For immediate release: Wednesday 8th  May 2002

 

GREATER TRANSPARENCY OF PENSION FUND COSTS

 

The IMA, in conjunction with the NAPF, today publishes its Pension Fund Cost Disclosure Code, which will lead to significantly improved transparency for pension fund trustees, as recommended in the Government’s response to the Myners Report. 

The objective of the Code is to assist pension fund trustees’ understanding of the charges and costs levied on the pension fund assets, and to provide a basis for discussion of these matters with fund managers.  It will provide a comprehensive, clear and standardised reporting format that will allow trustees to monitor and compare all costs incurred during the management of the fund’s assets.

Disclosure requirements

In order to promote greater transparency, the Code extends beyond the disclosure of transaction costs to disclosure of all costs incurred directly, or indirectly, by pension fund portfolios during the fund management process.

The Code proposes a two-level approach to disclosure. Level One Disclosure addresses company-wide policies, in-house processes and procedures in relation to the management of costs incurred on behalf of clients.  Level Two Disclosure provides client-specific data, in particular identifying transaction costs to an extent and level of detail that provides meaningful information for trustees.  Managers can only claim compliance with the code if they comply with all aspects of both Level One and Level Two.

Implementation Timetable

Taking account of the practical constraints, the Code proposes the following:

• To adopt reporting systems so that the generic information required for Level One Disclosure for half yearly or annual reporting periods ending during 2002 is in place by the end of this year or earlier.

• To install or amend systems with high priority, so that data collection can commence to enable the more detailed client-specific Level Two Disclosure to be made for half yearly reporting periods commencing during the first half of 2003.

The proposed timetable will be challenging for some, but the IMA urges any members that already have some disaggregated cost data to seek to comply with the Level Two Disclosure requirements from an earlier date.

Richard Saunders, Chief Executive for the IMA, commented:

 “Pension fund trustees and their advisers are rightly concerned to monitor how their assets are being managed.  This Code will, for the first time, give clear but detailed and specific information to pension fund clients, which will enable them to understand and question how their funds are being used, strengthening and improving the dialogue with managers.”

Ken Ayers, NAPF Investment Council Vice-Chairman, and Chairman of the working group which developed the Code, added:

“The new Disclosure Code will give pension fund trustees access to a better, more transparent breakdown of exactly what they are getting for their money.  It will help focus the minds, both of trustees and fund managers, on ensuring schemes value for money for millions of pension scheme members.  There is no question of partial compliance.   Managers either comply with all aspects of the Code, or they do not comply."”

 

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For further information please contact:

Richard Saunders, Chief Executive, IMA, 020 7831 0898

Clare Arber, Head of Communications, IMA, 020 7831 0898

Andy Fleming, Press & PR Manager, NAPF, 020 7808 13

Notes to Editors:

1. A copy of the Code is attached. 

2. The Code was drawn up by a Joint IMA and NAPF Working Party, in consultation with the IMA membership.  The Code has now been formally adopted by the Board of Directors of the IMA and endorsed by the NAPF Investment Council

3. The IMA and NAPF have agreed that, within 18 months to two years time, the Joint Working Party should carry out a progress review to ensure that the information that our Members are providing to pension fund trustees is proving to be both beneficial to the trustees and that the Code enables managers to provide that information in a cost effective way.

4. Most of the costs requiring disclosure are already available to managers, in order to comply with FSA requirements.  They have not however been required to be collected on a scheme-by-scheme basis. Since it is not possible to separate the data retrospectively, some managers will have to start collecting data on a scheme-by-scheme basis for the first time.  Furthermore, most managers will have either to make adjustments to existing data capture systems or to install completely new systems, and will have to redesign their reporting systems.  For these reasons, it is expected that most fund managers will not be able to provide full Level Two disclosure immediately, and the Code does not come into full effect for Level Two for periods starting before January 2003.

Attachment: Pension Fund Disclosure Code

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