The DWP is consulting on proposals to encourage defined contribution (DC) pension schemes to consider investing in less liquid assets such as smaller and medium-sized unlisted firms, housing, green energy projects and other infrastructure.
The proposals include:
- requiring larger DC pension schemes to document and publish their policy in relation to investment in illiquid assets, and to report annually on their approximate percentage allocation to this kind of investment; and
- allowing performance-related fees as an additional method of assessment for compliance with the charge cap, which applies in default funds of schemes used for automatic enrolment (as the DWP understands that funds that offer illiquid assets typically levy a performance fee for outperformance against a benchmark)
The consultation also includes proposals around requiring some, or all, smaller DC pension schemes to conduct a triennial assessment of whether their members’ may receive better value if the scheme consolidated into a larger scheme with more scale, and was wound-up.
The consultation closes on 1 April 2019.