(Commonwealth_ Europe) A significant new government initiative, in partnership with some of the UK’s largest pension providers, is being launched to boost investment in domestic companies and stimulate Britain’s economic growth. Under the voluntary Mansion House Accord, seventeen workplace pension providers are committing to channel more of their assets into private markets, with a particular focus on investments within the UK. These pension firms will pledge to allocate a minimum of 10% of the funds they manage from defined contribution (DC) pensions to private markets within the next five years. Crucially, at least half of that—5% of the total fund value—must be invested in the UK, provided that appropriate assets are available.
This new effort comes amid rising concerns about the competitiveness of London’s capital markets, particularly as several major companies have moved their primary listings from London to other financial hubs such as New York. The capital’s stock markets have notably underperformed in comparison with international peers over the past decade. The FTSE 100 index has risen by just 23% in the past 10 years, whereas indices like the Dow Jones in the US have surged 133%, Germany’s DAX by 115%, and Japan’s Nikkei by 87%. High-profile exits from the London Stock Exchange, including chip designer ARM Holdings choosing a US float and private equity firm CVC Capital Partners opting for a listing in Amsterdam, have highlighted the struggle to retain and attract major listings in the UK.
The Mansion House Accord builds on the earlier Mansion House Compact, signed in July 2023, which saw eleven UK pension providers agree to invest 5% of their DC default funds in unlisted equities, such as venture capital and growth equity, by 2030. The latest agreement considerably expands that ambition, both in scope and the number of participating pension schemes. The firms now joining the accord include Aegon UK, Aon, Aviva, Legal & General, LifeSight, M&G, Mercer, NatWest Cushon, Nest, now: pensions, Phoenix Group, Royal London, Smart Pension, the People’s Pension, SEI, TPT Retirement Solutions, and the Universities Superannuation Scheme (USS). Collectively, these providers manage approximately 90% of all active defined contribution pension savings in the UK.
This policy initiative is not only designed to stimulate domestic economic growth by directing more capital into UK companies—particularly in sectors such as clean energy, infrastructure, and start-ups—but also to address the longstanding issue of relatively low pension returns for British savers. Compared to international standards, British pensioners have seen weaker returns from their defined contribution pensions. By increasing exposure to higher-growth areas like venture capital and private equity, the government hopes to deliver better outcomes for retirees while simultaneously unlocking capital for productive economic use.
Chancellor Rachel Reeves praised the initiative, describing it as a bold move that could unlock billions in investment for key sectors. She emphasized that this influx of capital has the potential to deliver economic growth, strengthen pension funds, and improve the financial security of working people in retirement. Pensions Minister Torsten Bell echoed this sentiment, stating that pensions are not only essential for retirement security but also a critical source of long-term investment capital for the UK’s future economic prosperity. He noted that the decision by pension providers to allocate more funds to productive assets like infrastructure and growing businesses is a positive step toward better outcomes for both savers and the broader economy.
Yvonne Braun, a director at the Association of British Insurers, underscored that the investments made under the accord will continue to be aligned with the best interests of savers. However, she emphasized that for the initiative to succeed, the government must take further action. The agenda includes ensuring there is a steady supply of suitable investment opportunities, removing barriers that currently deter such investments, and implementing broader pension reforms effectively.
Zoe Alexander from the Pensions and Lifetime Savings Association (PLSA) highlighted the existing commitment of UK pension schemes to investing in domestic growth assets. She described the accord as a demonstration of the sector’s collective ambition and confidence in the UK’s economic potential. According to Alexander, the government’s reciprocal commitment to building a robust pipeline of investible projects is essential to fulfilling the accord’s promise.
Lord Mayor of London Alastair King also weighed in, stating that if the UK wants innovative firms to scale domestically, they must have access to capital. He emphasized that the initiative is about improving pension outcomes and creating a more dynamic and competitive investment environment in the UK.
This concerted effort reflects a strategic shift in how pensions can be used as a lever for national economic development. It underscores the government’s growing focus on mobilizing long-term capital from pensions into high-growth areas of the UK economy while ensuring that returns for savers are protected and enhanced. The success of this initiative will depend on effective coordination between government bodies, regulators, and the private sector to cultivate the right conditions for sustained investment and economic growth.
