Professional Pensions has launched a search to find the schemes offering the most innovative DC default strategies in a bid to raise awareness of best practice.
Barings head of UK and international institutional sales Andrew Benton:
Poor DC default design is one of the major issues that the industry needs to address… We have to work harder to narrow the gap between the ‘best of breed’ solutions offered by leading DC schemes and the passive default options that have dominated for the last decade.
Friends Life managing director of corporate benefits Colin Williams:
There has been consensus within the pension industry for years that default funds have to improve, and the forthcoming launch of Nest and auto-enrolment will bring the issue to the fore. The search to find a solution is now pressing for more than the achievement of good governance.
JLT Benefit Solutions head of investment solutions Peter Ball:
Many DC schemes were launched a long time back when, in reality, there was very little choice for the default option. Many DC members now have significant accounts and have had to endure too much volatility, as their default fund typically has a very high equity content.
New approaches have been running for many years that provide growth-like returns with less volatility and it is time for DC trustees and GPPs to embrace these as the default.
It’s time for wholesale change out of existing defaults into more modern investment ideas that will deliver better member outcomes. Trustees need to be bold and move past assets, and investment managers need to continue to refine and develop their offerings.
Pensions Administration Standards Association chairman Margaret Snowdon:
I support the PP campaign for better outcomes for members through the design of DC schemes.
I also believe that much better and measurable administration standards, including member communication, has a major impact on the eventual retirement outcome and should be promoted alongside good design. Encouraging positive member engagement will come from their understanding and how they are treated, so good administration is vital to success.
Pitmans Trustees managing director Richard Butcher:
I’m amazed at the number of new clients we meet who shrug their shoulders and ask “why would we?” when I ask them when they last reviewed their default strategies. We need to ensure that defaults are robust and proactive if we are to get good member outcomes.
Supertrust UK Trustees director Malcolm Delahaye:
The problem is that we are looking for a solution based on an investment outcome instead of a pension outcome. We focus on the means not the ends. Lifestyling and target dated funds will no doubt be a common favourite default choice, but research from Andrew Clare at the Cass Business School (http://tinyurl.com/7dmy2p6) shows clearly the ineffectiveness of this when looking at pension outcomes.
A full list of all the organisations backing the campaign can be found at: www.professionalpensions.com/2127032
