The Collective Action Backstop
Use a dormant statutory power to break industry coordination failures without exercising it
Bell describes a recurring pattern: an industry privately agrees a change is in customers' interests, but no firm will move first because doing so raises costs and lets cheaper rivals undercut them on price. This is a classic collective action problem. His framework is to legislate a backstop power — a statutory ability to compel the change — but commit to not using it as long as the industry delivers itself.
The backstop's job is not to be exercised. Its job is to change the payoff matrix so the cooperative outcome becomes the default. Each firm now knows that if it free-rides, the regulator can force compliance anyway, so the incentive to undercut disappears. The industry hits its own published target voluntarily, and the power expires unused.
The move only works if three conditions hold: there's genuine private agreement that the change is right; there's a verifiable, near-term deadline; and the backstop has a sunset clause so it cannot be repurposed for a future government's pet projects.
- If everyone privately agrees and nobody moves, it's a coordination failure, not a disagreement.
- The credible threat of compulsion is more valuable than compulsion itself.
- A backstop without a sunset becomes a future tool for capture.
- Industry-set targets work better than regulator-set targets — the legitimacy is owned by the firms.
- The buyer (employer) optimising for fee instead of return is the structural cause; the backstop neutralises it.
- Verify the private consensusBefore legislating anything, confirm in private conversations that the major firms actually agree the change is in customer interest. If they don't, this is a substantive disagreement, not a coordination problem, and the framework doesn't apply.WarningIf you skip this step, the backstop becomes a hostile mandate — it will be fought, not embraced.
- Get the industry to publish its own targetIndustry-set numbers (Mansion House: 10% / 5% by 2030) are far more durable than regulator-set ones. The firms own the commitment publicly, and the backstop merely enforces what they themselves promised.Pro tipLet the industry pick the percentage and the deadline. You only legislate the enforcement mechanism.
- Legislate a narrow, defined backstopDefine the power tightly to a measurable target (% of qualifying assets), not to specific projects. Bell is explicit: 'this power does not allow a government to say, I want this money to go into this pet project.'WarningLoose definitions will be repurposed by future governments. Tight scope is the entire safety mechanism.
- Attach a sunset clauseThe power must expire on a fixed date — Bell's expires in the early 2030s once the target window closes. This prevents the tool from outliving its purpose and becoming a permanent intervention lever.WarningNo sunset = this is mandation, not a backstop. Be honest about which one you're doing.
- Pair the threat with supply-side actionIf you're asking pension funds to invest in domestic infrastructure, you must also clear planning, build the pipeline, and unblock projects. Bell pairs mandation talk with reservoirs, grid, solar approvals — without the supply, the threat is hollow.
- Communicate the threat clearly, then go quietOnce legislated, name the backstop publicly so it's priced into firm behaviour, then stop talking about exercising it. The signal works only if firms believe non-compliance is uncomfortable but compliance is unremarkable.
UK pension providers signed a voluntary 10% / 5% target. Bell's bill adds a backstop power that activates only if industry misses the 2030 deadline, then lapses.
Both invest more in private and domestic assets than UK funds, partly because of historical industry coordination and supply-side public investment. Bell uses them as proof the cooperative outcome is achievable.
Employers picking pension providers shop on lowest fee, not member returns. This rewards firms that stay in passive global trackers and punishes anyone who builds private-asset capability — the structural collective action problem.
The framework emerged from the UK pension fund mandation debate. Industry signed the Mansion House Compact agreeing to invest 10% of default funds in private assets and 5% in UK assets. But in private, providers told Bell they had a collective action problem — moving first would lose them business to cheaper rivals serving fee-obsessed employers. Bell's response was to legislate a reserve mandation power in the Pension Schemes Bill that activates only if the 2030 industry target isn't met, then lapses regardless.