A major change to UK pensions could negatively impact the savings pots of millions, it has been warned. The pension schemes bill is legislation designed to support working people’s planning for their retirement by making pensions simpler to understand and easier to manage, and driving better value over the long term.

However, one expert has warned that a proposal to give regulators the power to force defined contribution schemes to invest a minimum amount in private markets might not be consistent with its aims. Charles Randell, former chair of the Financial Conduct Authority, told the Financial Times: The provision isn’t framed as a reserve power and doesn’t promise that there won’t be detriment to pension savers. This is a pity, given that the case for the intervention doesn’t seem to be very convincing in the first place.

“I worry that this could undermine trust in pension saving.”

Some experts believe that the change in law could give a regulator the authority to compel pension funds to invest in accordance with the voluntary Mansion House Accord.

Zoe Alexander, director of policy at the Pensions and Lifetime Savings Association trade group, is concerned that the bill’s wording, specifically the power to apply an asset allocation test, “could see the voluntary commitments of the Mansion House Accord become a regulator-led condition for approval.”

She told the Financial Times: “The Government has previously said it intends to keep any mandation power in reserve, and so this drafting has caused concern.”

Alexander believes that state intervention in investment decisions “could erode trust and potentially lead to poorer returns”.

The bill is due to have its second reading on July 7, meaning that any concerns over its wording can still be amended at later stages in the legislative process.

A source at the Treasury told the Financial Times that the power to mandate asset allocation was not expected to be used automatically alongside the approval for default funds reaching £25bn.

They added that the department was aware of concerns that the Bill’s clauses were “insufficiently clear” on this point and would amend them if necessary.

The Bill is part of a wider Government effort to reform the archaic pension system and aims to boost the UK economy by encouraging more domestic investment by UK firms.