Key Takeaways
- • Sector momentum accelerating: Most large UK DC master trusts signed the Mansion House Accord in May 2025, establishing sector-wide expectations for private markets exposure in default funds, with single employer schemes also making public commitments to private asset allocation.
- • Economic structural shift driving allocation: An increasing share of the economy now sits outside traditional public markets, as companies remain private longer and the vast majority never list publicly; private markets provide access to infrastructure, private credit, and private equity that are difficult or impossible to access via public markets.
- • Cost transparency remains the critical bottleneck: Trustees face a complex fee landscape that obscures true cost visibility and prevents meaningful comparison across private market propositions, making it difficult to determine maximum member costs and assess value on an apples-to-apples basis.
- • Diversification and risk-adjusted return benefits achievable: Adding private market assets to DC defaults diversifies member savings across additional asset classes and can enhance risk-adjusted returns, but only if trustees gain clarity on cost presentation, liquidity management, and the trade-offs inherent in private markets within a DC structure.
Summary
Defined contribution pension schemes across the UK are accelerating adoption of private market assets in their default portfolios, driven by a structural economic shift and reinforced by sector-wide governance commitments. In May 2025, most large DC master trusts signed the Mansion House Accord, which established consensus expectations around the appropriate level of private markets exposure in default funds. This institutional alignment follows individual employer schemes already making public commitments to private asset allocation, signaling sustained momentum across the sector.
The strategic rationale for this shift is clear: companies are remaining private for longer, and the vast majority will never access public markets, meaning an increasing portion of the global economy now sits outside traditional equity and bond portfolios. Private markets—encompassing infrastructure, private credit, and private equity—offer DC schemes access to asset classes otherwise unavailable through public market channels. This access provides meaningful portfolio diversification and has potential to enhance risk-adjusted returns for members over the long term.
However, trustees navigating this transition face a significant structural challenge: cost transparency. The complexity surrounding private market fee structures makes it difficult for trustees to establish a clear picture of maximum member costs or to conduct meaningful comparative analysis between competing propositions. This opacity extends across how costs are presented, how liquidity is managed, and what trade-offs accompany access to private assets within DC default structures. Without clarity on these dimensions, trustees cannot confidently assess whether they are comparing equivalent offerings or ensure they are delivering optimal value to members. Resolving this transparency gap has emerged as a foundational requirement for the sector to successfully scale private markets integration within defined contribution schemes.
The strategic rationale for this shift is clear: companies are remaining private for longer, and the vast majority will never access public markets, meaning an increasing portion of the global economy now sits outside traditional equity and bond portfolios. Private markets—encompassing infrastructure, private credit, and private equity—offer DC schemes access to asset classes otherwise unavailable through public market channels. This access provides meaningful portfolio diversification and has potential to enhance risk-adjusted returns for members over the long term.
However, trustees navigating this transition face a significant structural challenge: cost transparency. The complexity surrounding private market fee structures makes it difficult for trustees to establish a clear picture of maximum member costs or to conduct meaningful comparative analysis between competing propositions. This opacity extends across how costs are presented, how liquidity is managed, and what trade-offs accompany access to private assets within DC default structures. Without clarity on these dimensions, trustees cannot confidently assess whether they are comparing equivalent offerings or ensure they are delivering optimal value to members. Resolving this transparency gap has emerged as a foundational requirement for the sector to successfully scale private markets integration within defined contribution schemes.
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