When 11 of the UK’s largest pension providers signed a deal to pump billions into unlisted companies in July 2023, the mood at Mansion House in the City was celebratory.

Then Chancellor Jeremy Hunt hailed the signing a “great personal triumph” for then Lord Mayor, Sir Nicholas Lyons. If the remainder of the UK defined contribution market followed suit and invested five per cent of their assets in unlisted equities by 2030, he said, it could “unlock up to £50bn of investment”.

Three years on, the optimism of that night has morphed into concern that the pace of investment is slowing and the industry will struggle to meet its 2030 deadline.

The latest update in October 2025 from the Association of British Insurers, which is overseeing the compact, detailed a year on year increase of 0.24 percentage points, taking the total committed capital to 0.6 per cent of total assets in the signatories’ so-called defined contribution funds. The increase means that £1.6bn has now been invested.

But with only four years left to go, the figure is a far cry from the five per cent that was agreed by the 11 signatories, which include Nest, Smart Pension and Aviva.

And those who initially cheered the deal are getting restless.

“It is clear the pace must increase significantly for Mansion House Compact signatories to meet their commitments,” said Michael Moore, chief executive of UK Private Capital.

“It is essential that there is greater urgency in accelerating progress so that pension savers can benefit from more diversified portfolios and the stronger returns offered by the asset class.”

Client support

The call for urgency comes amid waning client support for the compact. Signatories admitted sentiment towards riskier unlisted equities is souring.

According to figures from the ABI, seven out of 11 firms agreed that clients appeared to be supportive of increasing investment of their schemes into unlisted equities in 2024.

The following year, this figure declined to just four. The ABI pinned this shift on a desire to minimise cost, stopping firms from deploying greater capital into unlisted equities, which are known for having higher fees and greater risk.

Additionally, venture capital funds are also struggling to secure hard commitments from signatories, according to the latest data from UK Private Capital. The body identified only two legally binding commitments to VC funds by UK default funds aligned with the compact.

The lack of engagement has left nearly 50 per cent of VC and growth equity firms believing the agreement will not deliver greater investment, it said.

Cultural shift

Tim Levene, chief executive of Augmentum Fintech, said the failure to gather pace in VC funding and client support stems from a cultural “lag” of investors failing to see the long-term value of allocating capital to startups.

“When you’re backing early-stage businesses it takes time…not just for the money to flow, but for the money to become productive as well,” he told City AM.

“When it comes to venture, there’s a lot of challenges for pension funds to get around the risks associated, the fees, the capabilities, the appetite from trustees. There needs to be a real cultural and capability shift.”

Levene also disagreed with concerns surrounding risk, arguing the UK has “experienced managers” who have long-standing track records in VC investing.

“There’s no shortage of managers. There is a shortage of pension funds willing to back the managers,” he said.

Joanna Sharples, chief investment officer of DC solutions at Aon said venture capital sits at the “higher end of the risk/return spectrum”, leaving funds to focus on asset classes with less risk, but expects to see a shift towards areas including venture in the next few years.

Steps toward the goal

Despite the fall in client interest, firms have made steps to boost their private capital allocations.

Smart Pension invested £330m in Octopus Energy Generation last July and Nest allocated £200m to venture capital.

Standard Life has a joint venture with Schroders Future Growth Capital, while Mercer also partnered with Schroders to create a bespoke long-term private markets vehicle, committing £350m in its first year.

The ABI said: “It’s important to recognise this is a journey requiring significant market, policy, regulatory and operational development. 

“Signatories have taken important steps and progress of the Compact…the industry continues to actively engage with Government and regulators on the policy and regulatory reforms needed to support delivery of the commitments.”

But signatories have expressed the need for further policy and regulatory intervention to break the deadlock.

Policy intervention

Lorna Blyth, managing director, investment proposition at Aegon, said: “While we have made meaningful progress, we remain concerned about the timeline to the 2030 Mansion House Compact target.

“Key regulatory building blocks are still not fully in place, including alignment on performance fees and greater clarity on Conditional Permitted Links.

“These are important enablers for broader investment in private markets, and providing certainty in these areas will be critical if the industry is to deliver on the ambitions of the Compact.”

Several signatories called for alignment between the FCA and pensions regulator on the treatment of performance fees in the latest ABI update, while others urged the government to continue building out greater investment opportunities in the UK. 

Heads are turning to both the Pension Schemes Act and Value For Money framework as potential regulatory levers that could be pulled to dismantle the cost-first mindset holding back the compact.

From 2028, the framework will require pension schemes to measure and publish how they perform against market leaders, in a bid to drive up industry standards and boost returns.

Schemes will be assessed on investment performance, costs, charges and service quality, a move pensions minister Torsten Bell said will stop “funds sitting in schemes that aren’t working hard”.