Understanding the true costs of your pension providers (Sponsored)

Aug 20, 2019

The weight of regulation on pension scheme sponsors is ever increasing as more obligations are being placed by the IORP II (Institutions for Occupational Retirement Provision) Directive as well as by the Pensions Authority.

For example, under the IORP II Directive, sponsors and trustees will be required to:

  • have clear governance systems in place which ensures proper oversight of all aspects of a pension scheme.
  • provide sufficient information to enable members to understand the impact of costs on their pension entitlements and to compare pension scheme cost levels.
  • understand the role of the trustee board, ensure that the composition of the board is fit for purpose, that it meets regularly and that trustees themselves have met fit and proper criteria.

Unsurprisingly, as a result of these regulation changes, there has been an increase in the outsourcing of governance responsibilities to professional pension providers. While this can relieve sponsors and trustees of the regulatory burden, and offer economies of scale that should deliver better outcomes for members, outsourcing presents its own challenges, principally in relation to transparency and value for money.

Trustees and finance professionals should be challenging their advisors and providers to demonstrate that both the scheme and members are getting maximum value for their money and insist on 100% transparency at all times.

Fee structures vary from provider to provider, so how do you know who is being paid for each element, and for what they are being paid? What does the fee to the provider cover? Are there any additional fees which are not included in the base cost? Are there hidden investment charges? Does the manager earn money from using in-house funds or do they receive fees from using certain preferred investment managers? The manager might be offering some quite sophisticated funds and strategies, which can carry higher fees, but it should be possible for trustees and members to see if the relatively high fees charged can be justified by the potential returns from the strategy.

These important questions can only be answered if there is real clarity and transparency. To help with this, Aon are hosting a FREE webinar on Wednesday 25 September, 10:00AM.

This webinar will give finance professionals and trustees insights to the questions you should ask to help you gain a clearer understanding of what your scheme is paying and to whom. Aon will also share insights into developments within the UK market that empowers schemes to compare cost and performance of investment managers.

You can register here for the free webinar.

(This article is sponsored by Aon.)