British pension funds pledged on Tuesday to invest up to 50 billion pounds ($66 billion) of additional capital into UK businesses and infrastructure as the government seeks to leverage private capital for public projects and economic growth.
Seventeen investment firms, including Aviva, Legal & General, and M&G, committed to allocating up to 10% of their pension portfolios to infrastructure, property, and private equity by 2030. Half of this investment will be specifically directed toward UK assets.
Millions of workplace pension scheme members will see their savings increasingly directed toward higher-risk, potentially higher-return assets such as early-stage businesses and green energy projects, alongside traditional investments in stocks and bonds.
These pension fund managers will now compete directly with private equity and specialist investment firms in a market that investment data firm Preqin projects will exceed $30 trillion by 2030.
Chancellor of the Exchequer Rachel Reeves described the initiative as a “bold step” that would stimulate growth while providing working people with greater financial security in retirement.
This new Mansion House Accord expands on a 2023 target, doubling the allocation from 5% to 10% of pension assets in productive investments and broadening the range of eligible assets.
“We have long believed that UK pension savers should benefit from exposure to the higher returns provided by private markets,” stated António Simões, Group Chief Executive Officer of L&G.
Other participating funds include the Universities Superannuation Scheme, the National Employment Savings Trust, and The People’s Pension.
Signatories to the accord are expected to gain improved access to the British Business Bank’s pipeline of UK venture capital opportunities, following the Financial Conduct Authority’s approval of the lender’s British Growth Partnership.
The commitments made on Tuesday are currently voluntary. However, the government plans to monitor progress and reinforce these commitments with additional measures in an upcoming pensions review.
According to media reports, including the Financial Times, the government is considering mandating pension funds to invest more in UK projects. This has concerned some executives, who argue that such requirements may not serve their clients’ best interests.
“We believe the most sustainable solution lies in creating the right incentives, not mandates,” said a spokesperson for Phoenix, one of the accord’s signatories.
Britain’s finance ministry was not immediately available for comment.
A YouGov survey of 1,563 UK pension savers commissioned by workplace savings and pensions fintech NatWest Cushon showed 52% of respondents agree that pension funds should invest more in the UK.
($1 = 0.7577 pounds)
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