More than £250bn of DC pension scheme assets could be potentially used for illiquid investment, with more than £100bn specifically for infrastructure investment, by 2030, according to analysis from Hymans Robertson. Its Illiquid Investment Embracing the Opportunities paper published today, finds that both the pandemic and the government’s levelling up agenda have reiterated the role of resilient supply chains and the need for material investment in infrastructure. Combined with the desire to support Net Zero goals, infrastructure investment presents an enormous opportunity for DC schemes.

The paper, from the leading pensions and financial services firm, examines new insights for the DC pension market and, in particular, why opportunities within the illiquid sphere should be considered to improve outcome for members at different stages of their journey. The findings reveal that infrastructure investment has the potential to improve retirement outcomes for DC savers by up to 20%.

Commenting on the findings in the paper, Callum Stewart, Head of DC Investment, at Hymans Robertson, says:

“As governments around the world begin to recognise the importance of a more balanced and sustainable economy, the value of a high-quality infrastructure has never been clearer. Our research finds that there is potential for assets of more £100bn to be used within this area over the next decade, reflecting growth in the size of the DC scheme space. There are opportunities not just to enhance retirement outcomes for DC savers, but also to contribute to the development of a more sustainable world. There is now a real belief that such development can, in tandem, lead to the meeting of climate change goals, as the UK strives to embrace Net Zero.

“Given this potential for investment, we believe that DC savers can afford to take on more risk through illiquid assets. For members at the early stage of their saving journey, risk can be rewarded over the long-term, with a clear opportunity to enhance returns - in some cases by as much as 20%. Any long-term capital commitment often associated with investing in illiquid assets should not be an immediate concern for DC schemes given savers’ very long time-horizons.

“Infrastructure investing means investing for the future. Generating a positive impact on the world by investing in tangible infrastructure projects also provides opportunities to engage DC savers. Schemes have a moral duty to ensure their members money is being used, not just to generate good returns, but to do good in the world.”

A copy of ‘Embracing the Opportunities’ publication can be found here.