Pensions - Articles - PLSA comments on Charge Cap consultation

 Joe Dabrowski, Deputy Director of Policy, PLSA, said: “We do not support changing the charge cap to exclude performance fees. The cap provides an important protection for millions of Automatic Enrolment (AE) savers. We have not seen enough evidence to suggest the change would improve outcomes for members. In our view, changes to the cap are also unlikely to fundamentally alter schemes’ ability to invest in illiquid assets or the volume of investments in the round.

 “There are a number of important reasons for this: larger schemes are already incorporating private market illiquids into their default funds, and issues of scale mean the change will only impact a limited number of additional schemes; a focus on 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 also play a part.

 “We are also concerned by the proposal to require schemes to invest a certain percentage of their assets in illiquid assets or explain why they are not doing so. This may pressure trustees into breaching their fiduciary duty to only invest in the interests of their members.

 “This should not prevent the Government and the wider pensions industry taking a long-term view to the barriers to long-term investment for DC schemes. In particular, we would like to see more consideration of existing operational barriers, the impact of an uncertain regulatory environment, and greater product innovation.”