Innovation in DC continues apace : Here’s 3 recommendations to improve member outcomes

DC schemes have been under the cosh to improve member outcomes. But it isn’t easy while navigating a changing regulatory and retirement landscape. Here are 3 things pension schemes could do differently to give their members a better future.

1. More exposure to private markets

Pension schemes traditionally favour listed equities. But that world is shrinking. Over 90% of the world’s established businesses and commercial real estate are privately owned. This includes companies operating in tantalising areas such as digitisation and climate tech. As the winds of change blow across developed economies, these companies may leave their publicly listed peers in the shade.

Cost and regulatory barriers have blocked DC schemes from these lucrative opportunities. But new investment vehicles can offer a bridge to private markets, along with the opportunity for better returns and diversification. We know because we’ve helped design them.

We worked with Schroders to launch the Long Term Asset Fund for a master trust we provide investment services for. We’re currently working with Future Planet Capital to give pension savers access to UK venture capital.

We’ve also engineered a hybrid investment model that allows schemes to hold assets that aren’t permitted under life insurance rules.

We’ve found this is a great way of upping the diversity of members’ portfolios. These ideas were born out of collaboration and innovation. The fruition of an idea often hinges on talking to the right people with the right technology. If something starts with an idea and ends with a good member outcome, we can design and build the bit in the middle.

2. Embrace cutting edge technology

The right technology can cut costs, convert ideas into solutions and polish communication. It can modernise antiquated processes to improve efficiency, transparency, and ultimately member outcomes.

We work with different trading and settlement cycles, and a range of tech interfaces. Instructions from our clients are funnelled directly into our systems and processed according to a client’s investment needs. By embracing automation, our clients have what they need when they need it. This frees up warm-blooded humans to do what we do best. We build relationships, listen deeply and think big to create solutions. When combined with data, technology packs even more of a punch. We bottle the data on investments made by or for our clients. This includes standard information like asset values, but also rich, complex data such as ESG, voting information and climate-related data. In future, we plan to include nature-related data too. We want to make our data accessible and visible to drive better decisions. But it can be useful in other ways too. That’s why our clients can access our data at any time through a dedicated portal.

3. Tailored post-retirement solutions

Nobel prize winner William Sharpe described decumulation as the ‘hardest and nastiest’ problem in finance. There is much talk about getting people to save more money. Less has been said on how to make that money last, even though this is arguably more crucial to good member outcomes

Members now save at varying levels, retire at different times and have different ideas about how to spend the final third of their lives.

They need investment solutions that are as flexible and varied as they are. While needs have become progressively individual, investment solutions often cater to the masses. We work with DC pension schemes to give their members flexibility and security. We’ve collaborated with private credit managers and developed funds that include private credit exposure but with daily pricing, reasonable fees, and daily liquidity by integrating liquid assets like equities and bonds. We’ve found this is a great way of offering a flexible but secure solution.

We’d love to talk more

Our best innovations have grown out of the problems people have spoken to us about. Pension professionals need a safe space to talk about current and future challenges. We would love to get you round a table and hear what you have to say

You can get in touch with a member of the Mobius team here.