CTI framework usage increases to 79% of pension schemes

The proportion of pension schemes using the Cost Transparency Initiative (CTI) framework increased from 56 per cent to 79 per cent between May and November last year, according to the Pensions and Lifetime Savings Association (PLSA).

In a survey of 43 schemes, nearly two-thirds (64 per cent) of those using the standardised templates and tools had reviewed costs and value for money as a result of the information received.

One in five (20 per cent) had acted on the costs and charges information received, while 9 per cent had reviewed their asset allocation.

Almost nine in 10 (89 per cent) found the framework easy to access, 74 per cent said it was easy to understand, and 70 per cent said the format suited the needs of their organisation.

However, the research also found several areas where improvements could be made, including around the templates’ limitations in capturing charges associated with property funds, illiquids and funds of funds.

Additionally, a need for additional promotion and guidance to improve understanding was identified, particularly regarding timescales for completing CTI templates and how to calculate specifics costs in specific ways.

The PLSA noted that the CTI is working to address these issues and will publish additional case studies later this year to help schemes make the most out of CTI data and challenge their managers where appropriate.

The CTI will also be considering whether further guidance can be provided in relation to benchmarking costs information and how this might relate to value for money more widely.

Commenting on the findings, PLSA policy board member and CTI chair, Mel Duffield, said: “The high level of uptake and growing awareness of the potential benefits show the CTI framework is making a significant impact on the market. As awareness of CTI reporting has increased, asset managers and intermediaries are working together to provide the information that schemes need to understand their costs and charges.

"This has already translated into tangible benefits for some schemes and we only expect this to gather pace through the course of this year and beyond.

“As we move into the third year since the CTI templates were first published, we will be doing more to encourage trustees to work with the templates.

“In a challenging investment environment post pandemic, understanding costs is as important as ever. The expectation continues to be that the CTI framework becomes the standardised way of reporting investment costs, right across the pensions industry.”

Local Government Pension Scheme Advisory Board board secretary, Jeff Houston, added: “The CTI templates continue to provide a vital element of the board’s Code of Transparency and are instrumental in enabling online submissions via the board’s compliance and reporting system.

“In particular, the availability of standard templates was pivotal in a disclosure rate of 96 per cent for costs relating to 2019/20 in what was a very difficult year when priorities were understandably elsewhere.

“There remain gaps in understanding of the templates and technical difficulties in their completion as well as uncertainty on how best to make use of the increased cost data but, without doubt, the direction of travel to greater transparency is now set.”

The CTI is a framework, a partnership initiative between the PLSA, the Investment Association and the Local Government Pension Scheme Advisory Board.

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