The new Cost Transparency Initiative – designed to make it easier for pension schemes to compare fund charges – has launched its first set of machine-readable standardised cost templates.
These new templates enable asset managers, and other suppliers of services to pension scheme, to report costs and charges in a standardised format. The templates come with additional guidance to ensure maximum transparency.
These templates allow pension trustees to scrutinise and compare fees and charges from their different investment management suppliers and asset classes.
Those running this CTI say they hoping this will make it easy for trustees to challenge asset managers on fees and performance, to ensure savers are getting the value for money.
The tools cover the vast majority of pension scheme assets, and are expected to be adopted by schemes, consultants and asset managers, representing around £2 trillion in assets under management.
The Cost Transparency Initiative expects trustees to engage with their investment management suppliers immediately. It says it wants for asset managers to be in a position to report against December 2019 and April 2020 year-ends using the new Cost Transparency Initiative tools.
The CTI launched in November 2018. It was tasked with implementing, promoting and encouraging the use of the new cost transparency templates – as proposed by the former Institutional Disclosure Working Group (IDWG) – across the pensions and investment industries.
This working group was led by Dr Chris Sier, and long-time campaigner for greater transparency on fund charges and asset management costs.
Sier – who subsequently set up a ClearGlass Analytics welcomed this move. ClearGlass Analytics has been using the original templates since they were released by the FCA in November last year, working with 122 managers to help them understand how these templates work.
Sier says: “Asset managers can now definitively build out their systems to collect and distribute data automatically and at scale. The excuse that there is no ‘machine-readable template’ is no longer acceptable – not that it ever was.”
The CTI initially ran a pilot to test materials inherited from the IDWG, which was completed by around 20 participants – both asset managers and schemes. The pilot concluded in March and provided substantial technical feedback which has been incorporated into the final tools being launched by the CTI Board.
CTI chair Mel Duffield says: “This is another big step forward for cost transparency in the pensions industry.
“Each of the three founding organisations – the Pensions Lifetime Savings Association, the Investment Association and the Local Government Pension 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.
“We will now push for widespread adoption of the templates and guidance over the next 12 months and promote the benefits both savers and pension fund trustees’ can experience from their use.”
Duffield adds that the board will review the take-up of the templates after the end of the reporting period in April 2020, and will working closely with Government, regulators, and industry to ensure high adoption levels in the interim.
The minister for pensions and financial inclusions Guy Opperman says: “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.
“I’d strongly encourage trustees and investment managers to embrace the Cost Transparency Initiative and adopt the new templates. The Government will legislate robustly to make this happen if the industry does not resolve this on a voluntary basis at speed.”
Sier adds: “As to the extremely supportive comments from the Minister, I hope the need for primary enforcement legislation is now a thing of the past. The experience of ClearGlass over the past five months since soft-launch in January has been one of support from asset owners and asset managers alike.
“ClearGlass already has more than 37 pension clients with a collective asset base of over £120bn AUM. On behalf of these pension funds we have collected, or are collecting, data on over 600 mandates from 122 asset managers of all styles and sizes.
“Only five managers so far have refused to give data. Fortunately, the FCA would like to hear about any such managers and we ensure that all our clients know that they are at liberty to report managers to the FCA for non-compliance, and that the FCA will listen.”
He added that at an an institutional level, ClearGlass will always point at the definitive CTI templates and pass any feedback to the CTI to help with the advancement of both the templates, and the guidance surrounding them.
“Indeed, we have already submitted all of our own hard-won experience, guidance and additional data structures to the CTI to help them with today’s release. This is a market-level issue and the concept of proprietary IP is alien to us. What we learn we share. This is the only way for the market to change rapidly.”