Chancellor Rachel Reeves has refused to rule out compelling UK pension funds to invest in domestic assets, escalating tensions with the pensions industry just hours after the announcement of the new £50 billion Mansion House accord.
The government had celebrated a voluntary commitment by 17 of the UK’s leading defined contribution pension providers to invest at least 10% of their default funds in private markets by 2030 — with half of that, an estimated £25 billion, channelled into UK-based investments. But while Reeves praised the agreement as a milestone, she also left the door open to introducing mandates if voluntary progress stalls.
“I’m never going to say never,” Reeves told Bloomberg Television. “But I don’t think it’s necessary.”
Her remarks have sparked unease within the pensions sector, which has long opposed any move to mandate asset allocation, arguing that such a step would conflict with trustees’ fiduciary duty to act in the best interests of members.
Sources close to the Treasury suggest the upcoming pensions investment review — due in the coming weeks — will recommend granting the government temporary powers to enforce binding investment targets if voluntary commitments fall short.
While officials have indicated these powers may not need to be used, the suggestion alone is drawing sharp criticism from the industry.
A spokesperson for Phoenix Group, one of the signatories of the Mansion House accord, said: “We believe the most sustainable solution lies in creating the right incentives, not mandates.”
Phil Parkinson, head of retirement and investments at Mercer UK, echoed the concern, saying: “We don’t think mandation is the right step but equally we don’t think it’s necessary.”
Jamie Jenkins, director of policy at Royal London, said the industry had long suspected the government would retain the right to mandate, but warned of public backlash: “There could be a strong, negative reaction from people if they feel the government is telling them how to invest their retirement savings.”
Jo Sharples, a senior executive at Aon, warned that any shift in decision-making responsibility “could lead to schemes picking up sub-optimal assets or overpaying for assets, neither of which will be in members’ best interest.”
Despite Reeves’ reassurance that the voluntary route remains preferable — “This week’s agreement shows that you don’t need to use mandation” — the accord itself was heavily caveated. Providers stressed their commitments remain subject to fiduciary duties and contingent on government and regulators delivering so-called “critical enablers” such as regulatory reform and improved market infrastructure.
Scottish Widows, owned by Lloyds Banking Group, notably did not sign the agreement — a move seen by some as a sign of caution amid growing political pressure.
As the government looks to unlock long-term capital to boost UK economic growth, particularly from the country’s vast pension funds, the debate over voluntary vs mandatory investment strategies is intensifying. The review’s findings, when published, could mark a critical turning point in how Britain’s retirement savings are managed and deployed.
