The pensions minister has told the industry its focus on the threat of investments being mandated by government was a distraction since the pension schemes bill allows trustees to explain why potentially mandated investments are not in members’ interests, after being challenged on mandation by one of his predecessors. 

Speaking at this year’s Annual Conference of Pensions UK on Wednesday, Torsten Bell suggested that serving others is a vocation, in pensions as much as in politics. 

Former pensions minister Sir Steve Webb, now a partner at LCP, picked him up on this. Referring to the discussion around mandation in the Public Bills Committee session last month, he said: “You became a [tiny] bit tetchy, some would say.” 

He said pensions professionals did indeed have a vocation, and that this was why the government should not seek investment mandation powers.

“People who want the best for their members don't want the government telling them how to invest. Why do you insist on the reserve power to make them do what, in their judgment, is not in the best interest of their members?” he said, receiving applause from the audience.  

In response, Bell claimed that the industry itself said it wants to change – “because that’s what's in members' best interest, to invest in a wider range of assets” – and that he is merely holding it to account on this declaration.  

Some might disagree and argue that this year’s Mansion House Accord, in which defined contribution schemes have pledged to invest 10% of default funds in private markets only came about to avert mandation, after the 2023 Mansion House Compact had failed to achieve its productive assets investment target.  

 

    

“I am just encouraging the industry to do what it said it's going to do,” said Bell. “But even if the power is used, you can just explain that you don't need to comply because it's not in your members’ interest to do so and that's what's in the reserve power.”
   
He added: “I basically feel like it's a slight distraction the way it's been presented.” 

   

The opt-out of mandation requires approval from the Pensions Regulator after trustees have submitted evidence, which was pointed out in parliament by Conservative MP Kit Malthouse in July. 

   

 

In his speech, the MP for Swansea West repeated his assessment that individuals bear too much risk, but when asked if he would feel more comfortable if people were saving more through collective defined contribution schemes, he remained ambivalent. 

 

“I don't think I should have a fixed view on that because I think we're far too early in the process,” he said. “What I'm in favour of is innovation in the DC space. CDC is one example of that. There are others that schemes look at and I think that is valuable.” 

He said CDC “deals with some of the most pressing challenges”. Adding that there are “on average higher returns", he said CDC is "not without risks. I think that's an important point for people to be making.”  

On the Local Government Pension Scheme, Bell thanked those involved for their work towards the ongoing pooling reforms adding: “Just to be clear, we don't have plans to kind of force further consolidation as things stand.” 

He also highlighted the upcoming consultation on trusteeship in his speech, saying “expertise is essential” but that “increasing professionalisation is not without risk”. The consultation will be out “later this autumn”, he noted. 

In this, there are wider questions where industry’s views will be sought, he said: “How do we ensure that the voice of members isn't squeezed out? Where are our future diverse pools of trustees going to come from when 85% of professional trustees expect to retire in the next three years? So I encourage everyone to engage closely with that consultation when it launches more widely.”