UK pensions industry builds on Mansion House Compact with Accord launch

The UK pensions industry has built on the Mansion House Compact with the launch of the Mansion House Accord, which secured commitment from 17 of the largest workplace pension providers in the UK to invest 10% of their defined contribution (DC) default funds into private markets by 2030, with 5% of the total allocated to the UK.

The voluntary initiative has been jointly led by the Association of British Insurers (ABI), the Pensions and Lifetime Savings Association (PLSA) and the City of London Corporation. It is aimed at securing better financial outcomes for DC savers through the higher potential net returns available in private markets, as well as boosting investment in the UK.

According to the trio, based on providers’ current investment holdings, total pension assets in the scope of the agreement amount to £252bn (€299bn), which is expected to increase over the Accord’s lifetime.

Signatories to the new commitment include: LifeSight, NOW: Pensions, Royal London, The People’s Pension, SEI, TPT Retirement Solutions and the Universities Superannuation Scheme (USS). They joined the previous Compact signatories Aviva, Legal & General, Aegon UK, Phoenix Group, NEST, Smart Pension, M&G, Mercer, Aon and NatWest Cushon.

Scottish Widows was an original signatory of the Compact but has not signed up to the Accord.

By signing the commitment, the signatories agree to allocate at least 10% of their default funds to private markets by 2030, with 5% of the total going to UK private markets, assuming a sufficient supply of suitable investible assets for providers.

However, the leading trio highlighted that the commitment is dependent on implementation by the government and regulators of critical enablers.

The new initiative builds on, rather than replaces, the Mansion House Compact, which was introduced in July 2023 by the then-chancellor of the exchequer Jeremy Hunt under the Conservative government, which saw 11 workplace pension providers commit to investing 5% of DC default funds in unlisted equities, capital and growth equity by 2030.

The trio stated that for providers signed up to both, progress under the Compact counts towards meeting the Accord’s goals. Together, they represent a “staged, voluntary roadmap for reform, supported by government, driven by industry”.

ABI, PLSA and City of London added that barriers to investing in private assets have reduced in recent years thanks to legislative and regulatory reform, as well as operational improvements. However, they urged that further progress is needed, with the Accord making it 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.

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.”

Braun added that it is “critical” that the government supports the industry’s ambition by facilitating a pipeline of suitable investment opportunities, tackling barriers to investments, and delivering wider pension reforms effectively.

Alastair King, Lord Mayor of London, said that the Accord builds on the strong foundations of the Compact and signals a step change in ambition – more signatories, deeper allocations to private markets, and a clearer commitment to backing UK assets.

He added that the commitment also includes a renewed focus on revitalising the Alternative Investment Market (AIM) of the London Stock Exchange as well as the Aquis Exchange, which he said play a critical role in supporting high-growth companies that drive innovation, jobs and productivity.

He said: “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.”

Zoe Alexander, director of policy and advocacy at the PLSA, said that UK pension schemes already invest billions in UK growth assets and the 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 added that the government has also committed to take action to ensure there is a strong pipeline of investable assets for pension schemes.

She said: “With everyone playing their part, there is great potential to boost returns for savers while providing vital funding to productive growth areas.”

Signatories

Steve Charlton, DC managing director at SEI, said that due to ongoing collaboration and open dialogue between the industry and the UK government, the master trusts have become comfortable with the proposed changes to the Mansion House reforms.

He said: “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.”

Charlton also welcomed the government’s commitment to ensure a good flow of investable opportunities for pension schemes.

He said: “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.”

Earlier this year, The People’s Pension committed to allocating £4bn, or 10% of AUM, into private markets by 2030. The master trust has not signed up to the original Compact but has now said signing the Accord reinforces its long-standing commitment to “becoming a world-class asset owner, to help our 6.9 million members build financial foundations for life”, according to Mark Condron, chair of The People’s Pension board of trustees.

He said: “Our continued growth in members’ assets, coupled with our growing in-house investment team, means People’s Pension is now well-positioned to broaden our reach into these asset classes. To meet this ambition, we welcome the long-term support from the government to ensure a strong and sustainable pipeline of private investment opportunities.”

Patrick Heath-Lay, chief executive officer of People’s Partnership, provider of  The People’s Pension, added that the provider has a “vital” role to play in “the exciting, shared vision for the future of the pensions industry, which will see bigger, stronger, value-driven schemes that will deliver better value to their members”.

He said: “By signing this Accord, we are reaffirming how seriously we take our commitment to delivering better outcomes, as well as helping to drive UK economic growth.”

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