James Wilson, Long-Term Savings Policy Adviser at the ABI said: "Plans to remove performance fees from the charge cap for FCA-regulated pension providers is positive. This is a step towards creating a more consistent pensions market, with savers in trust-based schemes having safely enjoyed this exemption for over three years. The change would help Group Personal Pension providers diversify investments, to improve long-term outcomes, allowing greater access to a wider range of assets, including private equity, venture capital and infrastructure. We’re pleased to see much of the consultation focused on creating an aligned regulatory environment for pensions providers. For ultimate success, we need consistency in the fine print too. Regulators must be able to adopt any new protections in lockstep, so all savers have access to the same wide range of investment opportunities."
Lorna Blyth – Managing Director, Investment Proposition, Aegon said: “These proposals are a welcome step towards greater consistency between contract-based and trust-based pensions, while removing a significant operational barrier to investing default funds in private markets. More broadly, they support the continued shift from focusing predominantly on keeping costs low towards delivering genuine value for money, backed by strong governance and Consumer Duty protections.”
Kelly Parsons, Head of DC Proposition at Broadstone, commented: “The FCA’s proposals are a welcome recognition that the cheapest pension investments do not necessarily deliver the best outcomes for savers. Excluding certain performance-linked fees from the charge cap could open up a broader range of investment opportunities, giving providers greater scope to generate stronger returns for members over the long term. “Private market investments can offer valuable diversification and access to growth opportunities, while potentially unlocking more pension capital for investment into UK businesses and infrastructure. However, providers must ensure that any increase in fees is justified by better outcomes for members. “The proposals come against the backdrop of the Government’s growing focus on Value for Money and its push to accelerate consolidation in the workplace pensions market to deliver economies of scale. Bigger does not automatically mean better, and the drive towards larger schemes and greater investment in private assets must translate into tangible benefits for savers. “Robust governance, transparency and scrutiny of investment performance will be essential, while aligning the rules for contract-based and trust-based pensions should help create a more consistent regulatory framework across the market.”
Becky O’Connor, Head of Pensions, PensionBee, commented: “This change is designed to enable workplace default pension funds to invest in private markets, which come with higher fees for many reasons - including because those investments are more complicated and harder to value, buy and sell. It could mean some pension savers pay more in fees. The idea is that savers end up better off overall, because the returns should make up for the extra cost. However, the regulator’s own modelling suggests the gain could be modest, at around 2% more in a pension pot over ten years. Providers investing this way have a responsibility to demonstrate that the higher charges are worth it for savers. Safeguards and transparency around how private market assets are valued remains critical, ensuring savers’ best interests prevail. Savers should be able to see clearly what they’re paying and why.”
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