Scottish Widows head of industry development Peter Glancy
Explicit charges, as described in the charge cap, will be shown to be the tip of the iceberg.
When these extra levels of charge are disclosed, we could get another big round of ‘rip-off’ pension fund accusations.
We believe fund managers will be mandated to disclose information that is currently not being handed over.
Some in the distribution space are setting up products like master trusts so they can take a charge from the fund. If you are an EBC making money opaquely now, you will not be able to in the future.
On the investment side, some providers find they can make more money out of the fund management because it is more opaque than the product wrapped. But vertically integrated participants could well be forced to specialise within a chosen element of the value chain.
Pensions are excluded from Mifid II and Prips. So the DWP wants to create a similar regime for pensions. It has asked the FCA to develop a framework where they disclose the previous 12 months’ charges and those they anticipate levying in the future. These include opportunity costs of stock lending, property renovation, maintenance and insurance costs, stamp duty on equity trading, brokers’ fees, spreads in bond markets and opportunity costs of inefficient execution.
Standard Life head of pensions strategy Jamie Jenkins
There is not room in the market for 80 or so master trusts to operate efficiently.
However, the larger master trusts are competing effectively and the market benefits from a diversity of models. Vertical integration can improve the efficiency of the model and such savings can be passed on to members. What matters is not the underlying business structure, but the level of governance carried out to ensure that the master trust is run in the interest of members.
Jelf Employee Benefits head of benefits strategy Steve Herbert
Many of the smaller master trusts have clearly been set up as an alternative to commission.