New Pensions Regulator Guidance on Private Market Investments

The Pensions Regulator has published guidance for trustees regarding investment in private markets. This guidance follows on from the Government’s Mansion House reforms, announced last July and reconfirmed in the Autumn Statement, which are intended to ‘enable our financial services sector to unlock capital for our most promising industries and increase returns for savers, supporting growth across the wider economy’.

The guidance:

  • Provides an overview of the types of private market assets and how the markets can be accessed;
  • Highlights some of the key opportunities and risks when investing in private markets;
  • Reminds trustees of their legal duties when investing, including that they must predominantly invest in investments traded on regulated markets and maintain a diverse portfolio;
  • Sets out key considerations for trustees – which includes that the trustees have the right knowledge and understanding of private market investments before investing – and the different considerations for defined benefit and defined contribution schemes.

Please click the link below to access the guidance:


Please contact us if you would like to discuss any of the issues highlighted in the guidance.

Michael Aherne
Michael Aherne
Partner, Pensions, London
+44 20 7466 7527

Mark Howard
Mark Howard
Of Counsel, Pensions, London
+44 20 3692 9672

Burying the lede: “Pot for life” grabs the headlines, but the key changes are elsewhere in the Autumn Statement

The Mansion House reforms

In July, the Chancellor of the Exchequer delivered his Mansion House speech outlining a wide range of proposed reforms to pension saving in the UK.  The “Mansion House Compact” was signed on the day of the speech by nine defined contribution (DC) pension providers[1] committing to allocate a minimum of 5% of defined contribution funds to unlisted equities by 2030, with the aim of unlocking over £50 billion of new capital by the end of the decade.

In October, the British Private Equity & Venture Capital Association announced the “Venture Capital Investment Compact” – signed by 70 leading venture capital and growth equity firms – which aims to build on the Mansion House Compact. Whilst the aims of this compact are not as clear as that of the DC providers, the signatories have nonetheless committed to working with the industry to encourage greater investment by pension schemes (particularly DC schemes) in venture capital.  It is clear that the “sell side” of the pensions industry is getting behind the Mansion House reforms.

Autumn Statement

The Chancellor had previously trailed at the Mansion House Summit in October that further plans in relation to the reforms would be announced in the Autumn Statement.  What we have got is a mixed bag: some headline grabbing announcements, further consultations and calls for evidence and some changes which could make a meaningful difference now.

Defined Benefit Surpluses

From 6 April 2024, the authorised surplus repayment charge, payable on any surplus funds returned to an employer, will be reduced from 35% to 25% (which is aligned with the current corporation tax rate).  Employers and trustees looking at a surplus return now may want to delay payment until the new tax year when the new lower rate will apply.  The Government is also consulting in the winter on whether changes to the rules of return of surplus could incentivise well-funded defined benefit schemes to invest in assets with higher returns.

Local Government Pension Scheme (LGPS) Consolidation

The Government is establishing a March 2025 deadline for accelerated consolidation of LGPS asset pools, with the goal of there being fewer pools with assets exceeding £50 billion.  The Government will also be revising the guidance for the pools so that there is an “allocation ambition” of 10% in private equity.  This is estimated to unlock around £30 billion for investment in private equity by the end of the decade.

Defined Contribution Consolidation

The Chancellor said that the majority of pension savers could be expected to belong to schemes of £30 billion or more by 2030.  This would likely mean further consolidation amongst authorised master trusts: it has been estimated that only 4 of the commercial authorised master trusts had funds under management in excess of £10 billion as at the start of H2 2023.[2]  But no new initiatives to achieve this consolidation were announced and the Chancellor’s statement was based on DWP research into existing trends and expectations.

The Department of Work and Pensions, Pensions Regulator and FCA published their proposals on assessing value for money (VFM) in DC schemes in July – at the same time as the Mansion House speech – which included the proposition that schemes not offering VFM could be forced to wind up and consolidate.  However, the FCA will now be consulting in the spring “on the next steps of the new Value for Money Framework“.  It is looking less likely that the new legislation to implement VFM framework will become law before the general election.

Funding for LIFTS and a new “Growth Fund”

The Government is committing £250 million under the Long term Investment for Technology and Science (LIFTS) initiative which was previously announced.  This is aiming to provide over £1 billion of new investment from pension funds into UK science and technology companies. There was also support for university spin-out companies and a new Growth Fund is also being established within the British Business Bank “to give pension schemes access to opportunities in UK’s most promising business“.

Solvency II

The government is legislating to reform Solvency II which will allow the insurance industry to be able to invest in a greater range of productive assets.  Schemes undertaking buy-outs usually carry out a covenant assessment of the proposed insurer and these may need to focus more on the investment approach of the insurer and the specific risks that this may bring.

Pension Protection Fund – consolidator or investment vehicle?

In his statement in the House of Commons, the Chancellor said that the PPF would take on a new role as an investment vehicle for smaller defined benefit schemes.  This sounds as if the PPF would be establishing some form of common investment fund or by providing fiduciary management and investment services, for example in a similar way as the BT Pension Scheme offers through its pension management arm, Brightwell.

However, the published Autumn Statement presents a different picture, with the Government consulting on whether the PPF “can act as a consolidator for schemes unattractive to commercial providers“.  This suggests that the PPF may also be taking on liabilities and paying scheme benefits as well as managing assets (something that is likely to be much more challenging for the PPF to implement). We await the consultation document to see the detail of the Government’s proposal.

“Pot for life”

This has been the most headline grabbing announcement.  The Government is undertaking another “call for evidence” entitled “Looking to the future: Great member security and rebalancing risk“.  This new call for evidence asks for views on a long-term vision for workplace pension saving in the UK, including whether a lifetime provider (or “pot for life”) model would improve outcomes for savers, how the CDC market can be grown, and whether there are synergies between the two. The lifetime provider model ” would allow individuals to have contributions paid into their existing pension scheme when they change employer”. 

Whilst on the face of it the pot for life idea seems a straightforward one, it would reverse the current status quo, which is that the choice of workplace pension is a decision for the employer.  Moving that decision into the hands of employees may, in time, help solve the stranded small pots problem but it raises a number of questions.  For example:

  • Employers may become less focused on providing a quality pension offering, fearing it will be money wasted if their employees opt to pick an alternative or stick with their current provider.
  • Will employees have choice over the scheme they select, or will they have to select a scheme from a previous employer? This could provide an advantage for NEST, which has almost twice as many members as the next largest master trust and will often be the first pension provider for many workers.
  • Will the nominated pension scheme be subject to any quality requirements (for example would it have to be an “authorised default consolidator ” – see below)? This could mean members pay higher charges and possibly also incur administration costs which might otherwise be met by the employer in their workplace pension scheme.
  • Employees might be drawn to providers based purely on cost or incentives, whereas a consistent theme in the value for money (VFM) proposals is that VFM must be looked at holistically rather than with a focus only on charges. Without changes to VFM alongside this, we could see a “race to the bottom” to attract employees away from their workplace pension scheme.
Other initiatives

In coordination with the Autumn Statement the DWP has also responded on a range of consultations launched after the Mansion House speech. We will be updating separately on these responses, but they include:

  • A response to the consultation on decumulation options, “Helping savers understand their pension choices: supporting individuals at the point of access“, which states that the Government will:
    • At the earliest opportunity place duties on all trustees of occupational pension schemes to offer a decumulation service with products to members at the point of access at an appropriate quality and price; and
    • Require schemes to devise a backstop default decumulation solution, based on the general profile of their members, that a member would be placed into if they access their pension assets without making an active choice on how to access their pension funds (e.g. simply taking the tax free cash lump sum). This could be achieved either directly or in partnership with another organisation(s).
  • A response to the consultation, “Ending the proliferation of deferred small pots“, which sets out a proposal to have multiple “authorised default consolidators” which would be used to consolidate small, stranded pots for members into one place. The response makes clear that the Government intends to proceed with the proposals and confirms the approach that it will take.  An industry working group will be established later this year to consider and discuss implementation of the proposals.
  • A response to the call for evidence in relation to “Pension trustee skills, capability and culture” where the Government has concluded there are a number of areas where it will take forward immediate actions to address issues raised by respondents in the call for evidence. These include the following areas:
    • Supporting TPR to put in place a trustee register;
    • Accreditation of professional trustees;
    • Updates to TPR’s investment guidance and trustee understanding of alternative investments; and
    • Engaging with employers selecting a pension scheme (so that the focus is not just on low costs)
  • A response to the call for evidence in relation to “Options for Defined Benefit schemes” where the Government has stated that it will introduce measures to make surplus extraction easier and establish a public sector consolidator by 2026. As noted above the Government intends to launch a public consultation to consider the detail of these measures, including design, eligibility, safeguards, and the viability of a 100% PPF underpin. Interestingly, the Government also stated that:

It should also be noted that the call for evidence aimed to build an evidence base around introducing new options in the DB pension landscape, alongside other market interventions that are already underway in this space. The revised funding regulations will make clearer what prudent funding plans look like, make explicit that there is headroom for more productive investment, and require schemes to be clear about their long-term strategy to provide member benefits. The superfund framework announced by this government will provide an option for employers who want to sever the link with their scheme where the scheme is not funded to levels that enable it to buy-out with an insurer in the short term.”

Finally, the Pensions (Extension of Automatic Enrolment) Act 2023 allows for reduction in the threshold for automatic enrolment from 22 to 18 and removes the lower end of the qualifying earning band, so that pension contributions are paid from the first pound of earnings.   But there was no mention of when these changes – first proposed in 2017 – will be implemented.

HSF Comment

After the fanfare and expectation of the Mansion House proposals, the most meaningful immediate changes appear to be in relation to the LGPS private equity “ambition allocations” and the 10% reduction in the authorised surplus repayment charge – and any employer going through a surplus return exercise now may wish to pause the exercise until the lower rate applies.  We will wait and see whether any of the other Mansion House proposals (PPF consolidation, small pot consolidators, pot for life, etc) will make any further progress beyond the consultation stage before the general election.


[1] Aviva, Scottish Widows, L&G, Phoenix, Nest, Smart Pension, M&G, Aegon and Mercer.  Aon and Cushon subsequently signed the Compact.




If you would like to discuss any of the topics covered in this blog speak with your usual HSF adviser or contact one of our specialists.

Michael Aherne
Michael Aherne
Partner, Pensions, London
+44 20 7466 7527
Nish Dissanayake
Nish Dissanayake
Partner, Corporate, London
+44 20 7466 2365
Mark Howard
Mark Howard
Of Counsel, Pensions, London
+44 20 3692 9672