The Government’s focus on ensuring that all workers are enrolled in a pension scheme which provides good value for money is to be welcomed, but the idea of the Government telling pension schemes how to invest is a step too far, according to Laura Myers, partner and head of DC pensions at consultants LCP.
Under the plans, the government will:
- Require multi-employer master trusts to be managing at least £25 billion in assets or have plans to reach that threshold by 2035;
- Set out new rules on how ‘value for money’ is to be measured in different types of pension schemes, to allow employers and members to compare more effectively and to focus on the quality of schemes – not just their cost;
- Keep[SB1] [SW2] [SB(3] a ‘reserve power’ to set ‘binding asset allocation targets’.
Whilst many of these reforms could help to drive improved member outcomes through lower costs or accessing a wider range of investment options, the threat of government intervention to ‘mandate’ how pension schemes invest members’ money is unprecedented.
Commenting, Laura Myers, partner and head of DC pensions at LCP said:
“Trustees have a crucial role to play in ensuring that pension schemes are run in the interests of their members. A greater focus on value for money is warranted and should not trouble the many well-run pension schemes in the UK. But the threat of government telling trustees how they should invest is a step too far. Trustees draw on professional expertise to draw up an investment strategy which will best meet the needs of members, and this should never be over-ridden by the political priorities of the government of the day. The industry has already voluntarily entered into various agreements to ensure that proper focus is given to investing in the UK economy and in long-term productive assets, but anything more than this risks losing sight of the primacy of member interests”.
