The government will consult on the regulatory charge cap on defined contribution pension schemes. This consultation is expected to take place before the end of this year.
The regulatory charge cap for pension schemes applies to costs and charges associated with the scheme and investment administration. This means that pension funds are currently restricted from investing in higher-fee products, even though these products might generate better returns. The consultation will consider whether the current cap creates a barrier to illiquid investments as these types of investments tend to have higher charges and performance fees.
It is hoped that any changes as a result of the consultation should encourage investment in a broader range of assets, which can improve overall returns for savers, offsetting the higher charges. The changes should also enable schemes to invest in illiquid and less traditional assets such as infrastructure and tech firms, in order to “unlock institutional investment”.
Overall the idea is positive, but savers will hope that any increase to the regulatory charge cap doesn’t just give free rein for a general increase in overall pension fund charges.
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