The House of Lords has voted to continue its opposition to investment mandation in the Pension Schemes Bill, despite a fresh round of concessions from the House of Commons aimed at easing concerns over trustee duties and member outcomes.

Peers backed an amendment to insist on their previous changes to the Pension Schemes Bill, by 197 votes to 129, prolonging the parliamentary standoff over the government’s proposed 'reserve power' on asset allocation.

The latest debate followed a third set of amendments from the Commons, which sought to soften the operation of the controversial investment powers by strengthening the so-called “savers’ interest test” and clarifying the circumstances in which schemes could be exempt.

Opening the session, Department for Work and Pensions minister, Baroness Sherlock, argued that the government had “moved a considerable distance” in response to concerns raised in the Lords.

She highlighted that the reserve power had already been significantly constrained, including limiting its use to default funds, capping it at Mansion House Accord targets, restricting it to a single use before 2032, and providing for the framework's full repeal by 2035.

Further concessions introduced by the Commons included lowering the threshold for exemptions, so schemes would only need to show that compliance would be “likely to” cause material financial detriment, rather than prove certainty.

The amendments also confirmed that the regulator must grant an exemption where this threshold is met, required it to give “due regard” to trustees’ reasoning, and mandated that reasons be provided where applications are refused.

Baroness Sherlock said these changes demonstrated that the government had engaged with concerns about fiduciary duty and trustee autonomy, while maintaining that intervention was necessary to address what it viewed as a market failure in asset allocation.

“The government have now brought forward three successive rounds of concessions… The power that is now before noble Lords bears the imprint of this House’s scrutiny at every turn,” she said.

However, peers remained unconvinced, with critics arguing that the amendments failed to address fundamental concerns about mandation and the role of trustees.

Liberal Democrat peer, Baroness Bowles of Berkhamsted, warned that the revised provisions still left trustees in a “double bind”, forcing them to choose between complying with mandated investment approaches or risking regulatory penalties.

She also raised constitutional concerns, claiming that the proposals interfered with fiduciary duty and member property rights, while relying on “threat rather than clarity and coercion rather than properly framed substance”.

Baroness Altmann echoed these concerns, arguing that the government had not fulfilled its commitments under the Mansion House Accord and cautioned against forcing schemes into investments that trustees may not consider appropriate.

Similarly, Conservative peer, Lord Ashcombe, said firms that had signed the accord in good faith now faced the “prospect or… the threat of mandation”, which he argued undermined trust in the regulatory framework.

Despite this, the government maintained that the reforms were necessary to improve outcomes for savers and unlock better long-term returns through greater investment in private markets.

Baroness Sherlock insisted that fiduciary duty remained intact, arguing that trustees would still be able to apply for exemptions where investments were not in members’ best interests.

“The whole purpose of the Pension Schemes Bill is to improve outcomes for savers,” she said, adding that international evidence supported the case for diversified portfolios including private assets.

The latest vote means the bill will continue its 'ping-pong' between the two Houses, returning to the Commons for further discussion.

---