TPR shares updated DC illiquid investment guidance

The Pensions Regulator (TPR) has shared updated guidance to help defined contribution (DC) schemes comply with new regulations designed to ensure they consider all the investment opportunities available to achieve best value for savers.

In particular, the updated guidance reflects new requirements for schemes to disclose any performance-based fees incurred in relation to each of their default arrangements in their chair's statements, calculated as a percentage of the average value of the assets held in those defaults.

TPR also stressed that trustees must robustly assess the extent to which these fees represent good value for their savers alongside other costs and charges.

The new regulations mean that, from 1 October 2023, trustees must state their policy on investing in illiquid assets in the statement of investment principles for their scheme’s default arrangements.

In addition to this, trustees will be required to disclose the asset class breakdown for each of their scheme’s default arrangements in the chair’s statement.

The regulations also removed a regulatory barrier that may have hindered trustees from exploring investment in certain funds, by allowing trustees to exclude specified performance-based fees from the list of charges falling within the regulatory charge cap limit of 0.75 per cent per annum.

Commenting on the update, TPR interim director of regulatory policy, analysis and advice, Louise Davey, stated: “Trustees have a duty to savers to act in their best interests.

"That means working hard to deliver the retirement income that savers expect, including properly considering the full range of investment options. Our updated guidance helps trustees make these often-complex decisions."

The new guidance comes hot on the heels of TPR's recently updated guidance on defined benefit (DB) superfunds, with further plans to provide new guidance on investing in productive finance and update its existing investment guidance for DB and DC schemes in the "autumn".

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