Pension providers ‘to boost saver outcomes and UK growth’ under new initiative

Seventeen workplace pension providers are signing up to a voluntary initiative with the aim of boosting savers’ investments and UK growth.

The Mansion House Accord aims to help defined contribution (DC) pension savers by harnessing higher potential net returns available in private markets, as well as strengthening investment in the UK.

Those signing up commit to allocating at least 10% of their DC default funds in private markets by 2030, with at least 5% of the total allocated to the UK, assuming that there is a sufficient supply of suitable assets.

The Government said £25 billion could be released directly into the UK economy by 2030, adding that some pension funds have already indicated privately they will go beyond the targets agreed through the accord.

The commitment is subject to fiduciary duties as well as the Consumer Duty, which requires financial firms to put consumers at the heart of their products.

Workers are often placed into a DC pension pot under automatic enrolment. The size of the pension pot they eventually end up with depends on factors such as how early they start saving, how much they put in and investment performance.

The 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.

Based on providers’ current investment holdings, total pension assets in the scope of the agreement amount to £252 billion. The industry expects this amount to increase over the accord’s lifetime.

Those signing up are: 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 (USS).

The initiative builds on the Mansion House Compact, which was signed in July 2023 and saw 11 UK pension providers committing to the aim of investing 5% of DC defaults in unlisted equities, including venture capital and growth equity, by 2030.

For providers who have signed up to both, progress under the compact counts towards meeting the goals of the accord.

Chancellor Rachel Reeves said: “I welcome this bold step by some of our biggest pension funds, which will unlock billions for major infrastructure, clean energy, and exciting start-ups – delivering growth, boosting pension pots, and giving working people greater security in retirement.”

Pensions Minister Torsten Bell said: “Pensions matter hugely, they underpin not just the retirements we all look forward to, but the investment our future prosperity depends on.

“I hugely welcome the pensions industry decision to invest in more productive assets, from growing companies to infrastructure. This supports better outcomes for savers and faster growth for Britain.”

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.

“Investments under the accord will always be made in savers’ best interests. It is now critical that 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: “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.”

Zoe Alexander, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), said: “UK pension schemes already invest billions in UK growth assets.

“This 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.

“The Government, in its turn, has committed to take action to ensure there is a strong pipeline of investable assets for pension schemes. With everyone playing their part, there is great potential to boost returns for savers while providing vital funding to productive growth areas.”

Andy Briggs, Phoenix Group chief executive, said: “The new commitments have the potential to strengthen the economy by fuelling the growth of British businesses and boosting investment in critical infrastructure.”

Ben Pollard, chief executive, NatWest Cushon said: “The investment case for UK private markets is strong, which is why we are a signatory to the Mansion House Compact and have also signed up to the new Mansion House Accord.

“But there is another positive angle – reconnecting people with the investments their pension is making. These types of investments are real and tangible and show savers how hard their money is working to improve their standard of living in the UK.”

Patrick Heath-Lay, chief executive of People’s Partnership, provider of People’s Pension, 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.”

Lorna Blyth, managing director – investment proposition at Aegon UK, said: “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 Pension Schemes Bill later this spring.

“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.

“This includes collaborating with more organisations such as the British Business Bank to provide access to diverse types of private assets – from private equity to infrastructure, which are all vital for optimising member benefits and developing investment portfolios designed for long-term growth.”

Amanda Blanc, chief executive officer of Aviva Group, said: “This is a major opportunity for the pension and investment industry to support UK growth while delivering improved outcomes for pension savers.

“As a significant investor in private markets, Aviva has recently launched a number of funds to give over four million workplace pension customers even greater opportunity to invest in UK assets, including innovative, early-stage businesses, and we want to do much more.”