Sonia Kataora, Partner and Head of DC Investment at BW said: "The Chancellor is no longer pulling her punches when it comes to promoting UK growth - and this is a big step on a long journey for pension schemes. While for now, the Mansion House Accord is just 'voluntary', the Government seems unabashed to further enforcing investment if its ambitious targets aren't met. What we cannot afford to lose with this new development is a diligent focus on member outcomes. We are already hurtling towards a retirement crisis, with low contribution rates and a lack of realistic financial planning - savers simply cannot afford underwhelming returns on top of that. The solution to this lies in better value assessments, rather than a myopic focus on costs. So long as the net returns of private markets are good, most UK pension savers will get on board with using their money to improve the health of UK infrastructure and other productive assets.”
Iain McLellan, Director at Isio, comments: “The Government’s upgrade of the Mansion House Compact to the Mansion House Accord, will see the largest Defined Contribution (DC) schemes in the UK agree to doubling the minimum allocation to private assets to 10% of funds held in their default investment strategy. There will also be a new requirement for at least 5% of assets in default investment strategies to be in UK private assets. The Accord, like the Compact it will replace, is voluntary. This represents a collaborative approach of working with the largest holders of DC funds in the industry rather than taking a more confrontational approach of introducing any legal mandatory minimums. It will be interesting to see more detail on the definition in the Accord for what assets meet the UK private market allocation and how the Government can help ensure that a pipeline of these assets can be expanded. Without this expansion, any increase in investment will just raise prices, resulting in the opposite of the wider aims to improve Value for Members.”
Lisa Picardo, Chief Business Officer UK at PensionBee, said: “Pension schemes should be empowered to make sound, independent decisions based on what delivers the best outcomes for their members. Investment decisions should be driven by long term value, transparency and suitability, not political pressure. The vountary pact made by many of the UK's largest pension funds suggests that there is real willingness to invest in private asset classes or UK assets. If this genuinely offers an opportunity for strong returns with sufficient liquidity, these asset classes will attract capital without the need for compulsion. However, the threat of mandation forcing schemes to allocate capital is deeply concerning, especially when it relates to private markets assets, where returns can be opaque, costs can be high and liquidity is limited. Whilst we support efforts to boost UK investment and growth, and to improve returns, legislation must not override a schemes’ duty to act solely in the best interests of its members. That principle must be respected and upheld.”
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