FCA workplace pensions proposals fail to provide complete transparency around transaction costs, compliance firm claims.

TCC, formerly known as The Consulting Consortium, has criticised the regulator’s proposed rules and guidance aimed at standardising the disclosure of the transaction costs incurred by pension investments.

The FCA plans to place a duty on asset managers to disclose aggregate transaction costs to pension schemes that, directly or indirectly, invest in their funds. This is to ensure that IGCs and trustees receive information about transaction costs.

It also proposed that asset managers provide the breakdown of transaction costs on request with the total broken down into categories of identifiable costs, which could include specific costs like taxes and securities lending costs.

As the consultation ends today, Andy Sutherland, managing director of Advisory Services at TCC, said the changes “would fall short of providing complete transparency around transaction costs in the absence of proposals to address concerns around customer-facing disclosure and consumer engagement”.

He said: “While the FCA’s latest proposals take into account the importance of a standardised approach to calculating value for money, it fails to address issues around lack of clarity in customer-facing disclosure or improving the levels of member engagement with their schemes.

“Concerns about levels of consumer engagement and disclosure within the wider financial services sector have been voiced previously by the regulator, and it wouldn’t come as a surprise if this was its next area of focus within workplace defined benefit pensions.”

The FCA declined to comment on the criticism.

Mr Sutherland, said however, there was merit in the plans to give Independent Governance Committees of workplace pension schemes greater powers with which to hold providers to account.

He said: “Although recent FCA research highlights that providers have made good progress towards reducing fees and charges, determining a standardised view of the aggregate transaction costs is the first step in being able to effectively determine the value for money being received, and this greater focus will indirectly benefit scheme members.”

At the time of launching the consultation in October, the FCA said the new rules would deliver a “high degree of consistency in how transaction costs are reported and give governance bodies confidence that the information presented to them contains a comprehensive assessment of costs”.