Aegon warns red tape is blocking pension investment spree
Aegon has warned that regulation is holding back some of Britain’s top pension fund managers from pumping cash into the country’s start-ups and unlisted companies.
The pension giant, which manages £160bn of assets in the UK alone, was one of 11 companies alongside Aviva and Legal & General to commit to investing five per cent of their assets in unlisted equities by 2030.
However, Aegon has warned that regulatory hurdles could throw timelines into doubt as the City marks the three year anniversary of the agreement’s signing.
“While we have made meaningful progress, we remain concerned about the timeline to the 2030 Mansion House Compact target,” Lorna Blyth, managing director, investment proposition at Aegon, told City PM.
“Key regulatory building blocks are still not fully in place, including alignment on performance fees and greater clarity on conditional permitted links.”
Under the terms of the agreement, the signatories which also include Aon and Mercer, agreed to invest at least five per cent of their default defined contribution funds into unlisted equities by 2030.
Regulatory problems
Blyth said both measures are “important enablers for broader investment in private markets” and that “providing certainty in these areas will be critical if the industry is to deliver on the ambitions of the compact”.
Other signatories have also expressed concerns over performance fees, branding them a “challenge” in the latest update from the Association of British Insurers (ABI), which is overseeing the agreement, from October 2025.
Providers said “managing appropriate fee structures remains problematic”, as certain models used in private capital markets are “financially unfeasible”.
To protect savers from having their pension pot eroded by high fees, the government introduced a law in 2015 preventing the total annual fee on default funds from exceeding 0.75 per cent of a pot’s total value.
While the cap has kept costs low for savers, it has created a barrier for signatories looking to invest in high-growth assets, such as venture capital, which typically charge performance-based fees.
Trustees are turned off from investing in private markets over fears fees could surpass the limit.
Link compliance
Permitted links have also been deemed a “barrier to investment”, with the majority of fund structures suitable for private assets failing to comply with the rules.
The regulatory rules from the Financial Conduct Authority (FCA) determine what assets funds can hold in a bid to protect savers from overly risky or unsuitable investments, restricting DC pension schemes from investing in certain vehicles.
Typically, venture capital and private equity funds are structured as close-ended vehicles which have a fixed pool of capital and a set lifespan, and do not comply with the FCA’s rules.
While the FCA created long term asset funds (LTAFs) to address the problem, providers have complained the wrapper is expensive to set up and has a lengthy regulatory approval process.
Deadline creeping closer
Despite the regulatory barriers voiced by Aegon, the firm has private equity exposure through two strategies, Life Path and Universal Balanced Collection.
Other providers have also taken steps towards meeting the goal, such as Standard Life via a joint venture with Schroders Future Growth Capital.
But the October 2025 update from the ABI detailed a year on year 0.24 percentage point increase in the exposure committed to unlisted equities. This took total exposure to 0.6 per cent with £1.6bn committed, a considerable distance from the five per cent promised in the next four years.