Financial Conduct Authority
Publication of costs and charges data by workplace personal pension providers
Our expectations of providers for the first publication of costs and charges information under the new rules.
The first publication of data under these rules is expected to take place this summer, when Independent Governance Committees (IGCs) publish their annual reports.
We’ve since received correspondence from firms and have held discussions with both firms and IGC members. These discussions have revealed different views among stakeholders as to whether the data should be published at the level of the arrangement with each individual employer, or whether it should be published at a higher level, with the data indicating the range of charges paid by members in different employer arrangements in one overarching scheme.
Here, we outline these 2 views and our expectations of firms for the first publication of the data.
Employer level disclosures
We're aware that some firms think the disclosures should be done at employer level. This is due to our stated aims in CP19/10 and PS20/2, including our aim to ensure competition in workplace pensions and, in particular, our aim to align costs and charges disclosures for contract-based pensions with the existing regime for occupational, trust-based pensions schemes.
For example, in CP19/10 we said that we were seeking 'to ensure that scheme members can find the information about costs and charges they require to establish that they receive good value for money from their pension scheme, and their pension scheme will meet their needs for future retirement.'
In PS20/2 we linked our final rules to our statutory objectives:
- competition – scheme members and others can access better information about costs and charges, promoting more effective competition between firms in the interests of consumers
- consumer protection – better information about costs and charges should enable scheme members to decide if their scheme is giving them value for money and if it will meet their future needs
- market integrity – workplace pension schemes should be better held to account by their members, which would improve the orderly operation of the financial markets
The approach of publishing at employer level aligns more closely with our aim for the rules. Firms must interpret every provision of the Handbook in light of its purpose (see GEN 2.2.1R).
In addition, we consulted in June 2020 (CP20/9) on rules that set out how we expect IGCs to assess the value for money of workplace personal pension schemes and investment pathway solutions.
We said that we expect IGCs to 'pick a small number of reasonably comparable schemes or investment pathways, including those that could potentially offer better value for money (against the factors set out in the rules), to conduct their assessment.'
When selecting these schemes, we also said we expect IGCs to 'take into account the size and demographics of the membership. This comparison with other comparable options on the market applies to the extent that information about those options is publicly available.'
We went on to say that, in relation to comparing to costs and charges data, 'we are confident that IGCs will have access to such pension scheme data to conduct this comparison once scheme governance bodies begin publishing costs and charges information on their websites'.
HMRC registered scheme level disclosures
Some stakeholders think that costs and charges data should be published at the level of the overarching HMRC registered scheme, with the data indicating a range of charges paid by members in different employer arrangements within that overarching scheme.
We don't consider that aggregation of costs and charges at the level of an overarching scheme would promote meaningful comparisons, however. Instead, comparisons at the employer level could play a useful role in helping to improve value for money in workplace pensions.
However, some firms have told us that they were unclear at what level disclosures were required and have been preparing disclosures at registered scheme level.
As our CP and PS didn’t specifically state that an employer level disclosure was expected, and considering the time remaining until the disclosures will be needed by IGCs, we don’t propose to take regulatory action against any firms that, for this reporting year:
- disclose each set of costs and charges that they levy (and the number of employer schemes which have these costs and charges), or
- show the distribution of costs and charges by employer arrangement in some other way, for example by dividing the range of charges into deciles (ie without also disclosing the relevant employer or scheme details against the particular costs and charges)
Publishing the data
In relation to where the relevant data should be published, firms don’t need to publish the information in the same document as the IGC’s annual report. We recognise that this may result in a large document that isn’t user friendly.
However, the information must be on a publicly accessible website, and a link to this website can be included in the annual report.
In light of the approach taken by firms, we will consider if we need to consult on changes to our Handbook to provide clarity and ensure consistent good outcomes.
We also plan to publish a policy statement in relation to CP20/9 in the summer, which will further clarify our expectations after we’ve considered the feedback.
We generally support an approach to comparisons that aggregates charges at the level of cohorts of similar employer arrangements, to the extent that such an approach would allow a participating IGC to compare its own provider’s individual employer arrangements with comparable arrangements at a cohort level, as well as enabling cohort to cohort comparisons.
It will be for individual IGCs or Governance Advisory Arrangements (GAAs) to determine which approach, or combination of approaches, is most appropriate, and it is for IGCs to determine where best to focus their attention.
In order that IGCs and GAAs have the option of employer level comparison though, the data must be publicly available.
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