Employers play a bigger role in pensions than imagined

Every link in the pension chain – from trustees to consultants to employers – has a part to play, writes Lady Mayor Susan Langley For many UK savers, their pension pot will become their single largest asset, bigger than their home. Yet too often the industry loses savers from the conversation entirely between the moment they are auto-enrolled and the day they eventually retire. Last week I welcomed senior figures from across the pensions value chain to Mansion House. Around the table we had employers, trustees, master trusts, consultants, providers, asset managers, growth capital investors and regulators. That breadth is important because no single organisation controls retirement outcomes. Every link in the pension value chain shapes what savers ultimately receive, but for too long different parts have operated in isolation, pointing to barriers elsewhere in the chain. Successful pension systems overseas make the case for change uncomfortable to ignore. Australia and the United States channel pension savings into domestic growth sectors, funding innovation, sustaining local jobs and delivering stronger returns for savers. The UK, by contrast, offers tax relief on pensions while providing too little incentive to invest in British businesses. The result: UK savers miss out on returns, UK companies miss out on capital and the Exchequer misses out on tax receipts that a growing economy would generate, all while our savings support jobs and R&D overseas. How to upgrade UK pensions The ambition to fix this is already on the table. Last year the City Corporation launched the Mansion House Accord: a commitment by 17 of the UK’s defined contribution pension providers to allocate 10 per cent of default fund assets to private markets by 2030, with at least half invested in the UK. Done well, the Accord has the potential to unlock billions of pounds of long-term capital for high-growth businesses, infrastructure and clean energy – diversifying savers’ portfolios for greater returns while backing British growth. For the Accord to deliver, however, we need a clear pipeline of investable UK opportunities placed firmly in the shop window, alongside confidence that the chokepoints blocking capital will be cleared. That is why government partnered with the City of London Corporation to launch Sterling 20, designed to become the trusted route for testing and shaping priority investment propositions. As these mechanisms come together, we also need a whole-system shift on value for money. For too long, workplace pension decisions have focused too heavily on cost.