accord. Leaving the powers in place until 2032 gives more than enough time for industry to deliver on the commitments in the Mansion House Accord and for government to assess progress, Alexander said, adding: “We feel that keeping it on the statute book until 2035 would introduce undue political risk.”
Her remarks come after the lobby group reacted strongly to a statement made by Reform UK’s deputy leader Richard Tice. At a press conference specifically about pensions on Monday, Tice said the Local Government Pension Scheme had wasted nearly £1bn in asset manager fees over the past year and should move to passive equity and bond funds. He also argued that sustainable funds were “a meaningful cause” of underperformance.
Pensions UK responded that the latest LGPS valuation figures showed an aggregate return of 8.9% in 2024 with an average funding level of 108%, and – potentially revealing that the government’s push for domestic investment has more than economic reasons – that the LGPS has the highest proportion of investments in domestic assets in the UK pension sector.
At the last local elections earlier this year, Reform UK won nearly 677 seats - 41% of seats up for election - gaining control of 10 councils. Councils controlled by Reform UK include Derbyshire, Durham, Kent, Lancashire, Lincolnshire, North Northamptonshire, Nottinghamshire, Staffordshire and West Northamptonshire.
The party’s website has a tab entitled ‘crypto’, where donations in cryptocurrency can be made, potentially indicating a type of investments the party could promote. Its leader Nigel Farage is an admirer of UK President Donald Trump, whose family runs a cryptocurrency firm and who has signed an order to allow US DC scheme members to invest in crypto, private equity and other alternative assets.
The power the government is looking to give itself via the pension schemes bill would allow it to mandate defined contribution schemes how to invest, for example if it thought that, in its view, not enough of savers’ money was flowing towards UK private market assets.
Pension trustees fear their fiduciary duty is being undermined, but there is another problem – although many agree with investing more in the UK, it is not clear that this will remain the goal because it is uncertain who will be the decision makers in future.
“We don’t know politically where we’ll be in 2035. We don’t know what government will be in place. It pushes us potentially into another government, another parliament,” Pensions UK’s director of policy and advocacy, Zoe Alexander, told the Public Bills Committee examining the pension schemes bill on Tuesday.
She said there was clear consensus among trustee members of Pensions UK that the date should be brought forward by three years, adding: “We don’t want it too early because that pushes government to make a decision, it might pre-empt a decision that doesn’t need to be taken. But 2035 felt too long.”
Pensions UK also wants to see the mandation power limited to what was committed to in the Mansion House Accord. Leaving the powers in place until 2032 gives more than enough time for industry to deliver on the commitments in the Mansion House Accord and for government to assess progress, Alexander said, adding: “We feel that keeping it on the statute book until 2035 would introduce undue political risk.”
Her remarks come after the lobby group reacted strongly to a statement made by Reform UK’s deputy leader Richard Tice. At a press conference specifically about pensions on Monday, Tice said the Local Government Pension Scheme had wasted nearly £1bn in asset manager fees over the past year and should move to passive equity and bond funds. He also argued that sustainable funds were “a meaningful cause” of underperformance.
Pensions UK responded that the latest LGPS valuation figures showed an aggregate return of 8.9% in 2024 with an average funding level of 108%, and – potentially revealing that the government’s push for domestic investment has more than economic reasons – that the LGPS has the highest proportion of investments in domestic assets in the UK pension sector.
At the last local elections earlier this year, Reform UK won nearly 677 seats - 41% of seats up for election - gaining control of 10 councils. Councils controlled by Reform UK include Derbyshire, Durham, Kent, Lancashire, Lincolnshire, North Northamptonshire, Nottinghamshire, Staffordshire and West Northamptonshire.
The party’s website has a tab entitled ‘crypto’, where donations in cryptocurrency can be made, potentially indicating a type of investments the party could promote. Its leader Nigel Farage is an admirer of UK President Donald Trump, whose family runs a cryptocurrency firm and who has signed an order to allow US DC scheme members to invest in crypto, private equity and other alternative assets.
