After much speculation, a new Mansion House arrangement has been announced that sees 17 UK workplace pension providers show intent to invest at least 10% of their defined contribution (DC) default funds in private markets by 2030, with 5% of the total allocated to the UK.
Signatories to the new so called Mansion House Accord, rather than compact, 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 aim is the latest Mansion House Accord, although voluntary, builds on, rather than replaces, the Mansion House Compact, continuing efforts to drive long-term investment in UK growth.
Through the compact, signed in July 2023, 11 UK pension providers committed to the objective of investing 5% of DC defaults in unlisted equities, including venture capital and growth equity, by 2030.
The accord has a broader definition of private market investments than the compact, with the latest version including property and infrastructure.
For providers signed up to both, progress under the compact counts towards meeting the accord’s goals.
Together, they seem to present a voluntary roadmap for reform set out by the government, with industry players like the Association of British Insurers (ABI), the Pensions and Lifetime Savings Association (PLSA) and the City of London Corporation playing their part.
Based on providers’ current investment holdings, total pension assets in the scope of the agreement amount to a hefty £252bn. The hope and expectation is this amount will increase over the accord’s lifetime.
In a joint statement, Now Pensions’ CEO Patrick Luthi and chair Joanne Segars said: “By investing in appropriate UK private market opportunities, we can together achieve alignment of our member’s long-term interests, with UK growth and benefits to society more broadly.”
They both said Now Pensions is set to make its first investment into UK private markets, focusing on affordable housing.
Yvonne Braun, director of policy, long-term savings, health and protection at the ABI, said that 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,” she added.
Steve Charlton, DC managing director at SEI, said that due to the ongoing collaboration and dialogue between the industry and the UK government, “we have become comfortable with the proposed changes to the Mansion House reforms.
“This accord demonstrates our collective ambition to have a consolidated workplace pension environment that provides flexibility and choice for pension funds to invest where they see opportunity, whilst balancing their responsibility to members,” he added.
A key part of the accord makes clear that the government and regulators will be integral to supporting the industry in securing a pipeline of UK investment opportunities and facilitating the Value for Money framework.
Zoe Alexander, director of policy and advocacy at the PLSA, said that 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,” she said.
Jo Sharples, CIO of DC Solutions at Aon, believes that investing in private assets “will benefit pension scheme members by delivering better expected returns over the long-term, ultimately resulting in higher retirement outcomes”.
Amanda Blanc, Aviva’s group chief executive, added that the accord “is a major opportunity for the pension and investment industry to support UK growth while delivering improved outcomes for pension savers”.
David Lane, chief executive of TPT Retirement Solutions, said the attraction of private markets to institutional investors. “Investment in assets such as infrastructure, transportation, housing, venture capital and private markets can play an important role in improving risk-adjusted returns for members while also contributing to economic growth,” he said.
Similarly, Benoit Hudon, CEO and chairman of Mercer UK, said: “Having the flexibility and ambition to invest into initiatives that bolster UK economic growth has the potential to benefit communities, help put more money in people’s pockets and support public services and indeed the broader economy.”
Andrea Rossi, CEO of M&G, said re-affirming M&G’s commitment to the Mansion House agreements is aligned “with our purpose, which is to give everyone real confidence to put their money to work and our track record in private markets investment”.
Andy Briggs, Phoenix Group CEO, also said: “The new commitments have the potential to strengthen the economy by fuelling the growth of British businesses and boosting investment in critical infrastructure.”
Rachel Reeves, chancellor of the exchequer, said in a statement that she welcomed “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”.
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