Marvin OnumonuUnder the Mansion House Accord, the majority of large UK workplace pension providers have agreed to invest at least 10% of their defined contribution (DB) default funds in private markets by 2030, with 5% of the total going to UK-based assets.
The agreement, called the Mansion House Accord, has been led by the Association of British Insurers (ABI), the Pensions and Lifetime Savings Association (PLSA) and the City of London Corporation.
The aim is to improve financial outcomes for savers and boost UK investment.
Based on current holdings, £252bn of pension assets are in scope, with the figure expected to rise over time.
Signatories include Aegon UK, Aon, Aviva, Legal & General, LifeSight, M&G, Mercer, NatWest Cushon, Nest, now:pensions, Phoenix Group, Royal London, Smart Pension, the People’s Pension, SEI, TPT Retirement Solutions and the Universities Superannuation Scheme.
The commitment depends on suitable UK investment opportunities and Government and regulatory support.
Barriers to private assets have reduced in recent years, but the industry said further Government and regulatory action is needed to ensure a strong pipeline of investable UK assets and to support wider pension reforms.
Chancellor Rachel Reeves said: “Through our Plan for Change, we are choosing to back British businesses and British workers.
“I welcome this bold step by some of our biggest pension funds, which will unlock billions for major infrastructure, clean energy, and exciting startups – delivering growth, boosting pension pots, and giving working people greater security in retirement.”
Pensions Minister Torsten Bell said: “Pensions matter hugely, they underpin not just the retirements we all look forward to, but the investment our future prosperity depends on.
“I hugely welcome the pensions industry decision to invest in more productive assets, from growing companies to infrastructure.
“This supports better outcomes for savers and faster growth for Britain.”
Yvonne Braun, director of policy, long-term savings, health and protection at the ABI, said: “As major investors, the pensions industry already plays a vital role in driving growth in the UK and globally.
“The Accord formalises the industry’s ambition to invest more in private markets to diversify investments, support innovation and infrastructure, and ensure prosperity.
“Investments under the Accord will always be made in savers’ best interests.
“It is now critical that Government supports the industry’s ambition, by facilitating a pipeline of suitable investment opportunities, tackling barriers to investments, and delivering wider pension reforms effectively.”
Lord Mayor of London Alastair King said: “The Mansion House Accord builds on the strong foundations of the Compact and signals a step change in ambition: more signatories, deeper allocations to private markets, and a clearer commitment to backing UK assets.
“That includes a renewed focus on revitalising the Alternative Investment Market (AIM) of the London Stock Exchange as well as the Aquis Exchange, which play a critical role in supporting high-growth companies that drive innovation, jobs and productivity.
“If we want those firms to scale in the UK, we must ensure they have the capital to do so.”
King added: “This is not just about better pension outcomes, it is about building a more dynamic, competitive investment ecosystem.
“Delivering long-term, sustainable growth is crucial and the City of London Corporation is delighted to have partnered with industry and Government to bring this ambition to life.”
Zoe Alexander, director of policy and advocacy at the PLSA, said: “UK pension schemes already invest billions in UK growth assets.
“This Accord demonstrates the collective ambition of the DC sector to do even more, as well as its confidence that the UK will provide the right opportunities to invest, consistent with schemes’ fiduciary duty to members.
“The Government, in its turn, has committed to take action to ensure there is a strong pipeline of investable assets for pension schemes.
“With everyone playing their part, there is great potential to boost returns for savers while providing vital funding to productive growth areas.”
Reaction:
Andy Briggs, CEO of Phoenix Group:
“This Mansion House Accord will unlock investment in UK private markets while helping deliver better long-term returns and retirements for millions of pension savers.
“The new commitments have the potential to strengthen the economy by fuelling the growth of British businesses and boosting investment in critical infrastructure.
“Phoenix Group has already taken a lead by launching Future Growth Capital — the first private market investment manager formed to deliver the commitments made in the initial Mansion House Compact — committing £2.5bn over three years to the UK’s most exciting, innovative and fastest growing companies.
“The Accord is the natural next step, and we’re proud to play our part in delivering better outcomes for our customers and for the wider society.”
Lorna Blyth, managing director – investment proposition at Aegon UK:
“Aegon UK is proud to be a signatory of the Mansion House Accord, which aligns with our aim to deliver better long-term outcomes for our pension scheme members.
“We are committed to ensuring our customers can access and share in the potential growth and success of new, innovative companies as part of diversified portfolios.
“Leveraging our partnership with the British Business Bank, along with our scale and expertise, we are dedicated to developing investment solutions that improve the retirement outcomes of the millions of members of the defined contribution pension schemes we support.
“We’ve made significant progress in becoming a DC provider fit for the future – but our journey doesn’t end here.
“The Accord is a key element of the Government’s growth agenda, alongside other initiatives likely to transform the UK’s DC pensions market.
“It comes as the conclusions of the Pensions Investment Review are expected imminently and further fundamental changes are expected in the Pension Schemes Bill later this spring.
“This makes it essential that the Government adopts a pragmatic approach to implementation. Realistic timeframes and a steady supply of high-quality UK investment opportunities across all private asset classes are crucial for ensuring success.
“This includes collaborating with more organisations such as the British Business Bank to provide access to diverse types of private assets – from private equity to infrastructure, which are all vital for optimising member benefits and developing investment portfolios designed for long term growth.”
Helen Dean CBE, chair of Standard Life Master Trust:
“It is very important that pension funds are invested in a diversified set of assets, and we support the Government in suggesting that private markets, including investing in opportunities within the UK, should play an increasingly important part in the asset allocation strategy for UK pension funds.
“It is reassuring to see that in today’s announcement Government have been so clear that they continue to support the principle that decisions about how pension scheme member’s money is invested should be made independently of Government and with the best interest of members in mind.
“This fiduciary principle is extremely important and underpins trust and confidence in our pension system.”
Nausicaa Delfas, chief executive of The Pensions Regulator:
“Savers rightly expect good performance from their pension investments.
“That’s why we welcome this latest initiative, which could both boost returns for pension savers while also potentially unlock more capital for investment in the UK economy.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown:
“These reforms give pension savers wider access to asset classes previously only available to institutions and intermediaries.
“Private assets can act as a key diversifier in long-term portfolios with the ability to boost people’s retirement incomes alongside the UK economy.
“However, for these reforms to work it is vital providers are given the flexibility to implement changes as the best opportunities present themselves rather than to a specific timetable.
“This is in line with the pension industry’s role to always secure the best outcomes for its members.
“With this in mind it is positive to see the pledge that Government and regulators must support the industry in securing a pipeline of suitable UK investment opportunities for schemes to invest in.
“There will also be other challenges to face, most notably the interplay between cost and value.
“There have long been concerns that a race to the bottom in terms of cost can reduce the long-term value that members receive.
“Private assets can push up these costs, but it will be important for schemes to demonstrate their role in improving member outcomes over the long-term as part of the wider Value for Money framework.”
