- 2017 Local Government Service Group Conference
- 22 February 2017
Conference notes that the combined assets of workplace pensions in the UK stands at £3 trillion and that 99% of that money is managed by commercial asset managers. The most shocking consideration in this process is that no pension fund either defined benefit or defined contribution can tell scheme members how much it costs to run the pension fund. In a report produced by the Financial Conduct Authority, the regulator of asset managers, found the following:
1) Asset management firms have consistently earned substantial profits with an average profit margin of 36%;
2) Investors (pension funds) are not given information on transaction costs in advance, meaning that investors cannot take full cost of investing into account when they make their initial investment decision.
In 2016 the West Midlands Local Government Pension Fund investigated costs in one asset, private equity, it found investment costs were £92m rather than the £10m reported to scheme members. It has been estimated by the Transparency Taskforce that annual fee extraction from our pension funds could be as high as £120bn.
These costs should be put back into our pension funds and not be taken by financial companies. This would mean defined benefit schemes would be more sustainable and defined contribution schemes would put more money back into the members’ pot.
We note success of the local government pension schemes in England, Wales and Scotland who introduced a voluntary cost collection methodology.
We therefore call on conference and the NEC to undertake a campaign with members, branches and regions to raise the demand for cost transparency in our member’s pension funds.
To place pension scheme cost collection on the bargaining table with employers who sponsor the defined benefit and contribution schemes of our members.
To demand government introduce the legislation to compel pension scheme trustees to collect and publish their scheme’s investment costs throughout the investment chain.