More than 80 per cent of scheme managers claim that not enough is being done to educate trustees on cost transparency, according to data from Kas Bank.
Furthermore, 32 per cent of trustees either do not know or do not factor in transaction costs when evaluating asset managers, despite the fact that transaction costs can amount to 20 per cent of total cost of ownership.
The survey was conducted at the Pensions and Lifetime Savings Association Annual Conference and, following an hour-long educational session, there was a 30 per cent increase in the number of trustees that said they would now scrutinise investment costs, including transaction costs.
Kas Bank UK managing director, Pat Sharman commented: “We are committed to supporting UK pension schemes, to both educate them on the subject of cost transparency, and support the collection, analysis and reporting of costs and charges, helping them to meet their governance and regulatory obligations.”
Kas Bank believes that cost transparency implementation by pensions schemes is beneficial, as it has seen changes in the Netherlands’ pensions market, of which it services around one third.
It found that the average total cost of ownership per pension scheme in the Netherlands fell by 37 per cent between 2015-16, which coincided with the introduction of a cost transparency framework, and widespread consolidation of Dutch pension schemes.
The PLSA has announced the Cost Transparency Initiative, which will be responsible for the new cost transparency framework, aimed at giving trustees a “clear and standardised approach to monitor and scrutinise costs across their suppliers”.
Sharman showed her support for the initiative: “We are delighted that the PLSA are leading the way, supported by the Investment Association and LGPS Scheme Advisory Board, with the announcement of the CTI, which will provide the pension industry with a much-needed standardised framework to ensure consistency and clarity on costs and charges”.