Seventeen of the UK’s biggest workplace pension providers have pledged to invest at least 10% of their default funds into private markets by 2030 – 5% of which needs to go into UK assets.

This voluntary commitment is known as the ‘Mansion House Accord’, and signatories include: Aegon, Aon, Aviva, Legal & General, LifeSight, M&G, Mercer, Natwest Cushon, Nest, NOW: Pensions, Phoenix Group, Royal London, Smart Pension, the People’s Pension, SEI, TPT Retirement Solutions and the Universities Superannuation Scheme.

Those firms, which cumulatively manage around 90% of savers’ defined contribution pension assets, will have to make sure 10% of their frontline investments are allocated to private markets, such as private equity or private credit, and 5% of that needs to be allocated specifically to the UK by the end of the decade.

It builds on the previous Mansion House Compact, a non-binding pledge signed by 11 firms to invest 5% into unlisted equities, with no commitment to put anything in the UK.

In total, around £252bn of pension assets will be in scope of the new agreement, and the government says it should unlock around £50bn of investment for the UK economy.

What does it mean for savers?

So who really benefits from this? That’s the question everyone is wondering.

Pensions minister Torsten Bell said in a formal statement that the move will “support better outcomes for savers”.

But in its official release, the government led on the fact pension schemes are “backing British growth” through the pledge, with chancellor Rachel Reeves focusing on unlocking “billions for major infrastructure, clean energy and exciting start-ups”.

As Dan Kemp, chief investment officer at Morningstar, put it, the announcement “appears to be focused on supporting British industry rather than solely for the benefit of investors.”

With private markets, the hope is that being more bullish in this area will pay off for investors. Private credit, for example, has been at a premium for a while. But these investments can often be in illiquid assets – assets that can’t typically be sold quickly and easily at fair market value – which can pose risks to savers.

It comes at a time when pension investments are already largely underperforming.

Our own research shows more than half (55%) of default workplace pension funds are underperforming against the FTSE All-Share, while a whopping 93% of the funds in Global Equities Pensions, which represents most default funds, failed to meet industry performance benchmarks.