An awkward delay in the unveiling of the Mansion House Accord was, we’re told, nothing more than a Downing Street ‘timetabling issue’. It was perhaps a tenterhooks issue too, as Donald Trump’s Sharpie hovered over the UK-US trade deal which was clearly going to make bigger headlines. But the Accord also had to contend with City discord around the issue of ‘mandation’ of pension funds to invest in unlisted equity that might contribute to future UK growth.
In July 2023, 11 institutions inked the first Mansion House ‘compact’, committing 5 per cent of ‘defined contribution’ pension monies to private equity by the end of the decade. Now 17 industry leaders have committed to upping the target to 10 per cent, at least half of which will back UK ventures. But the real level of this category of investment is thought to be around 2 per cent – plus a small slice in infrastructure projects, for which the UK largely relies on foreign sovereign wealth and Canadian pension funds. And there’s a suspicion not much has changed since 2023.
Hence Chancellor Rachel Reeves’s proposal of reserve ‘mandation’ powers to force funds to invest according to her wishes if they won’t do so voluntarily. Meanwhile, the former lord mayor Sir Nicholas Lyons, who conceived the first compact, talks of ‘naming and shaming’ laggards; and the pensions expert Baroness Altmann goes further, calling for at least 25 per cent of new pension contributions to be invested in public and private UK shares, on pain of losing tax reliefs.
On the other side are those who argue that the primary duty of pension fund trustees is to generate optimum returns for future pensioners, not to act as a tool of dirigiste government policy.
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