Investment decisions should focus on members’ best interests, not “arbitrary percentages”, the UK pensions sector has warned, following calls from the London Stock Exchange Group (LSEG) for defined contribution (DC) default funds to allocate a minimum of 25% of assets to UK investment.
In a letter sent last week to the chancellor of the exchequer, Rachel Reeves, and signed by more than 250 UK company bosses, LSEG urged the UK government to “condition the privileges that are granted to UK DC pension scheme default funds upon them allocating a minimum 25% of their default fund assets to UK investments – across each asset class”.
LSEG highlighted that allocation to UK-listed equities has fallen from 53% in 1997 to 4.1% in 2025, and projected it could drop to 3.5% by 2030 without intervention. The letter acknowledged government and industry initiatives such as the Sterling 20 and the Mansion House Accord, but argued that “more is needed to translate those incentives into actual investment flows”.
Signatories proposed that all DC schemes designate a “UK-weighted” fund as their default arrangement, setting domestic investment levels “closer to that of international competitors” and potentially boosting UK equities by around £76bn by 2030.
Responding to the LSEG letter, Yvonne Braun, director of policy and long-term savings at the Association of British Insurers (ABI), said: “When talking about how pensions should be invested, we must remember these are people’s retirement incomes, and their interests must be at the heart of all policy decisions.”
Braun stressed the industry is already pursuing the Mansion House Accord’s voluntary agenda to invest in UK businesses and infrastructure.
She added: “The Accord will drive UK growth and deliver for savers. In the same way, any investment should be made as a rational choice by investors, rather than because of outside pressures.”
Jamie Fiveash, chief executive officer of Smart Pension, echoed Braun, saying government initiatives such as the Mansion House Accord and Sterling 20 are already backing UK private markets.
He said the focus has to be on pension funds serving the best interests of their members, while building a strong pipeline of UK investment opportunities that deliver for savers and support the wider economy.
“We’ve already gone beyond the industry standard with a voluntary 15% commitment to private assets, with a third of those in UK assets, because the returns make sense. If the market continues to deliver these kinds of opportunities, schemes like ours will naturally invest more. That’s the best way to support UK growth while delivering better value for savers,” he noted.
Fiveash suggested fiscal incentives could also encourage investment in UK-listed equities, noting this approach has worked in mature DC markets such as Australia.
Tess Page, UK wealth strategy leader at Mercer, said pension funds need a pipeline of investment offering “genuine opportunity” for sustainable UK growth, not “arbitrary percentages”.
She continued: “It does, of course, need to be recognised that pension funds are there to provide benefits for their members rather than delivering other political or economic goals – in this context we remain steadfast in our commitment to investment quality and will continue to seek the best opportunities for our members, balancing the pursuit of higher returns with our fiduciary responsibilities.”
David Snowdon, head of master trust at SEI, agreed: the fundamental purpose of a pension scheme is to “deliver the best possible retirement outcomes for its members, driven by the total contributions paid in and the investment returns achieved over time”.
He cautioned that mandating 25% UK investment risks prioritising domestic companies over pension savers.
“DC pension members already bear all the investment risk in retirement planning and should not be exposed to the additional risk of a restrictive investment approach that could undermine those outcomes,” Snowdon noted.
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