PLSA: Where are we with the pipeline of investible opportunities?
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George Dollner, policy lead, Pensions and Lifetime Savings Association
Last week, the government launched the final report of the Pensions Investment Review– a detailed roadmap for overhauling the UK pensions system. Aimed at driving higher returns for savers, ensuring greater security in retirement and increasing investment in Britain to grow the UK economy, the proposals mark a pivotal moment for an industry navigating a changing landscape.
Underpinning the government’s policy agenda on UK investment is the industry-led Mansion House Accord. The Accord is focused on defined contribution pension schemes. Signatories have expressed an intent, on a voluntary basis, to achieve a minimum 10% allocation to private markets across all main default funds in their DC schemes by 2030, with at least 5% of the total going to UK private markets. The Accord is clear that this ambition is subject to fiduciary duties and the consumer duty. Crucially, the Accord is also clear that its successful delivery is dependent on swift, supporting actions by government.
Over the last two years, a key focus area of the PLSA’s pensions and growth work has been on how to create a pipeline of investible opportunities. Our report, ‘Creating a pipeline of investable UK opportunities’ from last year sets out the key investment areas of focus for UK pension schemes, articulates the challenges faced by different types of schemes and outlines proposed actions for government and other key actors within the pensions industry.
Almost a year on from that report, we remain focused on the importance of delivering an effective pipeline of opportunities for pension schemes. Within the Mansion House Accord, this was one of the key supporting actions identified, and we were pleased that within the Pensions Investment Review's final report, there was a chapter dedicated to “boosting the UK’s pipeline of investment opportunities”.
It is a welcome signal of the government’s intent to support UK pension schemes to deliver on the Mansion House Accord and hopefully go further, to invest in opportunities that can improve member outcomes and deliver for the UK economy. While we welcome this as a starting point, we are clear there is still much left to do.
It is a welcome signal of the government’s intent to support UK pension schemes to deliver on the Mansion House Accord and hopefully go further, to invest in opportunities that can improve member outcomes and deliver for the UK economy. While we welcome this as a starting point, we are clear there is still much left to do.
Many of the opportunities identified within the final report are projects that have already been committed to, and which require more thinking to clarify how they will be made accessible to UK pension funds. Here we set out some enabling actions that could be taken:
- The National Wealth Fund was announced in October 2024 and was a welcome step. But at present, pension schemes would need to be prepared to take a significant level of additional investment risk to make the opportunities viable. More clarity on the types of opportunities that will come through, particularly in relation to the proposed role of the NWF in partnering with the Local Government Pension Scheme, would be welcome.
- The British Business Bank’s growth partnership does indeed have the potential to drive pension fund capital into growth opportunities. However, it can appear fragmented and hard to access to both investors and SMEs, in part due to a delivery model that is reliant on partner institutions. We would welcome more clarity from the BBB on how it will facilitate pension fund investment.
- The progress that is being made to set out a long-term approach to infrastructure investment, through developments like the planning and infrastructure bill and the imminent 10-year Infrastructure Strategy, is encouraging. But again, more policy clarity and certainty will be needed. For example, we are still lacking a clear plan for the development of skills to deliver on these ambitions, and pension schemes require more information on the role that they can play in key growth sectors like artificial intelligence and life sciences.
- While several significant transport projects are outlined, they are still some distance from representing a viable investment proposition. Additionally, and as highlighted in our report last year, pension schemes are particularly concerned about the lack of detail on the investment needs of the supporting infrastructure that sits alongside some of these major proposals.
Major reform is now well underway to reshape the pensions industry, and facilitate investment in UK growth opportunities, at scale. We welcome government’s focus on expanding the pipeline of opportunities but emphasise that there is much more to be done. The PLSA and its members stand ready to help.
