The UK’s pensions minister has insisted that the government will not force pension schemes to invest in private markets if firms believe it is not in their members’ best interests.
Earlier this year, 17 of the UK’s largest workplace pension providers signed an agreement, the Mansion House Accord, pledging to invest at least 10 per cent of members’ funds into private markets – five per cent of which must be in UK assets – by 2030.
The aim is that increasing investment in private markets could see better returns for savers and boost the UK economy.
Read more: Aviva’s new default pension strategy to invest in private markets
In the Pension Schemes Bill, the government has a reserve power to force signatories of the Mansion House Accord to fulfil their pledge if they do not do so of their own accord.
Some finance professionals have criticised this power, saying that it should be up to trustees to decide whether investments are in members’ best interests.
Read more: UK finance industry divided over private markets investment pledge
But speaking at the Pensions UK annual conference this week, minister Torsten Bell told the industry that pension providers will be able to refuse to comply with the power on this basis, adding that the power is unlikely to be used at all.
“The reserve power, even if it was used – and it won’t need to be used, in my view – is just saying: comply with the thing the industry has said it wants to do,” he said.
“But even if the power is used, you can just explain that you don’t need to comply because it’s not in your member’s best interests to do so, and that is what’s in the reserve power.
“I feel like [the reserve power] is a slight distraction, as ‘comply or explain’ is what’s in the bill, so I feel like we should all just chill,” he added.
