How to avoid government’s workplace pension ‘power grab’

You may have read that the government wants the power to influence where workers’ pensions are invested, seeking to place some of our savings in higher-risk assets that could impact the retirement pots we end up with.

The prospect of this coming to pass is triggering serious concern, as the proposal flip-flops between the House of Commons and House of Lords in a saga that looks set to rumble on. MP Helen Whately has accused ministers of a “power grab”, while others have claimed it mixes political aims with savers’ futures.

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Let’s delve beneath the headlines and make sense of it all, and suggest ways you can sidestep the potential change, enabling you to invest your pension savings exactly where you want.

The Mansion House Accord and workplace pensions

Labour has made no secret of its desire to funnel more pension money into UK private assets (companies that don’t trade on the major financial exchanges), a move it believes can achieve a dual purpose: first, improve returns on our pension investments, leading to better retirement outcomes, and second, support a struggling UK economy by giving domestic start-ups a £50 billion shot in the arm.

Pension schemes reduced exposure UK-listed stocks in recent times, with allocations falling from 50% to 4.4% in the past 25 years. The government is striving to arrest this trend.

A big development arrived in May 2025 when 17 of the UK’s biggest pension schemes signed up to a voluntary initiative called the Mansion House Accord.

As part of this arrangement, the firms involved – including Aegon UK, Aon, Aviva, Legal & General, NatWest Cushon, Nest, and Royal London – pledged to invest at least 10% of their defined contribution (DC) default funds in private markets by 2030, with half of this weighted to domestic ventures. These schemes collectively administer around 90% of DC pension assets.

To be clear, the Accord is a non-legally binding agreement; schemes who’ve signed up can change their minds in the future and shun or reduce exposure to private assets should they wish.

While this initiative has drawn criticism from several quarters, despite its voluntary nature, what’s really rankling people and causing a giant stir is the government’s dogged bid to implement a clause in its Pensions Bill that will enable it to force schemes to invest in UK private assets.

Ministers have stressed this is a “backstop” so that schemes honour their commitments to the Accord, with pensions minister Torsten Bell saying he doesn’t plan to exercise the powers, which would only exist until 2035.

Critics aren’t convinced, countering that any authority to dictate how pension schemes invest goes against trustees’ fiduciary duty, which is to deliver the best outcomes for their members. Some schemes might believe that investing in UK infrastructure is a good idea, others may prefer to avoid the asset class. Those in opposition say investment decisions should rest absolutely with those tasked with managing savers’ money; the government shouldn’t have any involvement.

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A further concern is the additional risks posed by private assets, which tend to be more volatile and less liquid than companies that trade on the main markets. Higher risks can, of course, generate higher returns, but the outcome isn’t guaranteed. The government last year published calculations on the potential improved returns by upping allocations to private markets, and the case was far from compelling.

So far, things haven’t quite panned out as ministers hoped. The House of Lords have twice rejected the proposal, with peers voting 219 to 144 this week to veto the revised version. The Bill has since returned to the Commons for further consideration, forcing the government back to the drawing board.

According to reports, ministers have since watered things down and under a fresh proposal will only be able to wield the power once. The government will hope it’s a case of third time lucky, but a further rejection may well beckon.

However the situation pans out, within the next three and a half years most workplace pension schemes do plan to invest at least 10% of some funds into private assets. And according to the government’s press release published in May 2025: “Some providers have indicated they may exceed the private markets investment targets in the Accord.”

But importantly, if you’d prefer not to invest your pension savings in private equity and infrastructure, you don’t have to. You may, however, need to take active steps and engage with both your current workplace pensions and any dormant pots from previous jobs.

Before I run through two key steps, it’s worth remembering that not every workplace pension scheme is on board with the Accord. Scottish Widows is a notable absentee.

1) Review investments in your current scheme

Something important to flag is that the pledge to invest in private assets within the Accord only affects default pension funds in workplace pensions. This is where your employer sticks yours and its monthly contributions if you don’t choose your own investments.

Only provider-designed defaults are in scope - as opposed to bespoke defaults, which are often tailored to employers or types of employers – as well as assets yet to derisk (gradually move into safer assets as retirement draws closer).

But now for the good news: you don’t have to invest in your scheme’s default fund if you don’t want to. And it may not be the right solution for you, anyway.

That’s because default funds are designed to cater for a wide range of savers, offering the potential to grow your retirement wealth but equally mindful of the need to soften any downsides.

The problem here is that the one offered by your scheme might be either too risky or too cautious for your personal retirement needs.

Some are highly exposed to lower-growth assets, like fixed interest - I’ve seen instances of default funds holding 65% or more in bonds and other defensive assets. Such a cautious approach might be OK if you’re close to retirement and falling markets pose a threat to your later-life plans, but if you have time on your side, it could rip a glaring hole in your eventual pot. Having a bigger proportion in the stock market, perhaps even the lot, could be a better option.

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If you’re yet to review your workplace pension, or haven’t for a few years, it’s vital to look under the bonnet and make sure your investing strategy is personalised.

Workplace schemes typically offer at the very least a handful of options - many provide dozens or hundreds to choose from. While risk appetite is a personal affair, as a rule of thumb younger savers can usually expose themselves to greater ups and downs as they have more time to ride out the inevitable bumps.

One final point to consider when reviewing your workplace pension investments, is to examine both your accumulated savings and future contributions. 

2) Track down any previous workplace pensions and consider consolidating

It’s not just your current workplace pension that could be invested in a default fund – the same may apply to any dormant schemes from previous employers, which too could fall under the scope of the Accord.

One option to avoid allocations to private assets is to track these pots down, contact the schemes individually and switch to different investments. An alternative approach, and one that can afford you greater control over your future, is to consolidate them into a single scheme where the investment choices rest with you, such as a self-invested personal pension (SIPP).

This can be savvy exercise whatever happens to the workplace pension investing regime. Bringing several pensions under one roof can only allow you to invest in the way that works best for you (and many SIPPs offer thousands of investing options to pick from) and it can also make things easier to manage and potentially reduce your costs too. 

Before signing on the dotted line, it’s imperative to check that you won’t lose any valuable guarantees by transferring, but when it comes to defined benefit (DB) schemes these typically only apply to older pensions.

3) Now is the time to get ahead

The Accord is due to take affect by 2030, but schemes may funnel savers’ money into private markets before then. In addition, your scheme could, of course, choose to invest more than the minimum 10% pledged allocation.

We should note that some savers might be happy with this. But either way, this development offers a timely nudge to engage with your pension savings as soon as you can, helping you to remain in control of where your retirement pot is invested.