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New tools allow pension schemes to deliver greater value for savers

May 21, 2019 | Pensions
New tools allow pension schemes to deliver greater value for savers

New tools helping pension schemes deliver greater value for money for millions of savers have been launched by the Cost Transparency Initiative

The new standards comprise of templates and guidance for asset managers – and other suppliers of services to pension schemes – designed to enable them to report costs and charges in a standardised format. They will allow pension scheme trustees to make clear costs and charges comparisons across their different investment management suppliers and asset classes. This, in turn, will make it easier for trustees to scrutinise and challenge costs and performance and ensure savers are getting the best value for their investments.

The tools cover the vast majority of pension scheme assets and are expected to be adopted by schemes, consultants and asset managers representing around £2 trillion in assets under management. The Cost Transparency Initiative expects trustees to engage with their investment management suppliers immediately, and for asset managers to be in a position to report against December 2019 and April 2020 year-ends using the new Cost Transparency Initiative tools.

Launched in November 2018, the Cost Transparency Initiative was tasked with implementing, promoting and encouraging the use of the new cost transparency templates – as proposed by the former Institutional Disclosure Working Group (IDWG) – across the pensions and investment industries.

The Cost Transparency Initiative ran a pilot to test materials inherited from the IDWG which was completed by around 20 participants – both asset managers and schemes. The pilot concluded in March 2019 and provided substantial technical feedback which has been incorporated into the final tools being launched by the Cost Transparency Initiative Board today. The feedback will also help shape future developments. The Cost Transparency Initiative now expects the templates and guidance to be adopted across the industry.

Mel Duffield, Chair of the Cost Transparency Initiative, said: “This is another big step forward for this project and for cost transparency in the pensions industry. Each of the three founding organisations – the PLSA, IA and LGPS Scheme Advisory Board – has shown its commitment to taking forward the excellent work undertaken by Dr Chris Sier and the entire IDWG team, and we are delighted to have reached this stage.

“We will now push for wide-spread adoption of the templates and guidance over the next 12 months and promote the benefits both savers and pension fund trustees’ can experience from their use. The Board will review the take-up of the templates and guidance after the end of the reporting period in April 2020 and will be working closely with Government, regulators, and industry to ensure high adoption levels in the interim.”

Guy Opperman, Minister for Pensions and Financial Inclusion, said: “High fees can eat into savers’ pension pots and add to employers’ costs. This initiative will help pension schemes take a holistic view of costs and charges as they strive to ensure their members get value for money.

“I’d strongly encourage trustees and investment managers to embrace the Cost Transparency Initiative and adopt the new templates. The Government will legislate robustly to make this happen if the industry does not resolve this on a voluntary basis at speed.”

The Cost Transparency Initiative is supported by the Pensions and Lifetime Savings Association (PLSA), the Investment Association (IA) and the Local Government Pension Scheme Advisory Board following on from the IDWG’s report to the Financial Conduct Authority last year.

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