The House of Lords has voted to remove the government’s power to direct the investments of pension schemes that signed the Mansion House Accord if they do not meet their commitments.

The reserve power had been included in the Pension Schemes Bill (PSB) and would have enabled the government to drive certain private pension schemes' investments into government-specified assets.

However, the bill will return to the House of Commons for consideration, and the government can choose to reinstate the power. It has previously stated that it would not be removing the power from the bill.

The government had sought to assuage fears from the pensions industry over the reserve powers, arguing that the powers were designed to serve as a backstop to the Mansion House Accord commitments and that it did not intend to need to use them.

Despite this, industry concerns remain, and organisations in the sector welcomed the Lords’ decision.

“The Lords’ amendment to remove the power in the PSB for government to direct how retirement savings are invested is a win for savers,” said Pensions UK executive director of policy and advocacy, Zoe Alexander.

“Having the power on the statute book would expose millions of workers’ retirement savings to political cycles and undermine the duty of pension trustees to act at all times in the interests of savers.

“Pensions UK’s preferred method to drive investment in UK markets is a voluntary approach supported by improvements to the investment environment.

“The Mansion House Accord, a commitment by 17 of the largest UK pension providers to back unlisted UK and global investment opportunities where they are in the best interests of savers, shows there is already strong support.”

Pensions Management Institute (PMI) chief strategy officer, Helen Forrest Hall, added: "Mandating how schemes invest risked exposing savers’ pensions to political influence and weakening trustees’ fiduciary duty to act solely in members’ interests.

“Removing the power helps protect the independence and professionalism that underpin good outcomes for savers.

"There are many positive measures in the PSB which offer meaningful opportunities to strengthen the system.

“The PMI urges the government to focus now on their successful implementation, and we look forward to working with them and industry to achieve this."

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