Ministers are planning to reintroduce pension scheme investment mandation powers into the pensions bill, after the House of Lords removed them. The revised approach would cap the mandation power at 10% of assets and position it as a backstop to the Mansion House Accord, rather than an open-ended ability to direct investment.
This is being presented as a concession, but in practice, it does not engage with the concern that has been raised.
The issue has not been the level of mandation. It has been the existence of a power that allows government to direct asset allocation at all. Once that power is in place, even as a backstop, it changes behaviour. It is difficult to describe investment as voluntary when there is a mechanism to compel it if schemes do not move in the expected direction.
That matters in current conditions. Private markets can play a role, but they are illiquid, harder to value and operationally complex, particularly for DC schemes. Recent market experience has made these risks more visible, with questions around valuations, delayed exits and the practical challenges of managing liquidity coming through more clearly. If schemes shift allocations in anticipation of possible intervention, rather than purely on investment grounds, members are exposed to risks they did not choose.
If the aim is to increase UK investment, there are more direct routes. Government can focus on making assets more investable and attractive within DC structures, or it can share risk where projects would not otherwise meet market thresholds, for example through government infrastructure bonds, co-investment or downside protection.
At the moment, the risk sits with members. DC savers already bear investment and outcome risk, and this approach extends that further without offering any form of risk sharing.
Capping the power may limit how far it can go. It does not resolve the underlying question of who decides how pension savings are invested, or whose interests are being prioritised when that decision is made.
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