Total pension fund costs are still being hidden from consumers, the Financial Services Consumer Panel has said, as it proposes a new standard of reporting charges.
The panel has called on the Financial Conduct Authority, the Department for Work & Pensions (DWP) and The Pensions Regulator (TPR), along with professional and trade bodies, to define and put into practice a new standard for data collection on the costs and charges savers pay to UK pension funds.
Clear information on underlying asset management and other provider costs need to be included in charge calculations to help trustees and independent governance committees make fair judgements on value for money for scheme members, the panel said.
Sue Lewis, chairman of the Financial Services Consumer Panel, said: “The problems of cost opacity and conflicts of interest in asset management are well known and long-standing.
“We are always being told there is a solution just round the corner, whether it is European legislation or the work DWP and the FCA have done on transaction charges.
“While the direction of travel is welcome, millions of pension savers are still losing out year after year by paying too much in unseen costs and charges.
“We are recommending a small step that could be implemented quickly and make a big difference to tomorrow’s pensioners, without prejudicing more far reaching change to come.”
The standard is based on research conducted by Dr Christopher Sier commissioned by the panel in 2014, which provided examples of where actual costs for funds were higher than stated ones after all cost elements were tracked down.
For example one of the 89 Local Government Pension Scheme (LGPS) funds after chasing all outstanding invoices found that reported costs rose from 10 basis points to 92 basis points.
Actual costs to the LGPS fund did not rise, merely the way they were reported.
However, the panel claimed surfacing the costs in this way enabled the scheme governors to negotiate with suppliers and achieve a reduction in costs of approximately 10 basis points for 2014 to 2015.
