The UK's National Association of Pension Funds has welcomed the government's decision to put on ice Myners' proposal to change the structure of brokers' fees paid by pension funds.
The government has given the investment industry two years to come up with a viable alternative to the Myners’ review, which criticised soft commissions and said pension funds should pay up front for the services of brokers to ensure greater transparency.
Fund managers and brokers face an inquiry by the Office of Fair Trading and the Competition Commission if no viable alternative is found, the government has threatened.
Treasury economic secretary Ruth Kelly said: “The challenge for the industry is to develop much clearer structures and incentives. The government hopes this can be achieved on a voluntary basis but if in two years’ time there remains competition concerns the government will consider what further action is necessary to ensure that a sufficiently competitive environment exists.”
Frank Russell head of consulting Bob Collie said: ‘This is is a grown up and rational response to the consultation process and is great news for the investment industry. Clearly the Treasury did not want to drop the issue altogether but it realised that its initial proposals had gone too far.”
NAPF director general David Cranston said: The NAPF supports the government's proposals for dialogue on enabling pension funds better to understand how commissions are determined and spent. We particularly welcome the government’s intention to address concerns of smaller schemes and we look forward to working with the government and the fund management industry to develop new tools and mechanisms in pursuit of these goals.”
Soft commissions – payments made by pension funds to investment brokers for research and dealing services – are often hidden from pension scheme trustees. The charges are not featured in annual management charges despite the charge to institutional clients being up to £1bn each year.
Myners’ recommendations were endorsed by the government but proposals to abolish soft commissions came under fire by the investment industry.
Brokers warned that they would recoup any fees lost by Myners’ proposals by other means such as widening dealing spreads.
Despite improvements in investment manager attitudes towards responsible investment, research reveals there is a way to go before the majority deliver meaningful action. Victoria Ticha explores why
The Co-operative Bank is set to continue de-risking pension schemes after it mitigated further losses by switching from the retail prices index (RPI) to the consumer prices index (CPI).
A model aimed at reducing climate change-related financial risk exposure from corporate credit assets has been launched by Insight Investment.
Universities Superannuation Scheme (USS) members should be responsible for most of the cost of increased contributions if the scheme's defined benefit (DB) section remains open to accrual, Pensions Buzz respondents say.