Millions of British pension savers could have up to 25 per cent of their pots handed to private market groups including KKR and Apollo Global to manage, as Aviva pushes ahead with plans to shift more client money into unlisted assets.

Aviva, a big player in managing UK employers’ pension schemes, said it was launching a new “default” option for employers and employees that would produce far greater exposure to private assets.

The new “My Future Vision” (MFV) option will allocate an initial 25 per cent of an employee’s pension pot to private equity, private credit, infrastructure and property. That compares to a 10 per cent allocation under its existing “My Future Focus” (MFF) default and 0 per cent under its low-cost “My Future” default.

Employers and employees will still be able to opt out, but in practice few tend to. Defaults are powerful “nudge” tools in determining the choices made by clients.

Aviva expects the new default to lead to 5-6 per cent of people’s pots going into specifically UK-based private equity and infrastructure, which would align with the company’s recent promise under the Mansion House accord agreed with Rachel Reeves.

Aviva has assets of £419 billion and is one of Britain’s biggest managers of defined contribution (DC) pension schemes, including £15 billion for 800,000 people in its auto-enrolment master trust.

Initially, the new default will be offered only to the £30 billion of trust-based schemes it manages but Mai Rajah, Aviva’s director of investments, said he hoped the same approach could one day be applied to contract-based schemes, when the rules allow it.

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Members would benefit from higher risk-adjusted returns, he added. The trade-off because of a lack of liquidity and higher fees in private assets was “worthwhile”.

The new default, Rajah said, was “a major step forward for DC pension schemes when it comes to the scope and sophistication of private market investing”.

The shift to private assets is in full swing. Legal & General and Fidelity have also made moves to put more DC pension fund assets into the asset class, which has produced strong returns in the past few decades and improved diversification.

As well as KKR and Apollo, Aviva has signed up Neuberger Berman, Stepstone and Invesco to manage the money. All five are headquartered in the US.

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The government has argued that UK savers are missing out on higher eventual pensions because many are almost entirely invested in listed shares and bonds.

However, some experts are more cautious, arguing that the strong returns from private assets in the past may not be repeated in future, that the asset class is less liquid and less transparent and that savers will also have to shoulder much higher fees. Private credit in particular is an untested asset class, ballooning since 2008 when crisis-hit banks pulled back from much corporate lending.

The Mansion House pledge of many fund managers to allocate 5 per cent of pots to UK private assets has raised eyebrows with some, who argue ministers should not be pressuring the British public to take more potential risk when their own defined-benefit pensions are guaranteed in all circumstances.

The asset allocation shift could also be seen as a fresh blow to listed markets, including the London Stock Exchange. While Aviva’s existing MFF default puts 90 per cent of a young earner’s contributions into listed shares, the new MFV default will allocate only 75 per cent.

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Contract-based pension schemes are for now precluded from easily investing in private assets because they are bound by a fees cap of 0.75 per cent. For trust-based schemes, the cap excludes private assets.

Neuberger and Stepstone will manage the private equity allocation, KKR will be in charge of infrastructure investment, Apollo and Stepstone will handle private credit and Invesco will manage the real estate assets. The in-house team at Aviva Investors will also be given some mandates.

The private markets allocation in the new default will start at 25 per cent for young employees and drop to 20 per cent by retirement age. Within the overall private markets bucket, 35 per cent will be allocated to private equity, 25 per cent each to private credit and infrastructure and 15 per cent to real estate.

Asset class allocation, rather than the choice of individual stocks, has been much more important over the years in determining pot sizes and therefore retirement incomes.