The pensions industry has united to expand investment in the UK – and stave off reported efforts to mandate domestic allocations – through a major voluntary initiative.
The Pensions and Lifetime Savings Association (PLSA), the Association of British Insurers (ABI) and the City of London Corporation have announced a new joint initiative, the Mansion House Accord. This will see 17 pension schemes and providers pledge to allocate at least 10% of defined contribution (DC) default funds to private markets and at least half of this to UK assets by 2030.
According to the Treasury, the agreement will see more than £50bn mobilised over the next five years, including £25bn for UK investments.
The accord specifies that UK investments are dependent on “a sufficient supply of suitable investible assets” and on the implementation of “critical enablers” by the government and regulators. Allocations are also subject to fiduciary duty and Consumer Duty considerations.
“Government and regulators will be integral to supporting industry in securing a pipeline of UK investment opportunities and facilitating the Value for Money framework.”
The Mansion House Accord announcement
In the joint announcement, the three organisations said the move aimed to secure “better financial outcomes for DC savers through the higher potential net returns available in private markets, as well as boosting investment in the UK”.
Rumours had swirled in recent weeks that the government could seek to mandate specific allocations to UK assets, as it seeks to drive more domestic investment and boost economic growth. However, the Mansion House Accord is voluntary.
“Barriers to invest in private assets have reduced in recent years thanks to legislative and regulatory reform, as well as operational improvements,” the announcement stated. “However, further progress is needed. The accord makes clear that government and regulators will be integral to supporting industry in securing a pipeline of UK investment opportunities and facilitating the Value for Money framework.”
What the Mansion House Accord signatories said
Following today’s announcement, signatories including Now Pensions, The People’s Pension, Nest, Aegon and Phoenix Group have set out their intentions and called on government to support a pipeline of investable domestic assets. Read more
The Mansion House Accord builds on the Mansion House Compact, launched in 2023. This involved 11 providers pledging to invest at least 5% of their DC default funds in private equity and venture capital by 2030.
“Together, they represent a staged, voluntary roadmap for reform, supported by government, driven by industry,” the announcement said.
Government support for UK asset pipeline ‘critical’
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.”
“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.”
Yvonne Braun, ABI
Yvonne Braun, director of policy, long-term savings, health and protection at the ABI, said the Mansion House Accord “formalises the industry’s ambition to invest more in private markets to diversify investments, support innovation and infrastructure, and ensure prosperity”.
She added: “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.”
According to the government’s Pension Investment Review, the interim report for which was published in November, Australian pension schemes invest around three times more in infrastructure and 10 times more in private equity compared to UK DC schemes. By mirroring these models, the Treasury has claimed that UK schemes could deliver around £80bn of investment into “exciting new businesses and critical infrastructure while boosting DC savers’ pension pots”.
Rachel Reeves, the chancellor, hailed the voluntary agreement as a “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”.
Torsten Bell, the pensions minister, added: “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’s decision to invest in more productive assets, from growing companies to infrastructure. This supports better outcomes for savers and faster growth for Britain.”
Who has signed the Mansion House Accord?
The accord’s 17 signatories oversee more than £252bn worth of assets that are in the scope of the new agreement. This represents about 90% of active DC pensions, according to the Treasury. The signatories are:
- 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
- Universities Superannuation Scheme
(* denotes a signatory to the 2023 Mansion House Compact)
The backing of these pension providers signalled a “step change in ambition” on investing in the UK, according to Alastair King, the Lord Mayor of London.
“The Mansion House Accord… includes a renewed focus on revitalising the Alternative Investment Market 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,” King explained.
“If we want those firms to scale in the UK, we must ensure they have the capital to do so. 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.”
