PTL Blog

Transaction Costs in DC Schemes

Posted by Richard Butcher on Jan 8, 2015, 11:19:00 AM

It’s proposed that from April 2015 that Trustees and Independent Governance Committees (IGCs) will need to obtain data in relation to transaction costs and assess them for good value (in trust based schemes) or value for money (in contract based schemes).

Neither the FCA nor DWP intend to be prescriptive on what transaction charges should be considered. Below are the items they indicate should be considered.

FCA consultation on proposed rules for IGCs (CP14/16)

  • Para 4.7 the “direct and indirect costs of transactions”
  • Para 4.29 “to include but are not limited to:

- Dealing charges, such as brokerage commissions and fees

- Bid-offer spreads

- Transaction taxes (including stamp duty)

- Research costs

- Foreign exchange commissions

- Fees relating to stock lending or stock borrowing

- Initial charges, and entry and exit fees for investment in underlying funds (or funds of finds) and

- Transaction costs relating to investments held in underlying funds (or funds of funds)

The above will be formalised in revised Codes of Business (COBS). The draft COBs say:

  • 19.5.5 R (2) (e) “the direct and indirect costs incurred in relation to transactions and other activities in managing and investing the pension savings …”

For a full copy of the FCA Consultation Paper please contact us at info@ptluk.com

DWP consultation Putting Interests Savers First

  • Para 2.59 DWP do not intend to set out a list of transaction costs to be considered in regulations but “the costs we expect trustees to consider include:

- Brokerage commissions and fees

- Bid-offer spreads

- Transaction taxes (including stamp duty)

- Soft commission services including brokerage fees, e.g. research costs

- Foreign exchange commissions and

- Fees relating to stock lending or "stock borrowing”

The above will be formalised in regulations. The draft regulations say:

  • Para 1.2 “transaction costs” means the costs incurred as a result of the buying, selling, lending and borrowing of investments”

For a full copy of the DWP Consultation Paper please contact us at info@ptluk.com

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