The government looks set to delay the announcement of the next stage of the Mansion House agreement, according to industry insiders.
This next stage, understood to be called the ‘Mansion House Accord’, will see DC providers pledge to invest 10 per cent of default funds into private markets, of which half will be in the UK.
Encouraging pension schemes to boost investment into the UK economy is a key part of the Government’s wider plan to drive growth. Initially it had been expected that this next stage of these pension reforms would be announced next week.
There have been reports that if schemes do not voluntarily boost investments into private markets, the government may look at introducing legislation that would mandate this.
The delay is thought to be due to timing and operational issues in government, and there is no suggestion that it is stepping back or watering down plans after they were reported in the media earlier this week.
However a number of people in the industry have voiced concerns about aspects of this policy. Mercer’s UK chief executive Benoit Hudon said a stronger pipeline of UK private assets was needed, as current options did not deliver good enough returns for pension scheme members.
In an interview with City AM Hudon called on chancellor Rachel Reeves to deliver a clearer strategy on projects it wishes to deliver. “Our view is there simply isn’t a pipeline at the minute to drive good returns for members.” He added there were equal or better opportunities elsewhere at present at the scale needed by pension schemes.
Hudon also called for the government to introduce tax incentives to relieve some of the costs of investment in the UK, and help drive better retunes for members.
The new agreement with the pensions industry on private markets is expected to include different signatories to those who signed up to the original company. One source told Corporate Adviser that the number of signatories will be higher, potentially at around 20, with single-employer trusts potentially signing up for the first time.
Steve Webb, partner at LCP and former pensions minister said: “The Mansion House Compact had several flaws. There was no requirement that the 5 per cent private markets allocation be in the UK, and progress on implementation by 2030 had been slow. It was not happening in the straight line that had been hoped for.”
Reaction to the rumoured announcement has been mixed, with a number of commentators seeing the proposed intervention as an interference with fiduciary duty. There is believed to be no equivalent commitment drawn in relation to non-workplace pensions, including Sipps and personal pensions.
However, a number of pension consultants were positive about this expected development. XPS head of DC investment Mark Searle says: “Reports suggest the government might mandate UK allocations if domestic investment lags behind global benchmarks.
“While we have strong reservations about mandating investment choices and the potential impact on UK savers, capacity constraints – with is often cited as a concern – this shouldn’t deter DC schemes.
“A significant pool of illiquid assets is becoming available as DB schemes approach buyout, presenting a valuable opportunity for DC savers. Now is an exciting time to review asset allocations and enhance member outcomes by timing the purchase of illiquid assets to deliver real value.”
