Mansion House Accord unlocks up to £50 billion investment for the economy, with first commitments to invest in the UK.
More ambitious targets than 2023 Mansion House Compact will unlock investment into UK businesses and major infrastructure projects, including clean energy developments.
Comes ahead of Pensions Investment Review final report, which will create megafunds to drive more investment, boost pension pots and grow the economy through the Plan for Change.
Up to £50 billion of investment for UK businesses and major infrastructure projects is set to be unlocked through a new agreement with Britain's biggest pension funds, as the Government goes further and faster to drive growth through the Plan for Change.
Seventeen workplace pension providers managing around 90 percent of active savers' defined contribution pensions will sign the Mansion House Accord at a roundtable with the Chancellor and Minister for Pensions in the City of London today (Tuesday 13 May).
Signatories to the Accord will pledge to invest 10 percent of their workplace portfolios in assets that boost the economy such as infrastructure, property and private equity by 2030. At least 5 percent 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 - creating jobs, boosting businesses and putting more money into people's pockets.
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.
The pledge follows hot on the heels of securing trade agreements with India and the US, which will add billions of pounds to the UK economy and protect thousands of steel and car manufacturing jobs, as well as a fourth interest rate cut since last Summer. This demonstrates the UK's strength in navigating a changing world, going further and faster through our Plan for Change to drive growth and put more money into people's pockets.
Rachel Reeves, Chancellor of the Exchequer, 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.
Torsten Bell, Minister for Pensions, said:
Pensions matter hugely, they underpin not just the retirements we all look forward to, but the investment our future prosperity depends on. I hugely welcome 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.
Today's announcement is more ambitious than the 2023 Mansion House Compact, where eleven funds committed to the aim of investing 5 percent 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 percent to 10 percent, and includes a specific commitment to investing 5 percent in the UK.
Progress against the commitment will be monitored and the initiative will be reinforced by measures to be announced in the upcoming final report of the Pensions Investment Review. The final report will tackle fragmentation in the UK pension system, creating pension megafunds that take advantage of scale and consolidation like Australian and Canadian funds do, to invest in productive assets like private markets and big infrastructure projects.
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.
Today's commitment comes alongside progress in the government's efforts to help pension savers benefit from the opportunities of investing in UK growth. The British Business Bank has now received regulatory approval from the Financial Conduct Authority to deliver the British Growth Partnership - which will provide UK pension funds and other institutional investors with access to the Bank's extensive pipeline of UK venture capital opportunities.
The government will continue working with the industry to make sure pension schemes deliver the best possible value for savers - while driving the investment needed to deliver growth and put more money into people's pockets.
Yvonne Braun, Director of Policy, Long-Term Savings, Health and Protection 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.
Alastair King, Lord Mayor of London, said:
The Mansion House Accord builds on the strong foundations of the Compact and signals a step change in ambition: more signatories, deeper allocations to private markets, and a clearer commitment to backing UK assets. That includes a renewed focus on revitalising the Alternative Investment Market (AIM) of the London Stock Exchange as well as the Aquis Exchange, which play a critical role in supporting high-growth companies that drive innovation, jobs and productivity. If we want those firms to scale in the UK, we must ensure they have the capital to do so. This is not just about better pension outcomes, it is about building a more dynamic, competitive investment ecosystem. Delivering long-term, sustainable growth is crucial and the City of London Corporation is delighted to have partnered with industry and Government to bring this ambition to life.
Zoe Alexander, Director of Policy and Advocacy at the PLSA, said:
UK pension schemes already invest billions in UK growth assets. This accord demonstrates the collective ambition of the DC sector to do even more, as well as its confidence that the UK will provide the right opportunities to invest, consistent with schemes' fiduciary duty to members. The Government, in its turn, has committed to take action to ensure there is a strong pipeline of investable assets for pension schemes. With everyone playing their part, there is great potential to boost returns for savers while providing vital funding to productive growth areas.
