This article was originally published on Pitchbook.com.
The UK government was first announced Pension System Legislation of June 5th As part of the government’s efforts to promote investment in British companies.
One of the most controversial changes is to empower regulators to mandate default funds for workplace-defined control (DC) schemes to increase allocations to private equity, private debt, venture capital and real estate if the 10% allocation outlined in the Mansion House Accord is not voluntarily met.
A mandatory backstop is done after 17 workplace pension providers Aviva, M&G and Royal London–Last month I signed a new “Apartment House Accord.” The agreement promises to place at least 10% of the DC fund into private market assets. However, this commitment can be difficult to implement.
Law firm partner Rachel Pinto Herbert Smith Freehills CramerPension practices warn that regulatory power can lead to potential violations of pension fund fiduciary duties.
“The possibility of the bill’s narrative is “obligation.” The government says that if the system does not voluntarily increase its allocation to productive investments, power will only be used “as needed,” she said. “It has two purposes: to improve member outcomes and promote UK growth. However, providers must act solely in the interests of their members, as the law stands. The terms and protections regarding proposed power are very important.”
New Capital Consensus, a think tank supported by Leeds University Business School, believes a new approach is needed to ensure that the DC scheme is compliant with Mansion House Adcot.
“Current industry practices are so entrenched that tax incentives are needed to get a pension fund that invests in the UK,” said Ashok Gupta, founder of the New Capital Consensus.
The group also believes it is necessary to mandate all DC default funds and clarify the planned routes towards Mansion House Accord’s compliance.
Pension fund allocation will decrease
The UK pension fund’s profits to the private market appear to have declined over the past decade. Pitchbook data shows that UK pension funds have worked on just 33 private market funds so far this year from 92 funds last year.
In the private market, PE has traditionally been the most popular fund type in UK pension funds, with 560 commitments being made between 2015 and 2025. Real assets also collected 547 fund commitments during this period, but VCs have only 80 fund commitments in the past decade, with the lowest participation in pension funds.
Merseyside Pension Fund It is the most active UK Pension Fund since 2015 with 170 commitments in the Global Private Capital Fund. Greater Manchester Pension Fund, South Yorkshire Pension Bureau and East Riding Pension Fund We have all made over 100 commitments over the same period.
This article was written by Emily Rye and is a London-based reporter from Pitchbook.
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