Here’s a head-scratcher: the UK government wants pension schemes to pump more money into private assets, but they’re blocking one of the easiest ways to do it.
The new Pension Schemes Bill gives government powers to push schemes into private investments—think infrastructure, energy, and venture capital. Sounds smart, right? Except there’s a glaring oversight. The bill doesn’t let pension schemes count investments in listed investment companies (that already hold private assets) towards meeting these requirements.
The Association of Investment Companies (AIC) isn’t happy, and frankly, neither should pension savers be.
Why This Exclusion Makes No Sense
Investment Companies Are Already Doing the Heavy Lifting
Investment companies have poured over £110bn into private assets across critical growth sectors. They’re funding infrastructure projects, backing energy transitions, and pumping money into UK ventures. Yet under the new bill, pension schemes can’t tick the “private asset” box by investing through them.
It’s like being told you need to eat vegetables but being banned from buying them at Tesco.
Competition Takes a Hit
Richard Stone, AIC’s chief executive, put it bluntly: “For pension savers to achieve the best outcome, we need a competitive market which includes the widest choice of investments.”
Excluding investment companies doesn’t just limit options—it drives up costs and potentially delivers worse returns for savers. When you shrink the playing field, everyone loses except the remaining players.
The Industry Pushback
AIC Calls the Bill “Seriously Flawed”
The AIC has been vocal about this contradiction, writing directly to pensions minister Torsten Bell. They’re calling the government’s powers “seriously flawed” and highlighting a pattern of mixed messages.
“This contradiction reflects a longer-term pattern where the government claims to support the sector then fails to show that support when it is making actual policy decisions,” the AIC stated.
Translation: The government talks a good game but fumbles when it matters.
House of Lords: Last Chance for Change
With the bill moving to the House of Lords, the AIC is making one final push for amendments. They’re arguing that investment companies offer a “tried and tested way for all investors to access private assets” while providing vital capital for UK growth.
What Else Is in the Bill?
The Pension Schemes Bill isn’t just about private assets. It also includes:
- Pension pot consolidation: A system to merge small pension pots (because who needs 12 different £50 pensions?)
- Value for money framework: Defined contribution schemes will need to prove they’re actually worth the fees they charge
Both are sensible moves, making the investment company exclusion even more puzzling.
The Bottom Line
This bill could strengthen UK pension investment, but only if the government fixes its blind spot. Investment companies already channel billions into exactly the private assets the government wants to promote. For pension savers, more competition means better returns and lower costs. Want to stay updated on pension policy changes? Subscribe to our weekly finance roundup.
FAQ
Q1: What exactly is the Pension Schemes Bill trying to achieve?
A: The bill gives government powers to require pension schemes to invest a percentage of their portfolio in private assets like infrastructure and energy projects. It also introduces pension pot consolidation and value-for-money assessments.
Q2: Why are investment companies upset about being excluded?
A: Investment companies already hold £110bn in private assets, but the bill won’t let pension schemes count these investments toward their private asset requirements. This limits competition and could increase costs for savers.
Q3: Can the bill still be changed?
A: Yes, the AIC is pushing for amendments when the bill reaches the House of Lords. This represents their last opportunity to influence the legislation before it becomes law.
Q4: How does this affect regular pension savers?
A: Limited investment options typically mean higher costs and potentially lower returns. More competition in the market generally benefits savers through better value and performance.
Q5: What’s the government’s reasoning for excluding investment companies?
A: The article doesn’t specify the government’s rationale, but the AIC suggests it reflects a pattern of supporting the sector in words while limiting it in actual policy decisions.
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Effective Date: 15th July 2025
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