UK pensions may be forced to disclose fees

The UK government is mulling proposals that will prevent asset managers from signing non-disclosure agreements with their public pension fund investors.

Amendments to the UK’s Pension Schemes Bill, put forward by several House of Lords members, aims to stop asset managers concealing fees in a bid to provide pensioners with more information about how their pensions are managed.

Specifically, clause 38 of the proposal states that pension fund managers “shall be under a general requirement to account to their beneficiaries for all actions taken in the performance of their investment functions…and be under a general requirement to act transparently in that regard…and shall comply with any reasonable request for information.”

The proposal was submitted to parliament last month and will need approval from the Treasury and the Department for Business, Innovation and Skills. If adopted, the law could take effect as early as March.

Throughout 2014, a debate raged on fee transparency, both from within the industry and from outside critics who argued taxpayer-funded pension plans should disclose their fee arrangements with asset managers. BlackRock, the world’s biggest fund house, told the Financial Times in November that it was “neither in the interest of institutional investors nor of investment managers to ban non-disclosure agreements”.

In past interviews with pfm, no manager described management fees a vital trade secret, nor defended the idea that disclosing them can make or break a firm. However, GPs perceive the fee debate as a proxy battle for disclosing other data that really are sensitive to the firm’s ability to do business, such as the finer points of their investment strategies, key man clauses and the like. Fund managers argue these items are documented in the LPA, and if the LPA can no longer be subjected to non-disclosure, then sooner or later demands will be made to publish other types of fund-specific information also.