The default funds of large defined contribution master trusts are already collectively 8.9 per cent invested in private markets, little more than a percentage point short of the targets set by the Mansion House Accord.
According to data collected by The Pensions Regulator, 5.9 per cent, or £12.3bn, is invested into unlisted private market investment, and 3 per cent is listed private market investment, totalling £6.2bn. However, these allocations are unequal across master trusts.
TPR received information from DC master trusts during the accumulation phase. Its data reflects assets in 25 master trusts as of 31 December, representing 74 per cent of total MT assets.
According to the Mansion House Accord, signatories committed to allocate at least 10 per cent of assets in main DC default funds to private market investments by 2030. As part of the Pension Schemes Act, the government now has powers to mandate schemes to hit this target if deemed necessary.
The Accord also specified that at least half of the private markets allocation (5 per cent) should be invested in UK private markets.
TPR data shows that, in total, currently 3.3 per cent of the master trust assets are invested in UK private markets (2.6 per cent versus 0.7 per cent).
In total, 15.5 per cent of the master trust assets are invested domestically, including within asset classes such as gilts. In total, 87.7 per cent of all assets are invested across equities and bonds (65 per cent for equities, 22 per cent for bonds).
Richard Knox, TPR’s executive director for strategy, policy and analysis, says: “TPR does not tell schemes how to invest but we do challenge all schemes to deliver value for money. We want to see well-governed schemes confidently considering a broader range of investments, with potential to improve returns for members.
“We expect trustees and administrators to review their strategy, governance arrangements and diversification in line with our private market guidance. Where schemes cannot demonstrate value, trustees should consider consolidation in members’ interests.”
Collection of asset allocation data by TPR is eexpected to run annually until new legislative value for money disclosure requirements are introduced under the Pension Schemes Act.
