The U.K.'s Department for Work and Pensions launched a consultation Wednesday that could increase illiquid investments in defined contribution plans.
The proposal calls for all defined contribution plans to "disclose and explain" their policies on illiquid investment. Plans with more than £100 million ($132 million) in assets would also have to explain their default asset-class allocations in annual statements.
The proposal to include more information about asset allocation is part of a push to give participants more information, and to get more investment in illiquid assets, including those that invest in the U.K. Plan trustees starting this year are required to disclose net investment returns to participants.
Guy Opperman, U.K. minister for pensions and financial inclusion, said in a foreword to the proposal, "I am determined to pursue the path to opening illiquid asset classes to DC schemes. I am firmly of the view that all DC schemes should be considering diversifying their portfolio. For over a decade, public market passive investment has been able to deliver strong returns for savers. This may well continue to be the case in the long term, but it is right that trustees consider the role that illiquids can play in continuing to deliver the best possible opportunity of a comfortable retirement income for their members." More illiquid asset options for defined contribution plans would also bolster the role pension investments can play in achieving a carbon-free economy, he said.
Joe Dabrowski, deputy director of policy with the Pensions and Lifetime Savings Association, said in an emailed statement on the consultation that pushing trustees to invest in illiquid assets or explain why they are not doing so "may pressure trustees into breaching their fiduciary duty to only invest in the interests of their members."
It could give participants more choice, including ESG investments, and increase transparency, Karen Tasker, pensions audit partner with audit and consulting firm RSM UK, said in an interview.
"We feel opening up DC and particularly DC master trusts means investments will become clear, and could be more sustainable if there is more transparency. The key message has to be transparency and guidance to make sure trustees are making the right decisions," Ms. Tasker said.
The consultation period for the proposal, Facilitating Investment in Illiquid Assets, runs until May 11.
