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Simplitium's  cost transparency resolutions for Pension Schemes

News - 24.01.2018

Regulatory scrutiny of cost transparency is growing for all participants in the Pensions industry, with further obligations due in 2018.

Managing costs and charges associated with a pension scheme is central to its operation and can have a significant impact on the success of a scheme over the long-term.

Scheme representatives don’t always know what to look for or what questions to ask service providers. For many, costs remain widely unknown, misunderstood, and undisclosed.

Simplitium's team of pensions experts have identified 10 cost resolutions to help pension schemes manage costs more efficiently:

  1. Understand your obligations to disclose charges impacting your members. Check the scheme cost information you have to hand!

  2. Estimates show average pension scheme costs are between 1-3% (That’s 100-300bps). Check if you have all costs available; are you within that range?

  3. There are many costs to be mindful of, far beyond headline fees. Engage with your managers, consultants & cost specialists to understand the full range.

  4. Are you confident you have everything? Review the existing disclosure standards to check if you have all the charges listed.

  5. Don’t fixate on transaction costs - they are only a small portion of the pie. Other cost categories can have a much larger impact and need careful management.

  6. You may be surprised by your true costs. Don’t panic - costs are not necessarily bad, but can only be managed effectively when fully understood. Don’t overreact to new information. Commit to fully understanding costs before making new decisions.

  7. Once you have fully transparent cost information, start thinking about ‘Value for Money’. Be aware, many rush into this assessment, but incomplete cost data will undermine analysis. Don’t fall into the V4M trap!

  8. If you really want to assess if your costs are reasonable, discuss with peers to see what they are paying for similar services.

  9. Once happy with your cost information, combine it with information about your scheme’s risks & performance.

  10. Costs and charges can be complex to get to grips with. Help tackle the Transparency Challenge by talking to costs specialists.

ClaritEx is the next generation cost transparency solution for the Pensions industry. Powered by Simplitium, the service helps both the DB and DC Pension Markets access the information needed to make better investment decisions and meet increased governance obligations. In response to the ever-growing demand for greater transparency across UK financial services, ClaritEx provides comprehensive cost transparency to the UK Pensions industry. For more information, please visit the ClaritEx page.