Earlier this year, in partnership with NEST, Defaqto published its 2018 report ‘How to analyse workplace pension default funds’. The report is aimed at supporting advisers by comparing different default funds across workplace pensions. It offers an insight into the duties that apply to investment management.
When deciding what you need to consider in terms of investment management procedures and responsibilities, Defaqto believes there are three factors to bear in mind:
- investment strategy
- working practices
- individuals involved.
Optimising an investment strategy doesn’t just involve choosing either a passive philosophy or an active one. Instead, Defaqto suggests ensuring the strategy matches the profile of both the employer and its employees.
If most of the workforce within an organisation is near to retirement, would it make sense for the fund to adopt a high-risk strategy at this stage?
It’s easier to ensure that the fund meets the needs of the members concerned if you assess members’ goals.
Working practices adopted by the fund
Determine how reliable and independent the working practices are that govern the investment strategy:
- Have there been any breaches or changes to the strategy recently?
- Monitor any changes to investment strategy and ensure checks are used to make sure the working practices are accurately followed.
- Look at the individuals who are involved in the investment management process. This could prove tricker for smaller, trust-based schemes.
- Think about the influence and control that those individuals have.
- Is their knowledge and experience enough to warrant such significant involvement in the process?
The full report is available to read here.