Rachel Reeves, the current Chancellor of the Exchequer, is poised to announce a significant new initiative aimed at bolstering domestic investment, specifically through the revamped Mansion House Compact. This new version is expected to facilitate a 50 billion deal with pension funds, encouraging them to direct a greater portion of their assets towards British projects.

The revised Mansion House Compact will promote a voluntary commitment from the UK's largest retirement providers, mandating that they invest at least 10% of savers funds into unlisted assets by the year 2030. Notably, half of this amount, or approximately 50 billion, is earmarked for investment in the UK market. The urgency for this initiative is underscored by the increasing calls for economic nationalism, which have gained traction amid rising global trade tensions and calls for more localized economic strategies.

According to sources familiar with the negotiations, a draft of the new Mansion House Compact was circulated last week. This follows a series of complex and sometimes contentious discussions involving Treasury officials, representatives from the pension industry, and the City of London Corporation, which has played a pivotal role in facilitating these talks. Ms. Reeves is expected to make her formal announcement regarding the compact during her annual Mansion House speech in July.

This initiative comes as part of a broader strategy to stimulate domestic investment amid an environment characterized by increasing economic isolationism. For instance, former President Donald Trump has consistently advocated for policies aimed at rejuvenating the American economy through aggressive tariffs on foreign goods. In parallel, certain factions within the UK are proposing a campaign to encourage consumers to 'buy British' in response to the impact of these tariffs.

In order to complement this investment strategy, Ms. Reeves has previously acknowledged the need to reform cash ISAs, suggesting that upcoming changes could incentivize savers to invest their funds in a manner that supports national economic growth.

The forthcoming commitment from pension funds, amounting to approximately 100 billion of UK pension savings dedicated to unlisted assets by the end of the decade, represents a significant shift in investment strategy. It is intended to foster a more resilient UK economy. It was made very clear at the start of this process that the Treasury wanted to see movement on this, stated an industry insider, emphasizing the proactive stance the government is taking.

Crucially, this agreement remains voluntary, meaning the Treasury will not impose mandatory directives on how pension funds allocate their investments. The original Mansion House agreement, established in 2023 under Ms. Reevess predecessor, Jeremy Hunt, sought to stimulate economic growth by committing a minimum of 5% of workplace pension savings to unlisted equities by 2030. This earlier initiative garnered support from 11 major providers, including Aegon, Aviva, Legal & General, Nest, Standard Life's parent company Phoenix, and Scottish Widows.

Furthermore, Torsten Bell, the pensions minister, has urged companies to expand upon this foundation by increasing their investments in private markets, with a specific focus on UK assets as part of a broader strategy for financial stability.

Interestingly, a proposal from the Lord Mayor of London, Alastair King, to include a reference to national resilienceor investment in defense sectorsin the updated compact was ultimately set aside. While the government has been vocal about enhancing military spending, it appears that this particular suggestion was not formally discussed in the preparatory meetings. Some pension providers expressed hesitation about incorporating a specific UK target within the overarching 10% commitment. Nonetheless, a segment of industry leaders has shown willingness to extend their commitment, suggesting that they might allocate as much as 15% of savers cash to private markets.