The Financial Conduct Authority has recommended the Department for Work and Pensions removes barriers to pension scheme consolidation and pooling.

In its Asset Management Market Study, the regulator said doing so would help schemes that wish to benefit from economies of scale that might be achieved through consolidation.

“We believe that some schemes will be able to benefit from pooling assets, though we have found some barriers to doing this. We are therefore hoping to minimise these where possible.”

This is because the FCA has recognised a relationship between size and investment expertise and resources, with smaller pension schemes generally having fewer resources for governance and monitoring the performance of their asset managers and advisers. On the other hand, larger pension schemes are typically more attractive to asset managers, allowing trustees to negotiate lower fees per pound under administration.

However, the FCA has said that it does not propose to require trustees to publicly disclose all cost and charges information. However, the regulator noted that Section 44 of the Pensions Act 2014 places a duty on it and the DWP to require the disclosure and publication of information about transaction costs in DC schemes. It said it will consider the legal measures needed to meet the duties.

In addition, the FCA also proposed to support the disclosure of a single all-in fee to investors and MiFID II will introduce this for investors using intermediaries. This will include the asset management charge and an estimate of transaction charges.

It also supports the consistent and standardised disclosure of costs and charges to institutional investors. The FCA recommends that both industry and investor representatives agree a standardised template of costs and charges and it said it will ask an independent person to convene a group of relevant stakeholders to develop this further.

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