From policy ambition to portfolio reality: how UK pensions are moving into venture

Harry Raikes, Head of UK Venture Investments at Schroders discusses the building momentum for UK pension reform over the last decade.

Harry describes how the UK’s push to channel pension capital into high-growth companies is gaining traction, with early allocations to venture capital signalling a shift from policy ambition to practical implementation.

For much of the past decade, the debate around UK pensions reform has centred on a familiar challenge: how to better connect one of the world’s largest pools of long-term capital with the domestic growth economy. The Mansion House reforms marked a decisive shift in intent. The more relevant question now is whether that intent is translating into real portfolio allocations.

We are beginning to see that it is.
 

From exploration to execution

The direction of travel is increasingly clear. Policymakers have created both the incentive and the framework for defined contribution (DC) schemes to access private markets, including venture capital (VC). Initiatives such as the Mansion House reforms and the Long-Term Investment for Technology and Science (LIFTS) programme have helped catalyse momentum. But what distinguishes the current phase is not policy ambition - it is implementation.

From our perspective, the past 12 months have marked a turning point. UK pension schemes are moving from exploration to execution, with early allocations into venture and growth strategies now taking shape. Importantly, this shift is being underpinned by structures designed with institutional investors in mind.

A key example is the Long-Term Asset Fund (LTAF), which we have been actively developing as a route for DC capital to access less liquid, higher-growth opportunities. Through our UK Innovation LTAF, we are directly connecting pension capital with the UK’s most dynamic early-stage companies. Since first close, we have committed over £100 million across a diversified portfolio spanning artificial intelligence, life sciences and deep technology, including investments in companies such as ElevenLabs and Wayve.

For us, this is not simply about deploying capital - it is about building a scalable bridge between long-term savings and innovation. Historically, UK pension funds have been underrepresented in venture, despite the UK being one of the largest VC markets globally. We see the LTAF structure as a critical step in addressing that disconnect.
 

Behavioural shift

Our work with partners such as Standard Life, via Future Growth Capital, as well as with NEST and local government pension schemes, reflects a broader shift in institutional behaviour. These investors are increasingly recognising that venture and growth equity can play a valuable role within a diversified private markets portfolio. Importantly, rather than being viewed in isolation VC is being approached as complementary to private equity, offering differentiated exposure to innovation-led growth.

This more balanced approach is important, particularly for DC schemes. Allocations are being made with careful consideration of liquidity, governance and member outcomes. In practice, this means venture is often incorporated as part of a broader private markets allocation, rather than as a standalone exposure. We believe this is the right way to build conviction over time while managing risk appropriately.

Encouragingly, we are also seeing progress on the supply side. UK-focused venture strategies, including our own, are beginning to deploy capital into leading venture-backed companies at scale. This is a crucial development. One of the longstanding challenges in the UK ecosystem has been the ability to support companies through successive stages of growth. By mobilising institutional capital, we can help address that funding need and support the scaling of globally competitive businesses.
 

Overcoming barriers

However, while momentum is building, it would be unrealistic to suggest that all barriers have been removed. Many of the remaining challenges are practical rather than conceptual.

From an investor perspective, implementation continues to require significant coordination. Establishing appropriate legal structures, aligning operational processes and building internal expertise all take time. For Local Government Pension Schemes (LGPS), the ongoing process of pooling introduces additional complexity, as governance and decision-making frameworks evolve.

There is also the question of scale. While commitments are increasing, translating policy targets into sustained capital flows will require continued progress in standardisation, transparency and track record development. Investors need confidence - not just in the opportunity set, but in the structures through which they are accessing it.

We see these challenges as part of a natural evolution. The UK is, in many respects, building a new institutional framework for venture investment. That process will take time, but the foundations are now firmly in place.
 

Improving outcomes

Crucially, the alignment between venture investing and pension objectives is becoming clearer. Venture offers exposure to long-term growth trends and innovation that are difficult to access elsewhere. When structured appropriately, we believe it can play a meaningful role in delivering improved member outcomes over time.

The shift underway is therefore both structural and strategic. UK pension capital is beginning to move into venture - not as a tactical allocation, but as part of a broader rethinking of how portfolios are constructed.

If the first phase of pensions reform was about setting direction, this phase is about delivery. But delivery alone will not determine whether this shift endures. Two tests now matter.

First, UK venture firms need to demonstrate a clear right to win in backing the country’s strongest companies. Founders increasingly want long-term, value-added partners, and firms with deep networks, sector expertise and established track records are likely to have an advantage - one built over decades, not easily replicated.

Second, the industry must show more clearly how venture improves broader institutional portfolios. For pension schemes, that means proving not only returns, but venture’s role in providing differentiated exposure to innovation-led growth and diversification.

Policy has helped create the conditions for change. The next phase will depend on whether the industry can prove its value to both founders and institutional investors.
 

Authored by Harry Raikes,
Head of Venture Investments at Schroders.

The opinions expressed in this article are those of the authors. For more insights from Schroders, visit www.schroders.com/en/global/individual/