U.K. proposes changes for a number of workplace DC plans

The DWP is now consulting with industry experts, executives and managers in response to the consultation Investment Innovation and Future Consolidation

The U.K. Department for Work and Pensions (DWP) proposed several changes to a number of U.K. workplace defined contribution plan regulations Friday to improve participants' retirement outcomes.

The DWP is now consulting with industry experts, consultants, workplace plan executives and managers on the amendments it is planning to implement in October 2021.

The proposed changes would require executives of plans with assets below £100 million to report on how the default options offer value for participants when taking into account investment costs and fees as well as investment returns. Executives will be expected to show how the lack of value for participants relates to returns, according to the DWP.

Additional proposals would also see the DWP alter the Occupational Pension Schemes Regulations from 2015 to enable plans to pay performance fees on strategies featuring illiquid assets as well as to clarify definitions of costs in investment trusts. Currently, U.K. DC plans are bound by a 0.75% fee cap of assets under management and administration.

Other proposed changes will include a requirement to produce a Statement of Investment Principles by plans invested in pooled funds with an allocation to a mixture of asset classes and extend the costs disclosure requirements to strategies that are not offered to new participants in the plan.

Commenting on the consultation Stephen Budge, principal at consultant Lane Clark & Peacock's DC practice, welcomed the proposed relaxation of fee cap rules. It's interesting to see the greater clarity and support to hold physical assets outside of the charge cap restrictions, clearly highlighting the intent to allow infrastructure-focused investments, he said.

Mr. Budge added that the £100 million mark for smaller plans is a good level to assess whether plan strategies offer value compared to strategies that are available in the market.