PLSA submission - DWP Consultation - Broadening the investment opportunities of defined contribution pension schemes

This is the PLSA’s response to the government’s consultation on the draft regulations permitting certain performance fees to be exempted from the default DC fund charge cap, as well as on the new ‘disclose and explain’ policy in relation to trustees’ allocations to illiquid assets.

The objective of this work is to remove barriers from DC schemes accessing higher growth ‘illiquid’ assets including innovative new companies, infrastructure, green energy and others. The government hopes this will increase funding for such projects – key for rebuilding the UK’s economy, while offering pension savers the potential for greater investment return.

We consider there to be a number of reasons DC schemes have very little exposure to illiquids, not least because of the suitability of riskier assets for unengaged savers, as well as the possibility of excessive performance fees to erode member pots. We will continue to engage with government and regulators in helping reach a policy which improves saver outcomes.