Bank of England governor Andrew Bailey has voiced his concerns over government plans to force pension schemes to invest in the UK calling into question whether the proposals will go ahead.
The Pension Schemes Bill, which was debated in the House of Commons on Monday (7 July), stipulates schemes must have a minimum allocation to assets such as UK infrastructure and UK private markets, a step up from the voluntary agreements signed in the Mansion House Accord.
According to the Press Association, Bailey addressed the plans at the Financial Stability Report press conference on Wednesday (9 July). He said: “We’ve had a low level of pension fund investment in the economy and I think structural changes to the pension industry are helpful in this effect.
“However, I do not support mandating, I don’t think that’s appropriate. I think reforming the pensions industry does require a lot of heavy lifting but it needs to be done.”
LCP Partner and former Pensions Minister Steve Webb said: Bailey’s comments raise questions about whether the policy will survive scrutiny in the House of Commons and House of Lords over the coming months.
“The governor will not have chosen lightly to be so critical of government policy, and his nuclear intervention will be very unwelcome at DWP.
“But the governor speaks for many in thinking that the government is crossing a line if it presses ahead with plans to tell pension schemes how to invest.
“While pension assets can certainly be used more productively, it is ultimately for the trustees of pension schemes to decide how to invest in the best interests of their members, and not for ministers to tell them how to invest.”
