24 August 2023
The Pensions Regulator (TPR) 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 achieve best value for savers.
The law requires trustees of a scheme with more than 100 members to prepare a statement of investment principles (SIP) and ensure it is reviewed at least every three years. The purpose of a SIP is to set out investment strategy, including the investment objectives and investment policies a trustee adopts.
It was communicated that from 1 October 2023, trustees must state their policy on investing in illiquid assets in the SIP 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, which 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. However, 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.
Read the full press release, here.
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.