Employer enthusiasm for the Government’s Mansion House pension reforms appears to be waning, despite figures showing a sharp rise in investment into unlisted equities by pension providers.
Research from the Association of British Insurers (ABI) found that just four out of 11 providers signed up to the Mansion House Compact reported positive client sentiment towards increasing allocations to private equity — down from seven last year.
The ABI said this cooling of employer support reflects a continued focus on minimising pension costs, rather than maximising long-term value for members. It warned that without greater backing from employers and trustees, progress towards investment reform targets could stall.
Launched in 2023 by then-Chancellor Jeremy Hunt, the Mansion House Compact was a voluntary agreement which saw 11 multi-employer pension providers commit to allocate 5 per cent of their funds to unlisted equity by 2030.
It was later expanded through the Mansion House Accord, with 17 schemes pledging to invest at least 10 per cent of default funds into private assets — half of which would support UK growth opportunities. Private assets can include more than just private equity, for example it can also include property, infrastructure, private credit and venture capital investments.
According to the ABI’s latest figures, pension providers have invested £1.6bn in unlisted equities over the past two years, up from £0.8bn the previous year. While this represents a doubling of investment, it still accounts for less than 1 per cent of DC assets.
The ABI said most Compact signatories are taking steps to expand their exposure to private markets. Eight have formed new partnerships with specialist asset managers.
However, the trade body stressed that a cultural shift is needed across the pensions industry if progress is to continue. Yvonne Braun, the ABI’s director of long-term savings policy says: “For the Compact to succeed, the entire decision-making chain — from trustees to employers and advisers — must move from a cost-focused to a value-focused approach.”
She adds: “While firms are doing what they can to educate and inform clients about the long-term benefits of such adjustments, we need continued policy support and a cultural shift across the entire value chain to value over cost alone.”
The ABI said providers are stepping up client engagement and education to make the case for investing in private markets. It expects the forthcoming Value for Money framework, due in 2028, to play a key role in helping employers and trustees shift their focus from costs to outcomes.
