UK pension fund managers have agreed to invest at least 5% of their assets into UK private markets, marking a win for the Labour government that’s seeking to boost the economy by drawing billions of pounds into local startups and infrastructure projects.
Seventeen large pension providers are signing up to the voluntary commitment, which will see them invest at least 10% of defined-contribution default funds in private markets by the end of the decade, according to a statement on Tuesday. Within that allocation, at least 5% of the total will be going to UK private markets, “assuming a sufficient supply of suitable investible assets,” it said.
The new deal will “unlock billions for major infrastructure, clean energy, and exciting startups — delivering growth, boosting pension pots, and giving working people greater security in retirement,” Chancellor of the Exchequer Rachel Reeves said in the statement.
The agreement comes less than two years after the original Mansion House Accord, when 11 companies committed to invest 5% of pension assets in unlisted equities, though a proposal for a specific UK allocation was dropped.
The new requirement to buy British assets was again contentious. Scottish Widows, the pension arm of Lloyds Banking Group Plc, isn’t a signatory to the new accord, reflecting its wariness that such a mandate would impinge on its ability to maximize returns, according to the Telegraph.
The fresh accord is set to unlock £50 billion ($66 billion) of investment for UK businesses and major infrastructure projects, and assets within its scope currently amount to £252 billion, according to the statement.
The Labour government, which came to power in July 2024, has been trying to deliver on its pledge to boost private investment and economic growth, and measures include a raft of reforms to the country’s fragmented pension system. Policymakers have so far shied away from mandating pension funds to invest in UK assets. Such a move would face a backlash, given funds are bound by fiduciary duties that require them to act in the best interests of their customers.
Speaking in an interview to Bloomberg Television on Tuesday, Reeves said she didn’t rule out mandating pension funds to allocate money to UK assets, but added it wasn’t needed.
“I’m never going to say never,” she said when asked if she was considering such a move. “But I don’t think it’s necessary. We don’t need to mandate them if people are willing to sign a voluntary accord.”
Whether pension funds end up channeling more into domestic investments will also depend on their attractiveness. The Pensions and Lifetime Savings Association, a trade body, has pointed to the government’s industrial strategy and planning reform as critical for ensuring a pipeline of investable assets.
In the new accord, shares that are listed on the London Stock Exchange’s AIM market as well as the Aquis Growth Market also count toward the UK private-markets allocation target. The exchanges “play a critical role in supporting high-growth companies that drive innovation, jobs and productivity,” said Alastair King, Lord Mayor of London, who helped organize the pact.
Pension providers that signed up to the new Accord:
Written by: Leonard Kehnscherper — With assistance from Joe Mayes and Lizzy Burden @Bloomberg
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