How could the Mansion House Accord facilitate a pipeline of UK investment opportunities?

Yesterday (13 May 2025), seventeen of the largest workplace pension providers in the UK signed the “Mansion House Accord”, which is a successor initiative to the Mansion House Compact.

The Accord is a voluntary expression of intent by signatories to achieve a minimum 10% allocation to private markets across their main default funds by 2030, with at least 5% allocation to UK private markets.

The term “private markets" is broad and means unlisted equities, property, infrastructure and debit/credit. Whereas the Mansion House Compact focussed on unlisted equities only, the Accord broadens the scope of asset classes to real, physical assets.

The Mansion House Accord’s ambitions are subject to fiduciary duty and the Consumer Duty and depend on several critical enablers:

• The Government’s facilitating a pipeline of UK investment opportunities.
• Wholesale market shift from costs to value, including the Government’s successful delivery of the value for money framework
• Clarification on the scope of the charge cap and legal changes to bulk transfers without consent from contract-based arrangements
• Pragmatic, well-sequenced approach to the Government’s scale tests that ensure competition and innovation in the market.

Scale tests

The Mansion House Accord’s references to the scale tests are a clear indication of how the Government proposes to respond to consultation and reform the DC market. We expect there to be a gradual and staged application of the scale tests to 2030 and for providers (particularly the Accord signatories) to be given time to reach scale in an orderly manner that avoids market disruption and gives them sufficient time and assurance to implement the Accord’s ambitions.

Pipeline of UK investment opportunities

In our view, the most important enabler is the Government’s facilitating a sufficient and appropriate pipeline of UK investment opportunities. This is vital for the Accord to succeed. There are three specific elements to facilitating this pipeline: (i) policy interventions; (ii) market engagement; and (iii) enabling access.

(I)Policy interventions

In its final report published in April, the BVCA’s Pensions and Private Capital Expert Panel sets out solutions and recommendations to enable DC pension schemes to invest more assets into private capital funds and unlisted growth equity.

As part of its recommendations, the Expert Panel seeks government support on several policy interventions, including: (i) 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; and (ii) a new fund of funds investment vehicle, to build on the British Business Bank’s (BBB) British Growth Partnership, which will enable access to smaller private capital funds.

The Expert Panel believes these initiatives (and others such as an industry approved private capital directory to act as a “shop window” for investment) will facilitate and accelerate investment in UK productive assets.

(II)Market engagement

But these initiatives will take time to establish and implement. In the meantime, there needs to be better engagement and alignment between the private capital and pensions industries.

The Expert Panel reports that over 100 venture capital and growth equity firms are now signatories to the BVCA’s Investment Compact - an initiative for UK venture capital and growth equity fund managers to strengthen partnerships with UK pension investors. In March 2025, the BVCA carried out a survey of Investment Compact signatories, which found that over 60% of respondents were actively contacting Mansion House Compact signatories (which is an increase of 10% from September 2024).

Based on this survey, each signatory should be in active discussions with 60 venture capital and growth equity fund managers but we are not close to this level of engagement. In practice, DC providers are experiencing far less engagement than the BVCA suggests, which indicates the industries need to do more to inform, educate and engage each other on supply, demand and investible opportunities.

(III) Access

Finally - DC trustees and providers are faced with the decision of how to access new investment opportunities (assuming delivery of the pipeline).

Given the majority of DC schemes (including most of the “commercial master trust” supervisory segment) invest their assets through life platforms, Long Term Asset Funds (LTAFs) are the current vehicle of choice. As of April 2025, the FCA register currently shows authorisation has been given to 27 LTAFs with many more in the pipeline.

We expect the FCA to review and amend the “permitted links” rules for unit-linked life insurance platforms to enable greater flexibility and investment in illiquid assets. We are also seeing platform providers start to expand their private capital options by integrating quarterly valuations into member unit pricing, which includes netting off accrued/deemed carried interest to ensure fairer distribution of carried interest between members over time, and developing innovative structures to invest LTAF capital in third-party closed-ended funds.

But this is not the only way.

As schemes reach scale and enhance their buying and bargaining power, we are seeing a subtle but potentially seismic shift from life platforms to custody models where DC trustees invest through segregated mandates with fund managers. As the market develops, we expect more schemes to move to a custody model and for those on life company platforms to gain access to more innovative solutions, both within and outside the LTAF regime.