Seventeen of the largest workplace pension providers have pledged to unlock up to £50bn investment for the economy by allocating more to private markets as part of the new Mansion House Accord.
The providers have committed to invest at least 10 per cent of their DC default funds in private markets by 2030, with at least 5 per cent of this being invested in the UK.
According to the Treasury, the Mansion House Accord will unlock up to £50bn and is expected to release £25bn directly into the UK economy by 2030.
Led by the ABI, PLSA and the City of London Corporation, the initiative aims to secure better financial outcomes for DC savers through the higher potential net returns available in private markets.
The signatories to the Mansion House Accord include:
The agreement, which was described as more “ambitious” by the Treasury, builds on the Mansion House Compact, which saw 11 UK pension providers commit to the objective of investing 5 per cent of DC defaults in unlisted equities, including venture capital and growth equity by 2030.
Barriers to invest in private assets have reduced in recent years due to legislative and regulatory reform, as well as operational improvements.
However, the industry has said further progress is needed, with the Accord making it clear that government and regulators will be integral to secure a pipeline of UK investment opportunities.
Industry reacts
Today’s news was welcomed by the pensions industry with The Pensions Regulator saying savers rightly expect good performance from their pension investments.
Aegon UK has urged the government to adopt a pragmatic approach to these and other reforms with “realistic timeframes”.
Lorna Blyth, managing director of investment propositions at Aegon UK, said: “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.”
Now Pensions said it would shortly be making its first investment into UK private markets, focusing on affordable housing.
Ben Pollard, chief executive of Natwest Cushon, believed the investment case for UK private markets was strong.
The provider’s own research found 52 per cent of savers agreed pension funds should invest more in the UK, with younger savers more likely to want investments in the UK than older savers.
“It’s really encouraging to see this appetite from pension savers to invest in UK assets, particularly among younger people.
“That’s exactly the type of customer the industry generally struggles to engage, so it’s fantastic to see that investing further in UK private markets aligns with what they want,” Pollard added.
Steve Charlton, DC managing director at SEI, said the provider was now “comfortable” with the proposed changes to the Mansion House reforms following “open dialogue” with the industry and government.
“We welcome the government’s commitment to ensure a good flow of investable opportunities for pension schemes.
“This mitigates our previous concerns about the risks of high-priced, poor-quality investments in an environment where the originally proposed investable opportunities are scarce.
“It enables everyone to play their part in helping to deliver better member outcomes and drive economic growth,” he explained.
alina.khan@ft.com