Prudence and productivity: Walking the Mansion House tightrope

Policy momentum

The Mansion House Compact saw 11 of the UK’s largest DC pension providers commit to investing at least 5 per cent of their default funds in unlisted equities by 2030. This was complemented by the Mansion House Accord, launched in May 2025. Under the Accord, 17 major pension providers – together managing around 90 per cent of active savers’ DC pensions – pledged to invest 10 per cent of their portfolios in unlisted assets more generally by 2030, and this time with half earmarked for the UK. So while the Compact focusses solely on unlisted, non-infrastructure equities such as venture and growth equity, the Accord takes a broader approach and also covers such asset classes as property, credit and infrastructure.

Keeping up the momentum, the Government announced its next initiative just five months later, in October 2025. Sterling 20 seeks to mobilise 20 major pension funds and insurers to invest specifically in UK infrastructure and growth sectors. A range of immediate commitments were publicised. For example, a major UK insurer pledged £2bn for affordable housing by 2030, and a master trust £40m for rural gigabit broadband.

For all the flurry of proposals, progress will clearly take time. For example, default fund allocations to unlisted equities remain far from the 5 per cent target for 2030 set by the Compact: 0.6 per cent in February 2025, though up from 0.36 per cent in 2024. And, as Compact members have noted, they do face various headwinds. These include continuing prioritisation of cost over value for money amongst customers, the availability of appropriate investment opportunities, unnecessary regulatory burdens, and of course the specific challenges posed by illiquid assets.

Balancing growth and governance

While clearly offering benefits, a greater focus on unlisted assets is not straightforward, even for the largest players. Governance and diversification challenges could certainly slow adoption in the broader DC world. Trade-offs are now in fact coming under official scrutiny, with the Bank of England recently launching a system-wide stress test on private equity and credit markets to assess resilience to shocks. It is not surprising if trustees remain cautious about the Government’s drive for growth, given their fiduciary duties to act in members’ best interests and their generally healthy funding positions.

The Compact, Accord and Sterling 20 commitments are voluntary. However, the Pension Schemes Bill includes a controversial reserve power enabling the Government to mandate minimum DC investment in UK productive assets, should these initiatives prove unsuccessful. Attempts to remove this power were defeated during the Bill’s final stages in the House of Commons. But whether voluntary or not, it is clear that a significant shift in investment allocation would require both schemes and regulators to grapple with important trade-offs.

Looking ahead

In the meantime, for trustees their fiduciary duties remain paramount. Trustees cannot easily blame Government encouragement if their investments go wrong, and concerns over a mandate have prompted calls for clarity on what that might look like and how it would interact with trustee duties. The Pensions Minister, Torsten Bell, confirmed plans last month for statutory guidance to help trustees to comply with fiduciary duties when considering climate change and other systemic investment risks. It would be interesting also to know how the Government sees fiduciary duties and the thrust of their recent initiatives coming together.

Many thanks to Lesley Browning and Vivian Matthews for their help in preparing this post.