The Chancellor of the Exchequer, Rachel Reeves, has hailed a pledge by pension funds to invest ‘tens of billions’ in business and infrastructure projects.
For those investment planning in Cheshire and the wider UK, a total of 17 workplace pension providers are now on board with the Mansion House Accord. This is a voluntary initiative that tries to help defined contribution pension savers, with the incentive of higher net returns in private markets, while strengthening investment across the UK. It has been spearheaded by the Pensions and Lifetime Savings Association and Association of British Insurers, in collaboration with the City of London Corporation.
How does this work in practice?
Pension funds agree to allocate a minimum of 10% of their defined contribution default funds to private markets by 2030. Of these, at least 5% are UK-bound, on the basis there are enough suitable assets of interest.
On current calculations, this will release £25 billion into the British economy. Some pension funds have suggested privately that they will exceed agreed targets.
At a meeting with pension fund leaders, Reeves said the accord can be seen as a milestone in the Government’s strategy to make the pension industry work better for savers. It is bound by fiduciary duties, which are legal obligations to ensure businesses operate in good faith, and the Consumer Duty, which obliges financial entities to prioritise consumer interests.
The latest figures show that total pension assets covered by the agreement are estimated at £252 billion, a figure the industry expects to increase over the coming years.
