Pension funds are set to invest up to £50 billion, with half of it going to UK companies
The leaders of 17 of the UK’s largest pension funds have made a deal with the government, which says it could unlock up to £50bn in investments. At least half of this will go towards British projects, such as clean energy and UK-based startups.
Fund managers like Aviva, Legal & General, M\&G, Phoenix, and the Universities Superannuation Scheme have agreed to a new “Mansion House accord.” This will mean that by 2030, at least 10% of their workplace pension funds will be invested in private market assets.
Half of that (5%) will be directed towards investments in the UK, including shares in private British companies, property, and large infrastructure projects. This is part of the government’s efforts to boost the economy.
The new agreement doubles the size of promises made in a deal set up by the Conservative government in 2023, called the Mansion House compact. The deal, led by then Chancellor Jeremy Hunt, had companies agree to invest 5% of their funds in private assets, without any requirement to keep that money in the UK.
Chancellor Rachel Reeves said, “We are choosing to support British businesses and workers. I welcome this bold move by some of our biggest pension funds, which will unlock billions for major infrastructure, clean energy, and exciting startups.”
However, some pension fund managers are concerned about any government push to make companies invest in British assets. This could lead to lower returns for retirees compared to overseas investments, possibly going against their duty to clients.
The agreement itself doesn’t force UK investments, but there are worries that a pensions bill coming later this year might let the government tell companies how to use their funds.
Zoe Alexander, director of policy at the Pension and Lifetime Savings Association, said the government had “committed to ensure there are enough investable assets for pension schemes. If everyone plays their part, there is great potential to boost returns for savers and provide important funding for growing areas.”
The voluntary agreement applies to pension plans that don’t guarantee set retirement income, which are the default for most UK workers.
The 17 companies that signed the agreement, including Aegon UK, Aon, M\&G, and Mercer, manage a combined total of £252 billion in funds, meaning they are expected to invest about £12.6 billion in UK assets.
The government believes these funds will grow by 17% per year, and even more if the government pushes for pension schemes to be combined into large “megafunds” like those in Canada and Australia.
By 2030, the Treasury expects these funds to be worth £740 billion, with around £50 billion available for private investments. Of that, about £25 billion would be used for UK projects and startups.
Many pension providers already invest in private assets, including in the UK. This means there may not be a big increase in money coming from individual pension providers.
The Mansion House agreement comes as the government tries to address concerns about the lack of investment in the UK. However, the Treasury is facing pressure from different groups, with some asking for changes that could also increase ownership of companies listed on the stock exchange.
London has missed out on many major listings in recent years, such as the UK chip designer Arm, which chose to list on Wall Street in August 2023. Other companies, like the buy-now, pay-later company Klarna, and companies like Flutter (owner of Paddy Power) and Tui, moved their main listings from London to places like New York and Frankfurt.
However, metals investment company Cobalt Holdings broke this trend on Monday by announcing plans to list in London in June, giving a rare boost to the UK stock exchange. Cobalt aims to raise about $230 million (£174 million), with commodities trader Glencore set to take a 10% stake.
The government is also expected to launch a consultation soon on possible changes to the Isa market to encourage more investment in British stocks through tax-free accounts.
Published: 13th May 2025
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