Scottish Widows to Cut UK Equities Allocation in Pension Fund

Strategic Insights -

Scottish Widows, the Edinburgh-based business that manages £72bn in pension assets, plans to reduce its allocation for UK equities in its highest growth portfolio from 12% to as little as 4%, according to the Financial Times. The move will see billions pulled out of London's public markets over the coming months, with the plan set to be carried out by the end of January 2026. The fund's most conservative portfolio will see the UK allocation cut from 4% to just 1%. This decision comes after Scottish Widows refused to sign the Mansion House Accord, a voluntary pact in which funds committed to increase their exposure to UK private assets.

Key Takeaways:

  • Scottish Widows plans to slash the UK equities allocation in its highest growth portfolio from 12% to as little as 4%, affecting £72bn in pension assets.
  • The move will be carried out by the end of January 2026, with the fund's most conservative portfolio seeing the UK allocation cut from 4% to just 1%.
  • The decision comes after Scottish Widows refused to sign the Mansion House Accord, which pushes/punishes UK pension flows into private assets over the next five years.
  • The withdrawal from UK equities has been linked to the Accord, amid speculation that funds will sell down their UK stock holdings to compensate for the increased spend on UK private assets.
  • Simon French, Chief Economist at Panmure Liberum, described the move as "an inevitable reaction" to the recent Mansion House Accord.
  • Scottish Widows' new pension proposition, Scottish Widows Lifetime Investment, takes a market weight allocation to global equities by default.
  • Neil Wilson, UK investor strategist at Saxo Markets, expressed concerns about the impact on economic growth and prosperity, stating that UK pension funds are "down from 50% UK equities to 4% in 25 years".

Statistics:

  • £72bn: The value of pension assets managed by Scottish Widows.
  • 12%: The current UK equities allocation in Scottish Widows' highest growth portfolio.
  • 4%: The planned UK equities allocation in Scottish Widows' highest growth portfolio.
  • 25 years: The time period over which UK pension funds have reduced their UK equities allocation from 50% to 4%.
  • 5 years: The period over which UK pension flows are being pushed/punished into private assets, as per the Mansion House Accord.

Sources:

  • "Scottish Widows abandons Mansion House pension funds agreement" - https://www.cityam.com/scottish-widows-abandons-mansion-house-pension-funds-agreement/
  • "Pension funds sign Mansion House Accord in £50bn boost to UK" - https://www.cityam.com/pension-funds-sign-mansion-house-accord-in-50bn-boost-to-uk/
  • "FT: Scottish Widows Lifetime Investment" - https://www.ft.com/content/bdb5aa88-8756-4881-b84a-f5aff66b52a4
  • X (https://x.com/Frencheconomics/status/1935583609454236086?s=31) - quote from Simon French, Chief Economist at Panmure Liberum
  • City AM - quote from Neil Wilson, UK investor strategist at Saxo Markets