Pensions - Articles - PLSA comment on incorporating performance fees in charge cap

 Nigel Peaple, Director of Policy and Advocacy at the PLSA, said: “The PLSA welcomes the intent to make it easier for DC schemes to invest in a wider range of assets and illiquid investments.

 “We support the charge cap at its current level, and as many schemes are interested in investing to some degree in illiquid assets, we also support the DWP’s proposal to amend the charge cap calculation, so that performance fees can be smoothed over several years.

 “However, we do not believe that the alterations will lead to a material change in the volume of investment in illiquids. A focus by trustees on securing low charges in a competitive market; the prudent person principle, which requires schemes to take careful consideration of risk and reward; and operational barriers, such as the flexibility to move pots when requested and daily dealing, are likely to always result in only a very low proportion of scheme investment in such assets.

 “Although it is clear that there are many challenges still to resolve, the PLSA supports measures that enable savers in workplace pensions to 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 DC schemes investing in illiquid assets, such as trustee skills and training.”