Not just a number: How allocating to private markets can enhance member engagement
As the UK’s defined contribution pension landscape opens up to private markets, much of the conversation has focused on return potential and volatility smoothing. Yet there’s a third, equally powerful benefit: the ability of tangible, relatable private market investments to drive genuine engagement among savers – and, in turn, better financial behaviours.
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Traditionally, and in contrast to their counterparts in defined benefit pension schemes, savers in defined contribution (DC) pension schemes have had limited access to private market investments, spanning private equity, private credit, infrastructure and real estate.
That is now changing. Government initiatives have accelerated the shift – most notably the Mansion House Accord, through which 17 multi-employer DC pension providers have pledged to allocate at least 10% of their default fund assets to private markets, with half of that capital ringfenced for investment in the UK.
We have explored before the role that private market allocations could have in boosting long-term member outcomes, both in terms of potentially enhancing the growth of savings pots, and so income in retirement, as well as improving the savings journey by smoothing volatility.
In this article, we turn to an equally important third dimension: the role private market strategies can play in enhancing engagement, turning passive savers into active investors.
Capturing the imagination
For the purposes of this analysis, we will focus on investments within Schroders Capital’s own sustainability and impact-focused multi-private markets strategy – in the process encompassing two key themes of critical and growing importance to UK pension investors.
As such, the investments we will discuss seek to drive positive societal or environmental outcomes, alongside a compelling financial return – and so, by nature, they are well positioned to drive higher engagement. Whether it’s helping tackle homelessness, decarbonising our food system, or transforming healthcare, these investment stories capture the imagination and drive an emotional connection.
We also believe, however, that the core principle of what makes these investments potentially more engaging is relevant across a much wider range of private market strategies. This is because private markets in general offer something most listed investments cannot: tangibility.
These are specific investments into individual companies and assets that people can see and to which they can more directly relate. Moreover, many operate in growth sectors with an investment thesis that is based on transformational, disruptive and future-focused value creation.
Overall, when members feel their money is making a difference and supports exciting and impactful businesses and projects, we believe they may be more likely to engage – checking their pension, making contributions, sharing their pride with family.
Finally, and crucially, in specific relation to investments that are sustainability-related or oriented, our experience is that this does not involve sacrificing performance. In fact, sustainability and positive impact can walk hand-in-hand with – and be a key driver of – robust, long-term returns, as our prior study on impact in private equity shows.
Real stories, real impact
To bring to life the potential for private markets investments to drive heightened engagement, below we share three actual, real world investment examples from our own portfolio that illustrate how compelling investments can be connected to impactful activities and outcomes.
Enabling low-carbon farming
Since 2019, Schroders Capital’s energy transition infrastructure business, Schroders Greencoat, has invested £137 million into the construction of two large-scale agricultural greenhouse projects in Norwich and Bury St Edmunds, East Anglia.
These greenhouses grow over 100,000 peppers each week – and generate around 75% less carbon than traditional production methods. The secret lies in an elegant closed-loop system: waste heat from a nearby water recycling plant is captured to warm the greenhouses, reducing both emissions and costs.
The benefits extend well beyond carbon savings. The facilities create skilled rural jobs, support UK supermarkets in sustainable sourcing, and strengthen food security by reducing dependence on imports. They demonstrate how infrastructure can be both green and grounded, improving environmental outcomes while sustaining local economies.
For members, the story is immediate and relatable. They can see the produce on supermarket shelves, understand the environmental benefit, and take pride in knowing their pension is helping decarbonise UK agriculture.
Providing affordable housing for young people
Earlier this year, Schroders Capital’s real estate team acquired 38 new social and affordable apartments in Milton Keynes, developed in partnership with the charity and Registered Provider YMCA and national housebuilder Bellway.
These are not just buildings; they are homes and represent a lifeline for young people who have experienced or are at risk of homelessness. Each resident is moving on from the YMCA’s three-stage support campus – they are ready for more independence, but still in need of a safety net as they pursue education or employment. The homes sit in the middle of a new housing development on the outskirts of Milton Keynes and residents have access to the community centre with a new GP surgery and shops nearby. The 38 homes were immediately fully occupied with young people leaving the campus, who now live independently but can access ongoing support from YMCA.
Crucially, rents are affordable at a discount to open market rents: this is a regulated tenure set by the government and ensures genuine affordability for residents. Without the fund’s investment, Bellway would have sold the homes on the open market, yet YMCA could not have afforded to buy them leaving young people facing expensive local rents or falling back into homelessness. Financially this investment is robust, targeting an 8% ungeared return with inflation-linked income. Socially, the impact is profound – providing stability, safety, confidence, and opportunity to vulnerable young people.
Transforming home care through technology
In the UK’s strained social care system, innovation is urgently needed. Through private equity, Schroders Capital has invested in Cera Care, a technology-enabled home care provider that exemplifies how private markets can drive both efficiency and compassion.
Founded in 2016, Cera has grown into one of the UK’s largest home care operators, delivering more than 30 million patient home visits a year. Its technology platform does more than digitise logistics – it enables predictive, data-driven care, improving patient outcomes while at the same time reducing pressure on hospitals.
Cera’s model has saved the NHS and government more than £1 billion to date, according to the NHS’s own figures, contributing £1.5 million in daily savings by cutting unnecessary hospital stays and admissions. Its software is being deployed across healthcare systems, supporting the shift towards more efficient, community-based care.
The company’s industry-leading career pathways and cutting-edge AI recruitment tools are also growing the talent pool – attracting 1 million new carer and nurse applicants over the past two years, addressing acute workforce shortages while creating valuable employment opportunities.
For DC savers, the link can be motivated by a deep desire to be intentional; do well by doing good. Many will have elderly relatives or friends who depend on social care services. Knowing their pension is supporting innovation in this space transforms an abstract contribution into a meaningful connection.
Building confidence and trust
DC pensions have sometimes struggled with perception challenges. Many members view their pension as opaque – an account they contribute to but cannot influence or understand. Of course, private markets have had their own perception challenges, too.
But by deploying private market strategies thoughtfully, leveraging the tangible investments to which they provide access, the industry can help change these perceptions. In the process, they can reframe the pension member experience in ways that support the government’s broader drive to encourage more people to invest and save – building trust, boosting financial literacy and embedding a sense of ownership in the savings journey.
Importantly, this doesn’t mean members need to become investment experts. They simply need to see that their contributions are building something meaningful – assets with real utility and human benefit. For trustees and providers, this is an opportunity to communicate more effectively, translating portfolio allocations into relatable stories that make pensions matter.
A more complete value proposition for DC
We firmly believe private markets can materially enhance outcomes for DC savers – financially, but also behaviourally and emotionally.
Private markets have the potential to deliver stronger long-term returns and smoother journeys through diversification and access to differentiated risk premia and return drivers. But they also have potential to drive deeper member engagement, which in turn can prompt more active decision making and saving, embedding a sense of ownership in the savings journey.
Incorporating private markets is therefore about access to a more holistic overall value proposition and reframe the pension member experience, from “what’s my balance?” to “what is my pension making possible?”
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