New tools should improve cost transparency

New standards that should enable pension funds to compare asset manager costs and charges have been launched by the Cost Transparency Initiative (CTI).

The CTI has developed templates and guidance for asset managers so they can report costs in a standardised format. The tools cover a wide range of pension fund assets and are expected to be adopted by pension funds, consultants and asset managers representing £2 billion in assets under management. The CTI, which has been strongly supported by LGPS members and grew from work done by LGPS funds and the LGPS Scheme Advisory Board, said it expects pension fund trustees to engage with asset management suppliers immediately and for asset managers to be able to report using the new standards from December 2019 onwards. LGPS cost reports will also shift to the CTI templates.

Speaking at the recent PLSA local authority conference, Roger Edwards, chair of the LGPS Scheme Advisory Board said that 117 asset managers working for LGPS funds had signed up to the code, as have the eight LGPS asset pools. Edwards said that the LGPS paid more than £1 billion in investment costs in the 12 months to 31 March 2018, or 0.39% of total LGPS assets of £375 billion at 88 funds in England and Wales.

CTI chair, Mel Duffield, commented: “This is another big step forward for this project and for cost transparency in the pensions industry. Each of the three founding organisations – the PLSA, IA (Investment Association) and LGPS Scheme Advisory Board – has shown its commitment to taking forward the excellent work undertaken by Dr Chris Sier and the entire IDWG team, and we are delighted to have reached this stage.” And Guy Opperman, minister for pensions and financial inclusion, commented: “High fees can eat into savers’ pension pots and add to employers’ costs. This initiative will help pension schemes take a holistic view of costs and charges as they strive to ensure their members get value for money.”