The government has overturned a series of House of Lords amendments to the Pension Schemes Bill, with MPs voting to reinstate key provisions, including the controversial ‘mandation’ power, during Commons consideration on 15 April.

Speaking during the debate, Pensions Minister, Torsten Bell, reiterated the government’s rationale for retaining the reserve power, arguing that it was needed to address a “collective action problem” in pension investment.

He said a focus on cost had constrained allocations to asset classes that may offer higher long-term returns, adding that removing the power altogether would “let savers down” and “disregard the barriers that we all know are holding back delivery” on industry consensus.

Despite rejecting the Lords’ amendments removing the mandation clause, the Commons approved revised wording of the power, limiting any requirement on defined contribution (DC) schemes to allocate no more than 10 per cent of default fund assets to “qualifying assets”, with no more than half of that directed towards UK investments.

These thresholds reflected those set out in the Mansion House Accord.

Bell stressed that the revised clause would require any implementing regulations to be “entirely neutral between asset classes”, in an effort to address concerns that ministers could direct capital towards specific sectors.

However, opposition MPs continued to criticise the measure.

Conservative MP for Faversham and shadow work and pensions secretary, Helen Whately, pointed to previous defeats for the government in the Lords and reiterated concerns about the principle of state direction over pension investments.

She argued that, despite the revised limits, “the fundamental problem remains unresolved", warning that granting the government such powers over pension savings was “wrong in principle”.

Meanwhile, Conservative MP, Katie Lam, described the mandation provision as “a shocking power grab” and “totally indefensible”, while Liberal Democrat pensions spokesperson, Steve Darling, warned that giving future governments the ability to direct pension investments could prove “feckless and dangerous for our pensioners”.

Industry figures also voiced concern following the Commons' decision.

Barnett Waddingham, chief investment officer, Matt Tickle, said: “We are disappointed, if not surprised, that the Lords' amendments have not been retained. Whilst the revised wording is a small move in the right direction, it does not fundamentally change our view.

“Placing mandation powers on the statute book is not, in our opinion, in the best interests of members or the wider economy.

“Saver outcomes must always come first, and trustees must be able to fulfil their fiduciary duties, protecting members' retirement savings.

“We have never felt the economic argument for mandation stacked up. The Mansion House Accord has demonstrated that industry can voluntarily commit meaningfully to UK and infrastructure investment, and we believe that remains the right path.

“Our support for the government's ambition to grow the supply of infrastructure assets in the UK is unchanged, and we recognise the genuine effort being made to achieve that. We hope to see that progress continue.”

Echoing this, PensionBee chief business officer UK, Lisa Picardo, said it was “disappointing” that the Commons had chosen to override the Lords’ judgment, as well as bypassing widespread industry opposition to the reserve power.

"Even with limits, it still represents the crossing of a previously well-defined line.

“With power comes great responsibility – but this mandation clause creates asymmetry between who wields the power, and who takes responsibility.

“Ultimately, it is consumers who will bear the consequences if the government’s assumptions on returns from private market assets do not prove correct over time.

PMI chief strategy officer, Helen Forrest Hall, added: “While the PMI remains fundamentally opposed to the principle of a reserve investment power and its potential to impede fiduciary duties, we strongly support the wider Pension Schemes Bill and its objectives to deliver better outcomes for savers.

“We welcome the government’s decision to amend the bill so that the reserve power more closely aligns with the Mansion House Accord, even though the Accord is a voluntary agreement that not all schemes have signed up to. We now await the response from Peers in the House of Lords.

“At this stage, we remain concerned that this power will remain in legislation until at least the end of 2035, and we continue to call for the ‘sunset provision’ to be brought forward to give schemes greater certainty and remove political risk.

“We would also now like to see more granular detail on how the power would be applied, particularly what a ‘UK-specific description’ means in practice, as well as an update on the Mansion House Accord investment opportunities the government has promised.”

The Commons also established a committee, chaired by Bell, to set out formal reasons for rejecting specific amendments from the Lords.

These included arguments that certain provisions were unnecessary, would duplicate existing requirements, or could negatively impact scheme members.

In particular, MPs raised concerns that some amendments would impose additional publication requirements, extend dormancy periods to the detriment of members, or introduce unnecessary reviews and reporting obligations.

Amendments relating to financial matters were also rejected on the basis of Commons' financial privilege.

The bill will now return to the House of Lords for further consideration.

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