Investment powerhouses from the UK commit to pouring £50 billion into private equity and infrastructure projects in accordance with the Mansion House Agreement.
Mansion House Accord: Pension Funds to Invest £50bn in UK Private Markets by 2030
The Mansion House Accord, a voluntary commitment made by 17 of the UK's largest pension providers, aims to allocate up to £50bn to private markets and infrastructure by 2030. The signatories include major institutions such as Aviva, Aegon, Legal & General, and Nest.
The agreement represents a strategic shift for these pension funds, with each signatory targeting a 10% allocation of their defined contribution (DC) portfolios to private markets. At least half of this investment is intended for UK-based projects or companies.
The Mansion House Accord is a bold step towards diversifying portfolios by incorporating more illiquid, long-term, and often higher-return private assets. It is anticipated to improve returns for savers while supporting UK economic growth.
For the UK economy, channeling such substantial capital into infrastructure and innovation-related sectors supports government objectives highlighted in the Modern Industrial Strategy and the National Infrastructure Strategy. These strategies emphasize growth in frontier industries like life sciences, digital technologies, and telecommunications, which align well with private equity and venture capital investment interests.
While voluntary now, the Pension Schemes Bill empowers the government to mandate such productive investments in future, particularly if pension funds fail to meet the pledged targets. Non-compliance could risk losing eligibility for auto-enrolment schemes, which would be a strong enforcement mechanism beyond the voluntary nature of the Accord.
The Mansion House Accord is expected to stimulate the private market ecosystem by requiring a pipeline of viable UK assets for pension trustees to invest in, potentially accelerating infrastructure development and innovation financing.
The initiative, backed by pension schemes representing over 90% of workplace DC savers, is expected to release £25bn into the domestic economy over the next six years. Nest, the government-backed workplace pension scheme, is one of the signatories and is committed to investing at scale in private markets and in the UK.
The Mansion House Accord will be supported by the final report from the UK Pensions Investment Review, which is expected to recommend further reforms. The Treasury has also approved the British Growth Partnership, an initiative that will provide DC pension schemes and institutional investors with access to UK-focused venture capital funds.
The Mansion House Accord is a significant initiative, joining colleagues from across the industry, and builds on the 2023 Mansion House Compact. The accord aims to invest in the infrastructure used by UK workers, boosting economic growth and enhancing pension returns. Its approach is intended to drive substantial positive impact for its members and the UK.
Chancellor Rachel Reeves described the initiatives as a "bold step" that will enhance long-term returns for pension savers. The Mansion House Accord and the British Growth Partnership are set to unlock capital for clean energy, infrastructure, and high-growth UK businesses, marking a promising future for the UK's economic growth and pension investments.
References: 1. Mansion House Accord: www.pensions-investment.org.uk 2. British Business Bank: www.british-business-bank.co.uk 3. Pension Schemes Bill: www.parliament.uk 4. Modern Industrial Strategy: www.gov.uk 5. National Infrastructure Strategy: www.gov.uk
- The Mansion House Accord, a commitment by 17 UK pension providers, plans to invest £50bn in UK private markets by 2030, with a focus on private equity, venture capital, and infrastructure.
- Pension funds, such as Aviva, Aegon, Legal & General, and Nest, are strategic in their intent to allocate 10% of their defined contribution (DC) portfolios to these markets, half of which will be for UK-based projects or companies.
- This move represents a shift to diversify portfolios with illiquid, long-term, and often higher-return private assets, aiming to improve returns for savers and support UK economic growth.
- The Pension Schemes Bill empowers the government to mandate such investments in the future if targets are not met, potentially enforcing auto-enrolment scheme eligibility as a consequence of non-compliance.
- The initiative is anticipated to stimulate the private market ecosystem, accelerating infrastructure development and innovation financing, while releasing £25bn into the domestic economy over the next six years.
- The Mansion House Accord aligns with government objectives in the Modern Industrial Strategy and National Infrastructure Strategy, focusing on frontier industries like life sciences, digital technologies, and telecommunications.
