5 Facts on the UK’s £150 Billion Fund Gap: Will Pensions be the Solution?

Updated

September 16, 2025

Gambar 5 Facts on the UK’s £150 Billion Fund Gap: Will Pensions be the Solution?

Jakarta, Pintu News – The UK economy is facing major challenges. According to a report from the City of London Corporation, the UK is expected to experience a funding gap of £150 billion (around Rp2,981 trillion) in the next five years. The report calls for pension fund reform and increased transparency of infrastructure projects to attract private investment.

1. £150 Billion Gap Threatens UK Economic Growth

The report released by the City of London Corporation highlights a £15 billion per year shortfall in funding for the small-medium enterprise (SME) sector, as well as infrastructure projects such as housing, energy, transportation, and digital networks.

According to Chris Hayward, City of London Policy Chair, failure to fill this gap could result in “lost opportunities, reduced productivity and slower economic growth.” With a stagnant economy and potential tax increases, the government is facing immense pressure to find creative solutions.

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2. Pension Funds Directed to Domestic Projects

pension fund with ai — Source: Asian Investor

The City of London is pushing for pension system reform, with the aim of directing more citizens’ savings into domestic assets. Canada and Australia are cited as successful examples, where pension funds are a major source of national infrastructure financing.

As a first step, the Mansion House Accord has been signed by 17 of the UK’s largest pension funds. They commit to investing up to 10% of their portfolios into the private market by 2030 – with half of that prioritized for onshore assets, potentially unlocking up to £50 billion in fresh funds.

3. Government wants more transparent & structured projects

Although initial commitments have been made, the City says this is not enough. They urged the government to develop a clearer and more transparent infrastructure project pipeline.

Project transparency is considered crucial for attracting long-term capital and building investor confidence. For example, global investment firms such as BlackRock have invested $700 million in data centers in the UK – showing that investor interest remains high if the structure is attractive.

4. Political Change: Focus on Infrastructure & Green Energy

The new government under Prime Minister Keir Starmer has made investment a priority. The cabinet has also undergone a reshuffle: Jason Stockwood is now Minister for Investment, replacing Poppy Gustafsson, and Lucy Rigby replaces Emma Reynolds as Minister for Cities.

The government also plans to launch a national investment hub to connect global funds with local projects. The aim is to make the UK a more attractive and accessible investment destination.

5. Challenge: Pension Funds Prefer Overseas Investment

Despite the government’s push for domestic investment, the fact remains that only 4% of UK pension fund portfolios are currently invested in local stocks – a far cry from 50% in the 1990s.

Critics are concerned that being forced to shift investments domestically could violate the trustees’ legal obligation to prioritize the best outcomes for pensioners. Even Aviva’s CEO sounded a note of caution, stating that forcibly encouraging onshore investment could be detrimental to investment returns.

Conclusion

A funding gap of £150 billion signals that the UK must take serious steps to attract private capital to finance economic growth. Pension funds are a promising tool, but need to be balanced with transparent project structures and attractive incentives.

There is still a long way to go on this reform, and all parties – government, investors, and regulators – need to ensure that the solutions not only address the current crisis, but also maintain a balance of long-term interests.

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