There are two good ways at looking at the Mansion House Accord ( I speak as an ordinary person).
The first is that it is looking to boost the pensions that savers get and this works if you believe that the opportunities in private markets (wherever) are likely to deliver greater long-term returns than assets whose value is publicly quoted. I do not see the providers of pensions making this argument in terms that people can relate to. If they were making this argument then people like Martin and Paul Lewis would be interested as it would translate to a higher wage in retirement for the people who tune in or watch shows to better understand what’s happening their money and what they can expect back.
The second is that we are looking to be responsible for our country and our children’s country and we bought into this when we were introduced to the concepts of environmental , social and governance principles. Pensions having the power to improve climate , make for a fairer society and improved the behaviour of business people all appeal to ordinary people. But there is a cost to pay for “ESG” , it is a cost balanced against the wish to get better retirement income.
The Mansion House accord is an extension of ESG to me. There must be a balance between doing good for Britain and doing good for our retirement income. It would be good if both could come together. I do not hear pension funds saying they can provide better pensions and inject money into the British economy despite this under-pinning the Mansion House Accord. Infact I don’t see any attempt to do with Mansion House what we have tried to do with ESG.
Reading the FT report on what was released on the implementation of the Mansion House Accord I learn about numbers and about where the money that would otherwise have been invested in passive quoted funds, has gone. It does nothing to excite me.
The first official update by the trade bodies Pensions UK and the Association of British Insurers revealed that pension schemes held 6.6 per cent of their DC growth-phase assets, or £22.1bn, in global private markets, with 3.3 per cent in the UK.
Is this good as Pensions UK (for trust based occupational schemes ) and the ABI (for insurers) imply? The FT don’t seem so impressed
The bulk of money in UK assets — £8bn — went into British real estate, with infrastructure accounting for £1.3bn and private credit making up £900mn. Just £500mn went into domestic private equity.
I am surprised that investment in UK property is seen as something new. I remember being taught that property was a diversifier and that was 40 years ago. The amount going into scale ups and the other forms of private equity is relative to our pension funds – pretty small.
Despite protests from Pensions UK and ABI about needing to build up the investment expertise, manage the increased cost of these investments (within cost constraints set to win business sometimes way below any charge cap), there are still noises off , exasperated that despite all the noise, there is very little action.
Michael Moore, chief executive of industry body UK Private Capital, described the update as “disappointing”, adding that the pension providers were not moving quickly enough. “There is a lot of work being undertaken by the pensions industry to facilitate more investment into private capital and we are collaborating closely with them. But we are in danger of missing a once-in-a-generation opportunity for sovereign UK leadership in tech and thousands of new jobs in the economy,” he said.
I hope that politicians downwards, there will be more talk of the benefit of investing capital into UK private equity in the way that ESG was introduced into pension investment. That means popularising this type of investment as both better for our income and better for “thousands of new jobs in the economy”.
If we are going to get people excited about saving for retirement we need to get them turned on to investment and the benefit it brings over sticking money into Cash ISAs and the like.
Unfortunately, the one thing that depresses people most is their investment into property and I can’t imagine that ordinary people will get too excited in investments under this new Mansion House Accord as “property”. Can we have some excitement about what Mansion House Accord can bring us because now – to the ordinary person – it looks as dull as ditchwater.
Yes - but particularly in terms of pensions we need to support existing employers and help them thrive and grow.…