Roundtable

DC investment

New thinking on the future of retirement Despite the changes brought about by the freedoms, innovation from product providers has been slow to appear. There have been some interesting moves from certain areas of the market towards incorporating drawdown into DC investment strategies, as well as ways to include more illiquid private market assets in […]

February 2017

New thinking on the future of retirement

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Despite the changes brought about by the freedoms, innovation from product providers has been slow to appear. There have been some interesting moves from certain areas of the market towards incorporating drawdown into DC investment strategies, as well as ways to include more illiquid private market assets in default funds, but overall progress has been more leisurely than many would have hoped.  But getting the investment piece right, while hugely important, is only half the battle. People could be in the best investment strategy in the world, but if they are not saving enough in the first place then they risk facing an extremely underwhelming retirement. Auto-enrolment has been a success in taking the important first step of getting people to save in a pension, but current contribution levels are far below what they should be and that needs to change. There also needs to be more emphasis on educating people about what to do with their pot when they retire. What people want is advice, not guidance, from professionals they trust to steer them in the right direction. Incorporating this into DC provision is a tricky, but important and necessary, part of the future. Another crucial factor is the administration that sits behind schemes. With more savers expected to enter drawdown-type structures, the ability for schemes to be able to efficiently pay income directly to members will become integral, but this is not something many admin firms can facilitate at the moment. Quality administration is underrated by many, but it can help members to save more. Initiatives such as micro investing and auto-escalation are simple but effective ways to help people put away more for their retirement. There is no question that in a rapidly changing DC landscape the industry must place greater emphasis on good quality administration in order to lubricate the investment process and help members save more. This roundtable sees a panel of asset managers, consultants and asset owners debate the issues around DC investment, including opening up schemes to illiquidity, the different approaches to default fund design, and some of the administration initiatives that will help shape the future of DC.

Defined contribution (DC) scheme trustees have had plenty to think about over the last couple of years. The introduction of freedom and choice has meant having to adapt to an increasing number of scheme members wanting to either take their entire pot as cash or remain invested into and throughtout retirement, all against a backdrop of increasing longevity and heightened volatility.

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