What Private Credit means for Pension Schemes Today

I recently joined Jonathan Butler and Nick Cooney on Asset TV’s Pension Fund Forum to discuss the very different journeys Defined Benefit (DB) and Defined Contribution (DC) schemes are taking in private credit. It’s a market that has evolved rapidly in just a few years, and the conversation offered an opportunity to reflect on what schemes are prioritising today and where the real opportunities and risks now sit.

For DB schemes, the shift has been striking. Private credit once played a meaningful role as a diversifier, especially in the low rate environment. But with stronger funding levels and higher yields available elsewhere, liquidity has become the dominant consideration. Many DB investors are now net sellers, focusing on managing the tail of legacy commitments and ensuring that any remaining allocations are fully aligned with their journey plan. For those running on rather than moving immediately to buy out, private credit can still provide stability and yield, but only with a clear understanding of liquidity demands.

DC schemes, by contrast, are moving decisively in the other direction. The Mansion House reforms and the development of LTAF structures have opened the door to a broader use of illiquids in pursuit of better long-term outcomes. We’re seeing growing appetite from master trusts not only for multi asset LTAFs but also for dedicated credit strategies, including those designed to support decumulation. It is a notable widening of the opportunity set.

A key theme in the discussion was whether private credit remains attractive in today’s environment. Even with tighter public market valuations, the asset class still offers a meaningful yield pickup, often in the region of 150 to 250 bps, but it is essential for trustees to distinguish between genuine illiquidity premium and underlying credit risk. Recent headlines around defaults in the US private credit market have understandably raised questions, but these were tied to specific, atypical structures rather than representative of the core UK mid market. Defaults will likely edge higher across credit, yet there is currently no evidence of broader systemic pressure.

The Importance of Liquidity Discipline

My overarching message to trustees is simple: private credit and other illiquid asset classes can play an important role, but only when liquidity requirements are fully mapped, understood and stress tested. Selectivity matters more than ever.

Thank you to Jonathan and Nick for their time and the interesting conversation. You can watch the full discussion below.

And if you’d like to discuss how our IGG Funding & Investment team can support your scheme’s journey, please do get in touch.

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