Rachel Reeves is poised to unveil a controversial new plan to boost large pension funds’ investment into private assets, in a move the Tories have claimed smacks of “desperation”. In a new “Mansion House accord”, these funds will be compelled to pump up to £50bn if voluntary targets aren’t met, The Financial Times reports.
The Chancellor is expected to set out the Labour government’s new approach on Tuesday. Treasury officials told the FT that if the accord doesn’t deliver the desired result, Ms Reeves will legislate to give ministers a “backstop” to mandate a higher level of investment.
It comes as the bosses of 17 pension funds giants struck a deal with the Government, committing to allocate as much as £50bn for private markets and infrastructure by the end of the decade, as per Private Equity Insights.
At least half of these investments have been earmarked for UK assets including clean energy projects and startups, The Guardian reports.
Signatories allocate at least 10% of the funds into defined contributions to private markets within the next five years, of which a minimum of 5% will be allocated to the UK, if supply of suitable assets allows, as per Sky News.
The new accord markedly expands commitments made under Jeremy Hunt, Ms Reeves’ predecessor as Chancellor in the previous Conservative government, known as the Mansion House compact.
Signatories of the deal in 2023 agreed to put aside up to 5% of funds for investment private assets by the end of the decade, though they didn’t have to be UK, The Guardian.
The Treasury told the FT that the new accord’s progress would be monitored, with the initiative “reinforced by measures to be announced in the upcoming final report of the pensions investment review”.
An official at the Government department said: “We are confident the market is moving in the right direction and we won’t have to use mandation at this stage,” but added that “it’s an important backstop”.
Tory Shadow chancellor Mel Stride claimed the idea smacked of “desperation”, telling the FT: “Pension funds must be free to make investment decisions based on what’s best for savers.”
Ms Reeves said: “I welcome this bold step by some of our biggest pension funds, which will unlock billions for major infrastructure, clean energy and exciting start-ups — delivering growth, boosting pension pots and giving working people greater security in retirement.”
Pensions minister Torsten Bell said: “Pensions matter hugely, they underpin not just the retirements we all look forward to, but the investment our future prosperity depends on.
He also welcomed the “pensions industry decision to invest in more productive assets, from growing companies to infrastructure”, adding: “This supports better outcomes for savers and faster growth for Britain.”
