The Financial Services Consumer Panel has published a new standard for reporting pension fund charges that it says is quicker and easier to introduce than impending European rules.
Providers and asset managers are under growing pressure to boost transparency as result of Mifid II, Priips and the creation of Independent Governance Committees for workplace pensions.
The panel’s standard – based on research by Stonefish Consulting managing director Christopher Sier – will be broken into pension fund costs incurred by the scheme, asset management costs delivered by each manager and custody fees.
Sier concedes the proposed model does “not represent the entirety of costs” but would be “relatively quick and easy to implement” compared to the tighter standard suggested in Priips.
Siers adds that a voluntary code with regulator guidance “is the best way forward”.
He says: “The alternative is to impose something that might be extremely expensive and complicated to deliver whilst bringing us no nearer to the prize of full transparency and accountable asset managers and other service providers.”
Financial Services Consumer Panel chair Sue Lewis says: “The problems of cost opacity and conflicts of interest in asset management are well known and long-standing. We are always being told there is a solution just round the corner, whether it is European legislation or the work DWP and the FCA have done on transaction charges.
“While the direction of travel is welcome, millions of pension savers are still losing out year after year by paying too much in unseen costs and charges. We are recommending a small step that could be implemented quickly and make a big difference to tomorrow’s pensioners, without prejudicing more far reaching change to come.”
Investment Association interim chief executive Guy Sears says: “The alignment of the investment industry and consumer representatives on the future of charges and costs transparency has never been higher.
“The FSCP report supports the Investment Association’s views on mechanisms for the next generation of transparency, and is in line with our expectations for the new levels of disclosure to be introduced under European rules planned for the future.”
Scottish Widows head of industry development Pete Glancy says: “Whilst pensions get all the attention, people use a range of products to save for their retirement and its important that standards of disclosure are high but also consistent across all products to avoid confusion or regulatory arbitrage between products.
He adds: “Transparency needs to go hand in hand with simplicity in order that market forces can work to put pressure on firms to reduce costs and drive efficiencies. We have seen significant reductions in charges across both product wrappers and adviser charges following measures to increase the transparency and simplicity of charges in those areas of the value chain.
“I would expect similar market forces to start to have a similar impact on the asset management sector.”