UK pension schemes need to move from preparation to investment to achieve the goals of the Mansion House agenda, UK Private Capital has argued, as reports highlighted continued barriers to private market allocations across both defined contribution (DC) pensions and the Local Government Pension Scheme (LGPS).

The two reports, UK DC Pensions & Private Capital: The State of the Market and LGPS & Private Capital: An Evolving Landscape, assessed progress over the past year and outlined measures to accelerate pension fund investment into private capital.

On the DC side, UK Private Capital noted that schemes had made progress in building the infrastructure needed to access private markets, including expanding investment teams, developing partnerships with asset managers and adapting due diligence processes.

However, it warned that this preparation was yet to translate into significant capital deployment.

Indeed, the latest Mansion House Compact progress update showed that signatories had allocated 0.6 per cent of default fund assets to unlisted equities as of February 2025, up from 0.36 per cent a year earlier.

Meanwhile, a UK Private Capital survey conducted between April and May 2026 found just two legally binding commitments to venture capital funds from UK DC default funds aligned with the compact.

Of the 83 venture capital and growth equity firms responding, only six were in active negotiations with Mansion House signatories with a view to securing a binding commitment, while 76 per cent said they had not been able to engage meaningfully with DC providers.

In addition, 73 per cent believed the government needed to do more to facilitate investment into private capital.

UK Private Capital also found that international pension funds invested around 16.5 times more into UK private capital funds than UK pension funds during 2025, broadly in line with the longer-term trend.

The report therefore called on the government, regulators and industry to remove remaining barriers and maintain momentum behind the Mansion House commitments.

Among its recommendations, UK Private Capital called for the British Business Bank to establish a fund-of-funds structure to help larger pension schemes access smaller venture capital and growth equity funds as the DC market consolidates.

It also urged the Financial Conduct Authority (FCA) and Department for Work and Pensions (DWP) to align charge cap rules across trust- and contract-based schemes, arguing that differences between the two regimes continued to restrict investment options.

The report called on the FCA to review its permitted links rules and recommended an industry working group to develop more consistent and comparable disclosure of private capital costs within DC schemes.

UK Private Capital chief executive, Michael Moore, said that while progress had been made in creating the conditions for greater pension investment in private capital, this had “yet to translate meaningfully into capital reaching growing businesses”.

“Ensuring pension providers achieve the scale needed to invest effectively and removing regulatory barriers will be critical to accelerating investment and enabling pension savers to benefit from stronger long-term returns and more diversified portfolios,” he added.

The separate LGPS report revealed continued commitment to private capital and regional investment but highlighted concerns around the implementation of local investment targets and the growing size of investment tickets.

UK Private Capital warned that larger LGPS pools needed to retain sufficient flexibility to invest with smaller and mid-market private capital funds, as minimum investment sizes increased following consolidation.

It recommended that regional investment targets should recognise funds with a strong regional focus even where managers were unable to guarantee a specific level of investment within one area.

The report also encouraged greater use of innovative structures, co-investment arrangements and tailored partnerships between LGPS pools and private capital managers to preserve access to smaller opportunities.

LGPS and Private Capital Expert Panel chair, Rob Barr, acknowledged there was a shared ambition across the pensions and private capital industries to retain the LGPS's focus on regional investment, but warned that without flexibility “some valuable cross-UK opportunities may be missed”.

DC Pensions and Private Capital Expert Panel chair and Molten Ventures chief executive, Ben Wilkinson, added that the lack of greater progress in connecting UK pension capital with the country’s technology, life sciences and growth businesses represented a “missed opportunity”, arguing that “speed is of the essence”.

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