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New standards will allow pension schemes to achieve greater value for savers’ money

17 Jun 2019

Joe Dabrowski, head of DB, LGPS and Standards at the PLSA

Cost transparency from asset managers and service providers is one of the key ways pension schemes can ensure that they are achieving value for money with the investments they make for savers retirements. If we are to ensure that schemes are well run, and continue to provide value for money for savers, making sure that people have a clear understanding of their costs so that they can make informed judgments on investment services is a vital competent to the overall health of a pension scheme.

It’s for that reason that we within the Cost Transparency Initiative are so pleased to see our new industry standards for reporting investment costs and charges entering the marketplace.

While we know that pension schemes work extremely hard to obtain value for money, there hasn’t been an agreed way of reporting costs across the industry. To that end the new standards we are making available to the sector will help pension scheme trustees understand the costs of their investment services, and provide a standardised and comparable means for asset managers to report costs to clients.

The standards – which comprise of templates and guidance – cover the vast majority of assets invested in by pensions schemes. Following their launch, we are expecting them to be taken up by schemes, consultants and asset managers representing around £2trn worth of savers’ funds.

It’s our expectation that trustees immediately start talking to their managers about reporting their costs against the standards. We’re keen to see early adoption and we’d expect asset managers to be in a position – at the very latest – to report against December 2019 and April 2020 year-ends using the new Cost Transparency Initiative tools.

When we launched in November 2018, the Cost Transparency Initiative was tasked by the former Institutional Disclosure Working Group with implementing, promoting and encouraging the use of the new cost transparency templates across the pensions and investment industries. A challenge we gladly took on.

The Pensions and Lifetime Savings Association, the Investment Association and the Local Government Pension Scheme Advisory Board – the three founding bodies – we are now able to deliver and achieve the Cost Transparency Initiative Board’s goals and we are delighted with the progress it has made so far.

These standards will give investors the necessary information to compare charges between providers, give them a clear expectation of the disclosure they can expect, and ultimately deliver better value for money for members and employers.

It’s been a case of a lot of hard work going on in the background and we’ve already seen a great deal if industry buy-in. For example, the Cost Transparency Initiative ran a pilot to test materials. This was completed for hundreds of mandates only possible with the support of dozens of asset manager and pension scheme participants; both providers and investors. 

Concluding in March 2019, this pilot phase provided substantial technical feedback which the Cost Transparency Initiative Board has incorporated into its designs. Without the time and effort from those taking part we would not have been able to give these standards real-world tests that not only got us to this point but will also help shape future developments. With the standards launched and entering the market, the real work starts now. The Cost Transparency Initiative intends for the new standards to be adopted by all schemes and firms. For that to happen, we have to continue to work with asset managers and pensions schemes to not only show them why they should adopt the standards for their own benefit, but also why this work will help protect and enhance the investments of millions of savers throughout the UK and help them achieve a better retirement.

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