Bridging the gap: the opportunity for Australian pension capital in the UK and Europe
15.10.2025 - 07:07
In partnership with IFM Investors and Super Members Council, Mandala has developed a new report highlighting the growing role of Australia’s pension capital in the United Kingdom and Europe. This builds on the landmark report, 'Going Global: Unlocking the growth potential of Australian pension capital', released earlier this year by the same partnership. The UK and European Union (EU) together represent the second-largest international destination for Australian pension capital after the US.
Australia has built one of the world’s most successful pension systems
With A$4.3 trillion (£2.1T; €2.4T) in assets under management as of June 2025, Australian pension funds form the fourth-largest pool of retirement savings globally, behind only the US, Canada and the UK. Assets have grown strongly over the past two decades, supported by mandatory contributions, preservation rules, and competitive fund structures. Total inflows of around A$4 billion (£2.0B; €2.2B) each week will continue to drive this rapid system growth. By 2035, the Australian pension system is estimated to reach A$8.3 trillion (£4.1T; €4.6T) and will likely be the largest outside of the US.
As the system has matured, Australian pension funds have steadily expanded their international allocations to help diversify risk and access the best investment opportunities globally.
In the past decade, overseas investment has increased to nearly half of pension funds’ portfolios. This is set to increase further, with nearly 60 cents of every new Australian dollar contributed to Australian pension funds invested globally.
This report reveals that the UK and European Union (EU) together represent the second-largest international destination for Australian pension capital after the US, through analysis of funds’ portfolio holdings disclosures and other data sets.
As of mid-2025, Australian pension funds had invested A$264 billion (£129B; €147.9B) in the region, including A$83 billion (£40.6B; €46.5B) in the UK and A$181 billion (£88.5B; €101.4B) in the EU. This is equivalent to nearly one in every five dollars invested overseas by these funds. Public market investments dominate this exposure, but private market investments – including infrastructure, private equity, and real estate – are significant and growing. These are dominated by unlisted infrastructure assets, which represent over half of private markets investments in the UK and EU. Total investment is set to more than double over the next decade to over A$660 billion (£323B; €370B), including A$203 billion (£99.2B; €113.7B) in the UK and A$460 billion (£224.8B; €257.7B) in the EU.
Australian pension funds have deep expertise in infrastructure, which positions them as natural partners in meeting Europe’s investment needs.
Australian institutional investors were pioneers in this asset class in the early 1990s. Australia's strong political stability and substantial pension fund assets – collectively larger than the world's biggest sovereign wealth funds – make it an attractive source for trusted capital. Today, Australian capital is supporting Europe’s energy transition, digital infrastructure and transport renewal, with significant allocations into transport, renewable energy and storage projects and industrial decarbonisation across Europe, fibre-to-the-home broadband in Germany, and transport and energy projects in the UK.
The investment opportunity in infrastructure is substantial: the UK faces a shortfall of up to A$4.1 trillion (£2T; €2.3T), while the EU faces a capital gap of more than A$7.1 trillion (£3.5T; €4T) to 2030.
Australian funds are well placed to help close these gaps with long-term, patient capital. Based on current trends, Australian investment into the UK and EU is expected to grow by more than 10 per cent per year to 2035, with scope for faster growth if deeper partnerships and policy reforms are achieved. This would benefit Australian pension fund members, who would have access to some of the largest and most attractive infrastructure deals in the world, and European governments and taxpayers who could leverage long-term pension capital investment to reduce the burden on public balance sheets.
UK and EU governments can better attract this capital investment by evolving their policy settings.
Streamlining regulation, accelerating planning and permitting, expanding Public–Private Partnership (PPP) models, and ensuring predictable revenue settings in sectors such as energy, water, and transport will be critical. The UK government has put infrastructure, housing and commercial development front and centre of its growth agenda, with an active program of supply-side reform to attract private capital, particularly into regions outside of London and the South East. European governments, including France and Germany, are also putting in place reforms to mobilise greater private investment. With these conditions in place, Australian pension funds are well positioned to become long-term partners in financing Europe’s infrastructure, energy transition, and digital transformation. This would support jobs and growth across the region while delivering strong returns for Australian workers’ retirement savings.
Read the full report here.
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