The Investment Association (IA) today published a paper on Defined Contribution (DC) pensions, ‘Putting Investment at the Heart of DC Pensions’, highlighting the critical importance of investment management, alongside the need to increase pension contributions, if today’s savers are to have a more secure and prosperous retirement.
Auto-enrolment has been a game-changer, succeeding in bringing nine million new savers into the pensions system. In order to achieve the best outcomes for both new and existing savers, the investment process needs to be front and centre for DC schemes.
The IA paper builds on the existing direction of travel in the key areas of investment governance and transparency, while also seeking to respond effectively to the changing needs and priorities of the economy and society.
Looking to a new partnership between pension schemes and the investment management industry, the IA’s paper sets out a range of measures and recommendations that will create a firm foundation for the future. These include:
– A clear objective for savers so they know what their pension scheme is aiming to deliver for them.
– Further work to encourage greater engagement, particularly to achieve sufficient contribution rates.
– Increasing opportunities for savers to invest in a more responsible and sustainable way.
– Greater transparency of investment costs within pension products allowing savers to better assess ‘value for money’ in DC investment.
– Measures to ensure that DC schemes can invest more easily in the full range of asset classes so that savers are not missing out on investment opportunities.
Chris Cummings, Chief Executive of the Investment Association said:
“Auto-enrolment is a game changer, more people than ever are now saving for retirement, but more needs to be done to help today’s savers to have better pensions. Investment is the beating heart of the pensions system and is one of the most important factors in determining the value of savers’ pension pots. That is why investment needs to be made a greater priority for Defined Contribution pension schemes.
“The amount people are saving is in many cases still too little to ensure a secure retirement. Industry, regulators and government need to build confidence in pensions saving and find new ways to increase engagement. Better communication before, at and during retirement will be critical. The investment industry is committed to working in partnership with those across the pensions landscape to ensure that savers get the retirement they deserve.”