The Pensions Regulator (TPR) in the UK has updated its guidance to help defined contribution (DC) schemes comply with new regulations designed to ensure they consider all the investment opportunities available to savers.
In spring the government laid a regulation before Parliament that introduced a range of previously announced proposals affecting occupational pension schemes that provide DC benefits other than additional voluntary contributions.
Under the regulation, from 1 October 2023, trustees will be required to disclose and explain their policy on investing in illiquid assets in the statement of investment principles for their scheme’s default arrangements.
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, the regulation requires schemes to 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.
It also required trustees to “robustly” assess the extent to which these fees represent good value for their savers alongside other costs and charges.
Louise Davey, TPR’s interim director of regulatory policy, analysis and advice, said that trustees have a duty to savers to act in their best interests.
She said: “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.”
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