Commenting on the DWP’s outcome on the consultation ‘Completing the annual Value for Members assessment and Reporting of Net Investment Returns: Guidance for trustees of relevant occupational defined contribution pension schemes’ William Chan, Head of DC Investment, Hymans Robertson says:

“It is good to see that the DWP is progressing with plans around the assessment of fees for private markets investments. We remain concerned, however, that these changes do not appear to be in the interest of improving outcomes for members and feel these will stifle, not support, innovation. We feel the changes will perpetuate the industry’s focus on costs and charges, and not on improving member outcomes.

“We are also surprised that the DWP is planning to introduce these changes this year. Some important elements remain opaque and under-developed and there is insufficient time to address this. The treatment of ‘look-through’ costs, for example, is still unclear and we believe there will be challenges in implementing smoothing of performance fees in practice, particularly for illiquid investments that have already been implemented.

“The DWP should urgently review its decision to implement changes this year. Instead, it should provide more time to develop the framework for assessing fees for private markets investments with member outcomes at the heart. Private markets investments have already been implemented successfully for DC savers, and there are more solutions due to launch this year. This is an opportunity to improve members’ outcomes by learning from this innovation, and we risk stifling it.”