Pensions UK is calling for more co-ordinated action between government, regulators and public finance institutions to deliver scalable investment vehicles in private markets and help schemes meet Mansion House commitments.
This call to action accompanies a major new report looking at how schemes are currently deploying capital into private markets one year on from the Mansion House Accord.
Pension UK says it wants to ensure there are end-to-end pathways that connect pension capital to investable UK opportunities alongside regulation that enables long-term investment decisions focused on value as well as cost.
The report found that the current system to invest in private markets remains fragmented, despite significant policy activity. It says pensions schemes face a complex landscape with unclear co-ordination, accountability and engagement routes to investing in UK growth assets.
It adds that the various public finance institutions that are involved in this market are at different stages of readiness. The report evaluated four key public finance institutions — the British Business Bank, the National Wealth Fund, Homes England and Great British Energy — and said that the British bank had made the most tangible progress to date in created an investable route for pension schemes, which includes through the British Growth Partnership.
It adds that the Pensions UK is will work with the other institutions to help develop similar investment pathways for schemes, and adds that there is support for this from these bodies.
It says that while there still remains barriers to wider investment at present into private markets these are “practical and solvable”. It says current issues cited by pension schemes include insufficient risk-adjusted returns, a lack of suitable opportunities and policy uncertainty. Pensions UK adds that improved pipeline visibility, risk-sharing, and value-focused regulation can unlock further allocations.
It also adds that there are successful private finance initiatives, which provide a valuable blueprint. The report highlights successful case studies which showcase the structures and vehicles that work for pension schemes.
The report ‘From commitment to deployment: Scaling pension fund investment in the UK economy states that UK pension schemes already invest an estimated £1 trillion in the UK across equities, bonds, gilts, and alternatives investments. But it says that further growth-focused investments into private markets will only happen if the system can deliver more clear routes to market and appropriate risk-return prospects.
The report is being published a year on from the signing of the Mansion House Accord, a voluntary commitment by 17 of the UK’s largest pension providers to boost investment in unlisted assets, both in the UK and globally. As part of that Accord, Government committed to help build a pipeline of investable opportunities.
Pensions UK executive director of policy and advocacy Zoe Alexander says:
“More practical, co-ordinated action by Government and agencies is needed to support their efforts to keep scaling those investments. Schemes need a diverse range of investable routes that are consistent with fiduciary duty, and deliver good outcomes for savers.
“A year on from the delivery of the Mansion House Accord, this report sets out the practical steps needed so that public finance institutions, regulators and industry can work together to connect long-term pension capital with a clearer, more investable pipeline of UK opportunities.”
The report has been welcomed by the industry. Royal London’s director of policy Jamie Jenkins says:”It is widely accepted that greater economic growth will lead to greater prosperity for all, and that pension investments can play an important part in helping grow the UK economy.”
“Whether investing in social infrastructure, sustainable technologies or simply supporting innovative companies to thrive, there is an opportunity to improve our society while at the same time generating good returns for people saving for their retirement. There is inherent value for all concerned.”
“This report from Pensions UK recognises the progress already made but, importantly, identifies the actions we need to take to drive this ambition further in the coming years.”
Meanwhile Isio partner George Fowler adds: “The conversation around DC pension investment in private markets has clearly moved on over the last 12-18 months. The industry is now broadly aligned on the role illiquid assets can play in improving long-term member outcomes and supporting UK growth, but the focus is increasingly shifting towards implementation and delivery.
“What matters now is whether schemes and providers can access genuinely investable opportunities at the right scale, with appropriate governance, liquidity management, and fee structures in place. Simply increasing allocations alone will not automatically lead to better outcomes for members.
“We are also seeing a growing recognition across the market that operational execution matters just as much as strategic ambition. Areas such as manager selection, portfolio construction, and liquidity management will ultimately determine whether these allocations succeed over the long term.
“From a DC perspective, the direction of travel is clear. The challenge now is building the infrastructure, investment vehicles, and policy environment needed to support scalable long-term investment in a way that remains consistent with fiduciary duty and delivers value for savers.”