Private equity and infrastructure investments of £50 billion pledged by notable UK pension funds, in accordance with the Mansion House Agreement
The UK is witnessing a significant shift in pension fund investments, thanks to the Mansion House Accord and the UK Pension Investment Review. These initiatives aim to enhance pension returns and boost economic growth by directing pension fund investments towards private markets and UK infrastructure.
The Mansion House Accord, signed by 17 of the UK's largest pension providers, including Nest, a government-backed workplace pension scheme, commits to investing at least 10% of their main default fund assets in private assets by 2030. At least 5% of these investments will be allocated specifically to UK-based opportunities, such as private equity, venture capital, infrastructure, and other productive finance sectors.
This collective shift could unlock up to £50 billion for UK infrastructure and private market investments by the end of the decade, supporting businesses without requiring fresh government subsidies or tax incentives.
To facilitate this shift, the government has launched the British Growth Partnership, which provides investment opportunities, and supported the National Wealth Fund and Long-term Asset Funds (LTAFs) to ease pension scheme investments in private and illiquid assets. Regulatory and planning reforms are underway to strengthen the pipeline of housing and infrastructure projects, including clean energy initiatives, to create attractive investment opportunities for pension funds.
To ensure the commitment delivers results, the government included a "last resort" power in the Pension Schemes Bill to impose mandatory investment targets for pension schemes if industry-led changes do not materialize, with clear safeguards to protect savers' interests.
The reforms anticipate significant consequences for the financial services sector, requiring new skills and capabilities to manage the shift toward private markets, resulting in the creation of "megafunds" with assets under management reaching or exceeding £25 billion by 2030 within DC schemes and Local Government Pension Scheme pools.
The Mansion House Accord's goal is to invest in the communities and infrastructure used by UK workers, with the aim of driving the UK economy. The accord aims to increase the private markets allocation to 30% in the coming years, with 60% already invested in the UK.
Liz Fernando, Chief Investment Officer of Nest, signed the Mansion House Accord on behalf of Nest, stating, "As a scheme committed to investing at scale in private markets and in the UK, we are pleased to join the Mansion House Accord."
The Mansion House Accord's approach is designed to help drive substantial positive impact for its members and the UK. The accord continues to foster partnerships that help tap into great investment opportunities on its doorstep, such as the British Growth Partnership, described as a "bold step" by Chancellor Rachel Reeves, which aims to unlock capital for clean energy, infrastructure, and high-growth UK businesses.
The Mansion House Accord is supported by the forthcoming final report from the UK Pensions Investment Review, which may recommend additional reforms to improve access to private market vehicles.
- The Mansion House Accord, collectively signed by 17 UK pension providers, is committed to investing at least 10% of their main default fund assets into private assets by 2030, with at least 5% allocated to UK-based opportunities like private equity, venture capital, infrastructure, and other productive finance sectors.
- The government's initiatives, such as the British Growth Partnership and National Wealth Fund, aim to ease pension scheme investments in private and illiquid assets like infrastructure, supporting businesses without requiring fresh government subsidies or tax incentives.
- The shift in pension fund investments towards private markets and UK infrastructure, facilitated by the Mansion House Accord, could unlock up to £50 billion for these investments by the end of the decade.
- Regulatory and planning reforms are underway to strengthen the pipeline of housing and infrastructure projects, including clean energy initiatives, to create attractive investment opportunities for pension funds.
- The Pension Schemes Bill includes a "last resort" power to impose mandatory investment targets for pension schemes if industry-led changes do not materialize, ensuring the commitment delivers results while protecting savers' interests.
- The Mansion House Accord's goal is to invest in communities and infrastructure used by UK workers, aiming to drive the UK economy by increasing the private markets allocation to 30% in the coming years and with 60% already invested in the UK.
