4 minute read
How platforms are innovating to support better DC outcomes :Close collaboration will drive the innovation we need to see
By Jess Williams, Head of Corporate Investment Services, Phoenix Group
DC investment strategies are becoming ever more sophisticated, as schemes and their advisors strive for better outcomes for a generation that will increasingly rely on DC savings as their primary source of income in retirement.
As an investment only platform, Phoenix CIS has a vital role to play in developing and implementing the solutions our clients need in order to deliver their evolving investment strategy. We can support trustees and advisors in a number of ways, helping to drive the innovation that will ultimately lead to better DC outcomes.
Facilitating access to private markets
Focus is rightly shifting from cost to value for DC savers, and schemes are increasingly looking to access private market assets to take advantage of the illiquidity premium which DB schemes have long enjoyed.
We recently conducted a poll which asked about the perceived barriers to private market investment within DC, and operational challenges came out on top. This is where platforms like ours can resolve some of the issues associated with investing in less liquid assets.
We can adapt our processes to accommodate and manage funds that have non-standard dealing and pricing cycles and have already launched a private equity solution on our platform that includes both liquid and illiquid components as part of a blended fund structure. This supports efficient cash flow and enables investment into illiquid assets at the appropriate trading points.
The introduction of LTAFs will provide additional opportunities for DC schemes to invest in private markets. Trustees need to ensure they’re comfortable with the extended gating and notification periods, and we’re supporting our clients to understand these operational requirements. We’re also working with fund managers to launch LTAFs in response to client demand and are confident we can deliver what our clients will need, acting as an operational enabler to facilitate investment in alternative assets.
Supporting schemes on their journey to net zero
The same private market solutions that we’re enabling for DC schemes will also support them to meet their net zero commitments, through investment in areas such as sustainable infrastructure and alternative energy production.
As a platform we can smooth the journey towards more sustainable investing, transitioning assets and managing operational complexities under the bonnet of a scheme’s white labelled and blended funds. Our scale enables us to offer attractive fund terms, alongside prefunding for transitional activity.
We’re also rolling out a new type of report that explains the ESG characteristics of the funds scheme members invest in, using straightforward language and real-life comparisons. The report can be used by trustees and their advisors but will also be a useful tool to support member engagement and encourage more sustainable investment choices.
Supporting effective scheme governance
The evolving regulatory environment has introduced new challenges for schemes and their advisors, as they navigate a raft of new reporting requirements.
Phoenix CIS can offer solutions here too, as we work proactively on behalf of our clients to provide the necessary data, ensuring high levels of data coverage and presenting this back in a meaningful way.
We’re likely to see further changes to scheme governance in future, and as a platform we’ll continue to access and develop appropriate data solutions to help our clients meet ongoing regulatory challenges.
Delivering at- and post-retirement solutions
The question of how DC savers will access an income in retirement is increasingly relevant, and one that Master Trusts are looking to provide answers for with innovative solutions to meet these needs.
Working closely with our Master Trust clients, we’re seeing a wider range of products come to market, including flexible income drawdown options and annuities. Some Master Trusts are even developing to and through solutions to support in-scheme drawdown and facilitate a smooth transition for members moving into the decumulation phase.
We will play a key role in implementing these solutions, providing flexibility, operational expertise and an understanding of the unique requirements of the schemes we work with.
Embracing the challenges ahead
As an industry, we’re pulling together to improve outcomes for current and future generations of DC savers, although it’s clear that we still have a long way to go.
It’s this close collaboration that will drive the innovation we need to see, and while schemes and their advisors will be the architects of these solutions, it will be down to platforms like Phoenix CIS to build them on the solid foundations that ensure their success.
