Webb said the Government wanted to shine a light into the ‘dark recesses of the pensions industry’, and said that consideration would be given to including transaction costs within the default fund charge cap in a review to be conducted in 2017. He said the DWP was working with the FCA to develop standardised measures for disclosing transaction costs.
The Investment Management Association attacked the introduction of the charge cap, although supported calls for greater transparency around charges.
Webb said: “On transparency the OFT uncovered 18 different forms of and names for charges. In a further measure to shine some light into the dark recesses of the pensions industry we will introduce full standardised disclosure of all costs and charges, which will make scheme comparisons a reality for the first time.
The transaction costs that are currently hidden in complex and opaque investment chains will be exposed, so there will be new clarity about where a member’s money is really going.
“From April 2015 trustees and those who represent members’ interests in pension schemes will have a duty to obtain information on all charges. And we will start work straight away with the Financial Conduct Authority to develop standardised measures of transaction costs. We will use this information to consider whether another turn of the vice is needed in 2017 to take our reforms even further by potentially including transaction costs within the default fund charge cap.”
IMA director of public policy Jonathan Lipkin says: “While there is understandable concern in Government about assuring DC scheme quality, a charge cap is not the best way to achieve good outcomes and this was a key finding of the 2013 Office of Fair Trading (OFT) market study. Instead, the main focus should be on improving governance structures and standards across the DC environment.
“The IMA remains committed to working with Government and regulators to facilitate better governance as well as improved consistency and transparency of charges and costs disclosure. Such consistency and transparency is essential for building public trust in the pensions system.
“The Government has correctly recognised that charges and transaction costs should not be bundled together in a cap, again a clear conclusion of the OFT. Such an approach would have been counter-intuitive and counter-productive, unduly complicating the default design process and artificially constraining scheme decision-makers.”