Andrew Brown talks tax, investment jargon and what’s next for the organisation
Of all the uncertainties the new retirement freedoms have created, what to do about investment has to be at the top of the list for most trustees and scheme managers.
Schemes have been effectively forced to review their existing default funds and are looking for new ideas, especially immediately prior to and post-retirement.
It has certainly given the Defined Contribution Investment Forum (DCIF) plenty to talk about. The group of asset managers, which promotes discussion and debate, was founded in April 2011. The forum produces regular research and hosts events for DC decision-makers.
From six founding members, it has grown to 14 member firms, including Schroders, Standard Life Investments, J.P. Morgan Asset Management and Legal & General Investment Management, and is looking to expand further under Columbia Threadneedle’s Andrew Brown, who took over as chair of the group in July 2015.
“Asset management can be very complicated, even to us. How that feels for members is particularly acute”
“There’s no reason we wouldn’t branch out and include other types of stakeholders in the industry,” says Brown, who I meet alongside the DCIF’s vice chair Rob Barrett in Columbia Threadneedle’s new and very futuristic offices in the heart of the City. “We need a wider perspective and obviously it’s not just asset managers distributing funds – funds are distributed in a number of ways, by consultants, by platforms. I think we would benefit from their experience.”
How does the DCIF achieve a consensus with so many members with differing investment philosophies? “The thing we have all got in common is we are all committed to the DC market and ensuring that we have appropriate investment solutions in the UK to best service their needs,” replies Brown. “We are all very keen to ensure that investment features high on the agenda in all DC debate.”
At present, the DCIF is working on a report looking at the international experience of DC investment and what lessons can be learned from overseas.
“Whilst a fair bit of research has been done in relation to these markets, I don’t feel anything has been done on investment design specifically. The questions we’ll be looking to ask are ‘What does investment design for your DC members look like in those regions? How does that compare to the UK? Are there any lessons that can be learned? How have those investment designs come to be?’” says Brown.
Past projects have included a jargon-busting pensions glossary and collaborations with research partners including the National Association of Pension Funds and the Pensions Policy Institute.
Jargon-busting is dear to Brown’s heart. He says: “Asset management can be very complicated, even to us. How that feels for members is particularly acute. In the UK, members do not engage with their investment options and they rarely engage with their default investment approach. That’s just the way it is, currently. It would be great to think that might change, but the culture is very different here to in the US or other countries where people are generally more financially aware, more likely to own shares and take an interest in how they are invested.”
Research remains integral to the DCIF’s mission. In April, it spoke to nine pension schemes about the impact of the pensions freedoms on their at-retirement strategies, in partnership with research agency Spence Johnson. The researchers concluded that the impact of the 2014 Budget on scheme investment design was more limited than expected; rather, it refocused and reshaped schemes’ existing plans to refine their strategies.
“For now, at the top of the wishlist would be no more change”
The researchers reported that there was no consensus among the schemes on how they were changing their investment offerings in response to the Budget. Some planned to move to default options targeting drawdown, others decided to continue on the assumption that members would purchase an annuity at the point of retirement.
The DCIF has also collaborated with the Pensions Policy Institute, examining what level of pension contribution is necessary to achieve a sufficient retirement income.
What would Brown like to achieve during his tenure? “If you sat down with us in 18 months, I would like to think we would have produced three outstanding reports, had a very successful annual event, grown our brand within the pensions community in the UK, expanded our membership further, had greater reach, and that we’ve hit perhaps a different type of stakeholder in the industry, particularly in terms of membership,” he replies.
Also high on Brown and vice chair Rob Barrett (of Invesco Perpetual)’s wishlist is a period of stability for the pensions industry. We meet in the summer, while rumours are still swirling about potential reforms to tax relief. Brown says: “For now, at the top of the wishlist would be no more change and just to let things settle so that we can produce and supply good solutions.”
“We need catch-up time,” agrees Barrett. “The world has been moving very fast in the last 12 months. If people rush things through, there could be some traumas.”