UK pension schemes are increasingly willing to invest in private markets. New research from The Pensions Regulator suggests the challenge is turning that appetite into suitable investments.
The push to encourage pension schemes into private markets has often focused on investor appetite – but new research from The Pensions Regulator (TPR) suggests the debate is moving on to the practicalities of implementation.
Following discussions with more than 40 private sector pension schemes, trustees, consultants, industry bodies and investment managers, TPR found trustees were generally willing to consider UK private market investments where they met requirements around returns, risk, diversification, cashflow and liquidity.
While mature DB schemes express limited appetite for further allocations, DC schemes are beginning to turn their interest into practice. Most master trusts already have some private markets exposure, although material allocations remain less common, and TPR expects allocations to increase as schemes become larger and more experienced.
Join the discussion on LinkedIn.
Investment barriers
TPR identifies several barriers: knowledge gaps, fiduciary duty tension,investments time lags, regulatory constraints, guided retirement portfolios, market uncertainty, fee structures and transparency, access to VC and reporting inconsistencies.
It also highlights a more fundamental concern: whether there are enough accessible UK investments with the characteristics pension schemes require.
This is not a new concern. Railpen director of private markets and real assets investments Anna Rule told PMP earlier this year that attracting pension capital depended on creating a stable pipeline of investible opportunities.
The latest TPR research suggests this concern is shared more widely. Stakeholders identified government facilitation of an investible pipeline as a critical enabler of the Mansion House Accord, while some questioned whether sufficient UK opportunities were available with the required investment characteristics.
DC Asset Allocation Forum | London | 26 January 2026
Increasing scale
Some of the obstacles may diminish as the DC market consolidates. TPR found schemes with the necessary scale and capacity had made significant progress, while larger allocations could follow as governance and investment arrangements develop.
There is already evidence of this in practice. Nest, with £68bn of assets at the time, launched a dedicated £200m venture capital allocation in July, which it expects to grow towards £1bn by 2030. Its focus on later-stage companies also mirrors TPR’s finding that schemes investing in venture tend to favour larger, lower-risk growth and scale-up opportunities rather than early-stage businesses.
Likewise, Now:pensions told PMP last year about its first allocation to private markets and its ambition to reach 10% in private markets, including 5% in the UK, but only where investments “stack-up for the membership”. Its allocation was to UK affordable housing, where the trustee concluded the investment case and its desire to generate a positive social impact aligned.
Competing for capital
TPR found fiduciary duty was a consistent theme in its discussions. Some schemes deliberately avoided setting hard UK allocation targets because they wanted to ensure individual investments could be made in members’ best interests. Stakeholders also raised concerns that some UK assets could offer lower expected returns than alternatives elsewhere.
Yet whether the UK suffers from a shortage of investible opportunities remains open to debate.
At Longview Networks’ DC Forum in June, investors offered PMP a notably different diagnosis. They argued attractive UK businesses and assets were available, but domestic pension schemes had historically failed to provide enough of the capital supporting them.
Fulcrum Alternative Solutions’ David Merton pointed to investments in businesses including Oxford Quantum Circuits and Moneybox as evidence of the opportunities available, while Future Growth Capital’s Joanne Bugg said the firm was “super bullish on the UK growth opportunity”.
Institutional investment Conferences & Summits from Longview Networks
The two positions are not necessarily contradictory; attractive UK businesses and infrastructure can exist without them being available at sufficient scale, in appropriate structures or at terms that suit pension investors.
Fees provide a similar challenge. TPR identifies performance fees, opaque additional costs and uncertainty around the DC charge cap as continuing concerns.
TPT Investment Management has previously argued that these constraints make some strategies, particularly venture capital, difficult to accommodate within DC defaults even where the underlying investment proposition is attractive.
The emerging challenge for productive finance may therefore be less about persuading pension schemes of the merits of private markets than improving the connection between willing capital and suitable assets.
With DC assets expected by TPR to grow towards £1trn by 2036, and some schemes already targeting private market allocations of 20% or more, the amount of potentially available capital is substantial.
Whether the UK can provide enough investments capable of competing for it may be the more important test.
Join the discussion
What is really holding UK pension schemes back from investing more in private markets?
PMP is asking asset owners and other industry participants which barriers matter most in practice – and what would make the greatest difference.