The government’s UK investment push: A new chapter for pension schemes?

The call for UK pension schemes to invest more in domestic assets has grown louder in recent weeks. In fact, the Financial Times reported that ministers are prepared to legislate if funds fail to deliver on voluntary pledges to back UK capital markets. 

Additionally, the Work and Pensions Committee has also announced plans to examine ways to boost pension funds' investment in the UK. This includes questioning pension industry leaders on how to achieve this goal, hinting at an increasingly interventionist tone. This follows the government’s formal response to the Committee’s earlier report into DB Pension Schemes, in which it reiterated its ambition to “unlock capital” from pensions to drive national growth, while promising a "voluntary first" approach.

One can argue whether this investment is truly “voluntary”, especially as ministers are actually considering legislation if progress stalls. Industry voices, including the BVCA, have called for better mechanisms, such as a “shop window” to make private capital opportunities more accessible to schemes. This includes initiatives such as the creation of a private capital directory and a new Fund of Funds investment vehicle.

What can this mean for pension schemes? 

Pension schemes may soon find themselves navigating not just market dynamics but also political expectations. While labelled as “voluntary,” the direction of this recurring theme suggests stronger scrutiny and potential regulation ahead. Schemes might need to reconsider their investment governance, risk appetite, and operational frameworks to align with this national growth agenda.

Finally, schemes will also have to navigate the complexities of aligning their investment strategies with government expectations while safeguarding member benefits, and thus the main challenge will be balancing fiduciary duties with political and public pressure.