The 17 signatories to the Mansion House Accord said the move could ultimately boost member outcomes but said progress would be dependent on a “pragmatic” approach to implementation from the government as well as the facilitation of a “steady supply” of high-quality UK investment opportunities.
The Mansion House Accord – announced today (13 May) – is a voluntary expression of intent by signatories to invest at least 10% of their defined contribution (DC) default funds in private markets by 2030, with at least 5% allocated to the UK.
The response from signatories was as follows:
Aegon UK: Essential government adopts pragmatic approach to implementation
Aegon said that, by committing to the Accord, it builds on its support for the Mansion House Compact and underscored its dedication to improving member outcomes through investing in a broader range of private assets previously not accessible to DC pension savers.
It said this includes a focus on UK investments, aligning with the government's ambitious growth agenda.
Aegon said it also solidifies its strategic partnership with the British Business Bank and its intention to provide the cornerstone investment in the British Growth Partnership Fund I, which will provide access to UK private assets.
The move comes after Aegon announced in April it would "unlock" private markets for its workplace pension members, following Financial Conduct Authority authorisation of three long-term asset funds (LTAFs) – incorporating these LTAFs within its largest workplace default fund, the Universal Balanced Collection (UBC).
Aegon UK managing director of investment proposition Lorna Blyth said the firm was committed to ensuring its customers could access and share in the potential growth and success of new, innovative companies as part of diversified portfolios but urged the government to adopt a "pragmatic" approach to the reforms.
She said: "The Accord is a key element of the government's growth agenda, alongside other initiatives likely to transform the UK's DC pensions market. It comes as the conclusions of the Pensions Investment Review are expected imminently and further fundamental changes are expected in the Pension Schemes Bill later this spring.
"This makes it essential that the government adopts a pragmatic approach to implementation. Realistic timeframes and a steady supply of high-quality UK investment opportunities across all private asset classes are crucial for ensuring success. This includes collaborating with more organisations such as the British Business Bank to provide access to diverse types of private assets – from private equity to infrastructure, which are all vital for optimising member benefits and developing investment portfolios designed for long term growth."
Aon: Breaking down barriers to enable greater investment in private assets
Aon said the Mansion House Accord was a "great step forward" in helping to deliver better expected returns over the long-term.
The firm's signing comes after it said it would make changes to the main Aon Master Trust default funds - introducing private assets within the Aon Managed Core Retirement Pathway Funds and increase the allocation to private assets within the Aon Managed Retirement Pathway Funds by early next year.
Aon chief investment officer for DC solutions Jo Sharples said: "We believe that investing in private assets will benefit pension scheme members by delivering better expected returns over the long-term, ultimately resulting in higher retirement outcomes.
"The new Mansion House Accord is a great step forward in achieving this and is a fantastic example of how the UK pensions industry can work together to break down barriers to enable greater investment in private assets."
Aviva: A major opportunity for the pensions industry
Aviva said the Accord was a major opportunity for both the pensions and investment industries and would help deliver improved outcomes for pension savers.
The insurer currently allocates around 10% to direct property through the growth phase of its My Future Focus Universal Lifestyle Strategy, the standard default investment option for its members.
Commenting on the Mansion House Accord, Aviva group chief executive (CEO) Amanda Blanc said: "This is a major opportunity for the pension and investment industry to support UK growth while delivering improved outcomes for pension savers.
"As a significant investor in private markets, Aviva has recently launched a number of funds to give over four million workplace pension customers even greater opportunity to invest in UK assets, including innovative, early-stage businesses, and we want to do much more."
M&G: Enhanced returns, greater diversification and better value
M&G said individuals could significantly benefit from greater investment into private markets.
It said its own £128bn with-profits fund, PruFund, already invested extensively in private markets – citing M&G's 2021 launch of Catalyst, a multi-billion-pound, purpose-led, private asset strategy focused on innovative companies, as an example of its work in this area.
M&G CEO Andrea Rossi said: "Private markets play a fundamental role in shaping the world around us through long-term investment in real estate and infrastructure projects, alongside lending to and investing in companies that contribute to economic growth. By enabling and encouraging greater investment into these assets, individuals could benefit from enhanced returns, greater diversification and better value by having their pensions invested in this way.
"Reaffirming our commitment to the Mansion House agreements is aligned with our purpose which is to give everyone real confidence to put their money to work and our track record in private markets investment. This is a responsibility we have undertaken for over 170 years through our £128bn With Profits Fund, demonstrating the power of collective investment for millions of people through the generations. With £100bn invested in the UK economy, our savers enable the construction of schools, hospitals and homes, along with investing in UK companies that are positioned for future growth worldwide."
Mercer: Helping to put more money into people's pockets
Mercer said it was positive to see more firms signing up to the extended Mansion House agreement.
The firm has already pledged to introduce private markets to Mercer SmartPath, the off-the-shelf default used by clients, including the Mercer Master Trust – targeting an allocation of 10-15% by 2030.
Mercer UK CEO and chair Benoit Hudon said: "As founding signatories on the first Mansion House Compact, it's positive to see more firms signing up to this extended ambition.
"Having the flexibility and ambition to invest into initiatives that bolster UK economic growth has the potential to benefit communities, help put more money in people's pockets and support public services and indeed the broader economy. We are pleased to have had the opportunity to work closely with government and other stakeholders to agree the joint commitment needed to make this initiative a success."
NatWest Cushon
NatWest Cushon said the majority of savers wanted to see more of their money invested in the UK – views it said aligned with the Mansion House Accord.
The master trust surveyed over 2,000 adults in April finding that 52% of savers agree that pension funds should invest more in the UK and only 8% disagree. It said younger savers are more likely to want investments in the UK than older savers.
NatWest Cushon provided seed funding for the UK's first ever LTAF, Schroders Capital Climate+ LTAF, in 2021 – a fund that includes allocation to private equity, sustainable infrastructure and real estate – and is targeting a 15% allocation to private markets in its Sustainable Investment Strategy.
CEO Ben Pollard said: "The investment case for UK private markets is strong, which is why we are a signatory to the Mansion House Compact and have also signed up to the new Mansion House Accord. But there is another positive angle - reconnecting people with the investments their pension is making. These types of investments are real and tangible and show savers how hard their money is working to improve their standard of living in the UK.
"So it's really encouraging to see this appetite from pension savers to invest in UK assets, particularly among younger people. That's exactly the type of customer the industry generally struggles to engage, so it's fantastic to see that investing further in UK private markets aligns with what they want."
Nest: Driving substantial positive impact for members
Nest said that, as a scheme committed to investing at scale in private markets, as well as in the UK, it was pleased to join the Mansion House Accord initiative.
Chief investment officer Liz Fernando said: "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.
"Around 60% of this private market allocation already is in the UK. Our members are UK workers, and we want to invest in their communities and the infrastructure they use, to help drive the UK economy.
She added: "We are confident our approach will help drive substantial positive impact for our members and the UK, and we continue to foster partnerships that help us tap into the great investment opportunities on our doorstep."
Now Pensions: Achieving alignment with member interests
Now Pensions said the Mansion House Accord marked an important joint commitment by government and providers.
The master trust – which was bought by Mercer last year as part of its acquisition of Cardano – also said it would make its first private market investment shortly.
CEO Patrick Luthi and trustee chair Joanne Segars commented: "By investing in appropriate UK Private Market opportunities, we can together achieve alignment of our member's long-term interests, with UK growth and benefits to society more broadly. Shortly we will make our first investment into UK private markets, focusing on affordable housing. Alongside Mercer, we look forward to continuing to work with government to promote the right environment to invest in private markets and the UK.
People's Pension: Committed to delivering better outcomes and driving UK economic growth
People's Pension said signing the Mansion House Accord reinforced its long-standing commitment to becoming a world class asset owner.
The master trust said its pledge followed the announcement in January that it would begin allocating a substantial portion of its assets under management to private markets, with a target of 10% by 2030.
People's Pension trustees chair Mark Condron said: "Our continued growth in members' assets, coupled with our growing in-house investment team means People's Pension is now well-positioned to broaden our reach into these asset classes. To meet this ambition, we welcome the long-term support from the government to ensure a strong and sustainable pipeline of private investment opportunities."
People's Partnership CEO Patrick Heath-Lay added: "By signing this Accord, we are reaffirming how seriously we take our commitment to delivering better outcomes, as well as helping to drive UK economic growth."
Chief investment officer Dan Mikulskis noted the master trust had already taken "concrete steps" to build capacity.
He said: "As well as signing the Accord we have taken real, concrete steps to build the internal capability, and leverage our scale, to invest in private market assets in a way that leaves value in the hands of members and not asset managers.
"We look forward to continuing our philosophy of building deep partnerships with the right asset managers, alongside specialist internal capability to deliver the best outcomes for members. Current global risks highlight some of the benefits of UK assets which are also often cheaper to access than overseas alternatives leaving more value in the hands of members."
SEI: Flexibility and choice for pension funds
SEI welcomed the government's commitment to ensure a good flow of investable opportunities for pension schemes – something it said mitigated its previous concerns over investment in this area.
SEI DC managing director and Society of Pension Professionals DC committee member Steve Charlton said: "Due to ongoing collaboration and open dialogue between the industry and the UK government, we have become comfortable with the proposed changes to the Mansion House reforms.
"This accord demonstrates our collective ambition to have a consolidated workplace pension environment that provides flexibility and choice for pension funds to invest where they see opportunity, whilst balancing their responsibility to members."
Charlton added: "We welcome the government's commitment to ensure a good flow of investable opportunities for pension schemes. This mitigates our previous concerns about the risks of high-priced, poor-quality investments in an environment where the originally proposed investable opportunities are scarce. It enables everyone to play their part in helping to deliver better member outcomes and drive economic growth."
Smart Pension: Going beyond minimum commitments
Smart Pension said it was delighted to join with the industry and government to commit to investing in private markets and UK assets – a move which it believes can deliver strong long-term returns for savers.
CEO Jamie Fiveash said: "With planning reforms legislation encouraging growth, Smart Pension has plans to go beyond the minimum commitments, with further announcements in the coming weeks to accelerate our support for the UK economy and back more innovative British businesses and projects."
Smart Pension announced it had incorporated private market illiquids in its default strategy in March 2021. It now has an allocation of around 6% in private market debt.
The scheme's allocation is invested through an allocation to Natixis Investment Management's MV Dual Credit Fund within its default growth fund, Smart Sustainable Growth.
Smart said it intends to increase its allocation significantly in the coming years, investing across private debt, renewable infrastructure and private equity, including venture and impact debt.
Standard Life: Fiduciary principle underpins trust and confidence in our pension system
The Standard Life Master Trust said it was "reassuring" the government had been so clear they supported the principle that decisions about how pension scheme member's money is invested should be made independently of government.
Standard Life Master Trust chair Helen Dean commented: "It is very important that pension funds are invested in a diversified set of assets, and we support the government in suggesting that private markets, including investing in opportunities within the UK, should play an increasingly important part in the asset allocation strategy for UK pension funds.
"It is reassuring to see that in today's announcement government have been so clear that they continue to support the principle that decisions about how pension scheme member's money is invested should be made independently of government and with the best interest of members in mind. This fiduciary principle is extremely important and underpins trust and confidence in our pension system."
Standard Life is a brand owned by the Phoenix Group. In July last year, Phoenix Group and Schroders announced they had formed a strategic partnership to launch a private markets investment manager, Future Growth Capital (FGC).
The asset management partnership had an initial commitment of £1bn and aims to deploy a total of £10-20bn of investor funds into UK and global private markets over the next decade.
TPT Retirement Solutions: Provider pricing practices leave little room for investment fees
TPT Retirement Solutions welcomed the Mansion House Accord – noting that, by reaching an agreement with pension providers to invest in UK productive finance in a mutually beneficial way, the government can achieve its objective and support better outcomes for scheme members.
CEO David Lane commented: "Many pension schemes already invest in productive finance, and most are open to investing more in the UK. Investment in assets such as infrastructure, transportation, housing, venture capital and private markets can play an important role in improving risk-adjusted returns for members while also contributing to economic growth."
He continued: "Meeting the government's objectives while also maintaining fiduciary duty and ensuring strong returns for members are not mutually exclusive ambitions. However, hurdles remain around value for money considerations and the availability of suitable investment opportunities.
"These should be a focus for government policy to spur more investment. The most pressing issue to deal with is that provider pricing practices leave very little room in the annual management charge for investment fees. There needs to be a shift to a value for money approach that considers the returns from an investment and not just its fees."
