Lookthrough issues pdf#
Lookthrough issues series#

This means that trustees should not just incorporate the costs of investing in the pooled vehicle, but should вЂњlook-throughвЂќ this structure and consider the costs paid by the pooled vehicle manager as it invests in other funds, known as the underlying investments. The current position is that trustees of occupational DC pension schemes should вЂњlook-throughвЂќ any fund of funds or pooled investment vehicles, no matter the type of funds such vehicles invest in.

Lookthrough issues series#

is not calculated by reference to the value of the memberвЂ™s rights under the scheme.ДЄ series of illustrative examples has been developed in order to provide guidance on how a multiple year smoothing approach would work in practice.

is calculated by reference to the returns from investments held by the scheme, whether in terms of the capital appreciation of those investments, the income produced by those investments or otherwise, and.

The majority of the responses to the 2020 Consultation agreed that such a change would reduce the risk of a charge cap breach and could also increase investment in illiquid assets.ДЇor this purpose, a вЂњperformance feeвЂќ will mean a fee which:

Instead of being required to look back on (in the case of the retrospective method), or predict (in the case of the prospective method), the performance fees incurred over the course of the charges year, trustees would be able to вЂњswap outвЂќ this figure for a 5-year moving average of accrued performance fees. The proposed regulations would allow an exception to this requirement in respect of performance fees. Both require the level of charges for that year to be based on the costs and charges the scheme has paid during that period. Charge cap compliance: proposed changesД¬urrently, there are two different methods for calculating the charges that can be imposed on members in a DC default fund in any given year. Moreover, performance fees can incentivise the investment manager to achieve higher returns for their client, as this will trigger a more profitable pay-out for themselves. In addition, while pension schemes have traditionally tended to dedicate the majority of their investment portfolio to public markets, the expansion of DC provision following auto-enrolment has resulted in some DC trustees вЂњlooking to access a more diverse portfolio of assets, including illiquid assets that have the potential of even greater returnвЂќ.ДЄlthough it is possible to make such allocations without paying performance fees, a performance-related element is common. The Government believes that investment in вЂњemerging sectors like green infrastructure or innovative British companies fits well with the long-term horizons of DC schemesвЂќ, and is вЂњvital to helping sustain employment, our communities and the environmentвЂќ.

As part of its вЂњcommitment to removing perceived barriers to the commercial viability of innovative fund vehiclesвЂќ, the Government is also seeking views on the current position on look-through in relation to charge cap compliance, as a potential barrier to investment in alternative asset classes, particularly venture capital and growth equity.

Following a consultation in September 2020 (вЂњthe 2020 ConsultationвЂќ) (see our Alert), the Government is consulting on draft regulations which are intended to enable the diversification of DC investment portfolios.

Charge cap compliance: proposed changes.

Lookthrough issues pdf#

Further to an announcement in this yearвЂ™s Budget (see our Alert), on 19 March 2021, the DWP issued a consultation on proposed measures to allow occupational DC schemes to smooth performance fees within the charge cap, and a call for evidence on вЂњlook-throughвЂќ in relation to charge cap compliance (вЂњthe ConsultationвЂќ).Д¬lick here for a PDF of this Alert.