Guy Opperman is Minister for Pensions and Financial Inclusion
Department for Work and Pensions consults on plans to drive long-term pensions sector investment into ‘important sectors of the economy’ such as green technology
The Department for Work and Pensions (DWP) has launched a consultation to improve saver outcomes and promote investment in green technology and infrastructure in the UK pensions industry.
The consultation, published today, puts forward measures to encourage pension schemes to invest in a more diverse range of long-term assets – including illiquid products such as venture capital and green infrastructure. Views are also being sought on additional steps to encourage the consolidation of smaller pension schemes into larger schemes.
The DWP said the proposals would require trustees of smaller schemes to assess key elements of the value achieved by their scheme and to report on the outcome of that assessment. Where this assessment shows that members would achieve better value in a larger scheme they will be expected to initiate wind up and consolidate.
“We want all pensions scheme members to benefit from efficient administration, first class investment governance, and access to diversified investment strategies,” said Minister for Pensions and Financial Inclusion Guy Opperman. “The UK has a world-class occupational pension system. We want to encourage scale and innovation by pension schemes, and help drive new investment in important sectors of the economy as we build back better.”
It follows plans announced as part of a separate DWP consultation last month that would require all large pension schemes holding £5bn or more in assets to publicly disclose the risks posed to their savers investments by climate change and the net zero transition by 2022 or face penalties from regulators. The new rules would then also requre all schemes holding more than £1bn in assets to follow suit buy publicly disclosing climate risk from 2023.
“The UK is committed to leading the way in the provision of green technology and infrastructure, and we want pension funds to be at the forefront of taking advantage of these long-term opportunities,” Opperman added.
The seven-week consultation, which runs until 30 October 2020, was published alongside the government’s response to its February 2019 consultation on investment innovation and future consolidation.
The Pensions Regulator’s executive director of regulatory policy, analysis and advice, David Fairs, welcomed today’s proposals.
“The proposals call on schemes with assets under £100m to carry out a more rigorous annual assessment of their value for members,” he said. “If those schemes cannot demonstrate they offer good value, they will have to tell us whether they plan to improve or consolidate. This is in line with our aim to cut the number of poorly run schemes in the market so every saver benefits from being in a pension scheme with excellent standards of governance and which delivers good value.”
A version of this story originally appeared at Professional Pensions