1. Pensions

1.1 Mansion House reforms

On 10 July 2023, the chancellor, Jeremy Hunt, delivered the annual Mansion House speech.[1] During this, Mr Hunt announced proposals to reform the private pensions sector. He said the reforms were designed to “boost returns and improve outcomes for pension fund holders whilst increasing funding liquidity for high-growth companies”. He said that while the UK has the “largest pension market in Europe”, worth over £2.5tn, there was a “perverse situation” in which “UK institutional investors are not investing as much in UK high-growth companies as their international counterparts”.

The chancellor announced a range of reforms to defined contribution (DC) and defined benefit (DB) pensions. DC pensions do not provide a guaranteed pension and instead provide a pot of money which can be used in retirement. DB pensions, which are often workplace pensions, pay a guaranteed pension based on factors such as salary and length of service.[2] The chancellor said that while some of the proposals may require consultation, “all final decisions” would be made ahead of the autumn statement due on 22 November 2023.[3]

The announcements for the two types of pensions are summarised below.

Defined contribution pensions

  • The chancellor, the Lord Mayor of London, and the CEO’s of some of the largest DC pensions schemes in the UK—including Aviva, Scottish Widows and Legal and General—have signed the “Mansion House compact”.[4] The compact commits those schemes to “allocating at least 5% of their default funds to unlisted equities by 2030”. The chancellor said this could “unlock up to £50bn of investment into high growth companies” by that date.
  • The chancellor said that the government would facilitate a “programme of DC consolidation”, to ensure that “funds are able to maintain a diverse portfolio of bonds, equity and unlisted assets and deliver the best possible returns for savers”. The chancellor said that those DC schemes not achieving the “best possible outcome for their members will face being wound up by the Pensions Regulator”. He referred to the DC pensions ‘Value for money’ consultation that ran in early 2023 and which gathered views on ensuring that funds were making investment decisions based on value for their savers, rather than short-term costs.[5] The chancellor said that in response to the consultation the government would be “clarifying that investment decisions should be made on the basis of long-term returns and not simply cost”.
  • The chancellor said that DC schemes must have access to “a wide range of investment vehicles that enable them to invest quickly and effectively in unlisted high growth companies”. He said the Treasury would explore the case for “government to play a greater role in establishing investment vehicles”, as a means of “crowding in” more investment. The chancellor used the example of the British Business Bank, which he claimed had “helped to mobilise £15bn of capital into over 20,000 companies”.

Defined benefit pensions

  • The chancellor said that with “over 5,000” DB pensions schemes in the UK the market was “too fragmented”. He said the government would introduce a “superfund regulatory regime to provide sponsoring employers and trustees with a new scaled-up way of managing DB liabilities”. He said a call for evidence would be launched on the “role of the Pension Protection Fund and the part DB schemes play in productive investment”.
  • Jeremy Hunt also said the government must “lead by example”, therefore a consultation would be launched on consolidating the assets of the Local Government Pension Scheme (LGPS). He said a deadline of March 2025 would be set for all LGPS funds to “transfer their assets into local government pension pools and ensure greater transparency on investments”. A consultation would also be launched on doubling the existing limit on LGPS allocations in private equity to 10%, which the chancellor claimed could “unlock a further £25bn” of investment by 2030.

On 11 July 2023, HM Treasury published a collection of documents which provided further detail on the Mansion House pensions announcements, including those elements that may require primary legislation.[6]

1.2 Opposition and stakeholder views

The Labour Party has made similar proposals to consolidate the pensions market and to encourage funds to invest in UK firms. In May 2023, the shadow chancellor, Rachel Reeves, told the Financial Times that a future Labour government would encourage pensions funds to invest up to £50bn in a “future growth fund” to finance high-growth companies.[7] Ms Reeves also said that she hoped such a scheme would be voluntary. However, when asked if a Labour government could mandate such investments, she said “nothing is off the table”. The Financial Times also stated that Ms Reeves had said she wanted to “accelerate the merger of smaller UK pension funds so as to consolidate a fragmented market”.

The Pensions and Lifetime Savings Association (PLSA) welcomed some of the Mansion House reforms, but said other elements “require careful scrutiny”.[8] Nigel Peaple, director of policy and advocacy at PLSA, said that measures to improve the performance of DC funds and to improve the investment options for DB schemes were “especially positive developments”. On requiring pension funds to both “invest locally” and to invest “a greater allocation to unlisted equity”, Mr Peaple said many schemes would be “comfortable with this”. However, he added that it was “essential that the fiduciary duty to only invest in the interests of scheme members remains paramount”.

Tom Selby, head of retirement policy at the investment firm AJ Bell, has criticised some of the proposals. Writing in Money Marketing magazine, he said that “requiring a portion of people’s pensions to be invested in specific, possibly high risk, assets […] sends a shiver down my spine”.[9] He said that one of the strengths of the current system was that “investment decisions for members of DC default funds and DB schemes have independence baked in, usually via the appointment of independent trustees”. He said those trustees are currently required to make investment decisions “delivering the highest possible income in retirement for members”. He said that given that the average pensions saver is “either disengaged (in the case of DC defaults) or has no say over investment decisions (DB), it is crucial that remains the case”.

2. Read more

Cover image by Greg Montani from Pixabay.


  1. HM Treasury, ‘Chancellor Jeremy Hunt’s Mansion House speech’, 10 July 2023. Return to text
  2. HM Government website, ‘Types of private pensions’, accessed 17 October 2023. Return to text
  3. HM Treasury, ‘Autumn Statement 2023 date confirmed’, 5 September 2023. Return to text
  4. City of London Corporation, ‘Mansion House compact’, 10 July 2023. Return to text
  5. Department for Work and Pensions, ‘Value for money: A framework on metrics, standards, and disclosures’, 25 July 2023. Return to text
  6. HM Treasury, ‘Mansion House 2023’, 11 July 2023. Return to text
  7. George Parker and Josephine Cumbo, ‘Labour willing to force pension plans to invest in £50bn ‘growth fund’’, Financial Times (£), 22 May 2023. Return to text
  8. Pensions and Lifetime Savings Association, ‘Pension reforms include major steps forward, but other elements require careful scrutiny’, 11 July 2023. Return to text
  9. Tom Selby, ‘Government plans to control pension investments send shivers down my spine’, Money Marketing, 25 May 2023. Return to text