It would be "perverse" and "bizarre" to consider the charge cap to be the main barrier to DC schemes investing in illiquid assets, the Department for Work and Pensions (DWP) has claimed.

Speaking at the PLSA Annual Conference, DWP senior policy manager, David Farrar, highlighted that the average charges the DWP found in its 2016 survey were between 0.38 and 0.54 per cent, with fees dropping further in recent years due to the growth in administrator-, consultant- and insurer-led master trusts entering the market and increasing competition.

“I think at the present day it would feel perverse and slightly bizarre for the government to conclude that a slightly arbitrary ceiling, below which the vast majority of pension schemes are charging around a half to two-thirds of that, is the main barrier to illiquid investment,” Farrar stated.

An attendee poll supported Farrar’s view, with 39 per cent voting operational/platform issues to be the main obstacle to DC schemes investing in illiquid assets, with fees only being voted the main barrier by 13 per cent of respondents.

It also found that 41 per cent of respondents already have their DC schemes invested in illiquid assets, followed by 31 per cent expecting to do so in the next one to three years.

Farrer added that the charge cap will be reviewed in 2020, “but in the process of doing that we are conscious that we do not want to stifle or prevent pension schemes who are starting to take steps into illiquid investments”.

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