A total of 17 of the biggest pension providers in the UK, managing around 90% of active savers’ defined contribution workplace pensions, signed the Mansion House Accord this week. This was praised as a way to unlock £50 billion of investments and potential lower household energy bills over time.
But what does it actually mean for the hundreds of thousands of people who have their pensions with these providers? Lisa Picardo, Chief Business Officer UK at PensionBee, explained: “The Mansion House reforms are being framed as a turning point for UK pensions, but in reality, for the average saver, the impact is unlikely to be dramatic over the medium term.”
For older savers, in their 50s and over with plans to retire soon, Lisa warned: “It’s important not to be distracted by the political packaging.
“These reforms are unlikely to deliver a noticeable difference to pension pots in the near term.
“The Mansion House Accord is a voluntary pact with a five-year time-frame for implementation, and one that’s subject to a suitable pipeline of investment opportunities and more developed private markets.”
She urged people to keep a keen eye on how their pensions are invested while the Mansion House Accord is being implemented, noting that some people might not have a choice in where the funds of their active workplace pensions go.
However, anyone moving between workplace pension pots or with personal pensions has a bit more power: “Savers can choose their pension provider and where their funds are directed, to ensure that their retirement savings are invested in line with their own retirement goals and preferences.”
The pension expert explained that the agreement is essentially a “voluntary pact” that these providers promise to put 10% of the pension assets they hold into investments that boost the economy such as infrastructure, property and venture capital; 5% of these funds are also due to be invested into UK assets specifically by 2030.
Essentially, by 2030 most people that save into a workplace pension will see at least some of their money go into the UK economy.
Lisa added: “Whilst there is merit in exploring new ways to grow pension savings and support UK businesses, we should be honest about the risks and limitations.
“Evidence suggests that performance in private markets is not necessarily better than in public markets, fees can be high, and liquidity is limited.
“For many, these asset classes will remain a small part of a diversified investment strategy, and for others, these will not be suitable at all. Pension schemes must always keep savers’ best interests at the heart of their decision making.”
