The Pensions and Lifetime Savings Association (PLSA) is supportive of government plans to ‘smooth’ performance fees so they can be incorporated with the the auto-enrolment charge cap.
Publishings its response to the Department of Work and Pensions consultation on this issue, the PLSA said while this move was designed to enable DC schemes to invest in a wider range of assets there were still other barriers preventing schemes investing in more illiquid assets.
PLSA director of policy and advocacy Nigel Peaple says: “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.”
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