Opportunities available for advisers in the workplace pension arena

23 September 2020

When it comes to choice, there is a healthy and diverse array of scheme types and investment strategies to choose from. However, there is a void growing between the well-managed and performing default funds, and those where improvements are needed.

With the number of employees in workplace pensions now standing at over 11 million, all delivered through over 1.4 million employers, advisers have a key role to play in this space.

Key factors in any due diligence process

There are seven key factors we believe you should identify and consider in any workplace pension due diligence process, including governance and regulation, and provider financial strength and/or capability. You should also consider:

  • IGCs, trustees and investment committee oversight
  • Investment management key factors
  • Cost
  • Investment and performance
  • Benchmarking and evidencing ‘value for money’

There is a great variety in terms of manager structure (in-house manager, third-party managers or a mix), investment approach (active, passive or both), level of diversification, attention paid to responsible investing, performance and charging across the funds. With some of these attributes, such as manager structure, investment approach and attitude to responsible investing, the choice of provider and fund might come down to the investment beliefs of the employer or their adviser.

A comprehensive overview

Last year, 2019, was interesting. The higher 8% contribution rate came into force and a tough authorisation standard was introduced by The Pensions Regulator (TPR) for master trusts. The higher contribution rate didn’t create the mass increase in opt-outs that some pundits had predicted and so, positively, record numbers of employees continue to save for their retirement.

“In 2019 the higher 8% contribution rate came into force and a new authorisation standard was introduced by The Pensions Regulator (TPR) for master trusts. There will be further industry change throughout 2020 and into 2021 as the FCA has introduced minimum standards for publishing and disclosing costs and charges to workplace pension members” David Cartwright, Head of Insight and Consulting (Wealth and Protection), says.

“The Competition and Markets Authority (CMA) underlines the role that advisers have to play in ensuring optimum retirement outcomes for people – their report identified that pension schemes could benefit from more diverse and impartial advice” he adds.

Interested in learning more?

Our latest CPD accredited guide explains the key factors to consider when reviewing default funds, and takes a deep-dive into the most commonly used schemes. This guide explains the important information that can help you identify where improvements can be made, and also shows how the default funds in the market compare against each other.

You can download our guide to analysing workplace pension default funds document for free here.

To find out more about Defaqto workplace pension reviews, take a look here.

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