The Financial Conduct Authority (FCA) has acknowledged industry concerns about its proposed new costs and charges regime for workplace pension schemes.
The Pensions Act 2014 placed a duty on the FCA to make rules for publishing and disclosing costs and charges information for the workplace pension schemes it regulates.
Since January 3 2018, FCA rules have required asset managers to report costs and charges information to the operator, trustee or manager of workplace pension schemes.
A FCA policy statement sets out the rules requiring scheme governance bodies to disclose this information to scheme members on an ongoing basis.
The statement also sets out some amendments to the rules which set out how asset managers must calculate transaction costs when reporting costs and charges information as detailed above.
They mandate a calculation methodology similar to that used in the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation - known as the “slippage cost” methodology.
Some industry stakeholders expressed concerns about the slippage cost methodology, arguing that it can lead to potentially misleading information (such as negative transaction costs).
Therefore, the FCA has amended the rules and announced that in the first year of the regime the rules will only apply to default funds.
The FCA also confirmed that the new rules, surrounding the disclosure of costs and charges information on workplace pensions, will be phased in gradually after admitting its implementation timetable was “very challenging”.
The rules come into effect from April 2020, but from January 1 to December 31 2020, governance bodies, such as Independent Governance Committees and trustees, will only need to report on default funds, with a publication deadline of July 31, 2021.
For all subsequent years information must be provided on all the investment options pension members are able to select.