Dabrowski said the charge cap was an important consumer protection that helped derive better value for money for pension savers, and while pension schemes “will always be interested” in investing in assets with a strong likelihood of delivering long-term returns, such assets much be transparent, appropriate for members and provide value for money.
“For the growth in investment in productive finance it is important that new and innovative products, such as the Long-Term Asset Fund, come to the market and meet pensions schemes’ needs, rather than simply a reliance on traditional investment vehicles’ fee models,” he added.
A mixed response
Previous attempts to increase DC investment in illiquids have seen a mixed reception from the industry.
The DWP launched a consultation into the charge cap in March following the government’s “plan for growth”, published that same month, and looked specifically at whether the charge cap acts as a barrier to investment in a range of alternative asset classes, including illiquids.
It followed a call in November last year by the governor of the Bank of England, Andrew Bailey, for regulatory changes to tap DC for investment in the post-Covid recovery.
FTAdviser's sister publication Pensions Expert was told at the time that defined benefit schemes, which do not suffer many of the hurdles faced by DC schemes, nonetheless lacked substantive allocations to illiquids, suggesting that making these asset classes more available to DC will not in itself spur significantly more investment in them.
The March consultation also proposed “smoothing” performance fees within the charge cap, but industry players told a meeting of the BoE’s Productive Finance Working Group in July that this would only make a slight difference.
Opperman suggested in March this year, that the charge cap already has room for illiquid investments, telling a Pensions and Lifetime Savings Association investment conference that the average large DC master trust was charging members 0.4 per cent within a cap of 0.75 per cent and arguing against removing a cap they use “barely half of”.
Hannah Godfrey is a freelance reporter at FTAdviser's sister publication Pensions Expert
