UK pensions

05/05/2026

Our pension fund should be made to invest more than 2.5% in the UK.

We pay our pensions into PensionBee's Climate Plan, as it is marketed as ethical and climate-conscious. We don't see a point of investing in our future in a way that also actively destroys our climate, way of life and environment. Having recently reviewed the factsheet, its biggest holdings are Nvidia, Microsoft, Apple, Alphabet, Amazon and Meta. These are companies that are at the forefront of pushing AI, driving energy demand to unprecedented levels. While this by itself seems contradictory, what we found most shocking is that less than 2.5% is invested into the UK. We checked Nest's Ethical Fund, a government-backed provider used by millions, and found the same: holdings dominated by large US tech companies.

So, while we have been deliberately reducing our reliance on large US technology platforms, our pension contributions are doing the opposite.

It's a UK thing

The low UK allocation is not a quirk of these particular funds, as UK pension funds overall put just 4.4% of assets into UK equities and in this, the UK is an outlier with the domestic equities as a share of total pension fund assets being for each respective country:

UK pension schemes hold around £2 trillion in assets, so even closing part of that gap would represent tens of billions flowing into the domestic economy. While some of that sits in existing final salary-style schemes that may not be simply redirected, there is real opportunity for the newer contribution-based pensions. This money could instead be funding British businesses, clean energy, housing and infrastructure, encouraging long-term growth and a prosperous society we would be happy to retire in.

A known problem

Recognising this, Labour's 2024 manifesto committed to increase investment from pension funds in UK markets. And to be fair, they have followed through, at least in part.

The government launched a Pensions Investment Review in July 2024, and in May 2025 secured the Mansion House Accord, a voluntary pledge from 17 of the largest pension providers to put at least 5% of their assets into UK private markets by 2030. The Pension Schemes Act 2026, passed in April 2026, consolidates the market into large "megafunds" and requires schemes to demonstrate value for money.

Why this is not enough

The Mansion House Accord is voluntary, has low targets (5%), covers only private markets like infrastructure and private equity (not ordinary shares in UK companies), and applies only to the defined contribution default funds of its 17 signatories, not covering the wider defined benefit market. Progress under a similar earlier pledge saw the relevant allocation grow from 0.36% to 0.6% over a year.

The Pension Schemes Act goes further in some respects, creating large megafunds that could in theory unlock investment in infrastructure, housing and clean energy, and giving the government a reserve power to set mandatory UK investment targets if the voluntary approach fails. The megafunds do not come into effect until 2030, the mandatory targets have not been triggered, and the government remains wary of conflicting with pension trustees' duty to prioritise their members' financial interests, meaning the actual allocation numbers are moving very slowly.

The government's actions so far are largely structural, setting up the conditions for change rather than delivering it. For a saver who wants their contributions going into UK communities today, no mainstream workplace pension product currently offers that.

What we would like to see

We think the government should exercise its reserve powers to mandate domestic investment. According to the government's own analysis, it could kickstart the crowding in of further private and foreign capital, suggesting there is room to increase domestic allocation while still delivering competitive returns for members. We think with the right mandate in place, there would finally be a pension product we would actually choose: one that invests meaningfully in British businesses, local infrastructure and communities, alongside a sensible allocation to broader responsible global markets.

We think this sits naturally alongside initiatives like Scotland's Community Wealth Building approach, which pursues the same underlying goal of keeping economic benefit rooted in local communities. Together, these kinds of policies could deliver local economic growth and reduce the economic leverage that large foreign corporations and their governments can exert over us.

We wrote to our MP, Tracy Gilbert, about this in March and have not had a reply. If you know of providers or funds that already do this well, or have thoughts on the broader question, we would like to hear from you.