UK pension funds and the £1bn UK Scale-up Fund

A good few years ago I joined a scaleup to lead growth, and the funding round was pulled three months later. That experience is why I pay closer attention than most people to where growth capital in this country actually comes from, and how quickly it can disappear.

So when five of the UK’s largest pension providers said this week that they’re exploring a fund of more than £1bn to back high-growth British science and technology companies, I read the whole announcement twice. Railpen, Nest, LGPS Central, Border to Coast and LPPI, with the British Business Bank working alongside them and the Office for Investment supporting the group.¹

It’s worth being clear about the stage this is at. It’s a commitment to explore, not a fund that’s open for business. No manager has been appointed and market engagement is only just starting.¹ But it’s the most encouraging thing I’ve seen on UK growth capital in a long time, and I think it’s worth explaining why rather than just sharing the headline.

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What the UK is actually short of

The UK isn’t short of startups, and it isn’t short of early-stage money. It’s the third largest venture capital market in the world behind the US and China, and around £8bn went into UK venture-backed businesses in 2025.²

The problem shows up later, at the point where a company needs the kind of cheque that takes it global. In 2025, more than three-quarters of UK equity deals above £50m involved at least one overseas investor, and those deals made up over 85% of total value in that band.²

That’s not to say we shouldn’t be grateful for investment from overseas investors. Foreign capital brings expertise, liquidity and international networks, and plenty of UK companies have scaled brilliantly on the back of it. But when the largest rounds are consistently anchored abroad, the returns, the influence and often a company’s long-term centre of gravity end up abroad too.²

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How the UK compares on pension capital

The comparison that makes the case better than any argument I could write is this one. Non-UK pension funds invest 16 times more into UK private capital than UK pension funds do.²

UK defined contribution schemes hold £249bn in assets and allocate only a minimal share of it to UK venture and growth capital.² The money exists. It just isn’t pointed here.

There has been real effort to change that, and it’s fair to give it credit. The Mansion House Compact in 2023 got 11 of the largest workplace pension providers to commit at least 5% of their DC default funds to unlisted equities by 2030. The Mansion House Accord followed in 2025, with 17 schemes committing 10% of default funds to private markets by 2030, half of that allocated to the UK.² The Pension Schemes Act consolidates pension schemes into fewer, larger funds.² This is more than just admin, as it’s the part that unlocks opportunities for savers in smaller schemes. A small scheme competing on the lowest possible fee was probably not going to build the expertise to invest in startups, but a big one can.

Delivery has been slower than the announcements suggested. Association of British Insurers data shows that as of February 2025, only 0.6% of default funds were invested against that 5% target, a gap of around £11bn in pension commitments.²

Other countries have moved faster on the same idea. France launched its Tibi scheme in 2020 and it has attracted roughly €12bn to €13bn in commitments from long-term investors since.² UK Private Capital is pushing for a UK version of it, called NOVA.² Whether or not that’s the right mechanism, the underlying point stands: a clear route between pension decision-makers and fund managers gets built deliberately, or it doesn’t get built.

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What UK savers have been missing

Pension money going into UK scale-ups isn’t a favour to startups. UK-managed venture capital funds returned 13.3% a year over a 10-year horizon. The FTSE All-Share returned 6.2% a year over the same period.² Savers with almost no exposure to the asset class haven’t been shielded from risk so much as kept out of one of the strongest sources of long-term value creation in the economy.²

That’s the case the providers themselves are making, which is what gives me some confidence it might hold. Andy Bord at Railpen described it as an opportunity where “disciplined, patient capital can help growing companies scale, provide attractive returns for pension savers and generate lasting economic growth”.¹

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What it means for founders right now

Honestly, nothing changes for your round this quarter. There’s no fund to apply to, no published mandate and no manager in place.

If you’re building something that will need £20m or more to reach global scale, it’s worth keeping an eye on and not much more than that. Asset managers have been asked to contact the British Business Bank to express interest,¹ and whoever ends up running the vehicle will shape what kind of UK companies get backed at that stage. That appointment will say more about the fund’s real appetite than the press release does.

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Why we’re paying attention

More capital in the UK market is good for founders and good for investors, and it’s the reason a story like this matters to us at ThatRound even though it sits well above the stage we work at. When there’s more money in the system and it’s easier to find the people holding it, both sides waste less time.

We’d rather UK companies could scale here. Not out of any flag-waving, but because when a company has to follow the money overseas to grow, the UK loses the jobs, the intellectual property and the next generation of founders and angels that come out of it.

This is one fund, at an early stage, and it hasn’t closed. But a decade of people saying UK pension money should back UK innovation has turned into five providers working out how to actually do it. That’s further than we’ve got before and I’m pleased to hear this news.

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References

1. UK pension giants join forces to unlock £1bn to back Britain’s innovators | GOV.UK — https://www.gov.uk/government/news/uk-pension-giants-join-forces-to-unlock-1bn-to-back-britains-innovators
2. Venture Capital in the UK, May 2026 | UK Private Capital — https://www.ukprivatecapital.co.uk/static/b37e818c-cf8d-4714-a399dccd3fe64e6e/8841ecbc-7f1f-4a45-b7cea66364bfdae2/Venture-Capital-in-the-UK-2026.pdf