Cost transparency template should not be compulsory, ABI warns

Implementation of the new cost and transparency templates should not be made compulsory, the Work and Pensions Committee has heard.

Giving evidence in front of the Committee as part of their pension cost and transparency inquiry today, 5 December, Association of British Insurers (ABI) director of policy, long-term savings and protection, Yvonne Braun, said that compulsion should remain flexible at the operational level.

The template, which aims to give trustees clarity from asset managers on costs and charges, as well as allowing for comparisons across suppliers, was launched following the report from the Institutional Disclosure Working Group (IDWG) to the Financial Conduct Authority (FCA) earlier this year.

Braun said: “I think it is important to distinguish who the compulsion is actually on. There is compulsion on trustees and independent governance committees (IGCs) to disclose the charges and transaction costs.

“So the argument we were having is whether or not the disclosure templates should be compulsory or not. My view is that as soon as you get into things that are deeply operational, you usually better advised to leave that flexible and leave the compulsion at the top end. ”

Pensions and Lifetime Savings Association (PLSA) director of policy, Nigel Peaple, added that should the framework not be adopted over the next two years, he would be “making the case to parliament that it should be mandatory”.

“With regard for DB schemes, the government is on the cusp of reform at the moment and there is talk of a chairs statement and we think, if that were to be required … then this would be an obvious thing to put in there as well,” he said.

Last month, the Cost Transparency Initiative (CTI) was launched, backed by the PLSA, Investment Association and Local Government Pension Scheme Advisory Board, responsible for promoting and encouraging the use of the templates.

Furthermore, Peaple thinks that while uptake among trustees will be strong, smaller schemes will be much slower in putting the initiative into action.

He said: “The larger schemes, which are well resourced and where trustees are well supported in their decision making, are already doing something with this and I’m confident they will do it quickly.

“For the smaller schemes it will be slower, but I think through education and from the asset management and consultancy industry, fund managers are also very keen to demonstrate that they are being open with what they do, I am optimistic.”

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