Requirements for daily dealing must be relaxed to improve DC pension scheme performance, The Defined Contribution Investment Forum has claimed.

Presenting a new White Paper on the issue, the DC investment managers’ group argued that requirements for DC schemes to provide daily pricing and trading prevent the use of illiquid investments. The result is that diversification seen in DB schemes has not occurred in the DC space, with equities still accounting for up to 80 per cent of assets, according to some estimates.

“DC members don’t currently have access to the same first rate portfolio construction methods as used in DB,” the report stated. “At present there are many DC schemes which do not give members adequate or indeed any access to excellent investment services.”

It points to Towers Watson research suggesting that an increase in diversification could result in pension pots up to five per cent bigger.

Despite no regulatory requirements for daily dealing, operational systems on platforms hosting the bulk of DC funds, and restrictions to achieve UCITS compliance present barriers to greater use of illiquid assets. Industry bodies and regulators such as the NAPF, Investment Management Association and FSA, will need to come together to solve the problem, it says.

DCIF chairman and investment director of Standard Life Investment Andy Dickson, urged action: “The opportunity for greater diversification is a potential enhancement to current best ideas and has the potential to both improve member outcomes and also to improve the member journey.”

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