Commenting on the announcement of a new consultation on DC investment and charge cap in today’s Budget, William Chan, Head of DC Investment, Hymans Robertson says:

"We welcome the government’s commitment to exploring how they can remove barriers to investing in illiquid assets. We believe some “illiquid” assets can improve member outcomes at retirement and as schemes become larger, the more traditional problems such as daily liquidity are likely to be less of a challenge. As with any investment, it will be critical to explore where these asset types can add most value for members through their pensions journey and not simply regard them as a panacea.

“We acknowledge that more investment in illiquid assets investment by DC schemes could make a big difference in society given their potential to contribute to projects such as renewable energy. If we can also use this as a way to engage members in their pension savings – because they can physically see the good their money is doing – we can also potentially encourage them to contribute more to their pension savings. This will add to an improvement in overall long term outcomes.

“There will also need to be a mind shift away from the current focus on low fees and trustees may need to brave and increase fees to members by introducing more expensive asset classes in order to deliver better returns. We’d expect to see downward pressure on fees in other parts of default investment strategies in order to accommodate some of these more costly asset classes.”