Pension funds commit £22bn to UK infrastructure but trustees warn ‘members come before ministers’

Eleven of the country’s largest workplace pension schemes have committed to invest £22bn in British infrastructure, housing and unlisted companies by 2030 under an expanded version of the Mansion House accord, the Treasury announced on Tuesday.

The schemes, which between them manage about £480bn on behalf of 18 million savers, have agreed to put at least 10% of their default funds into private assets, half of it in the UK. Signatories include the master trusts Compass Pensions and Northfield, the scheme for universities staff and the pension funds of several large retailers and utilities.

The Treasury said the commitment would “unlock” investment in roads, grid connections, water infrastructure and new towns, and would deliver better returns for savers than the gilts and global equity trackers that dominate most default funds. Ministers have made clear they regard the pensions industry’s £3tn of assets as the single largest untapped source of domestic investment.

But the trustees who signed the accord were notably careful about what they had agreed to. “We have committed to look at UK assets seriously, and we are,” said Margaret Oyelaran, chair of trustees at Compass Pensions, which runs the retirement savings of 4.2 million people. “We have not committed to accept a lower return. If a wind farm in the Humber offers 7% and a data centre in Texas offers 9%, our members are entitled to the 9%, and no accord changes that. Ministers understand this. I am not sure the press release does.”

The expanded accord follows the original 2023 agreement, under which schemes pledged to invest 5% of their default funds in unlisted equities. Figures published alongside Tuesday’s announcement show they have so far reached 2.3%, with most of the money going into infrastructure funds rather than directly into companies. The Pensions and Lifetime Savings Association said the slow pace reflected a shortage of investable projects rather than reluctance.

Dr Imran Siddiqui, a pensions economist at the Institute for Fiscal Studies, said the government faced a tension it had not resolved. “Trustees have a legal duty to act in members’ interests, full stop,” he said. “If the UK assets are good, the schemes will buy them without an accord. If they are not, the accord cannot make them. The useful thing the government can do is produce projects that are worth investing in, and that is slower and harder than signing a document.”

The accord contains no penalties, but the government retains a reserve power, included in last year’s pensions act, to direct schemes’ investment if voluntary commitments are not met. The Treasury said on Tuesday that it had “no plans” to use it.

The schemes will report their progress annually from next autumn. Ms Oyelaran said Compass expected to meet its target “comfortably”, but added: “The day I am told to invest in something because it is British rather than because it is good, I resign.”