Enabling investment in productive finance

Isio response to consultation on proposals to remove performance-based fees from the charge cap.

In response to the DWP Consultation: Enabling investment in productive finance, Isio’s Senior DC Investment Consultant, Jenny Roe, questions whether removing performance-based fees will solve the issue which she believes needs a more radical solution.

Jenny Roe, DC Investment Consultant commented: “The proposals to remove performance-based fees from the charge cap seem to be a reactive, and in our opinion, an imperfect fix to a problem requiring a more radical solution. 

“We acknowledge that investment in illiquid asset classes by defined contribution (DC) pension schemes is currently hampered, however removing performance related fees won’t move the needle on illiquid allocations. There are bigger obstacles around fund structures, complexity and lack of available funds on DC platforms which need a more radical solution.

“Removing performance fees from the charge cap also has the potential to dilute member protections, making charges much less transparent. There’s a real risk that providers try to hide their fees, therefore making investing in illiquid assets more attractive. Simply requiring disclosure in the Chair’s Statement, which is rarely reviewed, is not the answer.”

Enabling investment in productive finance

Isio in the News

Read further insight from Isio in the latest Professionals Pensions article: Performance fee charge cap removal a ‘quick fix’ (professionalpensions.com)

Pensions Age discuss the matter further, with commentary from Jenny Roe, in this piece: Govt warned against proposed charge cap changes – Pensions Age Magazine