Lord Mayor welcomes landmark agreement to unlock pension funds
The Lord Mayor of the City of London has announced the signing of The Mansion House Compact, a commitment by major pension firms in the UK to allocate a minimum of 5% of defined contribution (DC) funds to unlisted equities by 2030. This initiative aims to unlock over £50 billion of new capital by the end of the decade.
Prominent firms such as Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, Smart Pensions, M&G, and Mercer, representing a majority of the DC market, have agreed to support this commitment. The primary objective is to achieve better returns for savers while providing vital support for fast-growing businesses in sectors like fintech and biotech, enabling them to thrive and expand within the UK.
The announcement was made during a speech by the Lord Mayor, who will be accompanied by the Chancellor of the Exchequer, Rt Hon. Jeremy Hunt MP, and Andrew Bailey, the Governor of the Bank of England.
In the Lord Mayor’s speech, he addressed the issue of risk appetite and its impact on business success and the growth of companies in the UK. He highlighted the need to foster innovation and provide sufficient funding opportunities for high-growth firms. Recognizing the lack of accelerator capital within the UK, he emphasized the importance of DC pension funds increasing their allocations to unlisted equities.
The Mansion House Compact, signed by CEOs of major DC pension schemes, commits them to achieve a minimum 5% allocation to unlisted equities by 2030. The objective is to unlock over £50 billion of new capital, which will be invested through existing or new investment vehicles, potentially including a joint investment vehicle like the Future Growth Fund. The formation of such a fund would address the scale and expertise challenges faced by smaller UK funds.
The Lord Mayor emphasized the need for pension system reform and the importance of this initiative in getting better returns for savers. While acknowledging the conservative nature of pension investments, he highlighted the modest yet meaningful allocation to unlisted equities as a voluntary choice for pension funds aiming to maximize returns.
Furthermore, the Lord Mayor expressed appreciation for the support of both the Chancellor and the shadow Chancellor, Rachel Reeves, emphasizing the cross-party nature of this issue. Regardless of the election outcome, it is crucial to continue this work to improve pensions, strengthen the UK economy, and create an environment where homegrown businesses can thrive.
In summary, the signing of The Mansion House Compact marks a significant commitment by major pension firms to allocate funds to unlisted equities, supporting high-growth sectors and aiming to unlock substantial capital for the UK’s economic growth.
