Currently, independent governance committees (IGCs) and trustees are required to report on transactions costs while asset managers are not.
The proposals will “place a duty on asset managers to disclose aggregate transaction costs to pension schemes that, directly or indirectly, invest in their funds”.
Under the new rules, asset managers will have to break down all transaction costs into specific sections such as taxes and securities lending costs.
The FCA said it expects the reforms to deliver a “high degree of consistency” in how transaction costs are reported.
“The proposals we are announcing today will allow IGCs to see fully the transaction costs that their funds pay and enable them to make better decisions about how they get value for money for their members,” said Christopher Woolard, executive director of strategy and competition at the FCA.
‘Promote transparency’
Nathan Long, a senior pension analyst at Hargreaves Lansdown, believe the new rules will “promote transparency within workplace pensions and may ultimately act to reduce some costs from fund management”.
However, disclosing fees may not be the only solution for improving value for money in pension schemes, added Long.
“What really matters to investors is the returns after all costs have been accounted for, fortunately this information is already in the public domain. The skill here lies in analysing which strategies offer value for money now, and which may continue to do so into the future. Greater disclosure of transaction costs alone will not solve this,” he said.
Meanwhile, Jonathan Lipkin, director of public policy at the Investment Association (IA), said: “The asset management industry is committed to introducing full charges and costs disclosure across all investment products and services.
“Transparency is crucial to ensure the confidence of our clients, so we welcome today’s consultation.”
