Ministers are to be granted new powers to compel pension funds to invest in British assets, under plans set to be announced in the Pension Schemes Bill on Thursday — a move expected to spark controversy within the retirement savings industry.
The government will introduce a “reserve power” that allows it to set binding asset allocation targets for workplace pension schemes. This would effectively give ministers the authority to dictate that a proportion of pension contributions must be directed into UK-based investments, including infrastructure, private equity, and start-ups.
The announcement forms part of a broader package of pension reforms designed to unleash billions of pounds in long-term capital into the UK economy. It follows the Mansion House Accord, a voluntary agreement reached in July between the Treasury and 17 of the UK’s biggest defined contribution pension providers to invest an estimated £25 billion in UK private assets by 2030.
While the accord was hailed as a step forward in aligning retirement savings with national economic priorities, the government had already signalled its intent to back the initiative with more forceful measures if needed. The Treasury confirmed on Wednesday night that the new reserve power will be included in legislation “to provide additional certainty” that individual pension schemes will not lose business by taking on the higher up-front costs associated with private market investments.
A Treasury spokesperson said: “The Mansion House Accord shows defined contribution schemes are voluntarily investing more in infrastructure and businesses. But to support further certainty and ensure fairness across the sector, the government will take a reserve power to set asset allocation targets if necessary.”
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