UK pension funds should look towards the cost-reporting framework established in the Netherlands, with an industry kite-mark proposed.
In a report by the Financial Services Consumer Panel (FSCP), a statutory body advising the Financial Conduct Authority, Christopher Sier of Stonefish Consulting weighed up options for improving cost transparency – including regulatory standards, or a voluntary code developed by the industry.
He singled out the voluntary code as allowing for a swift introduction, and one that could be boosted by selling disclosure to asset managers as a competitive advantage during tender processes.
Sier also suggested compliance with the code could be written into future asset management contracts and eventually developed into a kite-mark to allow trustees to assess costs easily.
The report further suggested the ongoing reforms of the local government pension schemes (LGPS), currently being mandated by the government to pool assets, could be used as an impetus to develop a kite-mark.
He repeatedly held up advances in cost disclosure in the Netherlands as a model for the UK industry to emulate.
Stewart Bevan, product specialist for cost benchmarking at the UK subsidiary of Dutch custodian bank KAS Bank, said the UK could benefit from emulating the “tried and tested” Dutch model, developed in an industry-led initiative and soon to be enshrined in law as a mandatory disclosure framework.
“Rather than hesitate,” Bevan said, “this is the time to begin to implement a solution to address the problem of undisclosed pension fund costs.
“As the paper says, it is about the art-of-the-possible rather than the art-of-the-desirable.”
Bevan also said Sier’s idea to develop an independent organisation in charge of monitoring the new reporting framework, rather than relying on regulatory enforcement, required further consideration.
Guy Sears, interim chief executive of the UK’s Investment Association, previously welcomed the FSCP report, arguing that alignment between the interests of consumers and the investment industry had “never been higher”.
The comments come months after Daniel Godfrey was forced out as head of the industry body over his championing of a code of conduct for asset managers, which included an emphasis on fee transparency.
The association is currently designing a new cost transparency framework, updating work first undertaken when the Markets in Financial Instruments Directive first came into force in 2007 to comply with its successor directive.