Scottish Widows, one of the º£½ÇÊÓƵ's largest pension funds, has opted not to sign up to a key agreement that is seen as vital to Chancellor Rachel Reeves' growth strategy.
Despite having supported an earlier version, Scottish Widows has not committed to the second iteration of the Mansion House Compact, as reported by .
The original agreement saw 11 pension funds pledge to invest five per cent of their assets in private markets.
The updated pact, now known as the Mansion House Accord, will see major pension funds including Phoenix and Aviva commit to investing ten per cent of their assets in private markets, with half of this amount dedicated to º£½ÇÊÓƵ projects.
Scottish Widows is planning to launch a separate asset fund by the end of the year.
In a statement given to City AM, a spokesperson for Scottish Widows said it was "great to see" an agreement being reached on further investment in the º£½ÇÊÓƵ.
"Later this year we'll share details on further investment into innovative º£½ÇÊÓƵ business," the spokesperson added.
It was also highlighted that the pension fund has significant long-term investments in º£½ÇÊÓƵ equities, totalling around £5.5bn.
The Chancellor has labelled the Accord as a "bold step" towards achieving growth, with 17 signatories voluntarily agreeing to the plans.
Rumours had been circulating in the City that one or more pension funds might withdraw as signatories ahead of today's announcement.
Pension fund pushback
Several companies have previously expressed their interest in investing in º£½ÇÊÓƵ assets, including Aegon and NatWest Cushon, both of which pledged to invest in British firms alongside the government-backed British Business Bank.
In response to what Aviva Investors chief Mark Versey described as the "º£½ÇÊÓƵ's supportive policy environment", Aviva launched a venture capital branch in September last year.
However, pension fund leaders have sounded the alarm over the scarcity of suitable investment opportunities within the º£½ÇÊÓƵ.
Benoit Hudon, Mercer º£½ÇÊÓƵ's chief executive, suggested that there isn't an adequate "pipeline" to yield good returns for savers.
Speaking to City AM, Hudon emphasised the need for the government to clearly identify which sectors of the º£½ÇÊÓƵ economy should receive support.
A major concern, however, revolves around the potential imposition of mandation, which would compel pension funds to invest in º£½ÇÊÓƵ assets.
"While we believe it's beneficial to encourage investments in the local economy and utilise the trillions invested in º£½ÇÊÓƵ pension funds to propel the economy forward, mandation could obstruct the intended outcome [for savers]," Hudon warned.
He added: "The best way to secure commitment is by providing the right incentives through a robust, healthy pipeline of opportunities, possibly coupled with tax incentives."
Whilst mandation won't be included in the new agreement, there are reports suggesting that the government might 'name and shame' funds that fail to meet targets.
