The Mansion House Accord marks a major turning point for the UK pensions industry, with the potential to unlock over £50 billion in defined contribution (DC) scheme assets for investment in productive UK assets such as infrastructure, private equity, and innovative startups. This initiative not only promises better returns for pension savers but also offers a crucial injection of capital for the UK economy, supporting growth, innovation, and job creation.

TODAY’S ANNOUNCEMENT that the Government plans on moving towards mandating Mansion House targets should the Accord not move the dial sufficiently over time creates concerns beyond the political and economic wisdom of government mandation.  

For the Accord to truly deliver on its ambitions and stave off future mandation, it must be governed by a supervision regime that incentivises genuine change rather than superficial compliance. 

However, as things currently stand, the Accord is structured to be “a dog that doesn’t bark in the night-time”.  It’s traditional ‘Comply or Explain’ approach – long a fixture in UK regulation – will fall short and needs replacing.  

NCC proposes an ‘Explain then Comply’ regime instead. 

The Flaws of ‘Comply or Explain’

Originating from the Cadbury Report of 1992, ‘Comply or Explain’ gives organisations the flexibility to either follow prescribed standards or publicly explain why they haven’t. While this flexibility can foster innovation and accommodate diverse business models, it has well-documented weaknesses—especially when applied to complex social policy goals like those of the Mansion House Accord:

• Poor quality explanations: Many firms provide vague or superficial reasons for non-compliance, undermining transparency and accountability.
• Non-explanation:Studies reveal that nearly one in five non-compliant firms offer no explanation at all.
• Box-ticking mentality: The regime often encourages a focus on the appearance of compliance over genuine engagement.
• Market indifference: Investors and stakeholders rarely scrutinise explanations, breaking the intended cycle of market discipline.

In short, the incentives behind Comply and Explain are simply not strong enough.   These are exacerbated by the unique dynamics of the Mansion House Accord. The market of DC Default Fund Managers is small and potentially conflicted, while DC Trustees often lack the expertise or resources to challenge explanations. The high-profile nature of the Accord also risks driving hasty, reputationally motivated compliance—what some call “productivity washing”—rather than meaningful change.

Why ‘Explain Then Comply’ Is a Better Fit 

To address these challenges, the NCC proposes an ‘Explain Then Comply’ regime, which flips the traditional model on its head: 

• Mandatory explanation: All DC Default Funds, not just volunteers, would be required to articulate their planned route toward compliance.
• Shared learning: Early adopters would share their methodologies, creating a knowledge base for others and fostering industry-wide improvement.
• Ongoing engagement: Compliance becomes a continuous improvement process, rather than a one-off event.
• Collaborative supervision: A Mansion House Council or similar body would assess progress, share best practices, and help funds develop effective approaches—mirroring the success of the Productive Finance Working Group in delivering the Long-Term Asset Fund (LTAF).

This approach creates the right incentives to change behaviours, encourages transparency, collaboration, and sustained progress, rather than box-ticking or reputational window-dressing. It also creates a forum for ongoing policy refinement, aligning Mansion House with related initiatives and adapting to future legislative changes – for example, in connection with the British Business Bank or National Wealth Fund. 

The Stakes for Pension Savers and the UK Economy

With over £500 billion in DC scheme assets at stake, getting this right is crucial. The Accord’s voluntary, industry-led approach has already brought together major pension providers, aiming to invest at least 10% of default funds into private markets by 2030—half of which will be in the UK. But without an effective supervision regime, the risk is that these ambitions will be undermined by superficial compliance or lack of follow-through.

By adopting an ‘Explain Then Comply’ model, the UK can ensure the Mansion House Accord becomes a catalyst for real change—delivering better outcomes for pension savers and providing the patient capital needed for national growth and innovation. In short, it’s time for the Accord to become the “dog that barks”—a true guard-dog for UK productivity and prosperity.

Dan Hedley, New Capital Consensus Policy Director