Spotlight on implications of the Mansion House Accord and the Pensions Investment Review

The ‘Mansion House Accord’, signed on 13 May 2025, involves 17 major pension providers. This agreement aims to unlock up to £50 billion for UK businesses and infrastructure projects. These providers, managing about 90% of active savers' defined contribution pensions, have pledged to invest 10% of their portfolios in assets that boost the economy like infrastructure, property, and private equity by 2030. At least 50% of these investments will focus on the UK, potentially injecting £25 billion into the economy.

Inspired by Australian and Canadian pension schemes, the Accord aims for higher risk-adjusted returns and diversified assets. It expands on the 2023 Mansion House Compact, increasing the commitment from 5% to 10% of workplace pension funds in unlisted companies, with a focus on UK investments.

It has subsequently been announced that the forthcoming Pension Schemes Bill will include a reserve power which would enable the government to set quantitative baseline targets for pension schemes to invest in a broader range of private assets, including UK investments.

The government published the final report of its Pensions Investment Review on 29 May 2025. Key areas include:

Danny Hurley

Actuarial Partner

KPMG in the UK

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Requirement to achieve a minimum scale

Legislation will require pension schemes to have at least £25 billion in assets under management (AUM) by 2030, with a transition pathway for smaller schemes. The £25 billion requirement will apply at the arrangement level, such that a provider must have at least one main default arrangement meeting the requirement by 2030.
Contractual Overrides for Bulk Transfers

A contractual override regime will be introduced for contract-based schemes to enable providers to consolidate underperforming and legacy arrangements. Contractual overrides will only be permitted where it is in savers’ best interests, certified by an independent expert.

Mansion House Accord: Key Considerations for Providers

Investment Strategy

Align investment strategies to invest 10% of portfolios in economy-boosting assets by 2030, with at least 5% focussed on UK investments.
Pricing & Value

Investing in infrastructure, property, and private equity typically involves higher management fees and transaction costs. Thus, providers need to assess how these increased costs impact overall pricing and whether they can be absorbed or need to be passed on. Communicating the potential benefits of higher risk-adjusted returns and diversification from these investments will be crucial. Providers must ensure that members understand the value they are receiving in exchange for potentially higher fees.
Risk Management

Balance potential higher risk-adjusted returns from private market investments with the associated risks, ensuring investments align with fiduciary duties to protect members' interests.
Portfolio Diversification

Maintain a diversified portfolio to mitigate risks and enhance risk-adjusted returns, selecting assets that align with the Accord's goals.
Stakeholder Communication

Clear communication with pension members and employers about the benefits and risks of the new investment approach will be important to maintain trust and confidence.
Monitoring and Reporting

Establish mechanisms to monitor progress towards the Accord's targets.

Pensions Investment Review: Key Considerations for Providers

Impact Assessment

Evaluate the impact of proposed reforms on Workplace Pensions business, considering changes to default arrangements and investment strategies.
Bulk Transfer Strategy

Develop a strategy to make the most of newly permitted contractual overrides for bulk transfers. Providers may also want to consider a strategy involving bulk transfer out of Group Personal Pensions (GPP) and into Master Trust.
Safeguards and Consumer Protection

Providers will need to consider how to ensure member interests are protected.
Master Trusts

The Pensions Investment Review strongly favours consolidation, with Master Trusts being seen as the preferred model. This poses a threat to providers who don't offer Master Trusts, as they may struggle to compete in a market dominated by larger, consolidated schemes. Such providers may wish to consider the business case for launching a Master Trust.
Stakeholder Engagement

Actively engage with the government and stakeholders to ensure effective reform implementation.
Regulatory monitoring

Continuously monitor evolving reforms and engage early to comply with new requirements.

How KPMG in the UK can help

KPMG in the UK is well positioned to support Workplace Pensions providers navigating the changing landscape. Our dedicated Pensions Advisory and Actuarial practice combines deep industry experience with a comprehensive range of services, enabling us to help firms develop strategies that capitalise on emerging opportunities and address evolving regulatory requirements.

We offer extensive support to providers through our profound experience and understanding of the UK Workplace Pensions market, including:

Our expertise in advising corporate clients on selecting a pension provider, which gives us valuable insights into what matters to corporate clients and how provider selection decisions are made.
Our experience in assisting Workplace providers to enhance their capability to process Own Rules Trust to Master Trust bulk transfers, including guidance on improving their propositions to accommodate non-standard features.