Pension Schemes Bill

Baroness Bowles of Berkhamsted Excerpts

Committee stage
Monday 26th January 2026 Grand Committee

Moved by

[Baroness Bowles of Berkhamsted]

111A: Clause 40, page 45, line 37, at end insert “as determined by the underlying assets in any structure or fund.”
Member’s explanatory statement
This amendment seeks to align provisions in the Bill with the Mansion House Accord definition used for UK private markets to mean the underlying assets.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, Amendment 111A would add the words

“as determined by the underlying assets in any structure or fund”

after “qualifying assets” in new Section 28C(1). Its purpose is simple: to ensure that when measuring investment in private markets via collective investment vehicles, we look at the underlying assets, not the wrapper in which they are held; we look at where the money goes, not the route it takes.

In debates on the Bill, I have been tracing the consequences of the Government’s approach to private markets. On the first day, I set out the competition concerns inherent in the Mansion House Accord as transposed in the Bill. Last Monday, I explained the role that listed investment companies play in transparency and valuation of private equity, as recognised by the Bank of England and the ICAEW. On Thursday, I explained the range of infrastructure that they fund and the regulatory changes that are designed to make investment easier but that have not been given time to work.

Today, I turn to the policy history of how long-term asset funds, LTAFs, were developed as an open-ended alternative to the closed-ended listed investment company and what was and was not agreed. The LTAF was developed through the productive finance working group, co-chaired by the Governor of the Bank of England, the chief executive of the FCA and the Economic Secretary to the Treasury. It was supported by senior representatives of the PRA, pension schemes and investment managers. It was an unusually high-level and accelerated process, driven in part by the then Chancellor’s public commitment to have the first LTAF launched within a year.

Precisely because of that elevated framework and compressed procedure, it is all the more important that we adhere to what the working group actually agreed. The record is remarkably consistent. Across almost every meeting of the working group, the minutes recognise that there were two established routes for accessing long-term illiquid assets: the new LTAF and the long-standing listed investment company. From the very first steering committee meeting on 26 January 2021, the minutes record that

“closed-ended funds facilitate investment in productive finance assets … Some members believed existing fund structures, such as investment trusts, were sufficient … several members suggested … adapting existing vehicles, such as investment trusts, rather than developing a new open-ended fund structure”.

At the first technical expert group meeting on 12 February 2021, the Investment Association stated explicitly:

“The proposal does not intend to replace existing structures”.


At the technical working group on 20 April 2021, it was confirmed that the LTAF was to

“complement, rather than replace, existing structures”.

Later in the process, on 4 May 2021, the steering committee agreed:

“The LTAF is not the only structure for investment in less liquid assets”.


The final road map, published in September 2021, reinforces this, stating:

“There are a range of ways to invest in less liquid assets, and all of them play important roles”.


In practice, for DC schemes and retail investors, those routes are the LTAF and listed investment company. Nothing in this policy process—not the minutes, road map, FCA contributions or the IEA’s own presentation—ever suggested that Parliament should legislate a single wrapper preference or exclude the listed wrapper route to private assets. On the contrary, the working group recognised two parallel structures capable of holding productive finance assets. It was explicit that the LTAF was to complement not replace the existing one.

When the public policy process is this clear, it is difficult to see why a private agreement should be allowed to override it. Yet the Bill does that, and the Minister says it is because of the Mansion House Accord. The effect of the Bill is therefore threefold. It is anti-competitive because it removes a functioning structure from the market and mandates a single route for accessing the same underlying assets. It is anti-policy, because it contradicts the working group’s own record—a record developed by the Bank of England, the PRA, the FCA and the Treasury, all of which recognise that listed investment companies already perform this role and were never intended to be displaced. It is anti-transparency, because it excludes the only structure where private assets are accessed, with all the benefits of public market transparency, daily market valuations, regular auditor disclosure and shareholder engagement, including AGMs and independent boards to hold managers to account.

The consequences do not stop at the DC default funds. Last night, one of the most senior asset management figures emailed me to say that this is not just a matter for pension schemes. Excluding listed investment companies will widen discounts to net asset value, with direct detriment to retail investors.

Next, let us examine the evidence of the origin of this exclusion. At Second Reading, the Minister said,

“we have aimed to stick closely to the scope of the Mansion House Accord, which itself is limited to investments made by unlisted funds”.—[Official Report, 18/12/25; col. 938.]

That is at best an approximation and, in substance, not true. There is no such definition in the accord. It points to underlying assets, explicitly defining that:

“UK private markets means where the underlying assets are based in the UK”.


It knows the difference between an asset and a wrapper.

The Minister’s letter after Second Reading says that the exclusion is to support the Mansion House agreement. That is even more approximate and perhaps an admission that it is not in the accord after all, but something done afterwards and now being justified in its name.

Treasury officials have said in meetings that the pension funds want it, but there is no public record of any such request. If the accord itself does not say it, the Government are doing it on the basis of something else. I must ask again: who asked for this exclusion? Where is the written evidence? It is not in the accord, any consultation or any published policy. It is not in the working group minutes, the road map or any regulatory framework on LTAFs or listed investment companies by the FCA. I have elaborated publicly available evidence showing that the policy process recognised two parallel structures. What written evidence can the Minister show the Committee that supports the exclusion of one of them? If the Government are relying on private representations, Parliament is entitled to know what they were and who made them.

I have written evidence from DC default pension providers and Mansion House Accord signatories, representing a substantial majority share of the auto-enrolment market. They say that the exclusion of listed invested companies was not something they agreed to or understood to be part of the accord. Some have been going back through their meeting records to check. Others have said that they had not realised that this was a provision in the Bill; that they are neutral on the wrapper; and that they thought that the exclusion meant only listed equities, not investments within a wider listed investment company wrapper, and would be against that exclusion. Others said that they use listed investment companies and would not want this.

I have my evidence and more is still coming. Where is the Government’s? This exclusion was devised within government without a proper evidential basis, or it is being done to please interests that have not been put on the public record, or Ministers have simply not appreciated the implications of what is being proposed. None of those possibilities is a sound basis for legislating away a long-standing structure with a clear history of positive economic outcomes.

It is explained as suitably targeted guard-rails. These are the kind of guard-rails over which you are thrown to the lions. We are being asked to legislate a single-wrapper mandate on the basis of assertions not supported by the public record. If the Government wish to exclude a structure that the Bank of England, the PRA, the FCA and the Treasury itself recognised as valid, they must show the evidence.

My amendment would restore the position that the working group adopted: what matters are the underlying assets, not the wrapper in which they are held. I beg to move.

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[Baroness Noakes (Con)]

The noble Baroness knows that she and I disagree on this subject. I hold to my view that the buying and selling of shares is simply the exchanging of financial assets.

[Baroness Bowles of Berkhamsted (LD)]

May I intervene so that I do not have to take up time later? I cannot see the difference between the follow-on funding that you get with a listed investment company, if you have an IPO, and the subsequent follow-on funding rounds. With an LTAF, you have initial fundraising and subscriptions. With a listed investment company, you buy and sell on the market. With the open-ended LTAFs, you have redemptions, purchases and flow matching. If you are watching the money, those are equivalent processes.

[Baroness Noakes (Con)]

If the noble Baroness, Lady Bowles, had listened, she would know that I said I thought what the Government were doing had gone too far, because there were instances where there was a necessary flow between the raising of funds and that flowing into new investment.

A number of noble Lords on this side of the Room have been talking as though this Bill stops pension schemes investing in listed assets or investment companies. It certainly does not; it merely says that they do not qualify if asset mandation is introduced. We ought to be concentrating on whether this is a valid policy objective—the Minister knows that I do not subscribe to that—to get money out of pension funds and into the real economy. We then ought to concentrate on which flows achieve that; certainly not all flows of buying investment trusts or other listed vehicles will achieve that.

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[Baroness Sherlock (Lab)]

My Lords, trustees will have to make their own decisions on that. I understand that, were mandation to come in, there would be constraints on this, but let me see whether I will pick up some answers to help with that as we go.

The noble Baroness, Lady Altmann, and, I think, the noble Viscount, Lord Younger, suggested that the Bill explicitly discriminates against listed investment funds. The noble Baroness, Lady Bowles, made this point previously. That concern is perhaps reflected in Amendment 124, which would remove the language that in general serves to exclude listed securities. Nothing in this language refers directly to investment funds or should be construed as a signal of discrimination, but I have listened carefully to the arguments made and I recognise that some people clearly feel otherwise. I am happy to take that away and consider further the arguments about signalling.

A number of noble Lords, starting with the noble Baroness, Lady Bowles, emphasised the issue of underlying investments, pointing out that the Mansion House Accord includes specific language on this. It defines UK private markets as meaning

“where the underlying assets are based in the UK”.

Accordingly, new Section 28C(6) provides the mechanism to reflect this aspect of the accord. Amendment 127 relates to this point, and I will say more when I return to it. I have already recognised that DC funds may invest directly or through funds. That means that, if we ever came to exercise these powers, we would need to implement the regulations under new Section 28C in a way that suitably reflects this. However, we do not consider it necessary to amend the clause to achieve this, since there is sufficient flexibility in new Section 28C to prescribe descriptions of qualifying assets in a way that reflects this, subject to the constraints in new Section 28C(5).

On the matter of competition, the noble Baroness, Lady Bowles, made a more constrained speech than she did last week, and I commend her for that. The question of competition law was raised. For the record, there has been no breach of competition law by the Government, nor are we encouraging a breach of competition law. We strongly welcome the Mansion House Accord; I make that clear for the record.

I turn back to Amendment 127 in the name of the noble Viscount, Lord Younger, because it picks up some of these points. This amendment would remove the provision that allows the Government, if exercising these powers, to specify that a proportion of assets subject to an asset allocation requirement should be invested in the UK. This aspect of the clause was developed with the Mansion House Accord firmly in mind. Under the accord, half of the 10% of default fund assets committed to private markets is intended to be invested in the UK. This provision simply ensures that the powers can operate as a backstop to that commitment. What constitutes a UK investment will vary by asset and will be set out in due course, with new Section 28C(6)(b) making it clear that this can be done through regulations.

Amendment 121, tabled by the noble Baroness, Lady Altmann, also relates to the definition of qualifying assets. Its effect would be to add to the list of examples of private asset classes that may be prescribed as qualifying assets in regulations made under new Section 28C(4). As the noble Baroness is aware, the Government have designed these provisions to mirror closely the asset classes covered by the Mansion House Accord. The clause does not perfectly correspond, word for word, with the drafting of the accord, but the effect is the same. To be clear, I can confirm that UK infrastructure assets, UK scale up capital and UK SME growth market shares, which I assume is what the noble Baroness meant when she referred to quoted companies, are all capable of being designated as qualifying assets, provided that they are not listed on a recognised investment exchange. They are very good examples of the sorts of assets in which these reforms should encourage investment; none the less, it is not necessary to list them individually in the Bill.

I have listened carefully to the many considered points and arguments that have been made in relation to qualifying assets. I recognise that there is not unanimity in the Committee, although it is always interesting when my noble friend Lord Davies agrees with the noble Baroness, Lady Altmann, and, at least in part, the noble Baroness, Lady Noakes, agrees with me; all things are possible, we discover, in Committee in the House of Lords. Given that, and given the arguments that have been made both here and previously, I hope that noble Lords will feel able to withdraw or not press their amendments.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I thank all noble Lords who have participated in this debate; I also thank the Minister for, from my perspective, attempting to defend the indefensible.

The Minister mentioned the industry documentation underlying the accord. I would be grateful if that could be forwarded to me, made a matter of public record and, perhaps, placed in the Library. As I said in my opening speech, if noble Lords want to know, I have had some 70% of the people representing the default funds—if you take their turnover—say that they did not think that they have agreed to the exclusion of listed investment companies. So something is going wrong here.

[Baroness Sherlock (Lab)]

I should have quoted what I was referring to; I meant to do so but forgot, so I apologise. I was referring to the question and answer materials that accompany the accord on the ABI’s pensions website, which I am sure the noble Baroness has read. They say:

“The definitions of both global and UK private markets assets include directly held, or via investment through unlisted funds in property, infrastructure, private credit, private equity and venture capital”.


The Government understand that this reflects the intention of the accord to exclude investment in listed investment funds. I would be happy to send these materials round to noble Lords.

[Baroness Bowles of Berkhamsted (LD)]

I am not sure that “directly held” applies to an LTAF either. The fact is that you have wrappers and underlying assets. It is discriminatory, and that should be tested. I still do not see how, when you have the public policy laid out by the high-level working group set up to create LTAFs, you can then say, “A private negotiation overrides that”. I stand by that.

I know that the Pensions Minister received a letter from a past lord mayor, Alastair King, who is one of the architects of the Mansion House initiatives, on 22 October last year. He relayed that he had encountered both support for the investment trust market and concerns that the Bill did not acknowledge the potential of the investment company structure. That evidence—one of the architects asking, “What’s going on here?”—also seems to have been ignored.

I come to the same basic point: for me, the Government have not provided a clear, public or specific rationale for this exclusion. I would say that neither has the ABI, but I did not know that it runs the country. All of the evidence points the opposite way to what the Government have done. Officials have confirmed in meetings that no assessment of using listed investment companies has been carried out, despite the clear steer of the policy in the working group to do so. It seems that this Q&A from the ABI overrides a Bank of England/FCA/government working group. That cannot be so. The only explanation ever offered is that there are “suitably targeted guardrails”—a phrase that has never been defined, evidenced or justified. What do you have to guard from in a listed investment company? Competition? Transparency? That is a very strange thing to say; it is an instrument of division and discrimination, protecting secrets.

Let us remind ourselves of what we are dealing with: two collective investment vehicles, each of which is a wrapper holding protected assets of net asset value for the pension scheme. That is where they differ from an ordinary equity. An ordinary equity does not have any protection for the assets; if the company goes bust, it is bust. If the listed investment company goes back to the net asset value, the assets are still there for the pension fund. That is the difference, which is why a collective investment vehicle such as a listed investment company belongs with the LTAF; it does not belong with an equity.

I still do not see why they stick so closely to some Q&A but, whether by design or by accident, they have produced a proposal that I still say is without foundation, without evidence and, frankly, without integrity. It is irrational and procedurally unfair, and it fails to take account of relevant and public considerations, relying instead on things that have not been consulted on and that have been presented through private industry discussions. I have never seen anything like this before. There are simple ways to make it fair in various proposed amendments in the rest of this group, spoken to by the noble Baroness, Lady Altmann—

[Lord Katz (Lab)]

The noble Baroness has spoken for five and a half minutes now. Whether she is pressing or withdrawing her amendment, this should be brief.

[Baroness Bowles of Berkhamsted (LD)]

I have only two more lines. I will just remind noble Lords that there are simple ways to make this fair and reasonable, as spoken to by the noble Baroness, Lady Altmann. These give a free choice of instrument, with no compulsion—and yet there is still resistance, with no rational explanation. This is, of course, not the end, unless the Government see their error, but for now I beg leave to withdraw my amendment.

Amendment 111A withdrawn.

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[Baroness Noakes (Con)]

My Lords, all the amendments in this group raise important issues. I hope that none of them will be necessary, because I hope that we will have got rid of the power from the Bill, so these will become irrelevant details. I have Amendment 130 in this group, which would modify the mandation power by removing new Section 28C(15). This subsection “overrides any provision” of a trustee or scheme rules that conflicts with the mandation power. Thus, if the scheme had been set up with investment parameters that, for example, ruled out investing in private equity, and the Government then specified private equity, the wishes of the employer expressed in the scheme’s governing documents would be completely overwritten. Since there is no requirement in the Bill, as I understand it, for the Government to specify more than one asset class, it is quite possible that the Government could specify a required asset class that conflicted with things that had been deliberately set up when the scheme was set up.

I can understand, of course, why the Government want to encourage pension schemes to consider investing in alternative asset classes. I do not think you will find much resistance to the concept of investing in alternative asset classes. But I simply cannot understand why the Government think they should have a power to force schemes to invest in a particular way, if a conscious decision has already been made not to invest in that asset class. The Government might not agree with that decision, but I hope we do not live in a world where the Government can simply ignore the clearly expressed wishes of those they govern. I hope that we still live in a free society. Subsection (15) seems to me to extend the powers of the state too far, and we ought not to go along with it.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I have several amendments in this group: Amendments 154, 157, 158 and 159, which I will not say much about because I am fishing in the same pond as everybody else. If there is this mandation, we are anxious to know how it works, and we think the review should come earlier—I have put in some of the things that I think it should look at. I will spend more time on my Amendment 131, which is about prior steps that would have to be taken before there was any exercise of the mandation and regulations were made. It is about the prior steps that must be taken before the Secretary of State can exercise the regulation-making power in new Section 28C—what I termed the devil’s clause once before, although we now know that it is the ABI clause.

It is probably worth pausing here to remind ourselves whom the ABI represent: it is the Association of British Insurers and it represents the insurance companies, which are the manufacturers of the LTAFs, as was indicated earlier. It had a meeting in which, as usual, it displayed the slide that says, “We’re not colluding and breaking competition law, but we’re just going to agree that we won’t be investing in the other vehicle that has protected net asset value, and we’ll do a Q&A that says that’s not happening”. Interestingly, the insurers present at that meeting seem to have either forgotten about it or are telling me that they did not agree to anything. However, I leave that hanging.

If the Government wish to enforce a power of this potential scope, which, as has been explained, is much wider than the example in the Bill—a power that could reshape asset allocation across the pension sector—it must be subject to proper safeguards. These prior steps are not obstacles but constructive checks that should support the Government’s own objectives.

Proposed new paragraph (a) would require the Secretary of State to

“review the effect of any voluntary agreements or coordinated commitments relating to asset allocation”.

We have had a lot of policy alignment, pledges and so forth, and we all want the voluntary method to succeed. But if the point comes that regulations are contemplated, it is essential to understand what the voluntary route has already achieved, where the evidence points and why it did not happen.

Proposed new paragraph (b) would require an assessment of

“the impact of any such agreements on asset allocation, pricing and valuations”.

If the Government are concerned about market functioning, they should be equally concerned about how co-ordinated commitments affect pricing signals and valuation discipline. This is simply good policy hygiene because it ultimately affects workers’ pensions.

Proposed new paragraph (c) would require a review of

“the likely effect on returns to pensions savers”.

We all hope for the double benefit: better long-term returns for savers and productive investment that supports the UK economy. But we must analyse whether that is happening in practice, and if not, why not, before moving to a regulatory footing.

Proposed new paragraph (d) would require the Secretary of State to “obtain clearance” from the Competition and Markets Authority, and that is entirely consistent with the CMA’s pro-competition remit and with the competitiveness and growth objectives embedded in FSMA. Any use of this power must reinforce the UK’s competition framework, not bypass it, and where co-ordinated commitments already exist in the market, the Government must be certain that any regulations they bring forward meet a clear public interest justification.

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[Baroness McIntosh of Pickering (Con)]

My Lords, I hope that this little group is fairly self-explanatory.

In Amendment 141, I am again seeking to provide more certainty in relation to the savers’ interest test for exemptions to the asset allocation requirements and ensure that providers are not required to alter their asset allocation until the authority has made its determination or they have received the outcome of the referral to the Upper Tribunal. This is a probing amendment for debating purposes. I hope that we will get further light from the Minister when she replies.

My noble friend Lady Noakes has just reminded me that I would also like to speak to Amendment 140, the “starter for 10” in this group. Here I am seeking to remove the time limit for savers’ interest exemptions to the asset allocation requirements that would be set by the authority. I thank the Committee for its forbearance in allowing me to speak to Amendment 141 as well.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I will speak to Amendments 146 to 150. This group of amendments is all about trustees. Although I submit that nothing in this Bill should unsettle the basic foundation of our trustee law, there remains extensive debate in the courts and academic literature, and among trustees, on how far wider policy objectives and emerging risks can be taken into account. I am trying to address some of those.

Amendment 146 would simply reinforce the obvious: fiduciary duty remains the overriding principle of pension governance and trustees must act in the best financial interests of members. That is the cornerstone of trust law. The courts have been clear for decades that trustees must prioritise members’ financial interests above all else. Yet the combination of the Mansion House rhetoric, promotional language in the Bill and the possibility of future regulations has created real anxiety among trustees about whether they are expected to prioritise government preferences over member outcomes. This amendment aims to remove that ambiguity. It would restate the law, reassuring trustees that their primary duty has not changed.

Amendment 147 follows on from that in seeking to introduce a safe harbour. Trustees are increasingly worried about being second-guessed, not for misconduct but for failing to meet expectations that are not clearly defined. Many are lay trustees. They act in good faith, take professional advice and follow their fiduciary duties. They should not face penalties or adverse consequences because they did not meet a quota or chose a different route to the same underlying assets. A safe harbour is a standard legal mechanism used in other regulatory regimes. It protects trustees who do the right thing, prevents retrospective reinterpretation of policy signals and ensures that trustees can make decisions based on evidence, not fear.

Amendment 148, also tabled by the noble Baroness, Lady Altmann, addresses systemic risk. Trustees already consider systemic risks: climate change, economic resilience, supply chain fragility and other long-term factors that materially affect pension outcomes. The Pensions Regulator already expects trustees to consider these issues, but the statutory framework is uneven and expectations are not always clear, so this amendment would codify best practice. It would ensure that trustees consider systemic risks as part of their fiduciary duties, while making it explicit that this does not mandate investment in any particular vehicle. It is about risk management, not direction of capital. Trustees are careful and sensible people and will observe the policy direction, including on private assets. As I said last week, before we had the devil’s clause, there was broad agreement that it would be far better to trust the trustees.

Amendment 149, again from the noble Baroness, Lady Altmann, addresses structural discrimination. I have already dealt extensively with how the Bill risks creating unequal treatment between different collective investment structures. Trustees should be free to choose the most appropriate structure for their scheme, whether listed or unlisted, based on liquidity, valuation, discipline, governance or member outcomes. The amendment would simply ensure a level playing field. It would prevent distortions, protect competition and ensure that trustees are not nudged away from structures that have served savers well for over a century.

Finally, Amendment 150 deals with herding risk. Regulatory herding is a known danger, which we have seen most recently and dramatically with LDI, where regulation, guidance or professional advice pushes everyone in the same direction at the same time and systemic risk increases, not decreases. The Mansion House agenda, if interpreted too narrowly, risks creating precisely that kind of clustering. This amendment would require the Secretary of State to avoid mandating or promoting investment in a way that induces herding and ensure that any guidance emphasises diversification and risk management. It is a simple “Do no harm” provision which learns from recent history. It is also embedded in the terms of the Mansion House Accord, as spoken to last Thursday by my noble friend Lord Sharkey. Trustees must not be forced to purchase assets that do not exist, do not exist safely or do not exist at a fair price.

None of these amendments would obstruct the Government’s objective. None would prevent investment in productive finance. None would limit trustee discretion. What they would do is ensure that trustees remain protected, that their duties remain clear and that the Bill does not inadvertently distort markets, undermine competition or create new systemic risks. These amendments are modest, sensible and protective. They would strengthen the Bill, support trustees and safeguard the long-term interests of pension savers. It is what we should all be thinking about.

[Lord Davies of Brixton (Lab)]

I support mandation. I am in favour of the Government introducing the measures in this Bill, in principle. All Governments have a duty, not just a right, to deal with market failure. If the current investment advice and structures that we have are failing to deliver investments in the growth that we need in our economy, then the Government have a duty to act. I am not yet convinced that they have all the mechanics of mandation right, but that is the process we are going through at the moment in investigating how it will be achieved.

I am not so sure—I ask my noble friend the Minister to guide the Committee on this—about a question raised at Second Reading to which there was no answer, which applies to this part of Bill. Do the Government understand that the inevitable corollary of mandation is responsibility for the outcome? Outcomes may be better. We are told at length that this will improve things; the aim is to grow the economy to achieve good investments.

The Government may not have a legal responsibility to make sure that happens, but they certainly have a moral responsibility when they are saying how members’ money should be invested and they also, inevitably, have a political responsibility to ensure that they produce a system that enjoys broad public trust. A failure to achieve the Government’s objective will break that trust. Do the Government appreciate and understand the implications of what they are doing?