73% of respondents would not let governance budget restrict investment strategy

Three-quarters (73%) of respondents would not let their pension governance budget restricts their investment strategy, according to research by Schroders.

The independent research, which surveyed 200 pension scheme managers, trustees and financial directors of defined contribution (DC) pension schemes in the UK, found that 15% of respondents said they had no governance budget and that they use the provider’s default fund, while 12% said they have a limited governance budget, so they use passive investments.

The research also found:

  • 61% of respondents felt that inflation plus X% was an appropriate return objective for its DC default strategy, while 26% chose benchmark relative return, and 12% chose cash plus X%.
  • 35% of respondents said liability-driven investment (LDI) strategies, which are used in defined benefit (DB) pension schemes, could be used in a DC lifestyle fund in the future, while 30% said it was too complex.

Stephen Bowles, head of DC at Schroders, said: “As DC becomes ever more prevalent, we are delighted to see that alternative strategies, which are often more appropriate for DB schemes, are being considered and budgetary constraints are not preventing this from happening.”

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