Greater transparency around performance and costs is needed for there to be “meaningful” positive changes in investment strategies, The Pensions Regulator (TPR) has said, as it announced plans to 'step up' its focus on investment governance.

In a speech to the British Private Equity and Venture Capital Association, TPR chief executive, Nausicaa Delfas, said that TPR has "completely changed" its structure to help make it more market-facing and outcome-focused.

“You will notice a difference in how we engage with schemes and also the wider market," she added, confirming that investment governance is set to be a particular focus for the regulator.

Whilst Delfas acknowledged that investment decisions are not no-risk, she argued that they should be the product of informed decision-making, warning that "just as taking too much risk puts good saver outcomes in jeopardy, excessive caution, and over-investing in low-risk, low return assets could end up depriving them of much needed retirement income".

“And that is where we will seek to probe," she continued. “We won’t tell schemes how to invest, but instead pose the right questions and make sure trustees and schemes have the controls, capability and scale to really deliver for savers."

Delfas also argued that sound investment in diverse assets can not only improve outcomes for savers but could also generate growth for the UK economy, stating that "the two don’t have to be in conflict".

In particular, she said that properly considered productive finance, including private and venture capital investments, have a role to play in a diversified portfolio.

However, Delfas acknowledged that trustees have historically struggled to capitalise on opportunities in private markets for a number of reasons, including higher costs and having fewer mechanisms to enable access.

Change is underway though, as Delfas said that TPR has played its part in seeking to raise the standards of trusteeship through new guidance on private market investments, while the market has also innovated to broaden access, with eight new Long-Term Asset Funds launched.

Despite this, she argued that “for there to be meaningful, positive changes in investment strategies – there must be greater transparency in industry around performance and costs”.

“We need to move the competitive pressure away from cost alone to value," she said, highlighting the forthcoming value for money framework as the "first step" in bringing greater transparency.

She continued: “Whilst not a panacea, it will bring consistent comparable metrics that matter to the market, at the same time, in the same format.

“Crucially, through many years of joint working to reach consensus, this will go across both sides of the market thanks to newly proposed Financial Conduct Authority (FCA)-rules also in development.

“In asking schemes to publish this data, and make their assessments of value, we don’t seek homogeneity. In a truly competitive market, schemes will cater to different groups of employers with different product offerings.

“What we want is that variation, to be a conscious decision by trustees and employers based on the wants and needs of their pension savers. Not as a by-product of a lack of transparency.”

Delfas also encouraged industry organisations to engage, not only with the ongoing value for money consultation, but also with other industry organisations.

"Commercial considerations can sometimes mean we’re guarded as an industry," she admitted, "but to really get this right, we have to talk to each other more… to understand where the barriers and opportunities are and come to some consensus on a way forward."

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