UK roundup: DC Investment Forum, Tennants, Buck Consultants, JLT
The Defined Contribution Investment Forum (DCIF) has published a paper suggesting the upcoming charge cap on DC default investment funds will affect the viability of suitable options available to small companies auto-enrolling their employees.
The UK government has legislated for a 0.75% charge cap on default funds from April this year, potentially falling to 0.5% by 2017.
The research, conducted among six life insurers and four DC master trusts, was compiled by consultancy Spence Johnson.
It said the cost constraints arising from market competition and the Department for Work and Pensions’ (DWP) charge cap would make it difficult for smaller companies to use a well-diversified investment approach.
The Pensions Trust told the report the charge cap would limit diversification in default funds, while Legal & General said DC default funds would adopt more strategic asset allocations, with only occasional shifts in assets.
The research also found that insurers and master trusts felt the popularity of alternatives to annuities would be short-lived.
Alternatives are a growing market as compulsory annuitisation ends in April.
However, providers feel many of the products will be challenged once it is realised they do not produce higher sustainable levels of income.
Elsewhere, the Tennants Consolidated Limited Pension Fund has appointed Buck Consultants to provide actuarial, administrative, secretarial and consulting services for both its defined benefit and contribution sections.
The pension fund has around 1,200 members and £130m (€170m) in assets.
David Welch, chair of trustees for the fund, said Buck demonstrated sound understanding of the scheme and employer’s needs.
Buck was chosen ahead of four others and said it had tailored its solution.
“They listened carefully to what we are looking for and demonstrated how they would bring working efficiencies, both through their people and their technology,” Welch added.
Lastly, research from UK consultancy JLT Employee Benefits showed the number of FTSE 100 companies offering defined benefit schemes fell to 56 from 65 over the year to 30 September 2014.
JLT said the deficit among FTSE 100 schemes deteriorated by £14bn over the same period and now stands at £66bn, as liabilities rose 7% to £591bn.
The amount companies contributed to their DB schemes fell by £1.1bn to £14.6bn – £8.8bn coming in the form of deficit reduction.