Transaction costs tally up to 37% of pension investment costs
Over a third of investment costs faced by pension savers come from transactions, according to the latest annual research from Caceis.
The figure is up 12 percentage points since the firm's 2018 study, although this was partly due to a "new methodology of implicit costs", the governance analyst said.
The updated calculation takes into account ‘market impact' costs - an addition that could cause next year's study to report further increased transaction costs due to the market volatility from Covid-19.
Caceis said 42% of investment costs arise from management charges, followed by 37% from transactions, 10% from performance fees, 6.5% from ongoing charges excluding annual management charges, and 4.5% from custody, fund administration and investment advisory. Total costs amounted to around 70 basis points (bps), under the 75bps charge cap.
However, Caceis did also note that not all providers were yet filing comprehensive and correct data when requested. While there has been a significant take up of the Cost Transparency Initiative templates, with 60% now reporting with these, around 80% of data still needs querying by Caceis
First-time-right data, nevertheless, has improved by 17% year-on-year, while the number of submissions coming in on time has also increased by 20% since last year.
Caceis UK managing director Pat Sharman noted that understanding of cost transparency's role in improving governance and oversight was improving, but warned that progress still needed to be made.
She said: "We believe good governance and value for money assessments can only be achieved by having a clear picture of all your pension scheme costs, something which is only going to become more important as we start to get a clear picture of the impact of Covid-19 on pension costs in the coming months,
"Furthermore, more progress is needed on the accuracy and completion of the data coming through from asset managers, which I am confident will continue to improve over the coming months."
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