In response to the FCA Consultation Paper CP16/30: Transaction cost disclosure in workplace pensions, published yesterday, Richard Butcher, Managing Director, Pitmans Trustees (PTL), the leading independent trustee and governance services provider, said:
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“Anything that puts member outcomes at the very heart of what it is trying to do is more than a welcome move. Transparency and disclosure are crucial if we are to get an optimal market and improve the financial future of members. But we question whether the FCA has gone far enough with its proposals. We have two key concerns:
“The first, is that while the FCA sets out a standardised method for calculating transaction costs, it does not set out a standardised method for reporting them. This is the equivalent of running the first 95m of a 100m race: it’s pointless and frustrates the purpose. If disclosure can be bespoked, a risk is created that managers can spin the outcome and hide inconvenient truths. It also means that trustees/IGCs cannot compare one manager with another – and an inability to compare undermines the point of disclosure. We need a level playing field.
“The second, is how this fits with the Charges and Governance regulations, which require trustees to consider “the costs incurred as a result of the buying, selling, lending or borrowing of investments”. What is proposed is that they see the amalgamated effect of these costs, not the costs themselves (or, at least, not all of them). While simplicity is often a virtue, I would argue that what has been proposed may not help trustees to comply with the law. In addition, if the breakdown of costs is possible to produce, then that is what should be done. The point of disclosure is surely to try and get efficiency and transparency in every respect.”
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