Shadow pensions minister Gregg McClymont and the Investment Management Association have clashed over the appropriate level of disclosure on investment charges.
The IMA published guidance on disclosing fund charges in September 2012, following industry consultation. The guidance, known as the IMA’s Statement of Recommended Practice asked fund managers to provide three-year averages for transaction costs, including broker commissions and taxes, as a percentage of a fund’s net asset value.
It also called on fund firms to disclose all ongoing charges rather than just annual management charges, and clearly explain the purpose of charges such as entry and exit costs, performance and transaction fees.
Speaking to Money Marketing at the Labour party annual conference in Brighton, McClymont said the IMA’s guidance does not go far enough.
He said: “Decisions on costs and charges cannot be left to trade associations whose members have a potential interest in not declaring all charges.
“While the IMA have adopted a draft disclosure table which contains some steps forward, it still leaves out key cost components.
“This is a case of a trade association being obliged by its members to walk slowly backwards from bad practice rather than seizing the moment to actively pursue the interests of savers.”
McClymont wants charges to be broken down to include the bid offer spread, the transaction costs of underlying funds where a fund invests in another fund, and the level of profits retained, if any, from fund managers from lending stock owned by the pension scheme or from interest earned on cash.
But IMA chief executive Daniel Godfrey says: “Gregg is a good guy, but he is completely wrong on this. He appears to be getting his opinions from people who have no interest in what is best for consumers, but only what is best for their own egos.
”The IMA’s proposals for accounting to investors for the costs they have incurred from being in a fund are simple, comprehensive and transparent.
“They represent a dramatic step forward and avoid repeating the mistakes of the past where attempts to deliver ‘supposed accuracy’ have left consumers with a bewildering calculation that often depends on making heroic assumptions about the future.”
McClymont has previously tabled an amendment to the Pensions Bill to force pension providers to disclose all costs and charges but it was rejected by the Government. Labour will push for the amendment again at the third reading in the House of Commons later this year.