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Defined Contribution

U.K. minister for pensions urges broadening of DC allocations

Guy Opperman

U.K. multiemployer plans should reconsider their investment strategies as they grow, looking beyond allocations to traditional asset classes such as equities and bonds, said Guy Opperman, minister for pensions and financial inclusion.

Speaking Thursday at the annual Pensions and Lifetime Savings Association conference in Liverpool, England, Mr. Opperman called on the industry to engage with the government to remove barriers that hinder non-traditional investment within these plans, known as master trusts.

"DC scheme consolidation is gathering pace. This means that we will have larger master trusts that will be increasingly free to move beyond the traditional equities, gilts and bonds, and start looking at investing directly in firms, housing and infrastructure and in a different way, frankly, than they have been," he said.

Mr. Opperman added there are "things that are holding DC organizations back from investing" in real assets. "That may be perception or reality, but it is not happening," he said.

While some DC plans elsewhere, such as Australian superannuation funds, are investing in infrastructure, U.K. DC plans have not done so. "I find it bizarre that King's Cross (railway station) is not run by British organizations," Mr. Opperman said.

With auto enrollment spurring growth, and the natural maturation of master trusts, Mr. Opperman said, "we are going to see a situation that is going to be radically different." "We are going to be in a position with substantial organizations, and I want them to be looking at the U.K.," he said.

The minister added a number of open consultations on defined benefit master trusts will be wrapped up before the end of year, in efforts to draft a pension bill allowing the creation of the so-called superfunds in the summer of 2019.

Consolidation is an alternative for DB plans that don't have a realistic prospect of conducting a buyout, he said. "Superfunds should be affordable for the employer."