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DC investment may never catch up with DB, trustees warn

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UK pension scheme trustees are split on whether defined contribution (DC) schemes can be as sophisticated as defined benefit (DB) schemes on investment.

In a poll of 100 trustees, consultancy Hymans Robertson found that 44% of respondents believed DC investment was as sophisticated as DB, but this was closely followed by 42% saying they were less advanced than their DB counterparts.

The consultancy highlighted that half of trustees who said DC lacked the sophistication of DB strategies agreed it would take at least 10 years for DC to catch up – and that 40% went as far as to agree that this would never happen.

Raj Shah, head of DC investment at Hymans Robertson, said: “It’s difficult to ignore how much the DC investment landscape has evolved in the three years since pension freedoms were introduced, and the results of our research make it clear that DC strategies fall behind DB in terms of sophistication.”

However, he said there was light at the end of the tunnel as DC evolution was showing no signs of slowing down.

“As long as the scale of assets in DC continues to grow and access to alternative asset classes widens, then sophistication in DC investment will improve,” Shah said.

The poll, conducted by the firm Opinium on behalf of Hymans Robertson, also found that trustees of larger schemes were generally more optimistic about the ability of DC investment to catch up.

Some 43% of trustees managing schemes with assets of less than £100m said they believed that DC would never be as sophisticated as DB, whereas at schemes with assets of over £100m, trustees said they felt this could happen in the next five years. 

 

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