Key Takeaways
- • The Small Schemes Partnership (SPP) opposes a government power to mandate that a minimum share of DC master trust and group personal pension assets be invested in private assets, including UK assets, arguing it undermines the prudent person principle and member interests.
- • The power sits in the Pensions Bill and would be exercisable throughout the current and next Parliament because of its sunset provisions, according to the SPP's position.
- • The government's stated plan is a "reserve power" to be used only if providers fail to honour the May 2025 Mansion House Accord commitment of a minimum 10% private markets allocation by 2030, including at least 5% in UK private markets.
- • The SPP's alternative is to focus on scale, a pipeline of UK investment opportunities, fiscal incentives, and planning and industrial policy reform.
- • The article argues the threat of mandation will be the government's initial lever, and recommends a statutory "safe harbour" and realistic timeframes if mandation proceeds.
Summary
The Small Schemes Partnership (SPP) has set out its opposition to a government power, contained in the Pensions Bill, to mandate that a minimum proportion of assets held in defined contribution master trusts and group personal pension plans be invested in private assets, including in the UK. The article, written by Jeremy Goodwin, an SPP member and partner and head of pensions at Eversheds Sutherland, frames the issue as a clear message to government: do not mandate.
The policy backdrop is the May 2025 Mansion House Accord, under which seventeen of the largest UK workplace pension providers, almost half of them SPP members, signed a voluntary expression of intent to achieve a minimum 10% allocation to private markets across their main default funds by 2030, with at least 5% in UK private markets. The BVCA's Investment Compact for Venture Capital & Growth Equity complements the Accord, with more than 100 UK venture capital and growth equity fund managers committing to partner with pension scheme investors as limited partners.
The SPP argues that mandation would conflict with the long-standing "prudent person" principle, under which courts have supervised trustees' investment powers for centuries, and would also cut across the Consumer Duty for providers of group personal pensions. It also warns that introducing mandation would make it easier for future governments to extend it. Citing a WPI Economics report, The scale of it, commissioned by several large UK asset owner pension funds, the SPP contends that artificially inflating UK investment prices due to a limited pool of suitable opportunities could create volatile pension values, overexposure to systemic economic risk, and potential long-term underperformance.
The government has said it intends the power to be a "reserve power" that it would exercise only if providers do not honour their Accord commitments. The Bill, however, would require schemes to meet the "asset allocation requirement" to remain auto-enrolment schemes. The government has said this is not its intention and has tabled amendments to convert the requirement into a reserve power, but the SPP considers these amendments insufficient. It expects further amendments to give effect to the government's objective, and suggests the government will initially rely on the threat of mandation.
If mandation is introduced, the SPP recommends that the government consider timeframes for minimum thresholds to avoid disorderly investment transitions and demand that outstrips supply, and that it provide trustees and providers a statutory "safe harbour" against member challenge where performance lags alternative investments. The article closes by expressing hope that the power will act as a deterrent that encourages rather than coerces schemes to invest more in the UK.
The policy backdrop is the May 2025 Mansion House Accord, under which seventeen of the largest UK workplace pension providers, almost half of them SPP members, signed a voluntary expression of intent to achieve a minimum 10% allocation to private markets across their main default funds by 2030, with at least 5% in UK private markets. The BVCA's Investment Compact for Venture Capital & Growth Equity complements the Accord, with more than 100 UK venture capital and growth equity fund managers committing to partner with pension scheme investors as limited partners.
The SPP argues that mandation would conflict with the long-standing "prudent person" principle, under which courts have supervised trustees' investment powers for centuries, and would also cut across the Consumer Duty for providers of group personal pensions. It also warns that introducing mandation would make it easier for future governments to extend it. Citing a WPI Economics report, The scale of it, commissioned by several large UK asset owner pension funds, the SPP contends that artificially inflating UK investment prices due to a limited pool of suitable opportunities could create volatile pension values, overexposure to systemic economic risk, and potential long-term underperformance.
The government has said it intends the power to be a "reserve power" that it would exercise only if providers do not honour their Accord commitments. The Bill, however, would require schemes to meet the "asset allocation requirement" to remain auto-enrolment schemes. The government has said this is not its intention and has tabled amendments to convert the requirement into a reserve power, but the SPP considers these amendments insufficient. It expects further amendments to give effect to the government's objective, and suggests the government will initially rely on the threat of mandation.
If mandation is introduced, the SPP recommends that the government consider timeframes for minimum thresholds to avoid disorderly investment transitions and demand that outstrips supply, and that it provide trustees and providers a statutory "safe harbour" against member challenge where performance lags alternative investments. The article closes by expressing hope that the power will act as a deterrent that encourages rather than coerces schemes to invest more in the UK.
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