Mansion House Reforms Announcement.

In July 2023, the Chancellor set out the government’s Mansion House reforms. As part of these reforms, it was recognised that the UK has the largest pension market in Europe, worth over £2.5 trillion, but Defined Contribution pension schemes invest less than 1% in unlisted equity. By comparison, Australia invests between 5% and 6%. As a result, some of the UK’s largest pension providers have signed up to the “Mansion House Compact”, which commits them to investing at least 5% of their default fund to unlisted equities by 2030. 

At the same time, the Value For Money framework, published by the DWP (in consultation with The Pensions Regulator and the FCA), clarifies that investment decisions should be made on the basis of long-term results and not simply cost. This may, therefore, open up the possibility of higher charges on workplace pension default funds in the future. Royal London were, however, noticeable by their absence, as one of the few leading pension providers that has not signed up to the Mansion House Compact.

Excerpt from Jeremy Hunt’s speech on 10th July 2023: “Today’s announcements could have a real and significant impact on people across the country. For an average earner who starts saving at 18, these measures could increase the size of their pension pot by 12% over their career - that’s worth over £1,000 more a year in retirement. At the same time, this package has the potential to unlock an additional £75 billion of financing for growth by 2030, finally addressing the shortage of scale up capital holding back so many of our most promising companies.”