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The City of London Lord Mayor has criticised British companies for picking pension providers that charge the lowest fees, arguing more expensive managers who invest in alternative assets will deliver better returns.\u00a0<\/p>\n
\u201cWe\u2019ve ended up with pension pots that have lots of equity trackers and lots of fixed income because it\u2019s a cheap way of doing it,\u201d Alastair King said in an interview with the Financial Times, adding that there had been an industry \u201cfixation\u201d on costs over the past 10 years.\u00a0<\/p>\n
King, who founded asset manager Naisbitt King in 2006, added that by charging higher fees, pension providers could invest more in specialist areas such as infrastructure, private debt and early-stage companies. <\/p>\n
This would enable them to get \u201csupernormal returns which is what this whole thing is about\u201d.\u00a0<\/p>\n
However, research from the government\u2019s actuarial department in November showed only a 2 per cent outperformance of its private markets model portfolio over a 30-year period.<\/p>\n
The 696th Lord Mayor made the comments as he prepared to announce a new \u201cemployers pension pledge\u201d on Tuesday in his annual Mansion House speech.<\/p>\n
Under the pledge, 15 companies have agreed to make a public declaration to focus on net returns rather than costs when picking their defined contribution (DC) pension provider and to request more transparency on private market allocations.\u00a0\u00a0<\/p>\n
Among the signatories are Tesco, NatWest Group, Standard Chartered, Aviva, Legal and General, Schroders, Samworth Brothers, London Stock Exchange Group, Octopus Group, Phoenix Group and Aberdeen. <\/p>\n
Many of the groups already run their own pension schemes. <\/p>\n
The move is the latest part of the government\u2019s attempt to push British pension schemes to invest more in assets to boost UK\u2019s sluggish economy, arguing it would improve investment returns in the process.\u00a0<\/p>\n