TPT Retirement Solutions, a UK workplace pension scheme, has announced it will invest £54m (€63.5m) in private equity through its defined contribution (DC) master trust default target date funds.
Members of TPT’s target date funds, whose investments are managed by AllianceBernstein, will see 3.5% of their pension pot allocated to private equity investments at the growth stage. The total percentage will decrease as members get closer to retirement age, it said.
The allocation – which will invest in listed private equity assets such as investment trusts and private equity investment managers’ stocks – is expected to contribute an additional 3.0% on an annual basis above global listed small-cap equities, the master trust disclosed.
For example, for a 25-year-old member who plans to retire at the age of 65, this incremental return enhancement could add a cumulative 2.0% to returns by the end of the growth stage of TPT’s target date funds, it said.
Philip Smith, DC director at TPT Retirement Solutions, said: “Our investment into private equity is leading the way for how DC schemes should be investing in the UK. It shows the ability of master trusts to offer greater diversification and better returns for our members.”
He added: “Not only will the allocation towards private equity be beneficial to members, but it can also act as valuable source of capital for growing businesses.”
Members of TPT’s Target Date Funds will see no change in costs.
John Townsend scheme agrees £30m buy-in
The John Townsend Trust Pension and Assurance Scheme has agreed a £30m (€35.3m) full scheme buy-in transaction with Legal & General Assurance Society Limited, covering the benefits of more than 280 pension scheme members.
The scheme entered Pension Protection Fund (PPF) assessment in December 2015, following the insolvency of its sponsor, John Townsend Trust, a charity that provided education and care to deaf children and young people.
This type of transaction, Legal & General said, enables the scheme trustees to secure benefits for its members at or above the level of compensation that would have been provided by the PPF.
Jonathan Hazlett, managing director of Open Trustees overseeing the John Townsend scheme, said: “The insurance market is extremely busy at the current time and it can be very challenging to secure member benefits for smaller schemes. Notwithstanding this, L&G have offered us the opportunity to ensure that scheme members receive benefits greater than what they would have received from the PPF.”
He noted that it had been a long process “as we negotiated all of the difficulties associated with the charity’s insolvency”, but added that “whilst the PPF provides a valuable safety net and a significant level of protection, many members will now receive higher benefits than they might otherwise have expected had the scheme entered the PPF”.
Open Trustees was advised on the transaction by Barnett Waddingham and received legal advice by Gowling.
Simon Bramwell, principal at Barnett Waddingham, said: “The key to getting transactions like this done is clear: it’s about thorough and comprehensive preparation. This isn’t necessarily quick or simple to accomplish, but the preparatory work done by the scheme has been incredibly beneficial in achieving the buy-in efficiently and in a manner that has maximised member outcomes.”