Pitmans Trustees (PTL), an independent trustee and governance services provider, has urged the FCA, government and industry not to overlook the fact that there are other costs for pensions, despite discussion focusing on transaction costs following the FCA’s Transparency Paper in the latter part of last year.
Richard Butcher (pictured), managing director at PTL, says: “Like many in the industry, PTL welcomed the FCA’s Transaction Costs consultation and Asset Management Market Study interim report because of what they said about costs transparency – anything that puts member outcomes central to its objective is a good thing. But with much of the industry focus and discussion dedicated to transaction costs, there is a real danger that the other costs are overlooked.
“Transaction costs, while hugely important, are just one piece of the jigsaw. On top of this there are other cost areas to consider including; explicit costs such as annual management charges (AMC), platform charges, member charges, exit charges and holding costs – such as those charged by custodians, audit fees and those for insurance with property investments. These costs then vary depending on factors like investment selection and whether any of these costs are bundled up into a single fee. So it’s currently very difficult to get a true picture of what a scheme is really costing its individual members.”
Butcher adds: “What the industry needs is a single measure to evaluate all of these complex costs in a holistic way. Complete transparency may never be realistically achievable, but that doesn’t mean schemes should be kept in the dark on the fundamental aspects of the costs they bear. Let’s hope the FCA’s focus on transaction costs is merely the first step in the right direction and not the last.”
