UK defined contribution (DC) charges are among the lowest in developed countries, new research from the Pensions Policy Institute (PPI) has found.
The educational charity published a 48 page report entitled Charges, returns and transparency in DC: what can we learn from other countries? yesterday (December 4), which showed UK scheme fees were similar to those in the US, and lower than in Australia.
Dutch and Swedish member charges were lower yet, but they were typically more complex, the PPI stated.
As well as having lower fees overall, the UK also does not exhibit a ‘long tail’ of high charging schemes, such as those seen in Australia and the US, the report stated.
In Australia, the number of funds significantly in excess of 1.5 per cent of annual management charge (AMC) – dubbed the ‘long tail’ - represent about 15 per cent of scheme members and 10 per cent of assets, according to the PPI.
Since 2015, UK providers have had to cap the charges within default funds to 0.75 per cent of funds under management per year. The average charge for large master trusts however, sits at about 0.5 per cent.
Last year, the minister of pensions and financial inclusion, Guy Opperman, said the cap was working broadly as intended and had helped drive down costs for members.
The UK charge cap of 0.75 per cent was key, but "regulatory action on older non-qualifying schemes combined with increased governance" was also a contributing factor, the PPI stated.
According to Daniela Silcock, PPI’s head of policy research, until recently, UK disclosure did not facilitate direct examination of how costs are changing, as it does in the Netherlands or Australia.
She said: "It may be important for all stakeholders in the UK market to have access to this data to manage outcomes better as scale grows in UK DC."
maria.espadinha@ft.com
