A cross-industry panel has called for new government-backed reforms to help UK defined contribution (DC) pensions invest in private capital, unlocking greater returns for savers and supporting British businesses.
Leaders from the pensions and private capital industries have jointly issued a set of proposals aimed at breaking down barriers for UK DC schemes to invest in venture and growth capital. The recommendations aim to channel more retirement savings into fast-growing British businesses while offering pension savers exposure to potentially higher returns.
The proposals come from the Pensions and Private Capital Expert Panel, a group formed in early 2024 to support initiatives under the Mansion House Compact and the Investment Compact for Venture Capital and Growth Equity. The panel, convened by the British Private Equity and Venture Capital Association (BVCA), includes senior representatives from the Association of British Insurers (ABI) , the Pensions and Lifetime Savings Association (PLSA), savings and retirement business Phoenix Group, investment manager M&G and DC workplace pension scheme Nest.
A key recommendation is the creation of a new programme to meet the needs of DC pension investors and support access to private capital markets. Central to this proposal is the establishment of a UK-specific investment marketplace named Nova (New Opportunities for Venture and growth Acceleration), modelled after France’s Tibi Scheme encouraging institutional investors to invest in the most innovative technology companies. Nova would provide DC schemes with access to specially accredited private capital funds focused on strategic sectors.
The panel has also proposed a new fund of funds vehicle to expand the reach of the British Business Bank’s British Growth Partnership. This would allow DC schemes to gain diversified exposure to smaller private capital funds, which are often harder to access due to size and complexity.
To further ease navigation of the private capital landscape, the panel has also recommended the introduction of an industry-approved directory. This ‘shop window’ of accredited private capital firms and funds would increase transparency and enable schemes to make informed investment decisions.
“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 panel stated.
A new BVCA survey found that 62% of Investment Compact signatories are actively engaging with Mansion House Compact participants—up from 50% in September 2024. According to the panel: “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, 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, ABI, commented: “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, 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.”
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 three years to a diversified private markets strategy. Our partnership with FGC puts us at the forefront to deliver better outcomes for our DC customers.”
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.”
