Seven out of 10 DC master trusts and 57 per cent of large DC schemes now hold some productive assets — such as infrastructure, private equity or renewables.
DC investment into productive finance is continuing apace, with 72 per cent of master trusts and 57 per cent of larger DC schemes already investing in assets like infrastructure, private equity or renewables according to new data from The Pensions Regulator (TPR).
However this is in contrast to smaller schemes. This TPR data shows a sizeable proportion (57 per cent) of small schemes and 70 per cent of micro schemes did not know if they were invested in these asset classes.
TPR says this lack of understanding could indicate poor governance standards.
The Chancellor Rachel Reeves has stated it wants to drive consolidation in the DC sector with a view of driving investment into productive finance to help support the UK economic and deliver better outcomes for UK savers. This remains a key plank of Reeves growth plans, mentioned int he most recent Budget and last year’s Mansion House reforms.
However with larger providers already diversifying their investments TPR says that almost nine in 10 DC savers are in schemes invest in at least one of these assets.
The research highlights how larger DB and DC schemes are more aware and engaged with their governance compared with smaller schemes.
It says this may put them in a stronger position to make informed decisions around diversified investments, cyber security and environmental, social and governance.
The findings also suggest smaller schemes are at risk of not performing as well against TPR’s expectations on investment governance and governance more broadly.
TPR’s chief executive Nausicaa Delfas says: “We believe sound investment in diverse assets could improve outcomes for savers and generate growth for the UK economy. The two do not have to be in conflict.
“We want to help all schemes to be able to consider a full range of investment options, either through ensuring strong governance or by encouraging them to consolidate.”
TPR says it is continuing to tackle poor governance in small schemes via the new Value for Members assessment. It says this has seen nearly one in five schemes engaged with concluding they do not offer value and winding up. The TPR has also issues fines for non-compliance with this assessment.
To further this agenda the TPR is also developing a Value for Money framework in partnership with Department for Work and Pensions and the Financial Conduct Authority and introducing a more proactive supervisory approach to improve the quality of trusteeship, with a greater emphasis on providing value.
The TPR has also outlined key areas where diversification in pension scheme assets to manage risk is important. This include investing in a wider range of growth assets, with a view to delivering higher returns for members, while balancing risks with exposure to more stable, lower-risk investments. .
TPR has called on trustees to work with investment advisers to develop a well-diversified investment strategy that aligns with the scheme’s risk tolerance and long-term goals.
