Two-thirds (66 per cent) of UK savers believe their pension should be invested in UK assets, even if this means lower returns, research from Future Growth Capital has revealed.

Presenting the findings at The Pensions UK annual conference, Future Growth Capital head of client solutions and product, Sam Murphy, emphasised that respondents were informed before answering that returns from US funds have been more than twice those of UK funds over the past decade, yet the majority still said they would prefer their pension money to be invested at home.

The findings come as efforts continue to channel more defined contribution (DC) pension savings into UK growth assets through initiatives such as the Mansion House Accord, under which 17 major pension providers have committed to allocate at least 5 per cent of their default fund assets under management (AUM) to UK private markets by 2030.

However, Future Growth Capital found a significant gap between saver expectations and reality regarding domestic investment exposure.

On average, savers believe that 41 per cent of their pension is invested in UK assets, when in fact the figure for DC schemes is currently closer to 5 per cent, Murphy warned.

Meanwhile, the firm’s report - Size Matters: Scoping the UK Private Markets Opportunity for Incoming DC Capital - revealed that annual investment into UK private markets by UK master trusts is expected to total less than £6bn over the five years to 2030.

This represents less than 3 per cent of current investment volumes, suggesting “room for substantial growth”.

A similar level of UK investment from Local Government Pension Schemes (LGPS) could bring total annual flows into UK private markets to around £10bn, or £40bn cumulatively between now and 2030, the report added.

However, it nonetheless concluded that the Mansion House Accord could mark a “turning point” for UK DC pensions, provided that capital is deployed “with discipline and foresight”.

The report warned that while liquidity, governance, fees and member communications all remain "key considerations,” the opportunity is clear.

"The UK private markets ecosystem is larger, more diverse, and more dynamic than many assume," it continued.

"The opportunity set is growing in both depth and breadth, and UK investors have scope to take a much larger share of overall investment.”

It added that as defined benefit (DB) schemes increasingly look to run down and generate liquidity, “opportunities will emerge to provide replacement capital”.

“With the right implementation frameworks, long-term DC capital can access high-quality assets - and in the process deliver to members differentiated investment strategies with potential to enhance portfolio returns, diversification and resilience,” the report stated.

“At the same time, this investment would support the real UK economy. In short, the transition is underway. Now the focus must turn to execution.”

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