The government announced a landmark agreement with the UK’s largest pension funds on Wednesday under which the schemes will commit to investing a minimum of £50 billion in domestic infrastructure, clean energy and growth capital projects over the next five years. The Mansion House Compact 2.0, as the deal has been dubbed by Treasury officials, builds on the original Mansion House agreement of 2023 and represents the most significant alignment of pension capital with national investment priorities since the post-war era.
The agreement covers eleven of the UK’s largest defined benefit and defined contribution pension schemes, including the Universities Superannuation Scheme, the BT Pension Scheme, Nest and several of the largest local government pension pools. Together, these schemes manage approximately £850 billion in assets, and the commitment represents a meaningful shift in their domestic allocation — currently, UK pension funds invest a significantly lower proportion of assets in UK infrastructure than their counterparts in Australia, Canada and the Netherlands.
Chancellor Rachel Reeves, who hosted the signing ceremony at Mansion House in the City of London, described the agreement as “a turning point in how we mobilise long-term capital for Britain’s future.” She argued that UK pension funds had historically underinvested in domestic assets relative to international peers, and that the deal would help to close this gap while generating competitive returns for pensioners. “There is no conflict between fiduciary duty and investing in Britain,” Reeves said. “The infrastructure this country needs to grow is also the infrastructure that can deliver strong, stable, long-term returns.”
The investment commitments will be directed through a combination of direct infrastructure investments — in areas including offshore wind, grid infrastructure, social housing and urban transport — and through the British Growth Partnership, a new co-investment vehicle being established by the British Business Bank to pool pension capital alongside government money in the National Wealth Fund. The vehicle is modelled partly on the successful Canadian pension infrastructure investment model, which has seen funds such as OMERS and CPP Investments become major global infrastructure investors.
Not all commentators were unconditionally positive. Some pension fund trustees and their advisers cautioned that the government needed to ensure that the investment pipeline was sufficiently developed and appropriately priced to deliver the risk-adjusted returns that pension trustees were legally required to seek for their beneficiaries. “We welcome the principle, but the proof will be in the specific opportunities,” said one senior pension fund investment officer who asked not to be named. “We cannot compromise on our fiduciary duty to members, whatever the political pressure.”
The deal also includes commitments on unlisted equity investment, with pension funds agreeing to allocate a proportion of their portfolios to UK venture capital and growth equity, addressing a longstanding concern that British technology and life sciences companies struggle to access domestic institutional capital at the scale available to their American counterparts.
— Sarah Mitchell, London Capital Post
