The government has moved to amend its ‘mandation’ power in the Pension Schemes Bill following widespread industry concern.

An amendment to the bill restricts the extent to which the government can direct how defined contribution (DC) pension schemes invest, imposing a cap of 10 per cent of assets held in default funds and no more than 5 per cent in UK-based assets.

These thresholds mirror those set out in the Mansion House Accord, a voluntary agreement between 17 of the UK’s largest DC pension providers to increase investment in unlisted assets, both domestically and globally.

The changes come after sustained industry concern over the inclusion of a reserve power that would allow the government to mandate asset allocation, with critics warning that such intervention could undermine trustee fiduciary duties and set a concerning precedent.

The concerns were echoed in parliament, with the House of Lords voting to remove the mandation power from the bill altogether.

The government had previously stated that it would not be removing the power from the bill.

Pensions UK, which has opposed the inclusion of mandation powers, said the amendment addressed its “most serious concern” and brought the legislation more closely in line with the government’s stated intention of using the power only as a backstop to the Mansion House Accord.

Pensions UK chief executive, Julian Mund, said the organisation continued to support the overall passage of the bill, describing it as delivering “a series of critical reforms in savers’ interests”.

However, he reiterated that Pensions UK remained opposed in principle to government direction over pension scheme investment, warning of the precedent set by retaining any such reserve power.

“While we do not expect the power to be used, we are clear that asset allocation decisions must rest with trustees acting in their members’ best interests," he said.

“We will be sharing thoughts on how delivery can be further supported by the government and related agencies via a publication later this Spring.”

Meanwhile, the Society of Pension Professionals (SPP) also welcomed the amendment as a “practical compromise”, acknowledging that while the House of Lords had previously voted to remove the mandation power entirely, the revised approach reflected that the government had listened to industry concerns.

SPP president, Sophia Singleton, added that aligning the power with the Mansion House Accord represented a workable solution to a complex issue as the bill reached its final stages in parliament.

The bill completed its third reading in the House of Lords last month and is set to return to the House of Commons for amendment consideration on 15 April.

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