DC Pensions in UK Will Soon Be Required to Disclose Illiquid Asset Policy

Beginning October 1, trustees must include the asset class breakdown for each of their plan’s default arrangements.



Beginning October 1, trustees of defined contribution plans in the U.K. will be required to disclose their plan’s policy on investing in illiquid assets.

Trustees will have to include the policy in the statement of investment principles for the plan’s default arrangements. The default statement of investment principles outlines the plan’s investment strategy, including investment objectives and policies, for a plan’s default arrangements. Trustees will also be required to disclose the asset class breakdown for each of their plan’s default arrangements in the chair’s statement.

The policy statement on illiquid investments applies to all trust-based occupational defined contribution pension plans with more than one member, unless it is an executive pension plan or a relevant small plan or falls within another of the exemptions in the Occupational Pension Schemes (Scheme Administration) Regulations of 1996.

Under the new requirements, trustees must review both the default strategy and the performance of the default arrangement at least every three years. Trustees must also do so after any significant change in investment policy or change in the demographic profile of the members invested in the default strategy or their beneficiaries.

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If a default arrangement’s policy is to not invest in illiquid assets, the default statement of investment principles must explain why and whether there are any plans to invest in illiquid assets in the future. However, if the policy is for a default arrangement to invest in illiquid assets, the default statement of investment principles must for that default arrangement describe the following:

  • The age profile of the members for whom investments will be held in illiquid assets;
  • Whether the investments made in illiquid assets will be made directly in illiquid assets or via a collective investment plan;
  • The types of illiquid investments that will be held;
  • Why the policy is to invest in illiquid assets—including the advantages over other classes of assets; and
  • Whether there are plans to increase investment in illiquid assets in the future.

Meanwhile, the annual chair’s statement must disclose for each of the plan’s default arrangements the percentage of relevant assets allocated to cash, corporate bonds, U.K. government bonds, foreign government bonds, listed equity, private equity, infrastructure that provides or supports public services, private debt/credit (excluding debt investments included under bonds) and “other” assets.

U.K. workplace pension watchdog The Pensions Regulator recently updated its guidance to help U.K.-based defined contribution plans comply with new rules.

“Trustees have a duty to savers to act in their best interests,” Louise Davey, TPR’s interim director of regulatory policy, analysis and advice, said in a release. “That means working hard to deliver the retirement income that savers expect, including properly considering the full range of investment options. Our updated guidance helps trustees make these often-complex decisions.”

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Pennsylvania SERS Will Join Pilot Project to Combat Securities Fraud

NCPERS Securities Fraud Recovery Services aims to help members recover damages from securities fraud.  


Earlier this year, the National Conference on Public Employee Retirement Systems announced a pilot project to recover damages when smaller public pension funds are victims of securities fraud. The Pennsylvania State Employees Retirement System will participate in the program, according to information released during the system’s September 26 board meeting.  

The pilot program, launched in partnership with investment adviser Dividex Management LLC, aims to provide free and cheap services for pension funds to recover funds lost in securities fraud cases. Smaller public pension funds may not have access to similar resources used by larger plans, which is why NCPERS launched the program, free for at least one year during the pilot. Dividex services include free monthly reports, up to three free evaluative consultations and low-cost evaluations and recovery services.  

“NCPERS identified the need for smaller plans to gain access to a service used by [the California State Teachers Retirement System], [Massachusetts Pension Reserve Investment Management] and others to help them optimize their recoveries and supplement their existing protocols for monitoring securities fraud opportunities,” wrote Lizzy Lees, director of communications at NCPERS, in an emailed response. “Designed after months of conversations and evaluations with a focus group composed of five target public pensions, NCPERS Securities Fraud Recovery Services was developed to help member public pension plans meet their fiduciary obligations and optimize recoveries from securities fraud cases … with the option [of] additional services for a nominal fee.”  

As securities litigation has gotten more complicated, we think our program will help our members evaluate whether to participate in a case and if so whether to join a class or opt out,” said Hank Kim, NCPERS executive director.  

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The NCPERS is a trade association that represents 500 public pension funds across the country that together are responsible for $4 trillion in managed assets for 22 million individuals.  

The year-long pilot program began on July 1 and is open to the first 25 public pension funds that enroll, offered for free thanks to subsidies from NCPERS. Funds must have less than $30 billion in assets under management or have annual securities litigation recoveries of less than $2.5 million to qualify. 


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