Start tackling transaction costs now and commit to a staged approach for future disclosure for member benefit, says NAPF

The National Association of Pension Funds (NAPF) today (Tuesday) published its response to the call for evidence by the Financial Conduct Authority (FCA) and Department for Work and Pensions (DWP) on ‘Transaction Costs Disclosure: Improving Transparency in Workplace Pensions’.

In its response the NAPF recognises the importance of understanding the costs of buying and selling investments in securing value for money on behalf of scheme members. The response calls on the FCA and DWP to grasp the scale of the challenge presented by capturing, analysing and measuring transaction costs. 

The response highlights that for many transaction costs there are currently no agreed definitions or methodologies; and, in addition, many costs are inconsistently applied and therefore very difficult to quantify. The NAPF estimates that for a large scheme the cost of hiring a consultant to collate the data needed to complete the existing template could be in the region of £20,000 a year.

Graham Vidler, director of external affairs, commented:

“The NAPF would like work to start immediately on the easily measured costs and then start to build a sustainable and practicable reporting framework for the more intangible costs. We believe we can learn from countries like the Netherlands, which have made good progress in this area by adopting a similar approach to this problem. 

“Further work will be needed to provide consistent and comparable information on transaction costs and rushing to use an advanced template before the inconsistencies in data are addressed threatens to increase costs for schemes rather than reduce them. 

“We call on the FCA and DWP to bring together and oversee a working group from the pensions and investment sector charged with implementing a consistent framework for reporting across all asset classes and product structures.”

The NAPF’s response goes on to make six recommendations to mitigate areas of the call for evidence that are of concern.  A copy of the NAPF’s response can be found on its website here.

Notes to editors:

The NAPF is the voice of workplace pensions in the UK. We speak for over 1,300 pension schemes that provide pensions for over 17 million people and have more than £900 billion of assets. We also have 400 members from businesses supporting the pensions sector.

We aim to help everyone get more out of their retirement savings. To do this we spread best practice among our members, challenge regulation where it adds more cost than benefit and promote policies that add value for savers.

Contacts:

Lucy Grubb, Head of Media and PR, NAPF, 020 7601 1726 or 07713 073023, [email protected]

Eleanor Bennett, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]