The Pensions Regulator (TPR) has published new guidance that aims to help trustees consider improved outcomes for members through private market investments.

Its guidance emphasised that private market assets can play a valuable role in a diversified portfolio that seeks to improve and protect member benefits, provided that the right advice and effective governance have been achieved.

TPR called on trustees to ensure they have an appropriate level of knowledge and understanding to have the tools to work with their advisers to fully explore how accessing private market assets could meet their needs.

This would include setting objectives for investment advisers regarding private market investment advice and improving outcomes for members.

The regulator warned that those who did not have the resource or skills to consider a more diversified portfolio should think about changing their governance model or consolidating.

Its guidance follows on from the government’s Mansion House reforms, which seek to help the financial services sector in unlocking capital for UK industries and improving returns for members while supporting growth across the wider economy.

Commenting on the publication of the guidance, Pensions Minister, Paul Maynard, said he welcomed TPR’s guidance encouraging schemes to consider private market investments.

“Considering a full range of investment options can help diversify portfolios and improve outcomes for savers,” he continued.

“The guidance bolsters our ambitious plans to improve retirement outcomes and drive economic growth in line with our Mansion House reforms.”

TPR interim director of regulatory policy, analysis and advice, Louise Davey, noted that innovation in the investment management market and the launch of new fund structures, such as the Long-Term Asset Fund, were providing more opportunities for defined contribution (DC) schemes to invest in private markets.

“Our focus is on driving up value for pension savers,” she stated. “For DC schemes, we want to see a shift in mindset from cost to value. Our guidance helps trustees consider how best to do this.

“Investing in a wider range of assets can help boost the value of DC pots. While private market investments generally carry higher costs, they can have a positive net impact on the value delivered.

“With appropriate advice, private market assets can play a key part in a diversified portfolio that aims to deliver better outcomes for savers.”

Davey added that, as the defined benefit universe develops and new models evolve involving, for example, consolidation or capital-backed funding arrangements and run-off models to generate additional surplus, further opportunities for increased investment in private market investments were likely to arise.

“It's not our job to tell trustees how to invest people's pensions,” she continued. “But it is our job to make sure they focus squarely on delivering value from investments and have the right skills and expertise to consider all asset classes.

“We support innovation that benefits savers. Trustees who don't have the scale or governance to achieve these rewards should consider consolidating or changing their governance model."

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