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Government consults on illiquid assets and consolidation of smaller schemes

Government consults on illiquid assets

The Government publishes a consultation setting out proposals to encourage defined contribution pension schemes to invest in illiquid assets.

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On 5 February 2019, the DWP published a consultation paper setting out proposals for significant changes to the way occupational defined contribution pension schemes invest in ‘illiquid’ assets.

The consultation paper is looking at ways to encourage defined contribution (DC) pension schemes to consider investing more widely, in areas such as:
• Start-up companies;
• Housing; and
• Green energy.

The proposals include:
• Requiring larger DC pension schemes to set out their policy and current practice in relation to illiquid investments. This includes encouraging DC schemes to invest more in infrastructure, like DC schemes in Australia and Canada;
• Requiring smaller schemes to assess, every three years, whether they should consolidate into a larger scheme – as larger schemes are more likely to be able to seek out illiquid assets to invest in; and
• Changes to accommodate performance fees within the charge cap, as illiquid assets are more likely to include this type of fee. However, this will not remove performance fees from the scope of the cap.

The trustees of occupational defined contribution pension schemes, and their sponsoring employers, will be watching the progress of this with interest. The consultation closes on 1 April 2019.

For further information please contact:

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