Defined contribution (DC) providers have warned that schemes seeking to increase investment in UK productive assets must temper their demand to avoid both a rise in prices and undermining potential returns for members.
Speaking at a Hymans Robertson roundtable on investing at scale, NEST’s CIO, Liz Fernando, said there was a risk that providers could end up competing for the same assets as they seek to meet the government’s Mansion House ambitions.
The Mansion House Accord saw 17 major UK workplace pension providers and schemes commit to allocate at least 10% of their DC default funds to private markets by 2030, including at least 5% directly to UK private markets.
“If everyone tries to rush through the same door at the same time, then the only thing that happens is prices go up that you pay for those assets,” she said.
Fernando said investment decisions should be driven by future expected returns rather than a desire to meet a particular target.
“Every investment decision needs to be on the basis of the future expected returns. It can’t just be to hit a number,” she added.
Nest has already allocated 20% to private markets, Fernando said, meaning the provider was not starting from a low base as the industry looks to increase allocations.
Alex Snowball, strategic relationship director at L&G Investment Management, agreed that a collective move towards the same investment opportunities could increase costs, further warning that investments must make sense for members.
He said: “It’s got to make sense for the member, for the investment to be made. If it doesn’t, mandation [and] things like that [are] not good.”
Snowball said increased demand could push up the cost of assets, echoing Fernando’s concerns about providers moving into the same areas at the same time.
However, Nigel Aston, market development lead of Aon’s UK defined contribution solutions team, highlighted the opportunities available in the UK, particularly among smaller companies, arguing that domestic investors could play a greater role in funding their growth.
“There’s a wealth of absolutely unbelievable smaller companies in the UK,” he said, adding that when these businesses scale up, investment often comes from Europe or the US.
“It would be great if some of the money came from UK investors rather than overseas investors,” he said, stressing that schemes must ensure members receive good returns.
The discussion comes as the government seeks to encourage pension schemes to invest more in the UK economy, including through its Mansion House Accord and wider efforts to increase allocations to private markets and domestic assets.
Data compiled by the Association of British Insurers (ABI) and Pensions UK showed that signatories to the Mansion House Accord had invested £11.1bn (€13.2bn) in UK private markets as at 31 December 2025.
The signatories held £22.1bn in global private market investments across DC growth-phase assets, representing 6.6% of those assets. UK investments accounted for 3.3%.
