BIA has moved the pensions agenda forward, but it’s now time to be bolder
The Mansion House Accord signed on 13 May 2025 and the publication of the Government’s Pensions Investment Review mark the latest developments in the BIA’s campaign to unlock pension funds for life sciences. Here, our Director of Policy and External Affairs, Dr Martin Turner, reflects on how we got to this point and what must happen next.
The pensions industry and UK Government have co-signed a new Mansion House Accord, committing the industry to invest 10% of its assets into private markets, with half going to the UK. This builds on the Mansion House Compact agreed in July 2023, which BIA cheered for at the time as a significant step forward in efforts to improve the financing environment for innovative life science scale-up companies. But overall progress has been too slow, much to our frustration, and we now believe bolder action is needed from government.
Background and why BIA thinks this is important
Way back in BIA’s Vision for the sector in 2025, published in 2015, we identified pensions as an untapped source of capital to grow the UK life sciences and biotech sector.
A lack of capital has long been the primary barrier to Britain producing companies of global scale from our world-leading science base.
In 2010, early-stage capital was the acute problem, but BIA’s work to secure the Biomedical Catalyst grant funding programme from Innovate UK, protect R&D tax reliefs and improve venture capital incentives like the Enterprise Investment Scheme have helped alleviate that early-stage “valley of death” (although we could always do with more!).
Over the past decade, the sector has matured, with a fantastic and promising pipeline of companies that could be the next Genentech or Moderna. However, as analysis by the British Business Bank shows, UK companies receive about half the amount of venture capital that their US competitors do. So, despite the undeniable quality of our science and management teams, lower investment stymies UK companies in a global race where speed to market is king. That said, UK life sciences attracts great sums of foreign capital, especially from expert US VCs (a sign that the quality of our companies is not the problem), but Britain lacks enough large and deep-pocketed domestic investors. As a result, companies are underinvested in and end up moving abroad in search of capital, or they are acquired, and the IP is lost overseas. Pension funds, which underinvest in the UK and equities in general, are therefore a potential source of capital that could be used to make bigger investments in UK companies. It is therefore the central call within our Vision for the UK life sciences sector in 2035.
Mansion House and progress made so far
In July 2023, the then Conservative Chancellor Jeremy Hunt signed, with the Lord Mayor of London, the Mansion House Compact, with 11 pension fund signatories committing to invest 5% of their assets into unlisted companies by 2030, including, it said, life sciences and biotech. This complemented various pension rule changes and consolidations initiated under the Edinburgh Reforms of Chancellor Philip Hammond in 2022, which attempted to address barriers that BIA and others had flagged were potentially preventing pensions from investing in venture capital.
Like many areas of policy change, it took a long time to get to even that point. BIA’s 2015 Vision put the stake in the ground and then government action really began with the 2017 Patient Capital Review. A one-year progress report on the Mansion House Compact in July 2024 revealed that only 0.36% of signatories’ assets were invested in unlisted companies, leaving quite some distance to reach 5%. That said, there has been positive movement. Phoenix Group and Schroders announced Future Growth Capital, a new private markets investment manager with a £1 billion initial commitment. The same two institutions also formed a £500 million fund with the British Business Bank, with 20% earmarked for life sciences. Natwest Cushon also announced a partnership with VC fund Future Planet Capital to allow regular default fund savers access to venture capital, through the £2.2 billion Cushon master trust.
And, in Autumn 2024, Labour Chancellor Rachel Reeves announced the formation of the British Growth Partnership (BGP), an investment vehicle run by British Business Bank to provide access to the Bank’s portfolio and pipeline of tech and life science companies (this includes many BIA members), with initial expressions of intend from Natwest Cushon and Aegon, and more recently the London local government pension scheme. BGP got FCA approval to manage third-party money in May 2025, allowing it to become fully active.
We have also heard from contacts in the City that Local Government Pension Schemes have recently been allocated into funds that will invest in small companies on the London Stock Exchange.
Despite all this progress, we are yet to see money actually being deployed into UK life science and biotech companies, which is not for lack of good opportunities.
The Mansion House Accord and why it’s not enough
The new Labour government has continued with the pension reform agenda. A couple of weeks ago, the Chancellor, Lord Mayor and 17 of the largest workplace pension providers in the UK signed a new Mansion House Accord to invest at least 10% of their defined contribution (DC) default funds in private markets by 2030, with 5% of the total allocated to the UK. Last week, the Government also published its Pensions Investment Review report, which detailed its next steps in reforms, including monitoring investment levels in UK assets and introducing powers to mandate, should the Accord commitments not be met.
The Accord is an expansion of the Compact, in good and bad ways. The specific 5% commitment to the UK is excellent and was missing entirely from the 2023 Compact, and there are more signatories too, but there’s a broader definition of private markets to include property and debt, and no mention of venture capital, nor life sciences and biotech.
We are concerned that the pensions industry is not committed to investing in scaling innovative companies that the UK needs to compete on a global stage in current and future growth industries. Despite the best efforts of BIA, the British Private Equity and Venture Capital Association, the Bank of England and many others, the pensions industry does not seem to be able to get past the higher costs (fees) required to invest in venture capital. This is despite the higher returns it can deliver for savers and the successful venture capital strategies we see in the pensions industries of Canada, Australia and America. Experts we’ve spoken to, and the government’s own conclusions, point to an excessive focus on cost over value at all levels of the pensions industry. There’s nothing currently forcing a change in this culture. A lack of investment in venture capital is holding back the UK economy and preventing us from capitalising on our world-leading life sciences by scaling homegrown companies here in the UK with UK capital, so that the returns are recycled in our ecosystem and grow our retirement pots whilst delivering better healthcare and other benefits.
What now? It’s time to mandate
There is a strong risk that pensions will not allocate to venture capital because they will continue to see it as too hard and too expensive. They can meet their Mansion House commitments with investments into woodland, bridges and department store buy-outs.
This is why BIA believes mandation is the only way to drive behaviour change. If pension trustees are given clear direction and – most importantly – top cover from government that they are acting prudently, to allocate a small proportion into venture capital, then they will have to overcome any barriers that possibly exist. Later this year, the Government will legislate for a “reserve power” in the Pension Schemes Bill to set binding asset allocation targets. BIA will study this carefully to ensure it gives the government the specific ability to mandate investment into life sciences (venture and other UK equities). If the pensions industry chooses not to back life sciences, which is one of the government’s eight priorities for growth, there will be a way to address this market failure.
BIA’s long campaign is beginning to bear fruit, but one last bold push is required to get it over the line. This begins this week with BIA’s 25th Parliament Day, where 50 BIA member CEOs and sector leaders will descend on Westminster to deliver this message.
