Governor's Intervention Casts Doubt on Government Plans to Dictate Pension Scheme Investments

The recent intervention of the Governor of the Bank of England, Andrew Bailey, has sparked controversy over the government's plans to dictate how DC pension schemes invest their funds. The Pension Schemes Bill, currently underway in the House of Commons, includes a clause that would allow the government to force pension schemes to invest in specific assets, such as UK infrastructure and private markets. This move has been met with resistance from the governor, who has expressed concerns that such mandatory measures could be counterproductive and infringe on the autonomy of pension scheme trustees.

Key Takeaways:

• The Pension Schemes Bill includes a clause that would give the government the power to dictate how DC pension schemes invest their funds, with a focus on UK infrastructure and private markets.
• The governor of the Bank of England, Andrew Bailey, has registered his opposition to the government's plans, stating that mandating investment decisions is not appropriate and could be counterproductive.
• LCP Partner Steve Webb has expressed concerns that the policy may not survive scrutiny in the House of Commons and House of Lords, and that it raises serious questions about the role of ministers in dictating investment decisions.
• The government's plans are aimed at driving investment in underutilized areas, but the governor's intervention has cast doubt on whether the policy will be successful in achieving this goal.
• The "Mansion House Accord" commitment by 17 schemes and providers to invest 10% in private assets, of which 5% would be in the UK, has been cited as an example of progress in driving investment in these areas through voluntary agreements.
• The government's decision to introduce a backstop power to force schemes to invest in a particular way has been met with criticism, with some arguing that it could undermine the autonomy of pension scheme trustees.

Statistics:

• 10% of pension scheme investments to be through private assets, according to the "Mansion House Accord" commitment by 17 schemes and providers.
• 5% of pension scheme investments to be in the UK, according to the "Mansion House Accord" commitment by 17 schemes and providers.
• The Bank of England governor, Andrew Bailey, has expressed support for structural changes to the pension industry, but has also emphasized the need for reform to be done in a way that is "natural" and does not involve mandating investment decisions.

Sources:

• Lane Clark & Peacock LLP.
• Press Association.
• Contify.com (Copyright 2017).