Fresh row over plan to mandate pension fund investments
A row has erupted over reports the government is plotting to set mandates on pension fund allocations, while the chief architect of the so-called Mansion House reforms – which aimed to encourage the deployment of pension fund assets into unlisted equities – has distanced himself from the move.
Pension bosses are understood to have been warned the government will enforce requirements to allocate at least 10 per cent of assets to private funds if they fail to do so voluntarily, under the terms of a new agreement dubbed the “Mansion House Compact II” due to be unveiled next week.
But Sir Nicholas Lyons, chairman of Phoenix Group, who led a voluntary pact signed by major pension funds in 2023 to invest more into private assets, appeared to take issue with the plans.
Speaking at an event at the Guildhall yesterday, he said: “I think we need to leave it to the private sector to make the right decisions around domestic buyers to listed equity capital.”
His views were echoed by British Business Bank CEO Louis Taylor, who said: “I think there are other ways of incentivising than actual mandation and I think that might go against the spirit of an open UK economy.”
Lyons added that the government should instead “retain the threat of mandation to help concentrate their minds.”
Some private funds who would stand to benefit from the rule-change have welcomed the move. James Codling, managing partner of VC firm Volution, which this week launched a new $100m fund, told Morning Wire: “I support anything that encourages greater investment into the venture ecosystem.”
Though others have issued a stern rebuke of the proposals. Simon French, chief economist at Panmure Liberum, said it was “hard to overstate how perverse a pension reform this would be.”
Writing in Morning Wire today, Gareth Davies, Shadow Financial Secretary to the Treasury, said: “If the Chancellor decides to go down the route of mandating investments, it will be because her poor choices mean she needs to shake down pension funds and funnel your money towards UK-based investments that her economic policies have done so much to make unattractive.”