Standard Life chairman calls for DC fund signatories to more than double 10% private markets allocations
Standard Life chairman Sir Nicholas Lyons used a keynote speech at Private Markets Profile’s Inside the Deal yesterday to deliver a clear message to policymakers and pension providers: the UK’s 10% private markets target for defined contribution (DC) schemes is not ambitious enough.
Under the Mansion House Accord, 17 major providers have committed to allocating at least 10% of default DC funds to private markets by 2030, with half earmarked for the UK. But Sir Nicholas argued this “must only be seen a staging post, not a destination”, suggesting allocations should ultimately reach at least 20%.
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Workplace DC schemes currently allocate around 4% to private equity and infrastructure combined – a level Sir Nicholas described as “a rounding error with good intentions”.
The real obstacle, he said, is not whether unlisted assets belong in DC portfolios, but whether the UK has built the infrastructure to deliver them at scale. “The obstacle is the delivery mechanism,” he noted, pointing to fragmentation, subscale initiatives and governance models designed for public markets.
Drawing comparisons with Canada, Australia, Sweden and Denmark, Sir Nicholas argued that successful pension systems share common traits: scale, pooling, governance capable of handling complexity, and a long-term focus on net returns rather than quarterly optics. By contrast, the UK’s 75 basis points charge cap and fragmented DC landscape risk steering schemes toward low-cost public market exposure at the expense of long-term value creation.
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He called for regulator-backed “safe harbour” guidance to give trustees confidence in building illiquidity budgets, reform of fee structures to allow performance-based private market access, and further consolidation to create institutional-scale default funds.
Sir Nicholas also framed the debate as one of national competitiveness. The UK, he argued, does not lack investable growth opportunities – it lacks patient domestic capital at scale. There is “no natural law”, he suggested, that British retirement savings should predominantly finance overseas infrastructure and companies.
Unlisted assets, he concluded, are no longer a niche allocation but “core plumbing” of modern capital markets. If DC schemes are to improve member outcomes and support domestic growth, the industry must move beyond incrementalism.
The 10% era, Sir Nicholas made clear, should be only the beginning.
Inside the deal: Legal & General
Legal & General has used a long-term asset fund (LTAF) structure to bring a diversified private markets allocation into defined contribution (DC) default strategies, as providers look beyond the lowest-cost approach toward value generation.
Speaking at the event, Martin Dietz, head of diversified strategies and asset allocation at Legal & General, said the LTAF has become the primary vehicle for incorporating illiquid assets within life company platforms. “If you want to get private markets into a life company, you need to use an LTAF,” he said.
Legal & General’s Private Markets Access Fund launched around 15 months ago and has grown to almost £3 billion as DC schemes migrate into the firm’s Lifetime Advantage default range. The portfolio combines multiple private market strategies, including private credit, infrastructure, property and natural resources, alongside selective private equity exposure.
The fund is designed to sit within the growth phase of DC portfolios and aims to deliver equity-like returns through different underlying drivers. “We want strong returns, diversification from listed markets and assets we can showcase to members,” Dietz said.
Operational design has been a key consideration. Unlike many LTAFs, the fund is priced daily to fit the trading requirements of DC schemes, allowing changes in underlying asset values to flow through more quickly to member pricing. The vehicle is structured as an authorised contractual scheme (ACS), giving pension investors tax transparency.
The portfolio combines Legal & General’s internal private markets capabilities with external managers, including infrastructure, private credit and real estate specialists. Early allocations have included direct lending strategies, renewable energy assets and UK affordable housing projects.
Dietz said the immediate priority is demonstrating that private markets can deliver value in DC portfolios. “This is something that needs to prove that it’s working now,” he said, noting that strong returns will be critical if private markets are to become a lasting component of default pension strategies.