The Pensions Regulator (TPR) has launched a fresh drive to understand why pension schemes are are not allocating more money into private markets and UK infrastructure, despite government efforts to encourage long-term investment into these growth sectors.
The initiative will examine how both DC and DB schemes approach investments in growth assets, and identify the practical barriers preventing greater allocations.
TPR said the work aims to support better long-term returns for savers and build on recent momentum in this area sparked by the voluntary Mansion House Accord.
This voluntary agreement has seen 17 DC workplace pension providers pledge to invest at least 10 per cent of defaults into private markets by 2030, of which half will be in the UK-based assets. This was followed by October’s launch of the Sterling 20 partnership — bringing together 20 major schemes and insurers — to invest in UK opportunities.
TPR has already issued guidance to help trustees assess the full range of private market options. This next phase of work will use sector insights to examine market opportunities, investment structures, and the UK-focused pipeline of assets, to identify limitations shaping scheme decisions.
The regulator said the government’s industrial strategy, including growth areas such as science and technology, presented long-term opportunities for pension investment.
TPR said its findings will be shared with government, with a market oversight report due next year.
TPR chief executive Nausicaa Delfas said the regulator was “uniquely placed” to engage directly with schemes and uncover the challenges they face when considering private markets. “We hope our research will provide insight to help trustees consider investment in diverse assets to achieve better returns for savers,” she adds.
Executive director of market oversight Julian Lyne says the regulator would step up efforts to improve trustee capability and governance. “We expect trustees to acquire the skills, capabilities and access to professional advice to consider investing in diversified portfolios,” he said. “Where schemes fall short, we will be asking trustees to consider whether it would be in savers’ interests to consolidate into larger vehicles with greater investment capabilities.”