Actuaries more 'competitive' with fees for smaller pension schemes
UK - Actuaries are more competitive when assessing fee structures for smaller schemes in the UK, according to a pension consultancy's survey of fees charged for core services.
Examining the fees levied at small, medium-sized and large schemes for routine pension fund tasks - such as conducting a triennial or annual valuation - by more than a dozen actuarial firms, Kim Gubler Consulting (KBC) found that competitive advantage dropped away when contracts were tendered by the largest pension schemes.
Compiling a list of 23 potential services, KBC dismissed claims that a comparison of actuarial fees was not possible - as some firms offered a larger variety than other surveyed. It argued that the majority of companies offered around 90% of all service categories, allowing for a fair like-for-like comparison.
Examining the fees charged small pension funds for annual actuarial activities varied by £21,000 (€24,000) between the cheapest and most expensive actuary.
The survey added: "This is a 40% reduction from 2010 and indicates much greater competiveness at the smaller scheme size. Six firms charge less than the average cost. The most expensive firm is one and a half times more expensive than the average annual cost, and the lowest provider is almost half the cost of the average fee."
However, it found that fees levied at large schemes were significantly higher, with the discrepancy alone between the highest and lowest fee only 13% less than the highest fee reported in its previous survey.
The survey said: "Interestingly, it seems this year the majority of firms' fees are above the average annual actuarial fee, compared to last year when the majority were below.
"This indicates the improved competitiveness shown in the smaller schemes is not so evident here."
It added that the most expensive price charged for annual actuarial activities was almost twice that of the average fee.
Considering the price of all costs it surveyed, including corporate actuarial valuations and ones conducted ad hoc, KBC found that large schemes were particularly vulnerable to steep differences in fees, with the most expensive firm being nearly three times more expensive than the lowest charging firm and 37% more than the average.
However, the survey concluded that the above was an "overall improvement" of about one-third over its 2010 results, with less difference found overall between charges, leading to a "more balanced" result.