Incentives needed to invest in productive finance, say master trusts

Patrick Heath-Lay, chief executive of People’s Partnership, told delegates at the Pensions and Lifetime Savings Association’s annual conference in Liverpool that asset owners needed more support and incentives to meet the objectives set out in the investment review.

He said: “I'm not sure we've seen the investment industry particularly come up with the products that can work for asset owners like us.”

“I think that the balance of the economics in some of the vehicles that are brought to us just don't work enough for the members.”

Jamie Fiveash, chief executive of Smart Pension, said there were signs the government was moving in the right direction. The reintroduction of tax credits on dividends is a move which would reassure schemes, he suggested.

He said: “We still need to have fiduciary duty elements, which is why we're talking about some of the fiscal incentives that we think are needed in portfolios.”

Delegates heard that master trusts are expected to account for £400bn of savers’ assets by 2045, according to the Department for Work and Pensions (DWP).

Julian Barker, head of policy for collective defined contribution and DC decumulation at the DWP said the assets in defined contribution (DC) schemes would grow to £1.3 trillion within 20 years. “Three times the amount it is now,” he added.

Barker said master trusts would dominate the employer-led pension landscape, although there is still a role for well run single employer trusts.

He added that pension reforms would be addressed by the value for money framework consultation and the productive finance initiative.

Barker also mentioned the launch of the first CDC pension scheme by the Royal Mail and said he believed CDCs would play an important role in addressing under-saving and value for money.

Heath-Lay warned against over regulation and said master trusts should not be forced to change their proposition “over things like losing a mandate over a basis point.”