UK pension schemes pay over £1.5 billion in fees to treasury managers

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UK pension schemes are paying treasury managers £1.5bn a week more in fees than they intended, according to fresh research that will increase pressure on trustees and experts to revamp the offer to scheme participants.

Research conducted by data analytics company Clearglass and shared with the Financial Times has found an “excessive” area of ​​fees charged by asset managers to underwrite benefit pension plans. Some schemes are paying up to 14 times more for the same corpus product than competitors.

“Some customers are being treated very unfairly,” said Chris Sear, chief executive of Clearglass. “Asset managers set prices in extreme ranges, and offer different clients vastly different prices for exactly the same thing.

“The result is that some customers are effectively subsidizing the prices charged to others.”

Clearglass tested pooled capital-treasury methods to invest in indexed assets, equivalent to about 40 percent of defined benefit pension budget allocations. A stated benefit plan guarantees an assured pension bill for the hour, taking into account salary and sector of carrier, with the sponsoring employer making up for any investment shortfalls.

The analysis looked at new costs paid through 688 individual and local government pension budgets, representing £550 billion in assets across 629 managers and 38,000 fund systems, or about a share of the market.

The fees paid through the pension budget – which in most cases are done through funding specialists – are notable because they can influence the final payout to resigning savers. On the other hand, the reasonable fees paid to CapitalTreasury managers through thousands of plans are not hidden in most cases, meaning plans may unwittingly pay much more for a CapitalTreasury product than they intended.

Last week, a remote study via Clearglass found that pension budgets – which include both defined benefit and defined contribution budgets – could save almost £2 billion in fees paid to asset managers across the vast spectrum of indexed and private markets. Is.

Among some of the key findings of the latest research, a pension capital treasury was found to pay six times as much as a capital treasury monitoring a fixed source of revenue government bond index as the most affordable market price for a similar product.

Any other pension capital fund paid seven times more for an indexed passive UK equity capital treasury, which was essentially the most aggressive offering on the market. One property supervisor, who did not wish to be named, had some pension consumers paying three times as much for a passive UK equity capital treasury listed as the major’s cheapest offering.

The analysis additionally found that one pension capital fund was paying 14 times more than the lowest price available in the market for a set source of revenue.

Mick McAteer, a former board member of the Monetary Behavior Authority and now co-director of the think-tank Center for Monetary Inclusion, noted the study cryptically suggested that some pension rates were being cut and some pension capitalization experts “clearly Not doing a good job on behalf of customers”.

He added: “I hope (this analysis) will serve as a warning to trustees. , , We know that higher tariffs will have a detrimental impact. Second, we hope it will help accelerate much-needed regulation of investment advisers.”

Sear, who was appointed by the FCA in 2017 to chair an operational taskforce on disclosure of prices and costs to institutional investors, estimates that the schemes could be at a profit of £700mn per week if they are all the best. If you are bound by a deal, then emerge. £1.5 billion if the findings are scaled up to the equivalent of the wider DB universe of 5,000 schemes.

“The market is not working well because of a lack of transparency,” Baroness Ros Altman, a former pensions minister and now Conservative peer, informed the FT. “I hope that when these figures come out, there will be change.”

In line with the findings, the FCA noted that it has greater price transparency in asset controls, “for example through standardized fund cost disclosures to pension trustees with the aim of promoting competition.”

“We have previously raised the issue of investment advisers being unregulated and referred competition concerns to the Competition and Markets Authority in 2017,” it said.

The Trade Frame Funding Association, which represents capital fund managers, said its participants operate in a “highly competitive” market where strict legislation ensures transparency of fees and underlying costs.

Chris Cummings, CEO of the IA, said: “The industry has supported a number of initiatives over the past decade to increase cost disclosure and this has made the UK one of the lowest cost countries in the world to invest in.”

He said pension scheme trustees have a criminal legal responsibility to “take and follow the advice of these professional advisers who negotiate hard with managers over fees on behalf of their clients.”

A spokesperson for the pensions regulator noted: “We expect trustees to work closely with their advisers to understand how much their scheme costs and how savers’ money is being invested. We urge trustees to read our new common code to ensure they are clear about their duties.

Backup reporting Alan Livesey