In the largest overhaul of the pensions market since auto-enrolment in 2011, in his ‘Mansion House Reforms’, chancellor Jeremy Hunt announced an agreement with the UK’s leading pension providers to invest significantly more in high-growth domestic firms.  

The Treasury estimates that up to £75bn of investment from pension schemes could be funneled into fast growing British start-ups; savers could see their pension pots boosted by an average of £1,000 a year, as a reward for taking on the extra risk. 

An average saver will see their pension boosted by £16,000 (12%) over the course of their career; following pension funds are committed to investing 5% of their assets in ‘unlisted equities’ by 2030. 

Announcing the initiative in a speech on Monday night at Mansion House, in the City of London, Mr Hunt said unlocking more investment in Britain ‘could have a real and significant impact on people across the country’  

The changes follow calls from business leaders including Sir Jonathan Symonds, chairman of the drugmaker GlaxoSmithKline to encourage British pension funds to back fast-growing companies. 

In response, Sir Jonathan said they will increase pensioners’ returns while ensuring Britain’s most innovative companies have the support to grow in the UK. 

The UK has the biggest pension market in Europe, but lag comparable schemes in Australia, for example that invest 10 times more in unlisted investments; defined contribution schemes in Britain invest less than 1% of their assets in start-ups and other unlisted companies, in Australia it is 5% – 6%. 

Mr Hunt said the extra £75bn of investment unlocked by the changes will ‘finally address the shortage of scale up capital holding back so many of our most promising companies’. 

He said: ‘With cooperation between government, regulators and business closer than ever… we will deliver not just more competitive financial services but a more innovative economy. 

‘More money for savers, more funding for our high-growth companies and more investment to grow our economy. 

Former pensions minister Baroness Ros Altmann said the reforms were a ‘welcome start’ but there is ‘a hell of a lot more we could do’. 

She said pension funds need to invest in the domestic economy overall, not just in higher risk growth companies: 

‘Pension funds could with lower risk projects to boost infrastructure, social housing, sustainable projects and growth initiatives that would otherwise be funded by taxpayers, because there is so much taxpayer money in pension funds. 

Former pensions minister Sir Steve Webb said investing in start-ups would probably be ‘riskier than bunging it on the FTSE or a global stock market tracker’. But he said the pension funds have ‘huge portfolios’ to balance out the risks. 

Tony Blair Institute policy director Jeegar Kakkad said the measures were ‘a welcome step’, but questioned whether ‘a non-binding agreement between a small number of pension funds can generate the investment the UK so desperately needs’ adding: ‘These policies will only be successful if they serve as the foundation for more radical reform including large-scale pension fund consolidation.’ 

The nine pension funds which signed up to the reforms are Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, Smart Pension, M&G & Mercer. 

Business leaders welcomed the announcement, saying it would ‘power growth’ and create jobs. 
Chris Cummings, chief executive of the Investment Association, said the reforms would ‘power growth by investing in British businesses’, adding: with the right regulatory framework, pension schemes will be able to invest productively and sustainably, unlocking further investment for innovative growth companies, and improving returns for savers by broadening investment options.’ 

Chris Smith, Investment Manager UK Equities, Jupiter Asset Management said:


As a UK fund manager with significant investments in UK PLC, it goes without saying that we are extremely keen to see the UK’s entrepreneurs, economy and its corporations thrive globally. That said, it is unrealistic to expect the reforms announced to make a meaningful difference to growth or investment in the UK in the short term and there is still a lot of questions to answer.

How are ‘UK growth assets’ defined? What does a ‘voluntary expression of intent’ mean? What will be the liquidity, valuation, cost differences and implications to pension fund members being asked to invest in unlisted assets?

Is there enough in the way of high quality, unlisted investment opportunities in the UK for an additional £75 billion of investment? What evidence suggests that unlisted assets will deliver higher, risk adjusted after fee returns and therefore justifies a higher allocation in pension portfolios?

Peter Bachmann, Managing Director of Sustainable Infrastructure at Gresham House, is a Senior Associate for the Cambridge Institute for Sustainability Leadership with 20+ years as an impact investor and extensive experience working with the UK’s pensions sector. In response, he said:

‘These reforms will empower UK pension funds to invest in the types of solutions that can play a key role in tackling society’s biggest challenges, from biodiversity loss to food security. Private capital and long-term thinking are desperately needed to address the climate and nature crises, and our pensions industry now has the power to do so.

‘While the situation with Thames Water rightly brought additional scrutiny over the proposed changes in the run-up to the chancellor’s speech, preventing pension funds from investing into all types of infrastructure assets is not the solution.

‘Infrastructure is a broad spectrum, traditionally covering everything from healthcare to transport, and more recently expanding to also include assets such as vertical farms and biodiversity habitat banks. For the UK to prosper environmentally, socially and financially, we need to invest in infrastructure focused on the green transition. These reforms will enable UK pension funds to lead the way.”


It is crucial that the pension compact remains voluntary both in letter and in spirit. Fundamentally, pension fund trustees have a fiduciary duty to carefully and thoughtfully maximise the risk adjusted returns for their members, and trustees should be making these important investment decisions independently without interference from politics.


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