Defined Contribution  

Provider slams FCA analysis of fee disclosure

Provider slams FCA analysis of fee disclosure

Aegon has told the Financial Conduct Authority that it is underestimating the cost providers will face when disclosing charges to workplace pension scheme members.

In its response to the watchdog's consultation CP19/10: Publishing and disclosing costs and charges to workplace pension scheme members and amendments to COBS, which closed in May, the provider said it had "significant concerns" with the approach taken by the FCA in its cost benefit analysis.

The FCA is proposing that providers’ independent governance committees disclose costs and charges on an ongoing basis to members.

The regulator expects that the overall cost of compliance with the new rules will be a one-off total of £13,050 and an ongoing cost of £2,320.

But Steven Cameron, pensions director at Aegon, said that providers typically set charges on an employer by employer basis, reflecting the nature of the workforce.

The default fund and other funds available to employees of different employers are often different and even if the same fund is available, it can have different charges, he noted.

"This can mean there are thousands of combinations of scheme charges, fund charges and transaction costs," he added.

Mr Cameron argued this will create an added cost for IGCs in being able to familiarise themselves with this data set.

He said: "But the greater cost will be for the firms in having to create the database; develop the calculation routines; update these; and make them available to members in a way that allows them practical and meaningful access.

"While we have not carried out a detailed assessment, it would not be unreasonable to speculate this could involve a six-figure sum per workplace pension provider."

In the consultation, the regulator explained the rationale for the low-cost benefit analysis. It stated that scheme governance bodies already have a duty to request and report on charges and transaction costs as they are able for the default arrangement, and the range of charges and transaction costs for other arrangements.

The FCA officials also noted this information must be included in the chairman’s statement and is available to members upon request.

"They should, therefore, already be familiar with the charges their members face," it added.

It did not want to comment on Aegon's remarks.

The consultation was a result of the recommendations made by the Office of Fair Trading in 2013 – which concluded that competition alone wouldn’t drive value for money for all savers in that market. Since then, the FCA has been working with the Department for Work and Pensions to design and implement a package of reform measures in this area.

The goal is to ensure that scheme members can find the information about costs and charges they require to establish that they receive good value for money from their pension scheme, and if it will meet their needs for future retirement.

But Mr Cameron also argued that DWP regulations stated that if there is a wide range of different investment returns for the various funds offered by the scheme it is permissible to present a selection.