Pensions Regulator to focus on transparency in DC investment governance

On September 11, 2024, the Pensions Regulator published the transcript of a speech given by its chief executive, Nausicaa Delfas, at the British Private Equity and Venture Capital Association (BVCA) UK Pensions Summit.   

Ms Delfas’ focus was on DC pensions and she noted that the "highly concentrated and commercialised" DC trust market is dominated by five master trusts holding two-thirds of assets under management in the DC trust-based system.   

Given the shift to DC provision, Ms Delfas said the Regulator must adapt its regulatory approach and focus to a far greater extent than before on DC investment performance. To achieve this, the Regulator has doubled the number of its investment consultants. 

Although Ms Delfas acknowledged that schemes will invest differently according to their members' needs, she said schemes of all types should share proper risk management controls and "a genuine understanding of what the right balance of risk and reward is for their type of member, and their type of scheme".

While steering clear of telling schemes how to invest, the Regulator will expect trustees to have clearly defined investment objectives as well as the controls, capability and scale to deliver returns for members. The Regulator considers a diversified investment portfolio can improve member outcomes, which may include "productive finance" such as private equity and venture capital investments. 

The Regulator issued guidance for trustees on private market investments in January 2024 and since then, the number of FCA-authorised long term asset funds has increased further, although Ms Delfas suggested that take-up may currently be affected by concerns about transparency on performance and costs.  

In addressing value more widely, Ms Delfas said she would like all trustees and their advisers "to know and understand the returns, and services received, for the price paid". To help move the focus of the market from cost alone to value, she indicated the Regulator will look to widen disclosure requirements. This shift will be detailed in the new DC value for money framework to be enacted in the forthcoming Pension Schemes Bill.