Pensions Bulletin 2021/20

Our viewpoint

FCA consults on new long-term asset fund class aimed at DC defaults

The Financial Conduct Authority has launched a consultation on a new category of authorised open-ended fund that will be able to invest in long-term illiquid assets such as venture capital, private equity, private debt, real estate and infrastructure.  This follows the Chancellor committing to launch the first long-term asset fund (LTAF) within a year, in a statement to Parliament on 9 November 2020 regarding the then Financial Services Bill.

The FCA is proposing that LTAF rules embed long redemption periods, high levels of disclosure, and specific liquidity management and governance features.  These would take account of the types of risk to which LTAFs might be exposed and help give investors’ confidence that they are being managed appropriately and in their interests.

Of note is the FCA’s statement that “we do not expect any of these funds to offer daily dealing.  Instead we will permit funds to use a wide range of liquidity management tools, including notice periods, and to disclose their use in the prospectus”.

As well as offering an alternative investment opportunity to experienced retail investors, the LTAF is also aimed at DC pension schemes which may be interested in investing part of their assets into a LTAF, in line with their investment horizons and risk appetite.  The FCA cites the recent DWP survey which found that two-thirds of these schemes do not invest in illiquid assets, while the remaining third invest between 1.5% and 7% (see Pensions Bulletin 2021/03).

The FCA considers that this matters because most DC pension investments are in default arrangements, according to the FCA a 1% pa increase in net returns would increase a pension pot by approximately 25% over 40 years and, according to one report, a diversified portfolio of alternative investments could achieve returns 1.4% higher each year than a typical balanced portfolio.

The FCA proposes amending the permitted links rules relating to unit-linked long-term insurance products to enable DC schemes to access a LTAF.  As a result, DC schemes will be able to invest in an individual and predominantly illiquid LTAF to gain a desired exposure to illiquid assets, rather than at present having to build up exposure across a number of funds, each of which have limits on illiquid assets thanks to the rules.

Consultation closes on 25 June 2021 and the FCA intends to publish a final policy statement and final handbook rules later in 2021.


The creation of such funds has the potential to tie together several topics which have been discussed over recent years including improving returns for DC members and unlocking pension scheme assets to invest in projects which benefit wider society such as housing and infrastructure.  As such we welcome this development.

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Financial regulators publish their latest ‘to do’ list

A forum of financial services regulators has published its latest list of upcoming work over the next two years in a third edition of the Regulatory Initiatives Grid.  And what started as a pilot exercise a year ago has now become permanent with updates expected every six months.

The May 2021 edition contains 128 initiatives of which 14 relate specifically to pensions and retirement income.  These 14 include the following:

  • A discussion paper on the assessment of value for money across workplace schemes is to be published jointly by the FCA and Pensions Regulator in either Q2 or Q3 2021
  • The Pensions Regulator’s second consultation on the regulatory framework for DB funding is promised for autumn 2021
  • A joint call for input from the FCA and Pensions Regulator inviting views on how the pensions consumer journey works for savers, and if it can be improved to help consumers make better decisions about their pension saving, is promised for Q2 2021

In addition, one of the multi-sector initiatives relevant to pensions is the FCA’s consultation paper setting out proposals to require climate-related disclosures by asset managers, life insurers, and FCA-regulated pension providers, aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).  This is promised for June 2021 with final rules being published in Q4 2021.

The forum is comprised of the Bank of England (including the Prudential Regulation Authority), Financial Conduct Authority, Payment Systems Regulator, Competition and Markets Authority, Pensions Regulator, Information Commissioner’s Office and now also the Financial Reporting Council, with HM Treasury attending as an observer member.


We welcome this pilot becoming permanent, both as a means for the regulators involved to work collaboratively and as a useful timetable of upcoming regulatory actions.

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Queen’s Speech – two pensions-related measures announced

Amongst the Bills announced in Tuesday’s Queen’s Speech for the new Parliamentary session were two relating to pensions.

The Public Service Pensions and Judicial Offices Bill

This is intended to ensure equal treatment for all members within each of the main public service pension schemes, implementing the Government’s decisions following the Court of Appeal judgments in the McCloud and Sargeant cases.  It will also raise the mandatory retirement age of judicial office holders from 70 to 75.  The Bill follows on from the Government’s response to its consultations on how to address the discrimination and related issues exposed by these cases (see Pensions Bulletin 2021/06).

The Dormant Assets Bill

This will expand the Dormant Assets Scheme into the insurance and pensions, investment and wealth management and securities sectors.  It follows on from the Government’s response to its consultation on expanding the scheme (see Pension Bulletin 2021/02).

There is also a promise to bring forward proposals on the reform of social care, though it is not yet clear whether this will include reforms to the way adults have to pay for their care in later life.

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Independent pre-pack scrutiny comes into force

Regulations outlining which pre-pack sales are now subject to mandatory independent scrutiny have come into force, accompanied by new guidance issued by the Insolvency Service.

The regulations, laid in draft form in February (see Pensions Bulletin 2021/10), apply to disposals made in the first eight weeks of administration to a party connected with the company.  The guidance outlines the roles of the connected person, the independent evaluator (who must make a statement about whether the consideration to be provided is reasonable), the administrator and the timings of the process.

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This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.