Regulator warns UK deal shortage limits pension investments

The TPR has warned that a shortage of suitable UK investment opportunities could curb pension schemes’ push into private markets, according to research released Monday.

Research flags lack of investable deals

The regulator’s study says private-market investments are considered when they meet scheme requirements on expected returns, risk, diversification, cash flow and liquidity.

Stakeholders surveyed identified a dearth of UK opportunities with those characteristics as a key obstacle to meeting the goals of the Mansion House Accord.

Some schemes have refrained from setting firm UK-investment targets, saying they must protect members’ best interests and adhere to fiduciary duties.

Trustees also voiced concern that UK assets often promise lower expected returns than comparable overseas options.

“Pension schemes want to invest in private markets, but many schemes are currently experiencing practical barriers that limit their opportunity for investment,” said Ben Gunnee, executive director of market oversight at TPR.

The regulator’s findings are based on dialogue with more than 40 stakeholders, including pension schemes, trustees, consultants, industry bodies and investment managers.

Varied appetite across scheme types

Defined contribution (DC) schemes and larger master trusts have shown notable progress, with most master trusts holding some private-market exposure by the end of 2025, though sizable allocations remain uncommon. This gradual build-up reflects a cautious approach that balances growth ambitions with the need to manage liquidity risk.

Several multi-employer master trusts aim for at least 10% of assets in private markets by 2030, with a minimum 5% in the UK, matching the Accord’s target. Others set goals of 20% or higher, indicating that ambition varies widely across the sector.

Among the country’s biggest pension schemes, Nest pledged an initial £200m to a venture-capital strategy run by Schroders Capital, planning to lift that to £1bn by 2030. Railpen is also exploring a fund of similar scale for UK scale-up businesses, showing that large players are willing to allocate capital if pipelines become clearer.

Despite these moves, venture-capital appetite remains limited market-wide. They tend to favor later-stage and scale-up deals, while private equity, private credit, infrastructure and property attract broader interest across the industry.

Defined benefit schemes display even weaker enthusiasm, as stronger funding positions reduce the need for growth assets and illiquid holdings could hamper flexibility if benefits are later transferred to insurers.

TPR also highlighted knowledge gaps, opaque fee structures, inconsistent reporting and regulatory uncertainty as persistent barriers, echoing findings from related industry surveys.

Trustees are urged to review private-market expertise, adviser support, governance capacity and risk controls, and to consider how their schemes might evolve over the next five to ten years as the market matures.

Research Intended to Inform Policy and Industry

The study says its analysis can help government and industry see what obstacles exist. It also notes that where action is taken, investment could benefit members and the wider economy. Some of the country’s largest pension schemes are actively looking for private-market opportunities at home and abroad.

The findings mirror a Pensions Expert survey of defined-contribution providers conducted with CACEIS. Results will be shared at the Pensions Expert DC and Master Trust Summit in St Albans on Tuesday, 22 September. They will later appear on the Pensions Expert website. The report will be published in due course on the Pensions Expert website, providing broader access to the data.