Starmer is stealing your pension! Or is he?

You may have seen recent headlines on social media, declaring that Starmer is about to steal our pension pots!

If you dig a little deeper, you will find that the statement is something of an exaggeration, but still contains a grain of truth. The Pension Schemes Bill gives the government the power to tell pension funds where to invest part of your retirement savings.

The bill contains a "mandation clause" that would allow the government to direct pension companies to invest up to 10% of their funds in specific areas, particularly in UK businesses. This mainly affects defined contribution private pensions, which include many workplace pensions in the UK. That includes about 20 million British workers.

The bill doesn't say that the government will take this action, and the government has indicated that they do not intend to do so initially. But it allows them to do it in the future if they decide to.

Critical opinions vary. Some regard it as an entirely sensible nudge, others claim it is outright confiscation. The truth is probably somewhere in the middle.

First, What the Clause Actually Does

The Pension Schemes Bill, currently making its way through Parliament, is a sprawling piece of legislation. Most of it is uncontroversial, indeed beneficial, tidying up. The bill makes it easier to consolidate small pension pots. This is useful, for example, if you have changed employers frequently and have a different pension from each employment. The bill also tidies up decades of accumulated rules under the existing legislation. But tucked away inside the bill is the mandation clause.

The clause would allow ministers to require pension funds to invest a minimum percentage of savers' money in specified categories of assets. This could force them to invest a small proportion of the vast funds they manage in areas such as UK infrastructure, British start-ups, and other investments that help the domestic economy grow. The bill currently proposes that 10% of the fund should be invested in those areas.

For context, it is worth noting that 17 of the biggest pension providers signed up to the Mansion House Accord in 2025, under which they voluntarily agreed to invest 10% of their funds in private markets, with half of that in the UK, by 2030. This is very similar to what the mandation clause would do, so the mandation clause can be viewed as a backstop to force pension companies to act if they fail to do so voluntarily. The clause might also apply to additional companies beyond the 17 that signed up to the Mansion House Accord.

One additional thing to bear in mind is that this only applies to the pension's default fund. This is the fund that your pension will be invested in by default. Many schemes allow you to move your investments to different funds. If you choose your own funds, then the mandatory clause would not currently apply to you. However, most people don't bother choosing their own funds and just stick with the default. We will come back to that later.

Why the Government Wants This Power

It isn't difficult to see why the government might think this is a good idea. Britain has one of the largest pension pools in the world, at around £3 trillion! But remarkably little of it is invested in the UK. If we look at Canadian and Australian pension funds, they put far more into their own economies' infrastructure and growth companies. British savers, by contrast, are heavily exposed to American technology giants and listed shares traded on global markets.

Ministers argue this is a double failure. It is bad for the UK economy, which is starved of long-term capital. And, arguably, it is bad for savers too, who miss out on the higher returns that private assets have historically delivered over long periods. If pension funds won't fix this themselves, as for years they haven't, the state will have to give them a push.

There are those who feel strongly that pension companies exist to look after their members' pension funds. The money in the fund belongs to the members, after all. But there is also the view that using part of the fund to help grow the UK economy also benefits their members. It is also true that pension contributions attract tax relief, so, in effect, part of the pension fund comes from the government. So maybe they deserve a say too?

The Case That It's Fair

There are some reasonable arguments as to why it might be fair to implement the mandation clause.

Start with the uncomfortable truth: the current system isn't exactly delivering perfect outcomes for savers. British pension funds have become extremely risk-averse. A pension's default funds often sit in cheap, liquid, listed assets. That is a "safe" thing to do, in the sense that you are unlikely to make big losses unless there is a global crash. But it is also unlikely to earn its full potential in the long term.

A young saver with decades until retirement is not well served by having all their money invested in stock market shares. Private markets, such as infrastructure and unlisted companies, tend to provide better returns over the longer term. Someone who is 30 or 40 years away from retirement is missing out if they are not being exposed to more lucrative, longer-term investments

There's also a collective action problem. No individual pension trustee wants to be the first to break ranks and invest heavily in longer-term assets. Those investments tend to charge higher fees because they require more management, and even though they might justify those fees with the returns they generate, they can still make the fund look unattractive. And anyone taking an unusual path is likely to be criticised and second-guessed at every turn. So everyone plays it safe, and everyone delivers the same mediocre outcomes. A government mandate might break that deadlock in a way the market has proven unable to.

Of course, another way of solving this problem would be for people to manage their funds more actively themselves. Your pension fund might well be your biggest financial asset, more valuable than even your house. Yet many people sit there for 40+ years, never knowing or caring how their money is invested or how much it is growing. Of course, that can be daunting for many of us, so it is fair that the government should step in. But for those who do decide to take more interest in their pension, then choosing your own funds means that your money will be invested as you decide, without the government investing 10% of it in something else.

And then there's the broader point, that British pension savers live in Britain. They work here, own homes here, and will most likely retire here. If forcing investment into UK infrastructure genuinely raises growth, wages, and tax receipts, savers benefit in their wider lives (also, potentially in their pension statements). A retirement fund that returns 7% in a stagnant economy may leave you poorer than one returning 6% in a thriving one.

On this view, the mandation clause is less "stealing" and more "fixing a market failure that was quietly robbing savers anyway".

The Case That It Isn't

Of course, there is another side to the argument, and it also has some pretty strong points.

The first is a point of principle. The money in your pension pot is not the government's, it is yours. It is deferred wages. It is income you earned but chose not to spend, locking it away for retirement. You did that on the understanding that the money would be managed in your best interests. In fact, British pension law rests on a single clear principle: trustees must act in the sole financial interest of members. Nothing else. The trustees are not there to do what is best for your employer, or the government, or the country.

The mandation clause quietly inserts a second master into that relationship. Even if today's ministers use the power wisely, the principle has changed. The assets exist, at least in part, to serve government objectives. And once that door is open, it doesn't close.

This could also put pension trustees in a difficult legal position. They are currently legally obliged to act in the members best interest, but now they will also be obliged to do as the government tell them. There will, presumably, have to be some form of legal protection so they are permitted to do what the government tell them, even if it is against the members' best interest. This creates a worrying situation. As a saver, there will be nobody whose sole responsibility is to do what is best for you!

That's the precedent argument, and it's the one that worries many critics. Today, it's the UK infrastructure, a cause most people can get behind. But what about the next government, or the one after? Could a future chancellor decide pensions must hold more gilts to help fund the deficit? Could a future prime minister decide they must avoid certain industries, or favour others, for reasons that have nothing to do with your retirement? Each step seems small, but the cumulative shift is enormous.

Then there's the question of who bears the risk. If mandated UK investments underperform, the loss falls on the saver. There is no Treasury guarantee, no compensation scheme, no floor. The government gets the political credit if things go well and none of the financial pain if they don't. That doesn't seem like a fair system.

There's also an awkward economic reality. Every major pension fund in the country will be required to buy UK private assets, and the sellers of those assets will know it. Prices will get bid up. Expected returns will fall. Savers will end up overpaying. This could become an invisible tax collected by whoever happens to own UK infrastructure when the mandate takes effect. Forced buyers make bad buyers, and in this scenario, the forced buyer is you, the pension saver.

And finally, there's the consent problem. If the government wants to fund infrastructure, it can borrow, tax, or issue bonds that people choose to buy. Each of those routes carries democratic accountability. Mandation doesn't. You can't opt out of your workplace pension without losing your employer's contributions and possibly triggering tax penalties. The money is already committed. Changing the rules on assets already locked away feels, to many savers, like moving the goalposts after the game has started.

So, Is He Stealing Our Pensions?

Of course, he isn't, not in any literal sense. The money remains yours. It is still invested on your behalf. You will still receive whatever it grows into at retirement. Nobody is taking anything out of your pot.

But the honest answer is more nuanced than the headline allows. At the moment, your pension is managed for your benefit. After mandation, your pension is not just managed for your benefit, but also the government's growth agenda, not to mention whatever a future minister decides is a national priority.

Whether that's acceptable depends on three things the Bill doesn't yet fully answer:

• When can the government use the power? If it's a genuine last resort, triggered only by national emergencies, most savers can probably live with it. If it becomes a routine economic lever that the government use whenever it suits them, that's a different story.
• Are trustees still protected when member interests clearly conflict with the mandate? If trustees can override the mandate when doing so genuinely harms savers, the fiduciary principle survives. If not, it doesn't.
• Are near-retirement savers shielded? A 30-year-old can absorb the greater uncertainty of more volatile investments, and indeed will probably benefit from higher returns. A 62-year-old about to buy an annuity cannot afford the same level of risk. The Bill needs to clearly recognise that difference.

The Bottom Line

The mandation clause is neither theft nor a gift. It's a gamble. Can the government allocate savers' money better than the market does currently? Will the long-term gains outweigh the risks of politicising retirement savings?

That might turn out to be right. Australian pension savers, whose system has similar features, have generally done well. It might also turn out to be wrong, in ways that only become visible decades from now, when today's auto-enrolled twenty-somethings are trying to retire.

What's certainly true is that a quietly consequential change to the relationship between British savers and their pensions is happening right now, without most of the country noticing. The clause isn't stealing your pension. But it is changing the rules of the game — and savers would do well to understand those rules before the whistle blows.