Scottish Widows joined the Mansion House Compact in July 2023 as one of the founding signatories committing to allocating at least 5% of its default funds to unlisted equities by 2030.

Peter Glancy, head of policy at Scottish Widows, told IPE the UK government needs to do more to create demand for private equity.

Peter Glancy, head of policy at Scottish Widows, said the firm joined the Mansion House Compact to work with the government to explore how barriers to access private equity in the UK could be “knocked down”.

He said that at the moment there are a number of constraints to accessing private markets, including focus on price by employers or unusual charging structures like performance fees.

Glancy believes the Mansion House Compact’s agenda, which calls for a 5% investment in UK private equity, can help improve savers’ outcomes. He pointed out that at the moment people are only saving 8% of their wages, below what the industry would like to see.

“But if you are able to get investment growth up by 1.7% per annum for a 22-year-old joining a workplace pension scheme, you could achieve the same effect as increasing those contributions from 8% to 12%,” he noted.

He pointed out that if Scottish Widows is able to invest 5% in private equity by 2030, it will create “upside for customers”.

“This places an onus on the government to work constructively with us. We would like to see the pension regime in the UK reform to look a bit more like Canada and Australia, so we can get better returns for our customers.”

However, he stressed the money belongs to customers and Scottish Widows can’t use it to fund the government’s agenda when the upside of investing in UK private assets has “not been demonstrated”.

He said: “We’ll need to look at that as an industry and work it out, but the government could come up with innovative ways to move up the investment case in favour of potential savers.”


In terms of actually getting into private equity, Glancy said that Scottish Widows wants to explore all asset classes. “We don’t want to be restricted to just cheap-as-chips asset classes that are readily tradable.”

He pointed out that Scottish Widows used to have commercial property in its default fund but “the race to the bottom on price changed that” as commercial property is more expensive because of buildings insurance and upkeep costs. However, Glancy said he would like it to be readded to the portfolio.

Other things he would like to see include infrastructure through public/private finance arrangements, private debt, private equity, and social housing.

He expects that to get to the 5% private equity allocation, keeping in mind that employers don’t want to pay more fees, the industry will look to launch “parallel funds” to account defaults that include private equity. This is an approach Scottish Widows is looking to take as well.

Glancy said: “We don’t expect anyone to buy them, but we will launch them, promote them and we will see that they could offer better returns for scheme members but employers are obsessed with price and will continue to pick the cheapest.

“Hopefully, that will provide the government the evidence that they need to do something on the demand side.”

He said that all of the current efforts from the government are going into the supply side, telling the industry to launch private equity investment vehicles, but not into changing the minds of employers.

“Nothing that we do will make a blind bit of difference. We will launch a new range of funds at some point, they’ll be slightly more expensive. We don’t expect any employers to purchase them,” he noted.

Mansion House Compact explained

The Mansion House Compact is a commitment announced by the UK chancellor, Jeremy Hunt, in his keynote policy speech at the Mansion House, the official residence of the Lord Mayor of London, on 10 July 2023.

It calls on DC pension schemes to boost investment in UK unlisted equities.

As part of the compact, signatories are expected to allocate at least 5% of their default funds to unlisted equities by 2030.

Currently, the DC schemes’ investment in UK unlisted equities is under 1%.

According to the chancellor, if the UK’s DC market follows suit, this could unlock up to £50bn of investment into high-growth companies by that time.

The initial signatories of the compact included Aviva, Scottish Widows, Legal & General, Aegon, PhoenixNESTSmart Pension, M&G and Mercer. Since then, Aon and Cushon have joined as signatories of the compact.

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