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IMA under pressure over transaction costs disclosure

Gregg McClymont 480

Politicians and advisers are piling pressure on the Investment Management Association to make disclosure of transaction costs compulsory for its members.

Last week, the Association of British Insurers announced plans to improve the disclosure of costs and charges by pension providers.

Providers will need to disclose total charges to employees at the outset, total charges in the previous year and the previous year’s transaction costs.

However, the ABI says the publication of transaction costs by providers will be based on voluntary IMA disclosure rules, meaning the transaction costs will only be available if the underlying fund managers are signed up to it.

So far, 14 pension providers have signed up to the new ABI standards, which are due to be implemented in summer 2014 for new automatic enrolment schemes and by 31 December 2015 for older schemes.

Labour shadow pensions minister Gregg McClymont (pictured) plans to write to pensions minister Steve Webb, the FSA and the Office of Fair Trading to outline the “deficiencies” in the ABI’s proposals.

Speaking to Money Marketing, McClymont says: “The ABI is intending to rely on the IMA disclosure rules as regards to declaring the costs of the investment funds in which pension schemes invest peoples’ savings. These rules are voluntary so not all fund managers will comply.

“The Government and the regulators need to get involved in setting the rules to ensure that everyone is saving into a pension in which they can trust.

“I will be writing to the pensions minister, the FSA and the OFT to explain the deficiencies in what the industry has been able to agree with respect to the declaration of transaction costs.”

Legal & General pensions strategy director Adrian Boulding says: “The IMA is starting from a position where it does not believe transaction costs are significant.

“Actually transaction costs can be very significant for some people, so I hope the ABI can influence the IMA to strengthen its requirements.

“If we are going to end up with a compulsory charges disclosure code for pension schemes, then it has got to include transaction costs. So we have to end up with a compulsory system where all of the fund managers can tell the pension fund providers who are using the funds what the transaction costs have been.”

Yellowtail Financial Planning managing director Dennis Hall says: “Advisers urgently need better disclosure from fund managers and once that happens, prices should be driven down. To get to that point I suspect we will need the regulator to get involved.”

IMA director of public policy Jonathan Lipkin says: “The IMA’s enhanced disclosure guidance is voluntary but we have an expectation that members will adopt it.

“While the IMA guidance only applies to authorised investment funds, it could clearly provide a template for the ABI to work on disclosure for pension scheme members within the life fund universe.”

An ABI spokeswoman says: “Our signatories are committing to work toward full disclosure of transaction costs in the timescales outlined and we hope and expect this will increase the adoption of the IMA’s code by fund managers to a comprehensive level of coverage.”

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