UK financial heavyweights commit £50 billion to private equity and infrastructure projects under the Mansion House Agreement
UK Pension Providers Commit to Boosting Private Market Investments
A significant shift in the UK's pension investment landscape is underway, with 17 major Defined Contribution (DC) pension providers committing to invest 10% of their default fund assets into private markets by 2030. This voluntary agreement, known as the Mansion House Accord, amounts to roughly £50 billion and targets at least half of this investment within the UK.
The accord aims to unlock the potential of private markets, which include private equity, infrastructure, property, and private debt. These private assets generally offer higher expected returns compared to publicly traded assets due to lower liquidity and higher risk premiums. Over 25 years to 2024, private equity funds returned an average of 13.1% per year, outperforming the S&P 500 by about 4.5% annually.
The UK government is supporting this initiative alongside the Mansion House Accord by introducing the Pension Schemes Bill. The bill includes provisions such as:
- Mandating master trust pension providers to reach at least £25 billion in assets under management (AUM) by 2030 or show credible plans to do so, aiming to achieve scale and buying power beneficial for investing in private markets.
- Legal provisions enabling future mandates on pension asset allocations if voluntary progress is insufficient.
- A new value for money framework, shifting from a narrow focus on fees to evaluating pension schemes based on overall value delivered to members.
These measures are expected to drive growth in demand and supply for Long-Term Asset Funds (LTAFs) and other investment vehicles suited to private market assets. This move aligns with broader government industrial and infrastructure strategies, aiming to channel pension capital into UK growth sectors.
Nest, the government-backed workplace pension scheme, is one of the signatories of the Mansion House Accord. Liz Fernando, the Chief Investment Officer of Nest, stated that Nest, as a scheme committed to investing at scale in private markets and in the UK, is pleased to join colleagues from across the industry in this significant initiative.
In addition to the Mansion House Accord, the British government is launching the British Growth Partnership, an initiative aimed at providing capital for clean energy, infrastructure, and high-growth UK businesses. The Treasury has confirmed that the British Business Bank has received Financial Conduct Authority (FCA) approval to launch the British Growth Partnership.
The Mansion House Accord and the British Growth Partnership are part of a strategic effort to improve returns for pension savers and mobilise long-term capital into economic development. Chancellor Rachel Reeves has described the Mansion House Accord and the British Growth Partnership as a "bold step".
The Mansion House Accord builds on the 2023 Mansion House Compact and is supported by the forthcoming final report from the UK Pensions Investment Review. The accord is expected to release £25bn into the domestic economy over the next six years, enhancing economic growth and pension returns by increasing exposure to private equity, infrastructure, and real assets.
- The Mansion House Accord, a commitment by 17 major UK DC pension providers to invest 10% of their default fund assets into private markets by 2030, aims to unlock the potential of private markets, which include private equity, infrastructure, property, and private debt.
- Over 25 years to 2024, private equity funds returned an average of 13.1% per year, outperforming the S&P 500 by about 4.5% annually.
- Nest, the government-backed workplace pension scheme, is one of the signatories of the Mansion House Accord, and its Chief Investment Officer, Liz Fernando, stated that Nest is pleased to join colleagues from across the industry in this significant initiative.
- The UK government is supporting this initiative by introducing the Pension Schemes Bill, which includes provisions to mandate master trust pension providers to reach at least £25 billion in assets under management by 2030 and to provide legal provisions enabling future mandates on pension asset allocations if progress is insufficient.
- In addition to the Mansion House Accord, the British government is launching the British Growth Partnership, an initiative aimed at providing capital for clean energy, infrastructure, and high-growth UK businesses.
- The Mansion House Accord and the British Growth Partnership are part of a strategic effort to improve returns for pension savers and mobilize long-term capital into economic development, aligning with broader government industrial and infrastructure strategies.
