We need to be wary about how much can be dealt with through better member engagement. Smart: There are three questions I would ask DC members. One, is your address up to date? Two, are you contributing the most you can afford? Three, have you thought about when you are going to retire?
If we can engage them every now and again on those three things, that will get us a long way. Delo: In an inflationary environment, people are not going to have any spare cash. They cannot afford to do more. Maybe we can squeeze the pips a little bit by ensuring efficient schemes that are well diversified, but in reality we are probably going to walk towards the point where the pensions timebomb is going to go off. Sheth: That is the double whammy. You are less able to contrib- ute and your investments are less likely to do as well. You lose meaningfully through that period, so perhaps that is what causes the crisis. Smart: That is interesting when talking about diversification as well. Some say it is the only free lunch in town, but could there
be a point when we eventually diversify any return away? We cannot do everything for everybody. The point of people being in a scheme throughout their lives is that they have a long period to be exposed to growth assets and can take a cer- tain amount of volatility. There is a conversation to be had about when diversification is needed and what it should look like. Savers should be able to benefit as much as possible from being in growth assets.
One of the things that will be important in the proposed Value for Money framework, which could be difficult to get right, is ensuring the focus on returns does not drive short termism. It is not acceptable to pay lots of money to follow a certain invest- ment strategy, and then, after 30 years, saying: “Oh, well, that didn’t work.” By that time, lots of value has been lost and you cannot get it back. Finding the middle ground will be tricky.
What assets are schemes using to hedge inflation? Segars: Inflation is a core part of Now Pensions’ investment philosophy. We have a balanced risk approach and one of our buckets is around inflation, which is core. We have set an infla-
November 2022 portfolio institutional roundtable: Defined contribution 15
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
