UK pension funds face new rules to boost private market investments
The Pension Schemes Bill has officially become law after receiving Royal Assent this week. The legislation follows a broader push to encourage UK pension funds to invest more in private markets, including high-growth startups. A key part of this effort, the Mansion House Accord, has already seen major providers commit billions to UK-based assets. In 2025, 17 leading pension providers signed the Mansion House Accord, voluntarily agreeing to allocate 10 per cent of their default funds to private markets by 2030. Half of that amount was pledged specifically for UK investments. The move came after years of low domestic investment in private assets, which the accord aimed to address.
The newly passed Pension Schemes Bill now sets firmer rules. It introduces statutory caps, limiting mandatory investments to 10 per cent of a default fund, with up to five per cent directed into UK assets. This balances the push for growth with the need to protect pension savings. Northern Gritstone, a five-year-old investment firm, has already demonstrated how pension funds can engage with venture capital. Around 70 per cent of its £400 million capital comes from UK pension schemes. The firm tailored its approach to suit pension funds, recognising the challenges they face in accessing high-risk, high-reward opportunities. Venture capital remains a high-stakes sector. Most investments fail to return capital, while only a small fraction deliver significant profits. Critics argue that forcing pension funds into these markets could lead to poor returns, undermining the long-term financial security of savers.
The new law sets clear boundaries for pension fund investments in private assets. While the Mansion House Accord has already spurred voluntary commitments, the bill ensures a measured approach to risk. The outcome will depend on whether these investments can deliver the growth needed without compromising returns for pension holders.
