Pension schemes have a fiduciary obligation to secure the best possible long-term outcomes for members, not to deliver on the government’s domestic industrial policy
The Mansion House Accord marked an important step towards unlocking long-term capital for the UK economy, with 17 of the UK’s largest pension providers committing to invest at least 10% of their defined contribution (DC) default funds in private markets by 2030, including at least 5% in the UK.
And progress is being made. Figures published by the Association of British Insurers (ABI) and Pensions UK in October show that Accord signatories held 6.6% of their relevant DC assets in private markets at the end of 2025, including 3.3% in the UK. Yet commitments alone cannot guarantee that capital reaches the businesses and projects that need it.
The next challenge for government is how to make domestic investments more attractive on a global stage. To do so requires a shift in the policy debate. Rather than focusing on how much pension capital should be directed towards the UK, policymakers should be asking what they can do to make British investment opportunities sufficiently attractive for long-term investors to choose them.
Pension schemes have a fiduciary obligation to secure the best possible long-term outcomes for their members, not to deliver on the government’s domestic industrial policy. They must retain the freedom to invest globally where they identify better risk-adjusted opportunities. With reserve powers to mandate investment allocations now on the statute book, preserving that discretion is particularly important.
The UK has a wealth of innovative businesses, established growth companies and infrastructure opportunities capable of attracting institutional investment. The government’s task now is to remove the barriers preventing those opportunities from competing for pension capital on their investment merits, rather than as a matter of obligation.
Here are three practical steps government could take to achieve this:
First, the UK should learn lessons from existing schemes to help investors identify credible opportunities.
The French Tibi initiative provides a useful example of how government can work with institutional investors to channel capital towards innovative businesses. Through an accreditation process for specialist investment funds, it has helped improve the visibility of opportunities and mobilise institutional capital. By March 2025, participating investors had announced more than €12.9bn in commitments, with over 140 accredited funds.
A similar framework in the UK, building on existing initiatives, could help pension schemes identify credible private-market managers and strategies against transparent, consistent criteria. This could reduce duplicated due diligence, improve visibility of the investable pipeline and give DC schemes greater confidence in allocating capital.
Crucially, accreditation should not amount to government directing investment decisions, nor replace independent due diligence. Its purpose should be to make it easier for investors to assess opportunities on their merits.
Second, government should broaden its focus beyond venture capital.
Success should not be measured solely by the proportion of pension assets invested domestically
Venture capital plays a vital role in supporting innovation, but its capacity to absorb investment is limited relative to the potential scale of the growing DC pensions market. The UK offers a much broader investable universe that deserves greater attention.
In particular, the middle market provides opportunities to invest in established, growing businesses, including in sectors such as technology and energy. These companies may already have proven business models but require long-term capital to expand their operations, develop new products and access new markets. Capturing these opportunities will require pension schemes to look beyond venture capital to other private capital strategies.
Alongside these opportunities, infrastructure, real estate and private credit can provide different sources of long-term returns. Broadening the range of opportunities available to pension funds could improve diversification and offer the scale needed to absorb greater institutional investment over time.
Third, government should be prepared to share risk where public-policy priorities and commercial returns do not naturally align.
There will inevitably be areas where government sees a strong strategic or economic case for investment, but where the opportunities cannot compete with alternatives elsewhere in the world on a risk-adjusted basis. This may include projects in economically disadvantaged regions or sectors considered strategically important to the UK’s long-term competitiveness. As many of the government’s priorities involve the development and redevelopment of real assets, the current significant development viability gap is something that they will need to be prepared to fill in order to attract private capital.
In these circumstances, government should consider targeted incentives, first-loss capital or blended-finance structures to improve the investment proposition. Such measures, designed with appropriate safeguards, could help attract private capital to projects that might otherwise struggle to secure it.
This is not an argument for subsidising poor investments. It is about recognising that, where an investment delivers benefits to the wider economy that are not fully reflected in commercial returns, government has a role in helping bridge that gap. Pension savers should not be expected to bear additional risks simply to fulfil national policy objectives.
What next?
If UK pension savers are to benefit from the same opportunities that overseas pension funds have long accessed, policymakers, regulators and industry participants must work together to remove the remaining barriers to investment. This could include the greater standardisation of fund terms and information and addressing the capability gap within DC schemes, many of which currently lack the internal expertise and operational infrastructure needed to assess and accommodate illiquid private-market assets. It also means continuing to shift the industry’s focus towards maximising long-term member outcomes rather than simply minimising short-term costs.
The Mansion House Accord has established a foundation for change, but the next step should focus on giving pension schemes the confidence, capability and opportunities to put capital to work.
Ultimately, success should not be measured solely by the proportion of pension assets invested domestically, but by the outcomes those investments deliver for savers. If the government wants more pension capital to support British growth, the most effective approach is to make the UK a compelling destination for investment, not an obligatory one.
Saker Nusseibeh, is the CEO of Federated Hermes
