• Value for Money is about more than low charges
• Learn from principles developed by Independent Governance Committees for workplace pensions
• Recognise differences between active and passive funds
The FCA is seeking to drive improved value for money across the fund management industry, and while supporting this, Aegon warns too narrow a focus on charges could lead to poorer outcomes. An earlier study of value for money in workplace pensions led to the formation of Independent Governance Committees (IGCs) to hold providers to account. The FCA decided against defining value for money, leaving IGCs to develop their own principles.
Steven Cameron, Pensions Director at Aegon said: “The FCA is right to push for value for money across all aspects of savings and investment. Price is one aspect of value for money but customers value other factors. In workplace pensions, Independent Governance Committees have developed principles covering service standards, communications, choice and security as well as charges. A disproportionate focus on any one aspect could result in poor outcomes and we urge the FCA to reflect this in their Asset Management Market Study remedies.
“This Study is very wide ranging and needs to clearly define the roles and responsibilities of all parties who play a part in delivering good customer outcomes, including fund managers, providers, platforms, advisers and other intermediaries.
Applying broad brush remedies may not be warranted or proportionate for firms in the ‘chain’ which have already responded to regulatory interventions such as the Retail Distribution Review, Treating Customers Fairly and charge caps on workplace pensions.
“We’re pleased the FCA is treating workplace pension funds as institutional rather than retail. Members of workplace pensions already benefit from charge restrictions and extensive layers of governance. We do not believe they would benefit from further detailed disclosure, for example splitting charges between fund management and pensions administration.
“The interim report could be interpreted as being critical of the VFM of active over passive funds. The different costs, objectives and strategies of each need to be reflected when considering what constitutes VFM. Both types have an important role to play and what’s important is equipping even DIY investors to choose between active and passive options and to select funds within either category that meet their objectives.“
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