The defined contribution (DC) pensions industry is expected to be worth at least £1trn by the end of the decade.
This would be quite a jump from the £113bn such schemes were collectively managing at the start of this year.
Such bullishness is largely the result of auto-enrolment, which is giving some master trusts hundreds of millions of pounds to invest each month.
But it is also influenced by how the industry is evolving. A campaign to focus on value for money could be changing the asset allocations within DC default funds, which is where most members are invested.
DC schemes now have the opportunity to increase their exposure to illiquid assets, a strategy that has, until now, been hindered by a fee cap.
Such a strategy could, according to Hymans Robertson, provide higher returns. Indeed, private assets such as property, private debt and infrastructure could have earned members better net returns by up to 2% a year during the past decade.
This will please the government, which needs private capital to upgrade the country’s infrastructure, which
includes building more houses and creating greener sources of energy, to make Britain competitive and fairer.
To help encourage such schemes into these assets it is not just the charge cap which has been reformed, but long-term asset funds have been authorised, which should make the process of investing in illiquids easier.
So with the industry maturing, how are defined contribution schemes constructing their portfolios?
Join portfolio institutional as we sit down with a panel of insiders to discuss the issues that are shaping the defined contribution industry.
DC Roundtable | September 2023 | 2:00 pm – 5:00 pm
- Portfolio construction
- Value for money
- Sustainable investing