Following that original landmark agreement, signed in July 2023 under the previous government, 11 pension providers committed to take meaningful action towards investing 5% of their DC default strategy into unlisted equities by 2030.
Then, in May of this year, the new Labour government announced a new Mansion House Accord, through which 17 pension providers have committed to seeking to invest at least 10% of default funds in private markets by 2030 – double the previous benchmark. Of this figure, at least half would be ringfenced for UK investments.
Mansion House Accord: Target allocations
Source: Schroders Capital. For illustrative purposes only.
In the same month, the government announced the Pension Scheme Bill, which seeks to make several structural changes to DC pensions that it believes would, among other things, make it easier to invest in a cost-effective way in a wider range of assets, including private markets.
From Compact to Accord: A scaling-up of ambition
Progress against the Mansion House Compact appears, at first glance, to have been slow. As of July 2024, one year on from the first agreement being signed, an Association of British Insurers (ABI) progress update reported that signatories held unlisted assets of around £793 million, equating to just 0.36% of their total DC default fund AUM (£219 billion).
However, that headline number masks a wave of foundational activity – what the ABI referred to as "key enabling steps". Providers have been focused on laying the groundwork for changes to their investment strategies: hiring investment professionals with private markets expertise, developing governance structures, and initiating partnerships with asset managers.
Critically, many have also been investing in the tools required to facilitate allocations in liquidity-constrained asset classes – most notably, Long-Term Asset Funds (LTAFs).
As an example of the work that has been done, Phoenix and Schroders launched Future Growth Capital (FGC), an independent private markets solutions business that aims to deploy a total of £10-20 billion of investor funds into UK and global private markets over the next decade. In April of this year, FGC launched two new LTAFs investing in both global and UK private markets.
The new Mansion House Accord seeks to build on this work, rather than replacing the original Compact – with all 11 original signatories re-signing and six new providers also signing up. The bar has been raised with the higher target for private market allocations doubling to 10%, while the ringfenced 5% of default funds for UK investments is expected to unlock up to £25 billion of new capital investment.
Pension Scheme Bill: Enhancing the foundations
In parallel with the new Accord, the government announced the Pension Schemes Bill, which seeks to introduce a number of key structural changes to enhance the foundations of the DC market.There are three key aspects of the draft legislation that are designed to enable schemes to more readily invest in a wider array of assets and, importantly, deliver better value for money for scheme members:
- Creation of ‘megafunds'
All providers managing master trust (multi-employer) schemes must reach £25 billion in AUM by 2030 – or demonstrate a credible plan to do so. The rationale is straightforward: based on evidence from other pension regimes around the world, the government hopes that greater scale will increase buying power, especially for private asset classes that typically come with higher fees. - Mandation powers introduced
The government is not setting out to mandate asset allocation for pension providers – and it is important to note that even the Mansion House Accord is voluntary. However, the Bill introduces legal provisions for the government to mandate asset allocation in the future. The message is clear: voluntary participation is preferred but may not be the only path forward. - Value for money framework
The Bill proposes a new value for money framework that marks a shift away from a narrow focus on charges. Instead, schemes will be evaluated on value delivered for members (i.e. outcomes). Smaller, single-employer schemes will also be required to compare themselves against larger providers, which could potentially accelerate the trend toward outsourcing or lead to a trickle down of investment approach from master trusts.
Why and how: DC investors and private markets
At the heart of these developments is a broader, longer-term effort to rewire the UK's long-term investment engine. As noted above, the government estimates that full delivery of the Mansion House Accord could unlock £50 billion of new investment into growth assets, half of which could flow into the UK economy.
For DC schemes, this presents an opportunity to address some of the structural challenges they face. Member outcomes are currently tied disproportionately to public market performance – particularly equities and government bonds – both of which have experienced significant volatility in recent years, and especially since the start of 2025. Investing in private markets has the potential to expose DC members to different and well-compensated risks, and can materially improve the efficiency of a portfolio.
However, diversifying into private assets comes with challenges, especially related to the operational considerations of adding less frequently traded funds to exiting arrangements. This is where regulatory innovations like the LTAF regime come into play. By enabling periodic liquidity and supporting blending with liquid assets, LTAFs are increasingly viewed as a viable route for default strategy inclusion.
Read our recent case study to find out how the Schroders Retirement Benefit Scheme utilised a blended fund solution to incorporate a multi-asset private markets LTAF for members in its DC default investment strategy.
Spotlight on private markets: Growth, diversification and impact
The key focus of the Mansion House Accord is to increase investment into assets that can boost the real economy and help to drive UK competitiveness across critical and evolving industries. There is a focus on backing innovative growth companies and investing in critical real assets, including infrastructure and real estate.
Private Equity: Unlocking the UK innovation economy
The UK hosts one of the most vibrant venture markets globally; it is home to the largest venture capital market in Europe, and the third largest in the world. London specifically is recognised as a leading global innovation hub.
Yet, and despite a strong track record for growing start-ups into market-leading global brands – today there are more than 50 UK ‘unicorns' (venture-backed companies that have achieved a valuation in excess of $1 billion) – institutional capital has historically largely come from overseas. Government initiatives such as the Mansion House Accord are seeking to change that, and in the process boost the innovation economy.
For investors, venture sits at the higher end of the risk spectrum – but offers the potential for strong returns and valuable diversification within a portfolio. It is this combination that drives the investment case for pension savers.
European venture deal values have grown - and UK is at the forefront of the market
Source: Pitchbook 2024 Annual European Venture Report, Beauhurst UK Unicorn List 2024, Schroders Capital, 2025. Data as of 31 December 2024.
Infrastructure: Financing the energy transition
Driving the energy transition requires once-in-a-generation levels of investment. The UK government estimates investment of £40 billion on average per year between 2025-2030 is required to meet its ambitions.
This is a significant investment, that will add to the UK's position as a leader in the energy transition area. The UK has been a keen supporter and innovator across a range of energy transition technologies, from renewable energy such as wind and solar, to emerging technologies such as green hydrogen, batteries and even industrial-sized glasshouses.
The UK has also been at the forefront of developing projects and regimes to incentivise deployment of private capital at scale into this area – from providing supportive policies and subsidies, to helping direct capital into nascent parts of the market and creating efficient structures to help further accelerate more mature technologies.
UK energy transition investment opportunity
Source: Aurora Energy Research, DUKES, Schroders Greencoat estimates, July 2024.
For investors, investing in renewables and the energy transition brings many potential benefits. Energy transition infrastructure can provide returns that are in line with, or at a premium to, listed equities, with operational renewables typically underwritten by our teams at 8-10% per annum return on a buy and hold basis.
The risk premia driving these returns are also differentiated versus other asset classes, including broader diversified infrastructure portfolios, which means the returns are typically uncorrelated. This brings potential diversification and resilience benefits, including linkage to inflation that can help protect the real value of DC members pots.
Real Estate: Investing for impact and returns in UK housing
Core to the principles of the Mansion House Accord is supporting the UK, and local, economies – and a key potential beneficiary that is closely tied with the broader government agenda is addressing the shortage of affordable UK housing.
More than 1.3 million people are on the social housing waiting list in the UK – and increases in house prices over time, exacerbated by a lack of new supply, has contributed to a growing number of households spending more than 40% of their income on housing costs, meaning they do not meet the broader and widely-accepted definition of ‘affordability'.
Addressing this has been a key focus of government policy, including its drive to build 300,000 homes annually over its first five years – and to focus resources on urban town centres that have been hollowed out by wider economic shifts in recent decades.
From an investment perspective, the chronic shortage of – and need for – housing that is affordable, coupled with government and local authority support, enhances the investment case for UK housing, which has the potential to generate strong, stable and long-term yield-based returns, as the below chart on UK private rental inflation shows.
Annualised monthly inflation: UK house prices and private rents
Source: Office for National Statistics, March 2025.
Conclusion: Ambition meets opportunity
In some respects, the new government initiatives and legislation do not seek to do anything new. Successive governments have lamented the decline in investment in the UK by large institutional investors – and have sought to incentivise more of their capital to be invested at home, and in the process to boost the real economy.
The difference now is the scale of the ambition. The target for private assets investment has doubled, and there is a specific target for the UK that could release £25 billion in new capital into the real economy. There are also legislative measures that will significantly shake up the DC pension landscape – and that could manifest in more directive intervention down the line.
The potential prizes are huge. From the government's policy perspective, there is the opportunity to provide a real boost to the economy and UK competitiveness. Meanwhile for pension savers, if the drive is successful and more schemes do broaden their investment horizons, there is the opportunity for retirement outcomes to be enhanced.
All of this should be seen as part of a wider journey. Providers did respond to the original Mansion House Compact by taking steps to enable private markets investment – and the infrastructure and product suite has continued to evolve to make this a reality. Changes that consolidate pension schemes and broaden the influence of larger scheme activities could spread the benefits to millions more pension savers.
Please remember that the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.
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On 17 September 2018 our remaining dual priced funds converted to single pricing and a list of the funds affected can be found in our Changes to Funds. To view historic dual prices from the launch date to 14 September 2018 click on Historic prices
