Minutes of the Productive Finance Working Group – 10 December 2021


Item 1 – Competition law reminder by Simmons & Simmons LLP

Simmons & Simmons LLP set out the legal obligations of all members of the Working Group relating to competition law.footnote [1] They reminded members that it is their responsibility to meet their legal obligations and to take their own legal advice.

Item 2 – Plan for 2022: objectives and deliverables

The chairs of the Technical Expert Group (TEG) footnote [2] welcomed the meeting participants and set the aims of the meeting – to discuss the objectives and deliverables for the next phase of the TEG’s work, and get updates from the official sector.

The chairs thanked the meeting participants for volunteering to take forward different elements of the recommendations from the Productive Finance Working Group report, published in September 2021. There recommendations, aiming to create an environment in which Defined Contribution (DC) pension scheme members can benefit from the appropriate long-term opportunities, fell into four categories:

  • Shifting the focus from cost to long-term value for DC pension scheme members
  • Building scale in the DC market
  • A new approach to liquidity management
  • Widening access to less liquid assets

The chairs reminded the meeting participants that prior to this meeting, the TEG members had agreed to take forward this work in sub-groups, each focusing on one of the recommendations addressed at industry. The members had formed five workstreams, focusing on value for money, actions by investment and employee-benefit consultants, performance fees, liquidity management, and raising awareness.footnote [3]

The representatives from each of these sub-groups summarised their proposals for objectives and deliverables, followed by a discussion. The members agreed to take forward the recommendations by producing several guides for DC scheme decision makers and other key market participants by mid-2022. These guides will aim to support investment in long-term, less liquid assets when in the interests of DC scheme members. The outputs will include the following:

  • A guide on liquidity management, covering appropriate notice periods at an asset and portfolio level, and liquidity management toolkit at a fund and DC scheme levels
  • A guide on achieving value with less liquid assets, covering conceptual considerations and appropriate metrics and benchmarks
  • A guide on performance fees, explaining what they are and setting out potential market-based solutions to improving the principles and methodologies for these fees
  • A guide to LTAF legal documents and standardised constitutional legal documents

The members also agreed that the TEG would bring together the key messages from the report and the above guides in a short, big picture narrative and communicate it to a range of market participants using a range of formats and events. The Working Group’s objectives would further be supported by a statement from consultants and them integrating less liquid assets into their default offerings to clients, when appropriate.

The chairs of the TEG reminded that at the meeting in August 2021, the Steering Committee of the Productive Finance Working Group agreed to monitor progress in implementing the recommendations from the report and meet in early 2022 to do that. The TEG members agreed to reconvene in early 2022 to discuss progress ahead of the next Steering Committee meeting.

Item 3 – Update from DWP on consultation on performance fees

The TEG chairs reiterated that the official sector would take forward the recommendations addressed at them and would update the TEG in due course. As part of the updates from the official sector, DWP highlighted the key messages from its recently published consultation Enabling Investment in Productive Finance, closing on 18 January 2022. The consultation seeks views on proposals to remove well-designed performance-based fees from the regulatory charge cap and to provide appropriate accompanying mechanisms to ensure member interests remain protected.

DWP expressed interest to stay in touch with the TEG, alongside a broad range of other stakeholders DWP plan on engaging, to seek views on potential improvements to performance fees methodologies that can be implemented by industry, in the interests of DC scheme members.


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