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A new agreement with Britain's biggest pension funds is set to unlock up to £50bn of investment for UK businesses and major infrastructure projects, the government announced on Tuesday.
The Treasury said that 17 workplace pension providers managing around 90% of active savers' defined contribution pensions will sign the Mansion House Accord at a roundtable in London with chancellor Rachel Reeves and minister for pensions Torsten Bell on Tuesday.
Signatories, which include Aviva (AV.L), Aegon (AGN.AS) and Legal & General (LGEN.L), will pledge to invest 10% of their workplace pension portfolios in assets that boost the economy such as infrastructure, property and private equity by 2030. The Treasury said that at least 5% of these portfolios will be ringfenced for the UK, which is expected to release £25bn directly into the UK economy by the end of the decade.
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The Treasury said that the £50bn and £25bn cash estimates for unlocked investment are indicative and assume current private market investment levels stand at 3.5%, of which 40% is UK-based. In line with the accord, these would increase to 10% and 50% respectively by 2030.
Reeves said: "I welcome this bold step by some of our biggest pension funds, which will unlock billions for major infrastructure, clean energy, and exciting startups — delivering growth, boosting pension pots, and giving working people greater security in retirement."
Bell said he also welcomed the "pensions industry decision to invest in more productive assets, from growing companies to infrastructure. This supports better outcomes for savers and faster growth for Britain."
The Treasury said that pension savers would benefit from the commitment to invest in private markets. It said that comparable Australian schemes invest significantly more in private markets and domestic companies than those in the UK, and that research suggested that greater investment in this area could "deliver security through diversified asset holdings and potentially drive higher returns".
The Treasury added that this agreement was "more ambitious" than the 2023 Mansion House Compact, in which 11 funds committed to the aim of investing 5% of their default workplace DC funds in unlisted companies by the end of the decade. Default workplace DC funds refer to the off-the-shelf products providers offer to the vast majority of savers.
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