The background

In an evolving DC market, it is important to regularly review the appropriateness of the investment solution being made available in a DC scheme. The pension scheme was receiving all of its administration, investment and consulting services from a single provider. The scheme offered a large number of legacy investment options to members, with a number of funds with similar investment objectives without providing genuine investment choices to the membership or diversification benefits. The investment range had not been fully reviewed for suitability and competitiveness for a number of years and the scale of the assets in the Scheme had grown significantly.

The Trustees appointed LCP to perform an independent DC strategy review and to renegotiate the investment manager fees where possible and practicable.

Our solution

LCP helped the Trustees by:

• Consolidating the fund range by eliminating underperforming managers – we proposed a reduction in the number of funds available to members to improve member engagement, and suggested alternative investment managers by putting forward best in class managers based on LCP’s extensive investment manager research.
• Reducing Fees – engaging with the current providers to obtain lower fees for members, based on the increased scale of the assets and arising from the consolidation of the fund range. The passive fees were reduced by ~40%p.a. and the fees for the preferred multi asset fund were reduced by ~30%p.a.
• Projecting members likely retirement pension assets at normal retirement – this analysis resulted in a change to the target asset allocation at retirement in the Default Lifestyle Strategy, based on the expected future fund values and the current market trends in how DC members access their pension benefits at retirement.  
• Reporting improvements – by working with the internal HR and Finance function we significantly improved the quality and usability of the investment quarterly reporting to the Trustees, which has allowed them to make better and more informed decisions in an efficient manner.

The results

The Trustees are now satisfied that the investment choices currently provided to members is demonstrably appropriate and they are better equipped to make any required changes going forward.  The members of the Scheme have benefited from significant investment management fee reductions and a more manageable and understandable range of investment choices.