Pension funds pledge £50bn to grow UK economy – Daily Business

Up to £50 billion of investment for UK businesses and major infrastructure projects is set to be unlocked through a new agreement with 17 of Britain’s biggest pension funds.

They manage around 90% of active savers’ defined contribution pensions and will sign the Mansion House Accord at a roundtable with the Chancellor and Minister for Pensions in the City of London today. 

Signatories to the Accord will pledge to invest 10% of their workplace portfolios in assets that boost the economy such as infrastructure, property and private equity by 2030.

At least 5% of these portfolios will be ringfenced for the UK, expected to release £25 billion directly into the UK economy by 2030.  

This investment could support clean energy developments across the country, delivering greater energy security and helping to lower household bills, as well as delivering growth finance to Britain’s world-leading science and technology businesses.

Pension savers will also benefit from the commitment to invest in private markets. Comparable Australian schemes invest significantly more in private markets and domestic companies than UK schemes, and research suggests greater investment in private markets can deliver security through diversified asset holdings and potentially drive higher returns. 

Chancellor Rachel Reeves said:  “Through our Plan for Change, we are choosing to back British businesses and British workers.

“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.”

Today’s announcement is more ambitious than the 2023 Mansion House Compact, where eleven funds committed to the aim of investing 5% of their workplace defined contribution default funds – the off-the-shelf funds providers offer to the vast majority of savers – in unlisted companies by 2030.

The new commitment involves the vast majority of the industry and brings more assets into scope, doubles the target from 5% to 10%, and includes a specific commitment to investing 5% in the UK. 

Some pension funds have already indicated privately that they will go beyond the targets agreed through the Mansion House Accord, which could lead to even more direct investment in the UK economy – and is particularly welcomed by the government. 

Yvonne Braun at the ABI, said: “As major investors, the pensions industry already plays a vital role in driving growth in the UK and globally.

“The Accord formalises the industry’s ambition to invest more in private markets to diversify investments, support innovation and infrastructure, and ensure prosperity.  Investments under the Accord will always be made in savers’ best interests.

“It is now critical that Government supports the industry’s ambition, by facilitating a pipeline of suitable investment opportunities, tackling barriers to investments, and delivering wider pension reforms effectively.”