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UK roundup: DWP, RS Consulting, PPF, PensionsFirst

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  • UK roundup: DWP, RS Consulting, PPF, PensionsFirst

UK - Research commissioned for the Department for Work and Pensions (DWP) shows that a small but increasing minority of occupational pension schemes only offered members a default option upon joining the fund.

Conducted by RS Consulting, the research examines the issues of vesting, whereby members switching employers within two years of enrolling a scheme are offered the possibility of a refund or transfer of accrued assets.

It also looks at the increasing importance of default options as the industry prepares for the introduction of auto-enrolment.

The report noted it was becoming “an increasingly common practice, albeit, still rare” for defined contribution schemes to only offer one investment option to members upon joining a scheme.

It quoted one intermediary, who argued that this guaranteed members were best served, as they would otherwise be confused by choice.

“I don’t think you will ever get more than a handful of members actively making decisions, taking tactical decisions, classifying their own attitude to risk properly and acting accordingly,” the unnamed intermediary continued.

The report noted that, with most of the funds examined, the majority of members opted for the default fund regardless, while members who join closer to retirement show a greater interest in other investment options.

A further unnamed intermediary noted: “Eighty per cent of employees are in the default fund, which means spending time on making the other options really good is wasted effort.”

Meanwhile, the Pension Protection Fund has announced the appointment of nine new managers to spearhead its investment in alternative credit.

The asset class, allowed after the lifeboat scheme amended its Statement of Investment Principles last year, forms part of its overall alternatives portfolio.

The appointments include Apollo Management and GSO Capital Partners, as well as Muzinich & Co and Ares Management.

Additionally, Intermediate Capital Group, Avenue Capital, as well as BlueMountain Capital Partners, Oaktree Capital and York Capital Management were appointed by the scheme.

It follows the recent reappointment of State Street as global custidian, as well as administration provider.

Finally, PensionsFirst has argued that with defined benefit deficits falling again last month, FTSE 100 companies were in the perfect position to de-risk schemes.

The organisation said pension fund deficits at FTSE 100 companies had fallen by close to 40% - from £134bn to £84bn - between August and now.

PensionsFirst Analytics chief executive Benjamin Reid said: “Over the past five months, the deficit has reduced substantially, and banking these gains could cut years off a recovery plan.

“The key for schemes in prioritising their de-risking options is a better understanding of the exposures that are actually driving improvements in the deficit.

“While large exposures to interest rates and equity may have worked in pension schemes’ favour recently, ultimately, it is a risk that they should not be taking.”

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