Commenting on today’s open DWP consultation ‘Enabling investment in productive finance’ Brenda Kite, DC Provider and Platform Solutions Lead, Hymans Robertson, says:

“Today’s announcement from the DWP to increase investing by DC schemes in illiquid assets, such as infrastructure and private equity, can improve retirement outcomes for DC members - both by diversifying the sources of investment growth and the ability to more directly influence the move to a low-carbon economy. However, we do not believe that allowing performance related fees for illiquid assets within the charge cap will be the “game-changer” the government hopes.

“Performance related fees are difficult to administer in DC schemes as well as raising questions of fairness from one member to the next. We are already seeing innovative approaches to including illiquid assets within the present charge cap which, with competition between fund managers growing and amendments to the present regulation. This is ensuring a level playing field and should drive more cost effective solutions for members.

“It also has to be remembered that the UK will have to compete on its merits with the rest of the world for a share of UK pension funds’ investments in illiquid assets. We feel that the government needs to look at other ways of incentivising investment in this area of the UK economy.“