Japanese defined contribution (DC) plans will fail to create a gold mine of opportunity for foreign fund managers that have their hearts set on the country's asset management industry, according to consultants Cerulli Associates (CA).
This belief follows the announcement of a legislation that will enable Japanese corporations to establish DC schemes from October 1.
CA explained that slim tax incentives would restrict initial asset growth within the DC plans. The firm found that under the current blueprint for the new plans, occupational retirement scheme members will only be able to contribute YEN432,000 (roughly $3,500) per annum. CA compared this with US 401(k) plan arrangement whereby participants can in many cases contribute as much as $15,000.
CA said that DC plans will rely heavily on principal-guaranteed products and this would play into Japanese investment culture, which traditionally has favoured risk protection over return. Consequently, CA believes that 75% of net new inflows to Japanese DC plans will wind up in capital-protected accounts.
The firm concluded that domestic banks and insurers, given their size and their ability to build such products while maintaining profit margins, will likely dominate this portion of the marketplace.
By Janet Du Chenne
Jonathan Stapleton asks whether newly-accredited professional trustees should be a statutory fixture on pension scheme boards.
Savers are being warned by the Insolvency Service to guard their pension pots from investment scammers and negligent trustees as it winds up 24 companies.
Respondents say they should only be required in certain situations as the system is not broken.