The government has been urged to consider supporting a new programme to increase opportunities for investing in venture and growth capital funds, in order to help encourage UK defined contribution (DC) pension schemes to invest in private capital.

The recommendation was one of a number made by the Pensions and Private Capital Expert Panel, which was established in February 2024 to take forward key aspects of the Mansion House Compact and Investment Compact for Venture Capital and Growth Equity

In particular, the group suggested that the new programme should include the creation of new opportunities for venture and growth acceleration (Nova), an initiative modelled on France’s Tibi Scheme, to create a market of private capital funds specially accredited for DC schemes to facilitate investment in strategically important sectors.

In addition to this, the group suggested that the programme should include a new Fund of Funds investment vehicle as part of a series of further initiatives to build on the British Business Bank’s (BBB) British Growth Partnership, which will enable access to returns generated by smaller private capital funds.

The programme could also introduce a private capital directory, containing the key facts and information of specific private capital firms/funds which would be made available to UK DC schemes, acting as a ‘shop window’ to accelerate investment.

The expert panel urged the government to consider endorsing this programme, raising its profile and continuing to support the British Business Bank in building on the British Growth Partnership and developing new partnerships to help DC pensions invest in private capital.

In addition to this, the report stressed the need for regulatory urgency in addressing some of the investment barriers that currently limit DC fund investment into the UK private capital industry.

The report also stressed, however, that despite the barriers still in place, there has been "major progress" for savers and investors over the past year.

Indeed, a new survey from the British Private Equity and Venture Capital Association (BVCA), which convened the panel, showed that 62 per cent of Investment Compact for Venture Capital and Growth Equity signatories are actively contacting Mansion House Compact signatories, up from 50 per cent in September 2024.

The group highlighted this rise in engagement as evidence of the "steady" progress in achieving commitments made by venture capital firms and UK pensions investors to develop a long-term and constructive working relationship with each other.

However,the panel suggested that implementing a new government supported programme would further enhance this progress, and in enabling domestic funding to fast growing businesses, could provide UK pensions savers access to the same returns experienced by international counterparts.

Pensions & Private Capital Expert Panel chair, Kerry Baldwin, said: "The expert panel’s recommendations will enable greater investment for venture and growth funds, and for founders to continue to establish and grow their business in the UK.

“Government has an opportunity to build on this growing momentum with a new programme informed by what both pensions and private capital leaders believe will make a difference.

"In addition, creating a ‘shop window’ for pension funds to better evaluate individual private capital firms will accelerate and prompt new conversations with Mansion House signatories that will ultimately drive increased investment in ambitious businesses, and result in greater returns for pension savers.”

BVCA chief executive, Michael Moore, echoed this, arguing that whilst the private capital and pensions industries have come a long way in the past year, more can be done with the "right kind" of government support.

"The Chancellor and other ministers have already shown strong leadership on this agenda, and the panel believes this progress can be further accelerated with the right support," he continued.

Adding to this, Pensions and Lifetime Savings Association (PLSA) chief executive, Julian Mund, said: "We look forward in particular to engaging further with government and the private capital industry on initiatives which improve the pipeline of quality assets for schemes to invest in to generate better returns for their members.”

The panel includes leading figures from across the pensions industry including the Association of British Insurers (ABI), PLSA, Phoenix Group, M&G and NEST.

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