Pensions Schemes Bill passed – An important step, but only the beginning for real change
UK Private Capital’s Senior Policy Manager for Pensions, Karen Hurst, provides her insights on the passage of the Pensions Schemes Bill, following a long period of ‘ping-pong’ between the House of Commons and the House of Lords.
Karen discusses compromises made to the mandation power, and positive changes to scale requirements and a value for money framework that UK Private Capital has long called for.
For followers of pension policy, it’s certainly been an eventful few weeks. Despite the Pensions Schemes Bill originating from what seemed to be cross party consensus, as Parliament approached prorogation, it became clear that there was a real danger that the Bill could fail to pass as a result of a lack of agreement between the Government and the House of Lords.
However, late last Tuesday a compromise was reached and Bill became an Act. The controversial investment ‘mandation power’, pitched by Pensions Minister Torsten Bell as a backstop to ensure the Mansion House commitments were not disregarded by pension providers, was watered down enough to ensure the support of the opposition Lords. Though the debate around this aspect of the Bill dominated the headlines, the Bill actually has brought in a wide range of changes, including new scale requirements for DC pension providers, steps to enable the consolidation of small pots, and a statutory underpin for the value for money framework. In other words, the law is potentially the beginning of a new era in pensions.
The Government issued a press release to mark the law, noting that the changes would benefit the average worker to the tune of up to £29,000 by the time they retire. It is a reminder that, though the landscape is already consolidating and most pensions schemes are now actively promoting their private markets offerings, for most there is much to do before savers begin to enjoy those sorts of benefits.
New UK Private Capital data – due to be published in our forthcoming report Venture Capital in the UK 2026 - shows that only a small number of venture capital funds have received any investment from any UK pension funds so far, despite the concerted effort. Most of those we spoke to told us that the process was slow, unclear, and that many pension providers are simply not yet equipped to invest in the asset class. If the Mansion House Compact – which involved the largest DC providers committing to invest 5% in unlisted equities by 2030 – is to be successful, there will need to be a real turnaround in how pension funds approach this.
So, though the Pension Schemes Bil feels like the end of a very long lobbying effort by the private capital industry, it can only be considered the beginning of real change. In the coming years pension funds will not only be subject to increased scrutiny in terms of their progress on their commitments, but will be required to assess and report whether they are offering long term value to members, and to meet new requirements on size. When we look at how pension funds in other parts of the world invest, we see a direct relationship between scale and ability to invest in private capital. We are also anticipating further relaxation on the charge cap rules, which are regularly cited as a barrier to private capital investment. It will no longer be sufficient for trustees to prioritise compliance, low costs, and full liquidity, as has long been the case. Instead, we are moving towards a system that will need to give more consideration to long term member value.
UK Private Capital has been leading the debate on this for some years, and we will continue to identify the barriers, make the case for private capital, and to demand progress.
Authored by Karen Hurst,
Senior Policy Manager, Pensions & Investment, UK Private Capital
