Joe Dabrowski, Deputy Director, Policy, PLSA, said: “We support the Government’s intent to facilitate DC schemes’ investment in the widest range of assets including, illiquid assets, private markets and other alternative investments, and maintenance of the charge cap. We therefore believe proposed calculation adjustments for performance fees and additional guidance on costs excluded from the charge cap while holding physical assets will provide clarity for schemes and aid those schemes which wish to add illiquid asset investment into their portfolio but have felt inhibited by current rules.
“However – as we set out in our submission and DWP’s recognises in their response – many other, structural factors are at play, including the cost and transparency of illiquid investments and the competitive and consolidating nature of the DC market so these proposals will only have a minor impact on asset allocation and there is unlikely to be a wholesale switch into illiquid investments.
“We are pleased to see the Government re-iterate that investment decisions are for trustees to make and will continue to support innovation of fee structures that fit better within DC schemes’ default arrangements, in order to facilitate investments which may unlock potential higher returns for pensions savers.
“Although it is clear that there are many challenges still to resolve, the PLSA supports measures that enable savers in workplace pensions to consider all their options including the potential benefit from the risk/return profile that illiquid assets can deliver. As part of the work in the Taskforce on Productive Finance, the PLSA is helping look at structural and perceived barriers to DB and DC schemes investing in illiquid assets, such as trustee skills and training.”
The PLSA has also commented on the government’s response to the ‘Improving outcomes for members of defined contribution pension schemes’ consultation.
Joe Dabrowski, Deputy Director, Policy, PLSA, said: “We agree that it’s important the government considers what ‘good’ looks like in the future DC market and whether creative ideas should be considered that go beyond fewer, bigger schemes being the only answer.
“Consolidation or scheme scale should not be an end in and of itself. Though we agree that there can be benefits to scale in terms of governance, access to expertise and availability of particular investment approaches, it is quality – and not the size of the scheme – which matters. We know from our wider membership and experience with the Pensions Quality Mark that good DC provision can come in many forms. Quality could include scheme benefits and guarantees that are available to members of smaller schemes, and the costs of wind-up should receive due attention. It is possible that these could be met by the trusts’ funds.
“While costs and charges have a real impact on members’ funds, value for money in pensions needs to be seen in the round and should not be reduced to a discussion about cost alone. Well governed schemes are able to deliver value for money for their members regardless of pot size.”
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