Seventeen of the UK’s biggest workplace pension providers have struck a deal with the Government, which will see them invest at least 10% of their defined contribution default funds in private markets by 2030.
At least 5% of the total will be allocated to the UK.
The voluntary initiative, known as the Mansion House Accord, has been jointly led by the Association of British Insurers, the Pensions and Lifetime Savings Association and the City of London Corporation.
The new accord doubles the size of commitments made under the Mansion House Compact arranged by the Conservative Government in 2023.
Signatories to the new commitment 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.
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.”
Aegon, one of the signatories to the new Accord, said the new deal underscores its dedication to improving member outcomes through investing in a broader range of private assets previously not accessible to DC pension savers.
Lorna Blyth, managing director, investment proposition at Aegon, said: “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.
“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 Pensions Schemes Bill. 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.”
Following the announcement, Hargreaves Lansdown said government and regulators must remember consumer outcomes and support industry in securing a pipeline of UK investment opportunities.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “These reforms give 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 that 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.”
Morrissey said 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,” Morrissey added.
