Pressure for the government to drop plans for a reserve mandating power in the Pension Schemes Bill has continued to grow as the bill begins the committee stage, with industry organisations making a united call for change.

Ahead of the evidence hearing with the Pension Schemes Bill Committee later today (2 September), the Pensions Management Institute (PMI) and the Society of Pension Professionals (SPP) issued a united call for improvements to the Pension Schemes Bill.

As part of this, both organisations said that while they support the bill’s broader aims to improve transparency, governance, and member outcomes, "serious concern" remains over provisions that would allow the government to mandate scheme investments.

The PMI and the SPP argued that such powers represent a fundamental shift in the UK pensions framework, which risks undermining trustee independence, distorting investment strategy, and eroding member confidence.
  
“The mandation power will have a negative effect on market pricing and could undermine public trust given scheme members or those thinking of saving in a pension may worry that saver returns are no longer the main priority," SPP president, Sophia Singleton, said.
 
"Trustees must retain the autonomy to act in members’ best interests, informed by pension scheme-specific circumstances, not political imperatives.”

And mandating concerns have already come up at the committee's first hearing on the bill this morning, as the session kicked off with an initial question from Shadow Economic Secretary, Mark Garnier,  on what he described as the "most controversial point" of the bill: the mandating reserve power.

In particular, Garnier queried whether it is "fundamentally the right thing to do to entrust trustees to look after members of the pension scheme, and then tell them how to invest that money", also querying whether there were sufficient guardrails to protect members from "unwise" investments.

Commenting in response, Pensions UK director of policy and advocacy, Zoe Alexander, confirmed that the association is "concerned about the precedent that the reserve power and the bill sets".

Whilst Alexander acknowledged that the bill might not be used, she warned that the "presence of the power creates a series of risks".

"Certainly enacting the power would create a series of risks for savers in terms of the impact it would have on investment, on price and value ultimately that is accrued to savers in the market," she stated.

Alexander also stressed that more guardrails on the power are needed, reiterating the association's recent calls for the power to be constrained to specifically apply to the commitments in the Mansion House Accord, and for  the sunset clause on the power be brought forward from 2035 to 2032.

"We feel that gives more than enough time for the industry to deliver on the commitments in the Mansion House Accord, for government to assess progress and to assess whether or not the power is required," she explained.

"And we feel that keeping it on the statute book until 2035 would introduce undue political risk."

However, she clarified: "We absolutely support the general direction of the policy... So this is not a position that we take because we don't agree that schemes should be investing more in the UK. It is to do with the trustee's discretion to make those decisions about where to invest."  

This was echoed by Association of British Insurers head of long-term savings and assistant director, Rob Yuille, who shared the concerns around the precedent the power could set, arguing that "the reserve power should not be necessary" given the trend towards UK investment already seen.

He also called for further guardrails, suggesting that, whilst the bill already includes a provision requiring a review of how this power is being used would impact the scheme members and the economy, it should also consider the impact on the pensions market and the market for assets.

The government has faced widespread opposition over its plans for the reserve power, with concerns around mandation overshadowing the cross-party support for many of the planned changes during the bill's second reading in the House of Commons.

And calls for change have grown since, with industry experts stressing the need for change, including Bank of England governor Andrew Bailey, who cautioned that such an intervention would not be "appropriate” and require “a lot of heavy lifting".

This is not the only issue that is set to be a key focus during the first committee hearing today (2 September), as the Pensions Action Group member, Terry Monk, is also set to give evidence, amid growing calls for MPs to back calls to include pre-1997 indexation in the bill.

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