The Financial Conduct Authority has launched a consultation on proposed rules for transaction cost disclosure in workplace pensions.

Currently, governance bodies of pension schemes have a duty to request and report on transaction costs as far as they are able. The FCA is consulting on proposals that will mean asset managers will be required to do the same duty.

Therefore, the FCA is proposing that asset managers should provide transaction costs on request, as a total cost with a breakdown into categories of identifiable cost. In the consultation paper the FCA sets out guidance on the methodology used for disclosure of ‘slippage costs’. This compares the price achieved within the fund with the price at the point of making the transaction.

“We consider that this will lead to greater availability of transaction costs for governance bodies. Because Section 44 of the Pensions Act includes an equivalent duty to make rules around the publication of administration charges, these rules also include a requirement to provide administration charges in response to a request,” the paper said.

Hargreaves Lansdown senior pension analyst Nathan Long said: “The FCA requires Independent Governance Committees who are the overseers of workplace pensions to assess value for money including transaction costs. Until now information has been hard to come by often with no standardised way of calculating all costs.

“If implemented these rules will promote transparency within workplace pensions and may ultimately act to reduce some costs from fund management. Analysing transaction costs alone though is not enough. The costs will differ based on different styles of fund management and types of assets invested in.

“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.’

The consultation closes on 4 January 2017 and can be accessed here.

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