The U.K. government is seeking views from executives at defined contribution plans and retirement providers on how to facilitate DC plan investment in less liquid assets.
Under the consultation announced Tuesday, the Department for Work and Pensions is seeking comment on three proposals:
- That executives at smaller DC plans assess triennially if participants could get better investment outcomes if the plan were consolidated into a larger DC arrangement. This would "improve governance, and enable more pension schemes to reach the critical mass needed to access a broader range of investments," the document states.
- That larger DC plans to publish their policy detailing investments in illiquid assets, such as smaller unlisted firms, housing and infrastructure. The government wants DC plans also to report annually on the size of illiquid allocations.
- That the government might revisit fee regulations to help plans use performance fees but still comply with the 75-basis-point cap on fees in default funds, if the responses to the consultation call for it.
DC plan executives welcomed the spotlight on consolidation.
"Pension fund management is not a cottage industry. It demands economies of scale. Pension scheme members would be better served by fewer, much larger schemes, run in the interests of their members and able to leverage the economies that come with genuine scale," Gregg McClymont, director of policy at B&CE, provider of the £4 billion ($5.2 billion) People's Pension,West Sussex, England, said in an emailed comment.
Regarding the fee section, the DWP said in the consultation document that while "we occasionally hear the suggestion that the DC automatic enrollment fee cap may be a barrier, evidence suggests that this is not the case, except for the smallest retirement plans."
A survey conducted by the DWP in 2016 found that the average fee on illiquid investments was within the annual 0.75% fee cap, at between 0.38% and 0.54% of assets under management.
The consultation ends April 1.