Pensions - Articles - Facilitating investment in illiquid assets by DB pensions

Commenting on the DWP consultation “Facilitating investment in illiquid assets by defined contribution pension schemes”, Callum Stewart, Head of DC Investment, says:

 “It is good to see the DWP’s continued commitment to facilitating investment in illiquid assets. There is a great deal of potential to improve long-term outcomes for DC savers through investment in less liquid assets. The opportunity is clear; we can improve not just financial outcomes for members but also the impact their money is having on the world around us.

 “We are particularly supportive of the DWP’s 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 would welcome more pragmatism in the regulations to support innovation given that a range of approaches for incorporating illiquid assets are already being adopted. We also do not support the use of Chair’s Statements as the home for new reporting requirements, which will add to an already burdensome process and won’t engage members in the desired way.

 “There still remains too much emphasis on the level of costs and charges in our industry and the emphasis on disclosures within Chair’s Statements could be distracting overall efforts to improve outcomes. More focus should be placed on a significant lack of capability from investment platforms to accommodate illiquid assets. Investment platforms require significant investment to create the conditions to deliver better long-term outcomes for savers.

 “Finally, as a pensions industry we need to recognise the positive impacts from illiquid investments. Indeed, this consultation does not make clear reference to the potential to have positive environmental or social impacts from illiquid investments. It’s time to update the way we think about value to ensure that this is compatible with future DC saver and their real world needs.”

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