On 11 September 2020, the Department for Work and Pensions issued the Government’s response to the February 2019 consultation ‘Investment Innovation and Future Consolidation’ which included a further consultation on proposed measures to improve outcomes for defined contribution scheme members.

The Government addresses stakeholder responses to the consultation proposal to use increased transparency as a vehicle to further encourage larger schemes to broaden their investments into a range of different asset classes. The Government also addresses stakeholder feedback on the role the measurement of performance fees and the charge cap might play in limiting the ability of schemes used for Automatic Enrolment default funds to access less liquid investment classes such as venture capital for their members.

The Government consults on a proposed legislative change to the way compliance with the charge cap is measured for performance fees to give trustees greater flexibility in these investment decisions and it invites views on a proposal to further extend this flexibility with an alternative approach to measurement. The Government also consults on changes to legislation and some new statutory guidance to support and accelerate the process of consolidation in the defined contributions market, and to extend access to a more diverse range of investment classes. Trustees of smaller schemes will be required to assess key elements of the value achieved by their scheme and to report on the outcome of that assessment. Where this assessment shows that members would achieve better value in a larger scheme they are expected to initiate wind up and consolidate. Finally, the Government consults on other changes to legislation and statutory guidance to improve defined contribution pension scheme member outcomes in response to the February 2019 consultation. The consultation period begins on 11 September 2020 and runs until 30 October 2020.