UK - Defined contribution (DC) product providers have been criticised by pension consultants in an IPE webcast for failing to develop products that savers need.

All three panellists in IPE's webcast Investment Consultants Forum expressed concern that DC funds are not up to scratch.

"The great shame of the UK pensions industry is that our DC offerings are really poor," said Paul Trickett, head of EMEA investment consulting, Towers Watson. "It's time that we applied more care and attention to these funds."

"The entire industry needs to up its game," agreed Andrew Kirton, global business leader, investment consulting, Mercer. "We need more innovation, for example in terms of the next generation of DC default options. I sense that a lot of clients are struggling with what is a better mousetrap for a default option."

John Belgrove, principal consultant, global investment practice, Hewitt, said that one reason for the poor DC showing could be the fee structures currently being employed by fund managers.

"It is not about having the lowest fees, it's about sensible fees and incentivisation and alignment," he said. "It doesn't seem right, and it is probably one of the explanations as to why DC offerings are relatively poor."

But Belgrove said the UK's £300bn (€335bn) to £400bn worth of DC assets in existence should be enough to encourage the asset management world to deliver the right sort of quality. Belgrove also laid some of the blame at the door of consultancy firms.

He said: "A large chunk of our business has been DB-focused and it needs to be more DC-focused in the future."

All three consultants also agreed on the need for a radical restructuring of fund managers' fees.

Trickett said that in the past, consultants and clients had not spent enough time examining fee structures.

"We need much more transparency, particularly around performance fees," he said. "Fees need to be at a level where managers are really well paid for doing a good job.  Far too much of any potential alpha is being paid away to the manager rather than delivered to the client."

Kirton called for a more client-focused approach to doing business, such as greater flexibility in tailoring products.

"Asset managers should be applying the rules that seem to apply to most other industries about how they keep clients happy and thereby thrive," he said. "We don't see as much in the financial services industry, but it would improve the industry's reputation and usefulness."

The full discussion can be accessed from IPE at www.ipe.com/webcasts

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