Now:pensions, the workplace pension provider for over two million people in the UK and part of the Cardano Group, is making its first investment in private markets with an allocation to UK affordable housing.
This investment supports the now:pensions ambition, as a signatory to the Mansion House Accord, it said, to invest at least 10% of its default fund in private market assets, including at least 5% in the UK by 2030.
The master trust said the move is expected to improve member retirement outcomes by generating better returns, noting that it aligns with now:pensions’ ”ambition to make responsible, socially impactful investments”.
The focus of the investment is to increase the supply of affordable housing in the UK, with capital strategically targeted towards areas with the greatest need, it added.
According to the Ministry of Housing, Communities & Local Government, there are over a million people on social housing waiting lists in the UK, with the average age of a first-time buyer having risen to 34, an increase of 30% since 2007.
On average, in London, people pay 47% of their disposable income on rent, versus 34% nationally, according to the Office for National Statistics.
The new investment will allow now:pensions to gain exposure to residential properties designated as affordable and deliver long-term, stable, inflation-linked returns, teh provider said. Specifically, it will support the development of three types of affordable housing:
- regulated rentals, for people on the social housing waiting list and receiving a housing benefit;
- local affordable rentals, designed for people priced out of the local rental market; and
- shared ownership models, for people who cannot afford a home in the local market.
Now:pensions’ investment into affordable housing marks the first stage in the pension provider’s private markets strategy, and the trustee is currently researching other suitable investments that would benefit its members.
Joanne Segars, chair of now:pensions’ board of trustees, said: “This is our first investment into private markets. Investing in affordable housing presents an opportunity to generate strong financial returns for our members while contributing to a vital social need.”
She added: “The now:pensions trustee will continue to explore opportunities to expand its exposure to private markets, with a particular focus on sectors that offer strong growth potential and align with the long-term needs of our members.”
Martyn James, now:pensions’ director of investment, noted: “This investment is expected to provide complementary return drivers compared to more traditional parts of the growth portfolio, providing good diversification.”
The master trust’s investment strategy remains “focused on delivering long-term value”, James said, adding that now:pensions’ diversified approach, which includes an ambition of at least a 10% allocation to private markets by 2030, will continue to benefit its members’ retirement savings.
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