Baroness Bowles and Baroness Altmann have joined the Association of Investment Companies (AIC) in calling on the government to amend the Pension Schemes Bill to include investment companies, warning that their exclusion would be a “serious error”.

The current draft of the Bill, which aims to drive pension investment into private markets and productive assets, does not include listed investment companies as eligible vehicles for schemes to meet any future investment requirements.

The AIC has argued that this exclusion could limit pension schemes’ access to established routes into private markets, while increasing costs and reducing diversification opportunities.

AIC chief executive, Richard Stone, said it was “illogical” for investment companies to be left out of the framework, given their extensive experience in private markets.

He argued that they have been “investing in private markets for decades”, giving investors access to assets such as infrastructure, renewables, property and private equity - many of which are currently trading at “attractive discounts”.

“Excluding them from the Bill will restrict choice and increase costs for pension schemes,” he added, urging the government to "put right this evident wrong.”

Echoing this, Baroness Bowles, a member of the House of Lords Financial Services Regulation Committee, also criticised the narrow drafting of the legislation, describing it as “anti-competitive”.

She warned that the Bill appears to mirror the Mansion House wording agreed by industry, but only recognises certain types of products or strategies, effectively excluding other vehicles investing in the same underlying assets.

“To be fair, the Bill should make clear that all investments of a similar nature can qualify, regardless of the product wrapper,” she said.

“Listed investment companies have already put more than £100bn into exactly the kind of productive assets the government wants to encourage.”

Former Pensions Minister, Baroness Altmann, similarly questioned the rationale behind excluding closed-ended investment companies, noting that they often offer better value and greater stability for long-term investors.

She pointed out that the government’s Mansion House reforms aim for pension funds to allocate at least 5 per cent of assets to unlisted companies and productive real assets such as infrastructure, clean energy, private equity and property.

“Investment companies can provide expertly managed, diversified portfolios in precisely these areas,” she argued, adding that they can also be “safer and better value” than open-ended funds, which carry liquidity risks and can gate during periods of market stress.

Altmann warned that shutting them out of the Bill would be a mistake.

“Their exclusion from possible mandating in the Pension Schemes Bill is a serious error - one I hope can be corrected as the Bill progresses through Parliament,” she said.

The AIC had already written to Pensions Minister, Torsten Bell, in July, setting out its concerns and calling for investment companies to be explicitly included in the legislation.

While the government has publicly committed to the broad agenda of boosting pension scheme investment in private markets and more productive assets and enabling reforms via the Bill, there remains a lack of clarity about the exclusion of investment companies, and the specific question is unanswered in the public record.

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