Trustees' focus on cheap fees limits pension funds' growth-sector investments

Industry officials say pension trustees are prioritising ultra-low fees over the need to fund high-growth sectors, a trend that is limiting allocations to private equity and venture capital. Zoe Alexander, chief policy officer at Pensions UK, highlighted that employer and employee-benefit consultant fee decisions are effectively tying the hands of schemes. The Association of British Insurers reported that the 17 signatories to the Mansion House Accord have invested only 3.3% of their assets in UK private markets, with roughly 70% of that money going into property and about £500 million into private equity.

The original pledge, announced by Chancellor Rachel Reeves, aimed to channel pension capital into infrastructure, clean energy and startups, but progress is lagging far behind the five-percent target. Yvonne Braun of the ABI noted a disparity in fee treatment between FCA-regulated and TPR-regulated firms, complicating investment decisions. Executives such as Michael Moore warned that, at one outlet pace, the Accord’s goals may be missed by a decade, jeopardising a potential surge in UK tech leadership and job creation.