Bank of England Governor Opposes UK Pension Investment Mandate

Bank of England governor Andrew Bailey has voiced strong opposition to the UK Government's Pension Schemes Bill provision that would mandate pension funds to invest a minimum proportion of their assets in UK infrastructure and private markets. While acknowledging the low level of pension fund investment in the UK economy and supporting the need for structural reforms in the pension sector, Bailey emphasized that mandating investment allocations is not appropriate and prefers reforms to happen more organically. His comments have sparked significant debate, with former pensions minister Steve Webb describing Bailey's intervention as 'nuclear' and warning that the government might be overstepping by directing how trustees should invest pension assets. The government argues that the new 'megafund' multi-employer master trusts, supported by the bill, could unlock over £50 billion in UK investments and improve returns for pension savers. Industry leaders, including Aviva's Amanda Blanc and Lloyds Bank's Charlie Nunn, have also criticized the mandate, likening it to heavy-handed or overly authoritarian approaches. Despite the government securing voluntary commitments from major pension funds to increase UK investments, Bailey and others caution that forcing allocations through legislation could undermine trustees' fiduciary responsibilities and face political challenges in Parliament.