Credit: Kirsty O’Connor / Treasury
Seventeen of the largest defined contribution plan providers in the U.K. will up their alternative investment allocations to a minimum of 10% by 2030, with at least half of that in the U.K., as part of the Mansion House Accord, signed on Tuesday. Chancellor of the Exchequer Rachel Reeves intends the agreement to boost pension investments in unlisted assets such as infrastructure, private equity and real estate.
Signatories of the accord included Aon, Legal & General, Mercer, Aviva, Nest, the Universities Superannuation Scheme, LifeSight, Royal London, Aegon, M&G, Natwest Cushon, NOW: Pensions, Phoenix Group, the People’s Pension, SEI, Smart Pension and TPT Retirement Solutions. The signatories have 252 billion pounds of assets subject to the pledge, a figure which could rise to 740 billion pounds by 2030, according to His Majesty’s Treasury.
The accord largely expands on the 2023 Mansion House Compact, which called for these investors to allocate a minimum of 5% of their workplace defined contribution default funds to alternatives but had no specific domestic investment targets.
Some U.K. DC plans are already ahead of the accord’s targets.
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“We currently have around 15% of our assets under management in private markets, and an ambition to increase this to 30% in the coming years,” said Nest CIO Elizabeth Fernando in a statement. “Around 60% of this private market allocation already is in the U.K.”
Reeves’ plans to boost domestic investment also include the consolidation of 92 local government pension schemes into larger “mega-funds,” which have the scale of Canadian public pension funds and Australian superannuation funds.
The Labour Party’s Treasury wants the U.K.’s pensions to be able to invest more like their Canadian and Australian peers; these funds generally have large allocations to alternative investments and are able to invest in big infrastructure projects.
“Comparable Australian schemes invest significantly more in private markets and domestic companies than U.K. schemes, and research suggests greater investment in private markets can deliver security through diversified asset holdings and potentially drive higher returns,” argued a Treasury statement.
The Pensions Investment Review, due later this spring, will provide guidance on how these mega-funds will be formed. The review will also include metrics to track the progress of and commitments to the Mansion House Accord.
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Tags: Alternatives, Alts, Mansion House Accord, Rachel Reeves, UK, UK Pensions
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