Major UK pension funds promise £50bn investments in private equity and infrastructure projects under the Mansion House Accord agreement.
The Mansion House Accord, an initiative aimed at enhancing economic growth and pension returns, has been signed by seventeen of the UK's largest pension providers, including Aviva, Aegon, Legal & General, and Nest. The accord, supported by the forthcoming final report from the UK Pensions Investment Review, is a significant step towards boosting long-term returns for pension savers.
Chancellor Rachel Reeves described the initiative as a "bold step" that will benefit both pension savers and the UK economy. The accord targets a 10% allocation of defined contribution (DC) portfolios to private markets, with a minimum of 5% committed to UK-based investments.
One of the signatories, Nest, the government-backed workplace pension scheme, is committed to investing at scale in private markets and in the UK. The private market allocation of the unnamed pension provider, currently at 60%, is planned to increase from 15% to 30% in the coming years.
The Mansion House Accord is part of a broader effort to reform the UK pensions system. The UK Pensions Investment Review, expected to be released soon, suggests several specific reforms to address fragmentation in the pension system and improve access to private market investment vehicles.
One such reform is the consolidation of the Defined Contribution (DC) market, requiring default pension funds to have at least £25 billion assets under management (AUM) by 2030. This aims to create fewer, larger, and more efficient pension providers, reducing fragmentation and improving governance and value for savers.
Other reforms include the introduction of a Value for Money framework across all pension schemes, consolidation of small pension pots, creation of default decumulation pathways, reforms to Local Government Pension Scheme (LGPS), and enabling bulk transfers without member consent. These reforms collectively aim to reduce pension scheme fragmentation, increase scale and professionalism, and provide pension savers with improved access to diverse private market investment opportunities, supporting better outcomes and long-term sustainability of the UK pensions system.
The British Growth Partnership, another initiative, will provide DC pension schemes and institutional investors with access to UK-focused venture capital funds. The partnership aims to unlock capital for clean energy, infrastructure, and high-growth UK businesses, contributing to the UK's economic growth.
Liz Fernando, the Chief Investment Officer of Nest, signed the Mansion House Accord on behalf of Nest and stated it as a significant initiative. The Mansion House Accord builds on the 2023 Mansion House Compact, further emphasising the commitment of major pension providers to invest in the communities and infrastructure used by UK workers.
In conclusion, the Mansion House Accord and the accompanying pension reforms represent a significant shift in the UK pensions landscape. They aim to boost economic growth, enhance pension returns, and provide pension savers with improved access to diverse private market investment opportunities, contributing to a more sustainable and efficient UK pensions system.
[1] UK Pensions Investment Review Interim Report (2022) [2] UK Pensions Investment Review Call for Evidence Response (2022) [3] HM Treasury, DC Pension Schemes Bill (2022) [4] The Pensions Regulator, DC Pension Schemes (Charge Cap) Regulations 2022 (2022)
- The Mansion House Accord is a significant initiative aimed at boosting long-term returns for pension savers by allocating 10% of defined contribution (DC) portfolios to private markets, with a minimum of 5% committed to UK-based investments.
- Nest, one of the signatories of the Mansion House Accord, is committed to investing at scale in private markets and in the UK, with a planned increase in the private market allocation of their pension provider from 15% to 30% in the coming years.
- The British Growth Partnership will provide DC pension schemes and institutional investors with access to UK-focused venture capital funds, contributing to the UK's economic growth by unlocking capital for clean energy, infrastructure, and high-growth UK businesses.
- Liz Fernando, the Chief Investment Officer of Nest, signed the Mansion House Accord on behalf of Nest and stated it as a significant initiative that builds on the 2023 Mansion House Compact, emphasising the commitment of major pension providers to invest in the communities and infrastructure used by UK workers.
- The UK Pensions Investment Review suggests several specific reforms to address fragmentation in the pension system and improve access to private market investment vehicles, including consolidation of the DC market, creation of default decumulation pathways, and enabling bulk transfers without member consent.
- The Mansion House Accord, along with the accompanying pension reforms, aims to reduce pension scheme fragmentation, increase scale and professionalism, and provide pension savers with improved access to diverse private market investment opportunities, supporting better outcomes and long-term sustainability of the UK pensions system. [References: 1] UK Pensions Investment Review Interim Report (2022) [2] UK Pensions Investment Review Call for Evidence Response (2022) [3] HM Treasury, DC Pension Schemes Bill (2022) [4] The Pensions Regulator, DC Pension Schemes (Charge Cap) Regulations 2022 (2022)]
