Pitmans Trustees (PTL) has fired a warning to the Financial Conduct Authority (FCA) to examine more than just transaction costs if it wants pension savers to get value for money.
“Transaction costs, while hugely important, are just one piece of the jigsaw,” PTL managing director Richard Butcher (pictured) said.
He wants to see annual management charges, platform fees, member costs and exit charges come under the watchdog’s microscope too. The holding costs charged by custodians, audit fees and charges linked to insurers’ property investments should also be on the FCA’s radar, the boss of the independent trustee provider believes.
Butcher’s comments are also aimed at the government as well as industry and are in response to an interim report from the FCA on asset managers. The upshot of the report is that the watchdog wants clearer pricing disclosure from those managing workplace defined contribution (DC) pension schemes to create more competition and expose poor performers.
The regulator also wants transaction charges to be broken down to help members identify specific fees such as taxes and securities lending.
This was the highlight of an interim review in October that is one of two landmark consultations the FCA is working on to help scheme members get value for money.
Butcher welcomed the FCA’s Transaction Costs consultation and the interim Asset Management Market Study report, believing that cost transparency benefits pension scheme members. His concern is that there could be too much focus on transaction costs while other fees are overlooked.
He admitted that evaluating all costs involved in managing a pension fund will not be easy. These costs vary depending on investment selection and can sometimes be bundled up into a single fee. “So it’s currently very difficult to get a true picture of what a scheme is really costing its individual members,” he added.
Butcher called for a single measure to evaluate all of these complex costs. “Complete transparency may never be realistically achievable, but that doesn’t mean schemes should be kept in the dark on the fundamental aspects of the costs they bear.
“Let’s hope the FCA’s focus on transaction costs is merely the first step in the right direction and not the last,” he added.
