Department for Work & Pensions  

Scheme costs ‘could increase’ under plans to promote illiquids

“You don't necessarily need a new Act of Parliament to get pension schemes to do more on illiquids,” observed former pensions minister Sir Steve Webb, meanwhile.

Callum Stewart, head of DC investment at Hymans Robertson, said his consultancy has a positive view on the potential to improve long-term outcomes for DC savers through investment in less-liquid assets, but warned about adding to the reporting requirements in the chair’s statement.  

He explained: “We are generally supportive of proposals to increase accountability for trustees regarding their policy for investing in illiquid assets. However, as always, the devil is in the detail in terms of regulatory change. 

“We prefer more pragmatism in the regulations to support innovation, given a range of approaches for incorporating illiquid assets are already being adopted. We also advocate not adding to the ever-extending chair’s statement requirements, and instead believe additional reporting requirements sit more naturally in the annual implementation statement.”

Stewart added that there is still too much focus on the level of costs and charges in the industry, and warned that this could be distracting overall efforts to improve outcomes. 

“For example, the level of costs and charges can often be swamped by other factors impacting members’ long-term outcomes such as performance, and quality of service,” he said. 

“More emphasis should also be placed, in our view, on a significant lack of capability from investment platforms to accommodate illiquid assets. We believe investment platforms require significant investment to create the conditions to deliver better long-term outcomes for savers.”

The Pensions and Lifetime Savings Association has also previously warned about the need for investment in illiquid assets to provide value for money to members. 

In its response to DWP’s consultation on investment in productive finance, the PLSA said: “Pension schemes will always be interested in investing in assets which have a strong likelihood of delivering higher returns over the long term, but these opportunities must be cost transparent, suitable for their members and provide value for money.”

Alex Janiaud is deputy editor at FTAdviser's sister publication Pensions Expert

Stephanie Baxter is a freelance journalist