FCA and DWP call for views on transaction cost reporting

FCA and DWP call for views on transaction cost reporting

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The Financial Conduct Authority (FCA) and the Department for Work and Pensions (DWP) have made a joint call for evidence on the disclosure of transaction cost information for workplace pension schemes.

From April this year, Independent Governance Committees (IGCs) and pension scheme trustees will be required to report annually on the costs and charges involved in managing and investing the pension pots of scheme members. The FCA and DWP are seeking opinions on how transaction costs should be reported in a standardised, comparable format.

"Pension savers need to have confidence that their hard-earned money is working for them,” said Minister for Pensions Steve Webb. "That is why it’s so important we understand all the charges that are placed directly and indirectly on pensions - and that pension schemes and trustees can present them to members in a clear and transparent way.”

"There is a fear that the dark corners of the investment and pensions industry hold some nasty surprises. We have a duty to throw light for the first time on potential hidden charges - and restore faith and fairness in British pensions."

The institutions are seeking information on what costs should be included in the transaction cost reporting, how such costs should be captured and reported, whether information about other factors that impact on investment return should also be provided and how IGCs and trustees will receive costs information and whether additional disclosure requirements on other parties are necessary to enable this. 

When, how and in what format members and/or other prescribed persons should receive transaction cost information will also be explored.

"Transaction costs and charges associated with workplace pension schemes have a direct impact on the value of people’s pension pots,” said Christopher Woolard, director of strategy and competition at the FCA. 

"We want clarity and consistency across the market and that is why we are asking for views on how costs and charges information should be disclosed."

The move has been positively received by UK industry body, The Investment Association and pensions business NOW: Pensions.

“The call for evidence provides an opportunity for all parties, most importantly scheme decision-makers, to help shape the disclosure regime at a critical time for the UK pensions environment,” said Daniel Godfrey, Chief Executive of the Association.

“Full transparency of costs and charges is essential in order to rebuild confidence in pension saving,” said Morten Nilsson, CEO of NOW: Pensions. “Getting to the point where transaction costs can be published in a standardised and comparable format isn’t going to be easy but, despite what many in the industry claim, it can be done.”

“It would have been preferable if this work had been completed sooner to help trustees and IGCs who are expected to gather information from April.”

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