The Pensions Regulator has updated its guidance for schemes and trustees on investments into illiquid assets.
This guidance comes ahead of rule changes from October 1, which will require trustees to state their policy on investing in illiquid assets in each scheme’s statement of investment principles.
TPR says this guidance will help ensure schemes comply with these new regulations which are aimed at ensuring trustees consider a wider range of investment opportunities to help achieve best outcomes for members.
The new rules require trustees to disclose the asset class breakdown for each of their scheme’s default arrangements in the chair’s statement. The rules have also removed a regulatory barrier that may have hindered trustees from exploring investment in certain funds that came with performance fees.
Since 6 April 2023, trustees have had the option to exclude specified performance-based fees from the list of charges falling within the regulatory charge cap limit of 0.75 per cent per annum.
To ensure transparency, schemes must disclose any performance-based fees incurred in relation to each of their default arrangements, calculated as a percentage of the average value of the assets held in those defaults. Trustees must also ‘robustly assess’ the extent to which these fees represent good value for their savers alongside other costs and charges.
TPR interim director of regulatory policy, analysis and advice, Louise Davey says: “Trustees have a duty to savers to act in their best interests. That means working hard to deliver the retirement income that savers expect, including properly considering the full range of investment options. Our updated guidance helps trustees make these often-complex decisions.”
The government has been keen to encourage wider DC investments into illiquid assets, which can include infrastructure as well as private equity and private debt holdings. The chancellor’s recent Mansion House pension reforms are designed to facilitate this via both DC and DB schemes which it is hoped will boost member outcomes as well as increasing investments into the UK economy.
