The Pensions Regulator (TPR) has updated their guidance to help defined contribution (DC) schemes comply with new regulations designed to ensure they consider all the investment opportunities available to achieve best value for savers.
From 1 October 2023, trustees must state their policy on investing in illiquid assets in the statement of investment principles for their scheme’s default arrangements.
Illiquid assets are those that cannot easily or quickly be sold or exchanged for cash and include any such assets held in a collective investment scheme.
Louise Davey, TPR’s Interim Director of Regulatory Policy, Analysis and Advice, said, “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.”
Trustees will also be required to disclose the asset class breakdown for each of their scheme’s default arrangements in the chair’s statement.
The new regulations 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 annum.
To ensure transparency, schemes must disclose in their chair’s statement 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 robustly assess the extent to which these fees represent good value for their savers alongside other costs and charges.