Mansion House reforms – a new dawn for pension schemes?
The Mansion House speech included several pensions announcements. A key driver is to increase investment by pension schemes into new technology start-ups.
The pension plans set out in the Mansion House speech are to be guided by three golden rules, being:
- To secure the best possible outcomes for pension savers;
- To prioritise a strong and diversified gilt market to deliver an evolutionary, rather than revolutionary, change in the pensions market; and
- To strengthen the UK’s competitive position as a leading financial centre able to create wealth and fund the UK’s public services.
The main pension plans to note are set out below.
- The government wants to facilitate a defined contribution (“DC”) consolidation programme to ensure that funds are able to maintain a diverse portfolio of assets. The reasoning for this is that the government believes that such diversification will deliver the best possible returns for savers.
- Nine of the largest pension providers have voluntarily decided to invest at least 5% of their default DC funds into unlisted equities by 2030. This is called the Mansion House Compact.
- The government will consider the pensions investment decisions culture and take steps to improve the understanding of pension trustees’ fiduciary duties to ensure good saver outcomes.
- HM Treasury and the Department for Work and Pensions have also published various consultation documents, policy papers and responses on a variety of DC policies. This has included the value for money consultation response as well as the response to call for evidence and further consultation on deferred small pots. The government wants to prioritise the best outcomes for members by, for example, maintaining a strong gilt market and strengthening the UK’s economy.
- A statutory regime for the compulsory authorisation and supervision of superfunds and other consolidation models by the Pensions Regulator will be introduced.
- Extending the Pension Protection Fund’s role to be a consolidator of defined benefit retirement schemes that are not in distress will be explored.
- The government wants pension schemes to increase investment into new technology start-ups to boost the UK economy and generate greater returns for pension schemes.
It is important to remember, when considering the new pension plans announced in the Mansion House speech, that all trustee investment decisions must always be in line with trustee fiduciary duties. This includes acting in the best interests of members, being their best financial interests, and ensuring a scheme’s investment portfolio is diversified.
Once the detail of the intentions underlying the Mansion House speech have been confirmed, trustees should seek advice on what they must, and should, do in order to comply with their obligations.