Pensions - Articles - Diluting the cap on management fees for pension savers

 Kerrin Rosenberg, CEO of Cardano UK, the pensions investment and advisory firm, comments: “It is encouraging that the Government is considering how it can better incentivise pensions funds to invest in its 'levelling up' agenda. One fundamental issue is the extent to which trustees can hold unlisted investments. Most ‘levelling-up’ assets such as large infrastructure projects are private, and require a long-term time frame. This is where UK pension funds are more challenged. The DC market seems to have converged to market practice that demands daily liquidity. This is done to allow members a choice, at all times, to switch their investments to another provider. Most trustees of DC schemes insist, therefore, that all assets are fully liquid and have a daily price. This is crazy, as most DC members will not be transferring the pensions and some exposure to illiquid assets could meet their long term investment needs well.

 "Dropping daily liquidity, pricing requirements and other impediments such as the very tight cap in investment costs imposed on autoenrollment schemes, could unlock a significant pool of funding. Illiquid investments typically come at a higher cost than their more liquid comparatives, which is not to say that these charge caps should be raised for all investments, liquid investments can be done at much lower costs. But if governments could incentivise a portion of clients’ portfolios that could bear illiquidity and higher fees, that would be very helpful to those considering investing in ‘levelling-up’ projects.”