Unions join forces with pension trustees over hidden cost transparencies

Written by Adam Cadle

Unions from around the globe are joining forces with their pension trustees to put pressure on asset managers and regulators to come clean over the hidden costs of charges to pensions schemes, UNISON has said.

Employees around the world are being left in the dark over the cost of their pensions, according to a new report from the Global Unions Committee on Workers’ Capital, part of the International Trade Union Confederation (ITUC).

The report said because so few schemes clearly set out their charges, it’s hard for employees to find out how much of their retirement savings are being paid out to asset managers.

The lack of clarity means workers don’t know whether they’re getting value for money or how the investments that will fund their retirement are performing.

The solution, say unions representing workers in the UK, the Netherlands, the USA and Australia – the four countries that hold over three-quarters of the world’s pension investments – is for schemes to start using new transparency templates.

In the Netherlands, pension charges have to be clearly set out for all to see, says the report, a move which has seen investment costs fall by more than a third since compulsory reporting was introduced three years ago.

In the UK, defined contribution schemes have to set out their charges, but there’s no similar obligation on the country’s 6,000 defined benefit schemes, UNISON stated.

It’s also becoming easier to distinguish between pension costs and scheme performance in America and Australia, but there’s still a considerable way to go, says the report.

Co-author of the report and UNISON national officer for pensions and investments Colin Meech said: “No-one would dream of buying a new car or a fridge freezer without knowing the costs and performances of particular models, but unfortunately the same can’t be said of most pension schemes.

“Without knowing the charges being levied, it’s nigh on impossible for workers to assess just how well, or how badly their pension scheme is performing.

“But if schemes used the new guide to become more open about charges, the most likely result would be a drop in fees, and a rise in returns. Then workers and their retired colleagues would see a much welcome boost to their pensions.”

A transparency template that could be adopted by UK pension schemes is due to be published by the Financial Conduct Authority later this year.

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