Helyne Slade, DC Investment Director at Isio, comments: “We encourage the Government to reconsider proposals for imposing a minimum asset under management (AUM) thresholds for pension default funds. While we support efforts to improve member outcomes, there is limited evidence that larger fund sizes inherently lead to better diversification, higher returns, or greater investment in UK productive assets. A robust value-for-money framework would be a more effective way to drive better outcomes without creating unnecessary market disruption.
“Focusing too rigidly on scale could risk reducing competition, stifling innovation, and limiting the options available to employers and members. Smaller, niche providers often bring tailored solutions that cater to specific member needs, and these should not be disadvantaged by overly high thresholds. If a minimum AUM is deemed necessary, a lower threshold, such as £1billion, combined with exemptions for specialist schemes and a growth period for new entrants, would strike a better balance.
“We welcome proposals to simplify contractual overrides and bulk transfers, provided that robust safeguards are in place to protect members' interests. There are significant legacy GPP assets that are currently unlikely to be providing value for members and we believe that enabling the easier flow of these assets to more appropriate funds would go a long way to helping the Government achieve its objective of improving member outcomes and facilitating greater investment in productive assets. Assigning responsibility for retirement outcomes to a named executive could encourage more thoughtful decision-making but should only apply to larger employers to avoid placing undue strain on smaller businesses, although we expect these businesses to already have the bandwidth and resources to be doing this already.
"Consolidation is already well underway in the DC market and a balanced approach that supports innovation and focusses on improving outcomes will help create a more sustainable and effective pensions system than blunt AUM minimums and additional employer red-tape.”
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