Defined contribution (DC) pension schemes are facing "growing tensions" between political pressure to invest in UK assets and their fiduciary duty to act in members’ best interests, the DC Investment Forum (DCIF) has warned.

In its report, Power Shift: The Future of DC Asset Allocation, the DCIF highlighted how the government’s Mansion House reforms are placing increasing pressure on schemes to allocate capital to UK-based assets, potentially at odds with trustees’ obligations to ensure long-term value and maintain member trust.

It also highlighted the risks of “unintended consequences” and warned against eroding public trust through premature or poorly supported mandates.

Additionally, the report identified opportunities for DC schemes to contribute to UK growth while delivering strong outcomes for members.

It also showed that areas such as infrastructure, affordable housing, and climate technology are attracting interest, particularly where investments offer inflation protection, long-term returns, and visible impact.

However, the report suggested that currently, the challenge is in connecting the schemes to the pipeline – as well as ensuring the pipeline will deliver for savers.

It further warned that without a credible investment pipeline, robust UK-specific performance data and clear regulatory signals, schemes remain cautious, and success will not just be unlocking capital, but building a fair, transparent, and resilient system.

Given this, the report explored how better policy coordination, platform innovation, and targeted tax incentives could improve scheme access to private markets, highlighting progress in governance, fund structures, and member engagement.

It emphasised the “critical” role of government and regulators in enabling this shift - through clearer rules, extended fee exemptions, and reforms such as reinstating dividend credits and adjusting stamp duty.

The report also raised questions for policymakers and the pensions industry, such as the ability of UK DC schemes to invest in productive assets at scale without compromising member outcomes, and safeguards needed to manage risk and maintain trust.

It also questioned how the UK can build an investment framework that supports long-term value for savers and the wider economy.

The report also challenged the widely cited comparisons to countries like Australia, arguing that structural and cultural differences mean such models cannot be directly applied to the UK.

DCIF chair, David Whitehair, said that this is a “critical” moment for the UK pension system.
He emphasised that as the government pushes ahead with the Mansion House agenda, it needs to ensure that long-term investment decisions remain “grounded in member outcomes, not just political ambition”.

Daniela Silcock Pensions Research director and author of the report, Daniela Silcock, suggested there is “genuine appetite” among schemes to invest more in the UK, especially in areas like infrastructure and housing, but we need the right conditions to do so.

DCIF vice chair, Lindsay Nickerson, said that although ambition for the UK economy is important – it cannot override fiduciary duty.

“There is an uncomfortable truth at the heart of this debate: it is DC members – often with the fewest protections – being asked to shoulder the risk of change. Individuals’ long-term savings must not become a convenient source of government funding,” Nickerson added.

---