Commenting on the DWP’s Consultation on DC investment innovation and future consolidation which closed on Monday (1st April), Raj Shah, Head of DC Investment at Hymans Robertson, says:

“We welcome the Consultation’s proposal to encourage the consideration of illiquid assets in occupational defined contribution (DC) schemes, with a focus on how schemes can develop the necessary scale required to invest in them. These assets have the potential to significantly improve member outcomes at retirement, especially for younger members with longer investment horizons. More investment by DC schemes into these asset classes can also make a big difference in society given their potential to contribute to projects such as renewable energy.

“This drive towards scale may also be the catalyst required for schemes to consolidate if they can’t deliver better net risk-adjusted returns than a bigger scheme could deliver. Bigger schemes should be able to achieve the economies of scale required to invest and capture more opportunities to improve outcomes to members. However, it’s important that the decision to consolidate is not based on assets under management alone, but in a wider value for members context.”