LONDON Asset managers in Britain will have a duty to disclose all transaction costs to workplace pension schemes that invest in their funds under the latest proposals by the financial regulator to improve transparency in a market with opaque fees.
Calling for responses to a consultation document by Jan. 4, 2017, the Financial Conduct Authority (FCA) said on Wednesday the planned rule changes would allow trustees and governance committees of defined contribution workplace pensions to properly assess if schemes provide value for money to members.
The FCA wants asset managers to break down transaction costs on request into identifiable categories, which could include taxes and securities lending costs, and compare the price at which a transaction was executed with the price when the order was received, the so-called slippage cost.
"The time an order enters the market should be captured by an order management system and this time can then be used to identify the price of the asset," the FCA said.
Pension providers and the asset management industry welcomed the proposals, saying transparency was crucial to ensure the confidence of clients and savers.
"Our goal here is consistent and complete reporting for all client groups, implementing both UK and EU regulatory change," said Jonathan Lipkin, director of public policy at the Investment Association, the trade body for UK investment managers.
The FCA consultation follows a March 2015 joint announcement with the government's Department for Work and Pensions to explore how information about transaction costs in occupational and workplace personal pension schemes can be better reported and disclosed.
The FCA said firms unable to provide transaction cost information for all of the assets in a scheme will have to disclose this clearly to the governance body with an explanation of why it has not been possible to provide it.
Opaque charges such as transaction costs can be small individually. But when added to other layers in a chain of costs, they can become more material, campaigners for cost transparency have said.
(Reporting by Kirstin Ridley; editing by Mark Heinrich)