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We caution that there is limited evidence that larger fund sizes lead to better member outcomes, greater diversification and more investment in UK productive assets. As such the Government should not impose a minimum scale on assets under management (AUM). Instead, it should allow a robust Value for Money assessment framework to drive better outcomes without creating unnecessary market disruption thereby allowing employers and Trustees to devise bespoke investment strategies to deliver better retirement outcomes for members.

We believe that allowing trustees and employers to design funds for the risk appetites of their members will offer the best way to diversify investment and achieve better retirement outcomes. There is an all too present danger that too much focus on price over value will stifle innovation locking providers in at low prices that prevent a productive investment focus.

Isio’s DC Investment Director Helyne Slade says: “Focusing too rigidly on scale could risk reducing competition, stifling innovation, and limiting the options available to employers and members. Smaller, niche providers often bring tailored solutions that cater to specific member needs, and these should not be disadvantaged by overly high thresholds. If a minimum AUM is deemed necessary, a lower threshold, such as £1billion, combined with exemptions for specialist schemes and a growth period for new entrants, would strike a better balance.”

A further drawback of a minimum AUM is that it would, in all likelihood block access to the market for innovative companies, something that runs counter the overall growth agenda the Government wants to pursue.

Our response welcomes the proposal to allow contractual overrides without consent for contract-based arrangements, provided the circumstances genuinely merit it and we see a role for independent assessment of such transfers to ensure best value is achieved

Finally, the consultation explores the potential for employers to take a more involved role in the assessment of the pension scheme they have selected for their employees. If it can be aligned with VfM assessments to make it easier for employers – we would suggest that any such duty initially be limited to larger employers.

If you are interested in seeing Isio’s full response, please contact your usual consultant.

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Image Helyne Slade

Director & Head of DC Investment

Helyne.slade@isio.com See full profile

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