Cautious trustees ‘tie the hands’ of pension schemes and hold back growth investment, industry boss says
Workplace pension trustees fixating on low-cost fees “tie the hands of schemes” and make it difficult for them to invest in high-growth companies, the pension trade body has said, after the government’s push to get pension money flowing into equities showed minimal progress. Zoe Alexander, chief policy officer at trade body Pensions UK, said the [...]
Trustees of workplace pension schemes are being accused of limiting investment growth by prioritizing low-cost fees, according to the pension trade body Pensions UK. Zoe Alexander, chief policy officer at Pensions UK, told City AM that such a focus on fees is preventing schemes from allocating more funds to high-growth assets like private equity and debt.
This comes after the government's initiative to direct pension money into equities has seen little success. The Association of British Insurers (ABI) reported that the 17 signatories of the Mansion House Accord, which aims to allocate assets to private market investments, have placed only 3.3% of assets into UK private markets by December 2025, totaling £11.1bn.
Property investments dominate the sector, accounting for around 70% of the committed capital. Alexander emphasized that employers and employee benefit consultants (EBCs) must make more balanced decisions when selecting fees for managing pension scheme assets. Yvonne Braun, director of long-term savings and health and protection policy at the ABI, noted that the disparity between private equity and property investments is due to the latter being a less established route, but argued that investing in property benefits the economy.
She also highlighted the "disparity" in how performance fees are treated based on whether a company is regulated by the FCA or The Pensions Regulator (TPR), calling this conflict "self-evidently not helpful." Concerns have been raised about blocked-up capital due to the lack of investment-grade growth projects in the UK. The Mansion House Compact, signed in 2023, aimed to have signatories invest at least five% of their default funds into unlisted equities, but progress has been slow, with only 0.85% of assets allocated to this sector, equating to £2.7bn.
Michael Moore, UK Private Capital executive, expressed disappointment at the limited investment in private equity, warning that the Compact target will likely be missed by a decade or more.
Written by urgent.news from City AM's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
