Dealing With the Reluctant Investor: Innovation and Governance in DC Pension Investment

Abstract

This report is the first major study of DC investment strategies used in UK defined contribution pension schemes. It is critical of 'traditional' arrangements and urges employers, trustees, and pension practitioners to consider innovative strategies for the default fund, in which the majority of members invest. It also calls on the regulators to introduce 'safe harbour' rules to enable parties to the scheme with relevant expertise to provide much clearer advice to 'reluctant investors', who are unable or unwilling to make active investment choices.

Keywords: pensions, defined contribution, lifecycle funds, governance

JEL Classification: G11, G22, G23, G28