Industry leaders call on the Government to support a new programme to put private capital in the ‘shop window’ for UK pension fund investment
Leaders from the pensions and private capital industries have issued new recommendations on how to facilitate UK DC pensions to invest in private capital, and how the Government can support this aim – boosting investment in fast growing British businesses and helping UK pension savers access potentially higher returns.
Among the recommendations made by the Pensions and Private Capital Expert Panel is a call for the Government to support a new programme that will increase opportunities for investing in venture and growth capital funds, and meet the needs of UK pension fund investors. Design features of the new programme should include:
Investment marketplace – the creation of ‘NOVA’ (New Opportunities for Venture and growth Acceleration), an initiative modelled on France’s successful Tibi Scheme, to create a market of private capital funds specially accredited for DC schemes to facilitate investment in strategically important sectors.
Investment vehicle - a new Fund of Funds investment vehicle as part of a series of further initiatives to build on the British Business Bank’s (BBB) British Growth Partnership, which will enable access to returns generated by smaller private capital funds.
Industry-approved directory – the introduction of a private capital directory, containing the key facts and information of specific private capital firms/funds which would be made available to UK DC schemes, acting as a ‘shop window’ to accelerate investment.
The Panel urges the Government to consider supporting this programme through endorsement, raising the profile of the programme, and continuing to support the British Business Bank in building on the British Growth Partnership and developing new partnerships to help DC pensions invest in private capital.
The report also calls for regulatory urgency in addressing some of the investment barriers that currently limit DC fund investment into the UK private capital industry. At the same time, the report underlines both industries’ commitment to continue the constructive engagement and collaboration which has made major progress for savers and investors over the past year.
The Expert Panel was established in February 2024 to take forward key aspects of the Mansion House Compact and Investment Compact for Venture Capital and Growth Equity. The Panel is convened by the British Private Equity and Venture Capital Association (BVCA), and includes leading figures from across the pensions industry including the ABI, PLSA, Phoenix Group, M&G and NEST. It has acted as the focal point for increased engagement between the industries, and has worked to identify the current barriers to investment by UK pension funds in private capital and develop solutions.
A new survey carried out by the BVCA found that 62% of Investment Compact for Venture Capital and Growth Equity signatories are actively contacting Mansion House Compact signatories, up from 50% in September 2024.
This rise in engagement signals steady progress in achieving commitments made by Venture Capital firms and UK pensions investors to develop a long-term and constructive working relationship with each other. The Expert Panel believes that implementing a new government supported programme would further enhance this progress, and in enabling domestic funding to fast growing businesses, can provide UK pensions savers access to the same returns experienced by international counterparts.
Kerry Baldwin, Chair of the Pensions & Private Capital Expert Panel said:
“It has been very encouraging to see increasing pension funds making private capital commitments over the last year. Work by the Expert Panel has brought both the pensions and private capital sectors together for the first time to provide solutions for regulators, government and industry. The Expert Panel’s recommendations will enable greater investment for venture and growth funds, and for founders to continue to establish and grow their business in the UK.
“Government has an opportunity to build on this growing momentum with a new programme informed by what both pensions and private capital leaders believe will make a difference. In addition, creating a ‘shop window’ for pension funds to better evaluate individual private capital firms will accelerate and prompt new conversations with Mansion House signatories that will ultimately drive increased investment in ambitious businesses, and result in greater returns for pension savers.”
Michael Moore, Chief Executive of the BVCA said:
“The private capital and pensions industries have come a long way in the past year, improving our mutual understanding and removing some of the obstacles to achieving our objectives of improving savers’ pension returns and providing capital to invest in the UK’s future growth companies.
”With the right kind of government support we can do more. The Chancellor and other ministers have already shown strong leadership on this agenda, and the panel believes this progress can be further accelerated with the right support.”
Hannah Gurga, Director General of the ABI said:
“The pensions industry is committed to allocating more investment to private capital where it’s in savers’ interests. Providers are making significant progress, which is already visible with several new funds launched in recent months.
“The new programme set out by the Expert Panel demonstrates a path forward for both industries and for the UK economy to achieve further growth.”
Julian Mund, Chief Executive of the PLSA said:
“Cross-industry collaboration between pensions and private capital has ensured greater understanding of the structural, regulatory and economic challenges DC investors face when investing in these assets.
“The Expert Panel’s recommendations for industry and government will help tackle these. We look forward in particular to engaging further with government and the private capital industry on initiatives which improve the pipeline of quality assets for schemes to invest in to generate better returns for their members.”
Lord Mayor of London, Alastair King said:
"This report is another important step in unlocking private capital to fuel Britain’s high-growth businesses. The BVCA’s backing of the Mansion House Compact is helping to bridge the gap between pensions and private markets, ensuring savers see the benefits of long-term investment. One of the clearest ways to accelerate progress is for the Government to implement the Value for Money framework without delay, pension funds need certainty to invest at scale."
James Mitchell, Head of Strategic Partnerships, Phoenix Group added:
“Phoenix is delighted to have contributed to the Pensions and Private Capital report over the last 18 months. By pooling cross industry knowledge into this forum, we are crowding in further capital to private market investments in the UK. Through Future Growth Capital, our joint venture investment management business, Phoenix aims to allocate £2.5bn over the next 3 years to a diversified private markets strategy. Our partnership with FGC puts us at the forefront to deliver better outcomes for our DC customers.”
Media contacts
James Gribben, BVCA: [email protected]
Notes to editors
The Pensions & Private Capital Expert Panel final report including all recommendations can be downloaded here. The full list of recommendations made by the Expert Panel are listed below:
Policy intervention
- The Government should introduce a new programme to accelerate DC investment in UK venture and growth capital funds, consisting of; a private capital fund directory, a NOVA scheme emulating France’s Tibi scheme, and an ambitious fund-of-funds programme.
- The Government should progress with implementation of a Value for Money framework, and provide clarity on how it will interact with other policy initiatives.
- The FCA and TPR should act to ensure that the Value for Money framework does not make short-term investments a mandatory consideration for schemes serving long-term DC savers.
- The Government should revise its guidance on the application of the DC charge cap, to ensure that costs are disclosed in a comparable manner across both public and private market investments.
- The FCA should carry out a formal post-implementation review of the LTAF framework, once a greater number of LTAFs have come to market.
- Regulators should ensure that DC schemes have clear expectations around liquidity as the landscape evolves.
- The FCA should ensure the ‘permitted links’ rules are amended as soon as possible to widen private capital investment options for DC default schemes that use life insurance platforms.
- The Government should continue to consider how CDC, and any other risk pooling models , can continue to develop as the DC landscape evolves over the coming years.
Facilitating investment
- Private capital firms, DC schemes, trustees and advisers should consider the Expert Panel’s “Guidance for the RFP process” (see Annex 1), to inform commercial discussions about DC default investments in private capital funds.
- DC schemes, private capital firms and their advisers should consider the market insights on fee innovations set out in this report.
- UK DC schemes should consider lessons from the experience of Australian DC schemes, especially around: (i) the operational integration of carried interest/performance fees; (ii) building private capital teams; and (iii) balancing fund investments with co-investments.
- Life insurance platforms should continue the positive trend of innovation in developing private capital solutions for DC schemes
- DC schemes to continue to implement strategies that will ensure savers are invested in growth assets both to and through their retirement.
- UK DC schemes, platforms, and advisers should continue integrating quarterly private capital valuations into member unit pricing.
Industry collaboration
- Cross-industry engagement generated by the Expert Panel will continue as new market practices develop and the legislative and regulatory environment change. Through further engagement across both industries, the Expert Panel will evolve to maintain industry engagement and collaboration, through a new forum.
About the Expert Panel
The Expert Panel, established in February 2024 by the BVCA, in partnership with the ABI and PLSA, has worked to develop solutions to structural challenges which have resulted in UK pension funds historically investing less in private businesses than international peers. In 2022, UK managed venture capital and growth equity funds received approximately £432m from international pension funds, whereas UK pension fund investment accounted for £48m.
The focus of the Expert Panel is underpinned by the Mansion House Compact, where 11 of the UK’s largest DC pension providers agreed to invest 5% of their default funds under management to unlisted equities by 2030. Separately, the Investment Compact for Venture Capital & Growth Equity has been signed by over 100 venture capital and growth equity firms who have committed to working with the pensions industry to clear the pathways to that objective.
Members of the Pensions & Private Capital Expert Panel include: Kerry Baldwin, Managing Partner, IQ Capital (Chair); Rob Barr, Partner and Head of Investor Relations for the EMEA, Pantheon; John Chilman, Strategic Adviser, Railpen; Andy Gregory, Chief Executive Officer, BGF; Hannah Gurga, Director General, ABI; Tegs Harding, Professional Trustee and Head of Sustainability, IGG; Virginia Holmes, Independent Trustee / Chair of the Unilever UK Pension Fund; Neville Howe, General Counsel, NEST; Allan Marchington, Managing Director and Head of Life Sciences, ICG; Matthew McNally, Head of Strategic Change – Investment Office, M&G; Dan Mikulskis, Chief Investment Officer, People’s Partnership; James Mitchell, Head of Strategic Partnerships & Research, Phoenix Group; Michael Moore, Chief Executive, BVCA; Julian Mund, Chief Executive, PLSA; Camilla Richards, Partner and Head of Investor Relations, Atomico; Ruston Smith, Chair of the Tesco Pension Fund; Ben Wilkinson, Chief Executive Officer, Molten Ventures; Tom Wrenn, Managing Partner, ECI.
