Pension Schemes: Ministerial Powers

Lord Vaux of Harrowden Excerpts

Wednesday 11th March 2026 Lords Chamber

[Baroness Sherlock (Lab)]

There is a short and a long answer. The short answer is no. The long answer is that the Government have made it abundantly clear, because I have done it myself many times in Committee, what the purpose of the reserve power is: to backstop the Mansion House and trust commitments. My honourable friend the Pensions Minister and I have made it clear—he said it again this morning at a pensions conference—that we would make absolutely sure that the Government’s intention simply to backstop those agreements was there in the Bill. That is what the legislation is for, but I need to correct something in particular. This power does not direct schemes into specific assets or projects. What it does is set a broad framework aligned with the industry’s own voluntary commitments under the Mansion House Accord. Trustees retain full discretion over individual investment selection and the balance between asset classes. The role of a pension trustee has always been to exercise judgment, subject to constraints, and nothing in these provisions changes that.

[Lord Vaux of Harrowden (CB)]

My Lords, can the Minister perhaps tell us why she thinks pension funds are not currently investing, or have not been investing, in the types of assets that she would like them to? I ask that question because surely the better way forward is to understand what is stopping them doing so and fixing that problem, rather than telling them to do something they do not wish to do.

[Baroness Sherlock (Lab)]

My Lords, I have said this many times in Committee, as the noble Lord knows, but I am delighted to explain again for the benefit of the whole House. I have just explained what the Government believe the challenge is. By international standards, we are really very low in aiming for 10%. Canadian schemes invest 11% in infrastructure alone. The evidence is clear that investing a small proportion of funds in the context of a diversified portfolio brings better returns for savers over the long run. The aim is to get better returns for savers. There is too much short-termism in our markets at the moment, and the view of the Government—as well as the evidence that seems to be out there—is that this is because we are seen as competing on cost, rather than on return or value. It is much easier to pitch to an employer on that basis. If we make it clear that the whole industry is going in this direction, then we believe that that will be the case. The choices will still be there, the safeguards are still in place, and we believe that this will be in the interests of savers across the long term.