Biggest retirement providers to sign voluntary code to ‘buy British’ after Treasury pressure
Rachel Reeves is closing in on a £50bn deal with pension funds to buy British assets after pressuring them to invest more in home-grown projects.
The Chancellor will announce a new version of a voluntary code signed by the biggest retirement providers that will see them commit to ploughing 10pc of savers’ cash into unlisted assets by 2030, with half of that devoted to the UK.
It is understood that a first draft of the new Mansion House Compact was circulated last week following several rounds of sometimes tense negotiations between Treasury ministers, the industry and the City of London Corporation, which is coordinating the talks.
Ms Reeves is expected to announce the revamped compact this summer, with the explicit commitment to invest more in UK assets coming against a backdrop of growing economic nationalism.
Donald Trump has vowed to “make America wealthy again” through his tariff onslaught, while some in the UK are calling for a “buy British” campaign to offset the impact of higher tariffs.
The Chancellor is looking for ways to spur UK investment. She admitted last month that cash Isas will be reformed to encourage savers to invest their money instead. The changes could be announced at her annual Mansion House speech in July.
The new commitment from pension funds will see 10pc, or around £100bn of UK pension savings, ploughed into unlisted assets by the end of the decade. Within that, £50bn – or around 5pc of savings – would be invested in the UK.
“It was made very clear at the start of this process that the Treasury wanted to see movement on this,” said an industry source.
The voluntary agreement means the Treasury will stop short of mandating that companies invest in UK assets.
The original Mansion House agreement spearheaded in 2023 by Ms Reeves’s predecessor Jeremy Hunt aimed to boost growth by pledging a minimum 5pc of workplace pension savings into unlisted equities by 2030. It was signed by 11 providers including Aegon, Aviva, L&G, Nest, Standard Life owner Phoenix and Scottish Widows.
Torsten Bell, the pensions minister, has called on companies to build on this with more investment in private markets, including an explicit reference to UK assets.
A push from the Lord Mayor of London to include a reference to “national resilience” – or defence investment – in the updated compact has been dropped, despite the Government’s push to increase military spending. Alastair King had floated the plan privately, though City sources said the idea was not discussed formally in meetings.
It is understood that some pension providers were reluctant to specify a UK target within the broader 10pc commitment. Others were prepared to go further and commit as much as 15pc of savers’ cash to private markets.
Pipeline of projects
M&G and Scottish Widows are thought to be among the companies that raised concerns about making the voluntary pact more ambitious. It has been suggested that one or two of the original signatories may not even agree to the new pact, though a source at M&G said they would be part of the new accord.
A lower bar also means more funds are expected to sign, with Fidelity, the People’s Pension, TPT, Royal London, Willis Towers Watson and USS all in discussions to join the pact.
The Treasury and City of London Corporation declined to comment.
Investment in unlisted equities will primarily mean pension cash is ploughed into infrastructure projects and other large developments.
While such projects have the potential to deliver higher returns, some executives in the industry argue that targets are not compatible with an existing fiduciary duty to members. Others have highlighted a relative lack of transparency in private markets compared to traditional share markets.
The Treasury is understood to have bowed to industry demands that extra investment in the UK is contingent on the Government stewarding a pipeline of high quality assets to invest in.
Mr Bell has said he recognises that extra investment “requires a supply of investable propositions, not just the existence of capital”, adding: “Across the board we are working to grow that pipeline and to make it more visible.”
A Pension Investment Review published in the coming weeks will stop short of mandating UK investment, as it sets out a more detailed timeline.
Its plan consists of consolidating workplace pensions into around 15 so-called “mega-funds” that will have the firepower to invest in more productive assets.
The Treasury wants schemes to be at least £25bn to £50bn in size, though it has agreed to take a “pragmatic approach” to consolidation.
Regulators will also commit to delivering changes that will force companies contributing to workplace pensions to consider returns as well as fees when choosing retirement funds.
