A new report by the Pensions and Private Capital Expert Panel has called on the UK government to support a dedicated programme aimed at increasing defined contribution (DC) pension scheme allocations to venture and growth capital funds.
The expert panel – convened by the British Private Equity and Venture Capital Association (BVCA) – was launched in February 2024 to help implement the objectives of the Mansion House Compact and the Investment Compact for Venture Capital and Growth Equity. It includes representatives from across the pensions and private capital sectors, including the Association of British Insurers (ABI), the Pensions and Lifetime Savings Association (PLSA), Phoenix Group, M&G and NEST.
The panel has acted as a platform for deeper collaboration between the two industries, with a focus on identifying and addressing barriers that currently hinder UK DC schemes from investing in private capital.
In its latest set of recommendations, the panel has proposed the launch of a new government-backed programme to expand investment opportunities in private markets and improve accessibility for DC schemes. It said the initiative should be built around three key components:
- Investment marketplace – the creation of ‘NOVA’ (New Opportunities for Venture and growth Acceleration) modelled on France’s Tibi Scheme. The initiative would accredit a selection of private capital funds for DC schemes, particularly those targeting strategically important sectors of the UK economy.
- Investment vehicle – a new fund-of-funds structure designed to complement the British Business Bank’s British Growth Partnership. The vehicle would offer DC schemes diversified exposure to smaller-scale private capital funds with high growth potential.
- Industry-approved directory – a centralised directory of accredited private capital funds and firms, providing DC schemes with accessible, standardised information to inform investment decisions – described as a “shop window” for the market.
The panel is urging the government to endorse and raise the profile of the programme, while continuing its support for the British Business Bank in expanding the British Growth Partnership and forming new partnerships to enable greater DC investment into private capital.
It also called for swifter regulatory action to remove structural and regulatory obstacles limiting DC allocations to the asset class. The report reaffirms the commitment from both industries to continued collaboration, noting the progress achieved over the past 12 months.
Increased engagement
According to BVCA data, UK pension schemes have increased their private capital commitments in the past year. The number of Investment Compact signatories actively engaging with Mansion House Compact signatories has risen to 62% from 50% in September 2024.
The panel said this increased engagement reflects growing momentum in the sector and a greater willingness from institutional investors and private capital managers to build long-term, constructive partnerships.
Kerry Baldwin, chair of the expert panel, said: “It has been very encouraging to see increasing pension funds making private capital commitments over the last year,” adding that the recommendations will enable “greater investment for venture and growth funds, and for founders to continue to establish and grow their business in the UK”.
She added: “The government has an opportunity to build on this growing momentum with a programme informed by what pensions and private capital leaders agree will make a difference. A dedicated ‘shop window’ would help pension funds better evaluate managers and spark new conversations that ultimately lead to greater investment in ambitious UK businesses – and stronger returns for savers.”
BVCA chief executive officer Michael Moore said that while the pensions and private capital sectors have made significant progress in improving mutual understanding, government support remains vital.
“With the right kind of support, we can do more. The chancellor and other ministers have already shown strong leadership on this agenda, and the panel believes this progress can be further accelerated,” he continued.
Alastair King, Lord Mayor of London, said the BVCA’s support for the Mansion House Compact is helping to “bridge the gap between pension schemes and private markets”.
“One of the clearest ways to accelerate progress is for the government to implement the Value for Money framework without delay,” he added. “Pension funds need certainty to invest at scale,” he said.
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