Defined contribution (DC) pension schemes might fail to disclose transaction costs to their members, as asset managers are still struggling to compile all the necessary information, new research has concluded.
Consultancy firm LCP surveyed 20 DC asset managers and five of the largest DC pension providers, concluding that 56 per cent of respondents won’t be able to provide full transaction costs in time for their March year end statements, as stipulated by new requirements.
The Department for Work and Pensions (DWP) introduced new legislation last year which will allow workplace pension members to compare pension charges online, as the disclosure of this information from managers and trustees has become mandatory.
Asset managers have had to provide transaction cost data for the day to day management of the funds using a uniform calculation methodology since January this year, according to Financial Conduct Authority (FCA) rules.
The scheme trustees do not only have to publish a percentage figure for fees levied on pension savings, but also provide a "pounds and pence" illustration so members can see how charges hit their growing retirement pot.
The new rules have been introduced for all annual chair statements from the year ending 6 April 2018.
LCP’s survey respondents had greater confidence, however, when it came to providing members with transaction costs for annual statements ending next June, with more than half of managers and schemes saying they would be in a position to do so.
According to the consultant, asset managers are facing problems with the initial reporting due to a lack of data available, as some elements of the FCA’s new methodology have not previously been monitored.
As a result, managers have had to rebuild internal technology within less than 12 months, it said.
According to Laura Myers, LCP partner and head of DC, "the FCA legislation mandating the calculation of transaction costs has been at short notice, and providers still need to build the internal technology necessary to record the required information".
She said: "It is likely there will be further delays until complete disclosure of transaction costs is possible.
"Longer term, the news is more positive, with managers and providers are seemingly confident that transaction cost information will be available and in a format that can be understood by all involved in running and saving into DC pensions.
"In light of the intentions of the FCA’s regulation in the first place, that appears to be a productive step forward."
maria.espadinha@ft.com
