Fiddich Review Centre
Alternative Investment

U.K. chancellor tackles charges caps for illiquid investments in emergency ‘mini budget’ to stimulate economic growth

The size of fees for more sophisticated investments “is a much bigger barrier” than regulation, said Phil Brown, director of policy for B&CE, the provider of The People’s Pension. “The commercial reality is that employers buying pensions for their staff expect workplace pension charges to be well below the charge cap,” Mr. Brown said in his own statement.

Stephen Budge, partner at consultant Lane Clark & Peacock, said that while government support for giving defined contribution participants more access to illiquid asset classes is critical, “we aren’t convinced these steps will necessarily open the flood gates on their own.”

For trustees, the priority is identifying appropriate investment opportunities, not supporting specific sectors of the economy, said Tim Middleton, director of policy and external affairs at the Pensions Management Institute, a membership organization for pension professionals, in an emailed statement. The chancellor’s proposal “is a pragmatic step” but if it succeeds, “it will be because science and technology would represent an appropriate investment and a legitimate alternative to existing assets,” Mr. Middleton said.

It also unclear when the changes might be made and how “well-designed performance fees” will be defined, said Matthew Swynnerton, pensions partner with law firm DLA Piper. “Trustees have an overriding duty to act in their members’ best interests and cost is only one factor that they will take into account when determining value,” he said.

Mr. Kwarteng also said that the government later this year will “bring forward an ambitious deregulatory package to unleash the potential of the U.K. financial services sector,” by replacing Solvency II regulations, the EU directive setting regulatory requirements for insurance firms, including pension buy-in and buyout providers.

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