Steven Cameron, Pensions Director at Aegon said: “When taking forward the Pensions Investment Review, the Government must recognise the essential role and unique values offered by both Master Trusts and GPPs in the workplace pensions market.
“The consultation asks which is more likely to invest more in UK productive assets. Here, the key driver will be having the investment scale to diversify into such classes and the expertise (in-house or through third parties) to do so in a well governed manner. But regardless of scale, decision-makers must be left to assess whether such investments will deliver benefits over alternatives.
“It would be highly risky to legislate for particular investment allocations. Trustees and Independent Governance Committees will be very much against being forced to invest their schemes assets in a particular way if they believe this is not in the member’s best interests. The Government could set an overriding requirement that a minimum % of assets had to be invested in UK productive assets. But this has the potential to backfire on the Government, if it is viewed as people’s pensions propping up the UK economy, or in future if such asset classes underperform.
“In addition, the Value for Money framework currently being consulted on, with its strong focus on comparisons with peers, could ironically create a herd mentality and discourage governing bodies to take ‘outlier’ positions with such investments.
“Over time, the relative merits of GPPs and Master Trusts have changed. GPPs, regulated by both the FCA and PRA, ensure financial soundness which was historically uncertain in many master trusts. Conversely, GPP members were not always assured a trustee-style member focus, but the Consumer Duty now ensures good member outcomes. GPPs currently offer members a wider range of retirement options and support, but the Pension Schemes Bill will introduce new requirements there for trustees to offer Retirement Products.
“This sequential ‘levelling up’ means there is no reason that either a Master Trust or GPP will be ‘better’ for member outcomes - the aim should be for both to focus on delivering value for those saving for their future.”
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