𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Rachel Reeves has been warned her controversial pension reforms will mean “lower returns and lower pensions in future for millions of workers”, as Labour prepares for a fresh battle with the House of Lords. Peers are expected to reject plans to allow the Chancellor to order pension funds to invest in the British economy. It’s the latest round in an ongoing battle between the Commons and the Lords over the Government’s Pensions Schemes Bill.

The Lords has already removed elements of the legislation that will give Ministers a “reserve power” to force pension schemes managing the savings of working people to invest in the UK. However, the measure was reinstated by MPs, in a process known at Westminster as “ping pong” – and now the Lords will consider it again.

Treasury ministers insist the change will bring investment of £50billion into the British economy and provide higher returns, so people with private pensions have bigger incomes once they retire. But Baroness Ros Altmann, a former pensions minister, said fund managers will be forced to make decisions that are not in the best interests of savers.

She said: “The Government still seems determined to force reluctant pension managers to invest in private assets, even if pension managers in future decide that these investments are not appropriate for their members.”

Predicting another defeat for the Government, Baroness Altmann said: “The House of Lords is expected to stand firm against this power grab.”

The Government insists that it is unlikely to use any new powers, as it expects funds to comply with its plans voluntarily. But Baroness Altmann said: “They will be used to force schemes who decide that investing so much of their funds in these high-risk private assets is not appropriate, to do so anyway. That is how mandation works.”

She said the schemes the Government wanted pension funds to back might be profitable. But she added: “It is true that such assets can deliver higher long-term returns, but the risks associated with these and the timing of the investment, also require sound judgment. Forcing investment at the wrong time, perhaps in overvalued private equity and private credit, could mean lower returns and lower pensions in future for millions of workers, even though the Government believes returns should be higher over time.”

Work and Pensions Minister Torsten Bell has insisted that the Government’s version of the Bill “has one purpose, supporting better outcomes for savers”.

He told a recent Commons debate: “The truth is, this is a Bill that supports savers that focuses on driving up the returns on their savings, and even the most overexcited members opposite know it is the right thing to do.”

Other measures in the Bill include providing members of Defined Contribution pension schemes – the type that most private sector workers are enrolled in – with more information about their pensions and retirement options, consolidating savings pots and securing better returns.