Kinna Patel, head of investment proposition at NatWest Cushon, joins us for this episode of The Professional Investment Podcast. Her news story of the week is the FT’s coverage of the shake-up to salary sacrifice announced at last week’s budget.
While this measure is not due to come into force until 2029 – and could be reversed before then – it seems a counterintuitive move. The government has reformed The Pensions Commission to address pension adequacy – reducing people’s ability to add to their pension pots at the same time seems odd.
With any changes to contribution levels ruled out until the next parliament, the pressure is on investment professionals running auto-enrolled pensions to ensure they can get the highest returns without taking on too much risk.
We discuss how equities are the key driver of wealth creation throughout the lifetime of a member –not only are they effective at growing capital but they can be accessed cheaply through passive vehicle.
And there are multiple ways to shape this allocation – including climate tilts, dynamic regional weightings, adding an alpha allocation and currency hedging. Natwest Cushon is considering the latter option.
Fixed income helps to preserve member’s wealth as the move to and through retirement but investors still need an allocation to growth assets after they stop working.
Private assets can not only add growth and diversification to a portfolio but also help investors to build emotional connection with their pension. Natwest Cushon’s investment in a pepper farm powered by a nearby wastewater plant, fits this brief. Scheme members could visit the farm and eat their pension!
Kinna also shared her thoughts on how auto-enrolment providers can address retirement income saying the industry is thinking the best way to address this challenge with solutions likely to evolve over time.
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