Pension schemes already invest an estimated £1trn in the UK, but more action is needed to sustain that momentum, a new report has warned.
The paper, published by Pensions UK, sets out what needs to happen to enable schemes to increase investment in growth assets while continuing to deliver good outcomes for savers.
It argues that further growth-focused investment will only be possible if the system can deliver stronger “pension-grade” opportunities.
The report comes a year after the signing of the Mansion House Accord, a voluntary commitment by 17 of the UK’s largest pension providers to increase investment in unlisted assets, both domestically and globally.
As part of the Accord, the government committed to help build a pipeline of investable opportunities – but the report suggests there is still more work to do.
According to Pensions UK, the pensions system remains fragmented.
It added that despite significant policy activity, schemes continue to face a complex landscape, with unclear coordination, accountability and engagement routes when investing in UK growth assets.
Insufficient risk-adjusted returns, a lack of suitable opportunities and ongoing policy uncertainty were some of the key barriers highlighted by Pensions UK members.
However, the report argues these challenges can be addressed through improved pipeline visibility, greater use of risk-sharing mechanisms and a regulatory approach focused more clearly on long-term value.
Alongside the report, Pensions UK has issued a call to action for government, regulators, public finance institutions and the wider industry.
It calls for clearer end-to-end pathways that connect pension capital to investable UK opportunities, supported by coordinated government action and regulation that enables long-term investment decisions focused on value as well as cost.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “Pension schemes are already major investors in the UK, supporting economic growth – but more practical, co-ordinated action by government and agencies is needed to support their efforts to keep scaling those investments.
“Schemes need a diverse range of investable routes that are consistent with fiduciary duty and deliver good outcomes for savers.
“A year on from the delivery of the Mansion House Accord, this report sets out the practical steps needed so that public finance institutions, regulators and industry can work together to connect long-term pension capital with a clearer, more investable pipeline of UK opportunities.”
Lorna Blyth, managing director of investment proposition at Aegon, said she welcomed the report.
“As a founding signatory to the Mansion House Accord, we have already deployed one-third of our DC workplace private market assets in the UK, driven solely by our fiduciary duty to secure better risk-adjusted returns for members rather than by mandation.
“Ensuring clearer regulation and access to scalable pension-grade opportunities is vital.
“At the same time, we believe providers must retain discretion to balance risk, return and liquidity, and to set allocations voluntarily in their members’ best interests.
“We urge the government and industry to adopt pragmatic timelines and to deliver a steady pipeline of high-quality UK private market investment opportunities that are appropriate for the scale of pension assets.
This is vital to optimise member outcomes and ensure long-term UK economic growth.”
Royal London director of policy Jamie Jenkins added: “It is widely accepted that greater economic growth will lead to greater prosperity for all, and that pension investments can play an important part in helping grow the UK economy.
“Whether investing in social infrastructure, sustainable technologies or simply supporting innovative companies to thrive, there is an opportunity to improve our society while at the same time generating good returns for people saving for their retirement. There is inherent value for all concerned.
“This report from Pensions UK recognises the progress already made but, importantly, identifies the actions we need to take to drive this ambition further in the coming years.”