Costs and charges
The consultation outlined there are three key elements of the value for money framework: investment performance, costs and charges and quality of services.
The government said where a sponsoring employer undertakes to pay certain costs or charges of its workplace pension scheme on behalf of its employees, this has the effect of improving the apparent investment returns net of all charges.
Therefore, it is proposing that investment performance should be disclosed net of the sum of member-borne costs and charges and all costs paid by an employer to a scheme or pension provider.
This would allow comparisons of net investment performance to be carried out on a like-for-like basis.
“Our overarching aim for requiring publication of costs and charges data is for trustees and IGCs to see how their overall costs and charges impact on the overall value they provide to their members and how this compares to other schemes,” it said.
“We want them to be able to use this data alongside services data to compare the quality of services with the costs charged for those services.”
Simon Grover, director at Quietroom, said: "The consultation considers reporting requirements and we believe how this information is presented will be key to the success of the initiative. Standardised templates and reporting will certainly help with comparisons, and this is something that came through strongly in the work we did on the simplified benefit statements.
"But we should also use this as an opportunity to rethink how we communicate and engage with members so people really understand the value of their pensions. Metrics and commentary will get us so far, but this is an opportunity to rethink how we communicate value to savers."
The government has proposed building on the definitions that underpin existing disclosures – primarily ‘administration charges’ and ‘transaction costs’.
“We want trustees and IGCs to take account of costs and charges throughout the assessment process, starting with net returns,” it said.
“However, we think that separate disclosure of costs and charges is also needed for clear comparison between schemes.”
The disclosure of investment charges only will complement the corresponding net returns metric, by showing how much a scheme is paying for asset management, including any performance-based fees.
Additionally, the disclosure of all “service” costs (all costs aside from investment charges and transaction costs), as a percentage of assets under management, will highlight differences between schemes and assessment of whether the services delivered are worth the cost, it explained.
