Pensions Minister, Torsten Bell, has said he is “not anticipating using” the backstop set to be introduced in the Pension Schemes Bill that would allow the government to set binding asset allocation targets for pension schemes.

There has been widespread concerns in the industry surrounding the possible mandation of pension fund investment in UK private markets following the Mansion House Accord, which saw 17 of the largest UK workplace pension providers express their intent to invest at least 10 per cent of their DC default funds in private markets by 2030, with 5 per cent of the total allocated to the UK.

These concerns have grown since, after the government's Pension Investment Review confirmed that it would take a reserve power in the Pension Schemes Bill to set binding asset allocation targets, as it moves ahead with plans to double the number of UK pension megafunds by 2030.

However, speaking to Pensions Age about the final report of the Pension Investment Review, Bell stated that he was “confident” the government would not need to mandate.

“Everybody's on the same path. I think we're seeing that right across the industry. My view is that we should all be clear that there's a really strong shared sense of purpose,” Bell said.

However, he emphasised that this needs to be done in the “right way”, acknowledging that different schemes will take different views.

“You will definitely see differences in the asset allocation within private assets, just like you do within public assets. That's what you should be seeing,” he continued.

“There will be different choices about how much they're doing that directly, how much they're doing that with their bodies, how much they're doing that in collaboration with each other. I think all of us should be very confident that the whole industry is moving in the direction.”

When asked to comment on industry professionals’ concerns that “the threat of government telling trustees how they should invest is a step too far” and concerns that “pension schemes must be allowed to direct pension assets in members best interests without mandatory requirements to invest in specific markets or assets”, Bell stated that “this was not happening”.

Instead, he argued that "it is the industry that have set themselves the benchmarks to move towards a wider private asset allocation", stating that this "actually is best practice around the world".

“And in the end, people should be asking why we haven't made more progress in the past because what really matters here is returns to savers and, particularly for people investing over their lifetime in defined contribution (DC) pots," he continued.

“All of the risk in terms of investment returns now sits with savers. It doesn't sit with employers, it doesn't sit with the schemes, it sits with savers.

“And so we as an industry should be doing everything possible to drive out returns for savers. That is what motivator all of the changes.”

Bell was also asked about the backstop for Local Government Pension Scheme (LGPS) investment, to which he explained that there is already a consolidation process underway in both the DC and LGPS pension markets.

He noted that the government’s role is to “accelerate this existing trend”, not introduce something entirely new.

Bell also noted that six LGPS investment pools have approved plans and are moving forward, while the two remaining pools “must now choose what pool they want to join”.

He emphasised that this decision is up to the individual pools and that the government won’t dictate that decision but will support the process - only stepping in as a "backstop" if necessary.

---