Pension managers say trustees must learn more about costs
More than 80% of UK pension scheme managers believe more action needs to be taken to educate scheme trustees about transaction cost transparency, according to a new survey.
In a poll it carried out among pension professionals at the recent annual conference of the PLSA, the UK pension fund association, KAS Bank said it found that 32% of trustees did not know – or did not factor in – transaction costs when evaluating an asset manager.
Citing the increasing focus on cost transparency in the UK – including the Financial Conduct Authority’s formation of an industry working group for disclosure and the subsequent launch of the Cost Transparency Initiative – KAS Bank said: “An industry push is needed to ensure that the various market participants are aligned.
“However, only with sufficient education will cost transparency be properly and successfully implemented in the UK,” it said.
The European custodian bank said the cost of trading could amount to 20% of the total cost of ownership (TCO) for an investment fund.
The advantages for pension schemes of making costs transparent had been made clear in the Netherlands: KAS Bank said it found that the average TCO per Dutch pension scheme fell 37% between 2015 and 2016. This was based on a survey of its Dutch clients.
“These findings coincide with the introduction of a cost transparency framework, and widespread consolidation of Dutch pension schemes,” KAS Bank said.
The Cost Transparency Initiative (CTI) was launched earlier this month by the PLSA – which represents UK pension schemes – the Investment Association, and the LGPS Advisory Board.
It will oversee trials of cost disclosure templates with a number of UK pension schemes, starting in the new year. The templates are designed to help asset managers report the many layers of costs and charges incurred during the investment process, including those related to transactions, brokerage, custody, legal services and performance fees.
Mel Duffield, pensions strategy executive at the Universities Superannuation Scheme, was appointed the CTI’s first chair.