The government has proposed a scaled back version of its Pension Schemes Bill investment mandation clause as the House of Lords continues to reject it.
This comes as the bill continues the parliamentary ‘ping pong' process, with the House of Lords on Monday (20 April) disagreeing with the Commons' amendment to the clause – which was to introduce a limit to the extent it can mandate how schemes invest, bringing the power in line with the Mansion House Accord agreement – calling on MPs to "consider the matter again".
After the Lords rejected the amendment, secretary of state for work and pensions Pat McFadden has proposed a ‘sunset' clause concession.
This proposes the power will be time limited to the end of 2035 rather than falling away at that point if it had not been brought into force.
The amendment also proposes the power would fall away even earlier, at the end of 2032, if not brought into force by then and the power to ensure regulations in relation to the asset allocation requirement can only be used once, after which the government cannot force schemes to invest further.
The House of Commons is set to vote on the amendment today (22 April) as the debate on the bill continues.
WTW director David Robbins explained: "If the Commons approves the idea of reinserting the power with these changes, the Lords will have three choices: back down, insist on deleting the mandation power, or propose its own alternative.
"Because the Commons will not simply be sending back the version that the Lords rejected on Monday, a further defeat in the Lords tonight would not result in the bill being lost."
He added: "If the sunset clause is not enough to mollify the Lords, and if ministers won't give up on mandation, they could potentially look at lowering the hurdle that trustees need to get over for a scheme to be exempt – currently, trustees would have to persuade the regulator that complying would cause ‘material financial detriment' to members."
The Commons will debate the issue today, with amendments expected to continue back and forth until both houses reach an agreement for the bill to progress to Royal Assent.
It is likely the government will be keen to come to an agreement on all clauses ahead of the King's Speech on 13 May, but in theory there is no time limit on the ‘ping pong' process.
Read our Pension Schemes Bill coverage here.
