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KAS BANK launched the first UK pension cost transparency dashboard in 2017, with the Superannuation Arrangements of the University of London (SAUL).
SAUL used the dashboard to achieve greater visibility of its total costs, with an emphasis on transaction costs at an investment mandate level.
Although it has taken a while for the UK pension industry to get to grips with cost transparency, and there has been some heated debate, KAS BANK are now seeing a spike in interest from UK pension schemes as they recognise the benefits of a better understanding of their costs and the necessity for assessing value for money.
Despite the momentum gathered, two key challenges remain, the first being a widespread adoption of cost transparency and secondly, the education of trustees and pension scheme executives on the subject.
The institutional disclosure working group (IDWG) templates due to be published, will provide the UK industry with an all-inclusive standardised framework for collecting the majority of costs incurred by a pension scheme.
The templates will support a deeper dive into the alternative investment strategies (often criticised for the opaqueness of fees) and more scrutiny on custody and administration fees.
”Cost Transparency is on the regulatory agenda”
Whilst this will give pension schemes a standard framework to collect costs from their service providers, there remains the challenge for pension schemes to contend with the large volume of new information coming their way, and importantly, to report on it effectively to members.
On the topic of education, the 2017 FCA Asset Management study found that investor awareness of costs and charges are poor, and whilst largely the case on the retail side, this finding still rings true with institutional trustees and pension scheme executives.
In bullish periods, it is easy to focus on a high net return figure and neglect the costs associated with it. However, as we slowly approach the end of a bullish market cycle again, the industry now needs to ensure that we support investors (including trustees and pension scheme executives) on the education of the array of different costs and charges.
These costs should be viewed in the context of investment strategy, risk and returns, and the service they are receiving, so that they are well equipped to truly assess value.
Cost Transparency is on the regulatory agenda, with the regulator demanding trustees assess value for money on the costs incurred by members. This assessment has to be reported on the DC’s chairs statement, and non-compliance will incur a fine, so it is important for schemes to ensure they are well informed and supported to carry out these fiduciary duties.
KAS BANK is committed to the education of trustees and pension executives about cost transparency and has conducted a Trustee Learning Zone at the PLSA Annual Conference. For further information on cost transparency, KAS BANK has also written and sponsored the PLSA Made Simple Guide to Cost Transparency which is now available online at https://www.plsa.co.uk/Policy-and-Research-Document-library-Cost-transparency-Made-Simple.
Pat Sharman, UK Managing Director of KAS BANK commented: “We are committed to supporting UK pension schemes, to both educate them on the subject of cost transparency and also complete the collection, analysis and reporting of costs and charges, to ensure they meet their governance and regulatory obligations.
“One year on and the dashboard has proved the benefit of detailed cost reporting, both to uphold high governance standards and demonstrate true value for money. We now look forward to working with our UK pension scheme clients over the coming months to help them better understand their total cost of ownership in context of their strategy and risk appetite.”
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