The government has today (Wednesday 30th March) announced
proposals to help pension savers benefit from more diversified
investment portfolios.
The DWP’s combined consultation – which runs until 11th May –
seeks views on policy proposals and draft regulations designed to
make it easier for defined contribution (DC) pension schemes to
invest in illiquid assets, if trustees deem it in members’
interests.
Illiquid assets – also known as productive finance – include
infrastructure and private equity, along with long-term projects
that will help move the dial towards a carbon-free economy.
The proposals outlined include requiring DC schemes to “disclose
and explain” their policies on illiquid investment and for
schemes with over £100 million in assets to disclose their
current asset allocation to members.
Providing this information to savers, employers, trustees, and
the market at-large will bring greater transparency, consistency
and encourage further competition based on overall value.
Minister for Pensions said:
I am passionate about ensuring pension schemes have the necessary
information, and a broad range of options, to deliver the best
possible outcomes for the record number of Brits now saving for
retirement.
Opening up greater illiquid asset options to DC scheme investment
will help do just this and enable schemes – and savers – to
benefit from more diversified portfolios, while also bolstering
the role pension investments can play on our journey to a
carbon-free economy.
The document also provides responses to two recent consultations:
the December 2021 charge cap consultation, which sought views on
proposals to remove performance fees from the 0.75% limit on
charges in default arrangements, along with a summary of the
responses the DWP received to last summer’s call for evidence on
the future of the DC market.
The government plans to engage further with industry and other
stakeholders on the charge cap and explore how the feedback
received could be addressed in the design of future policy.
Alongside this, the government is also proposing to bring forward
legislation this year to reduce burdens and further open up
private markets by removing restrictions which currently apply to
large authorised Master Trusts.
The proposals would maintain saver protections whilst removing
disproportionate red tape and, at the same time, reducing the
costs of investment in private equity and debt.
This year will be a landmark year for value for money in DC
pensions. It will see them disclosing their investment
performance for the very first time, and small DC schemes going
through a rigorous assessment to determine whether they offer
value to their members.
The measures, along with the combined consultation published
today, form part of the DWP’s wider ongoing work, in partnership
with the Financial Conduct Authority and The Pensions Regulator,
to create an effective framework that works across the DC market.
Additional information
- The full combined consultation document “Facilitating
investment in illiquid assets” can be found here.
- This combined consultation includes:
- Response to the ‘Enabling Investment in Productive
Finance’ consultation
- Consultation on new ‘Disclose and Explain’ proposals
- Consultation on draft ‘Employer-related investment’
regulations
- Response to the ‘Future of the defined contribution
market’ call for evidence
