The Financial Conduct Association (FCA) is consulting on proposed guidance to improve the disclosure of transaction costs in workplace pensions, with the aim to obtain a standardised disclosure of the costs that pension investments incur
Trustees and independent governance committees (IGCs) must request and report on transaction costs including as much information as possible but asset managers do not need to provide a full disclosure. The FCA is consulting on the suggestion to introduce a similar requirement on asset managers, calling for them to provide full disclosure of transaction costs in a standardised form.
Asset managers would have to calculate transaction costs on workplace pension scheme investments and disclose them to their clients, by doing this IGCs and trustees would then have the information they need to assess whether these costs offer value for money.
The consultation proposes that asset managers should provide a full breakdown of the transactional costs by reporting under categories of identifiable costs including specifics such as taxes.
By introducing a standardised disclosure process to asset managers, transactional costs would be reported consistently and the information provided would include a more complete assessment of the costs, allowing governance bodies to assess whether scheme members are receiving value for money.
Transaction costs can incur by money flowing into or out of the pension fund, members switching between funds, pension providers or trustees switching activities and because of investment decisions taken by the scheme’s investment managers.
Comments on the consultation must be sent to the FCA by 4 January 2017.
The FCA’s consultation on Transaction cost disclosure in workplace pensions is available here.