University of Leeds – driving cost transparency in pension funds to boost investment outcomes

Leeds University research was central to the development of a new industry standard for the collection institutional investment cost data, and has been instrumental in transforming how UK pension fund trustees make decisions when investing pension fund assets.

Working with the Financial Conduct Authority, the UK regulator, academics from Leeds were responsible for the design of a new user template for the collection and reporting of standardised and aggregated investment cost and fee data. The research and creation of a new industry-wide disclosure template was designed to address issues related to the high level of complexity and lack of transparency associated with costs and fees charged by the asset management industry. Lack of transparency over fees has a significant impact on the ability of UK pension fund trustees to take optimal investment decisions. This has a detrimental effect on the performance of pension funds and ultimately the security and level of pension individuals receive in retirement.

Industry leaders, such as the Royal Bank of Scotland Group, report that the introduction of standardized industry-wide cost templates offer significant advantages over bespoke processes, reducing the resources required to collect data from asset managers significantly, and enabling schemes to benchmark fund costs accurately against other asset managers to ensure value for money.

Independent analysis estimated the economic impact of this increased transparency contributed to overall market cost savings of approximately £3bn in 2018/19. The compound value of these and future savings, along with the impact of improved decision-making by trustees facilitated by enhanced transparency around costs and fees, is forecast to save pension funds £2tn over the next 35 years.

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