Pension funds may be hiding £3 billion in costs

Researchers recently have claimed that pension funds are hiding over £3 billion in costs from their investors. This money is being hidden by excessive trading that causes little improvement in a pension fund performance. The researcher has come out of wealth management company, SCM Private which is showing that pension funds in the UK keep their assets for only nine months and then sell them. This creates a nearly 1% increase in yearly costs that comes on top of disclosed fees.

Alan Miller the co-founder of the wealth management company has commented, “It’s quite appalling to see this complete lack of transparency and this is an issue that needs to be immediately addressed. This would be fraud in any other industry.”

The research conducted by the company looked at nearly 1300 pension funds that have been working for over 10 years. There is already a debate going on about the charges that pension funds are making and this is likely to encourage this debate further. The annual management fee is currently around 1.3% but an additional custody fee of which around 0.3% is also tacked on.

The pensions minister for the U.K is Steve Webb and he has been taking into consideration comments from consumer groups about pension funds charging fees that are too high. He has said that the government is seriously considering putting a cap on excessive charges. National Association of Pension Funds chairman is Mark Hyde Harrison who said that the sector needs to be radically rethought. He also said that the lack of information in the sector is completely unacceptable, saying that he wants to see a code of practice introduced to bring transparency to the sector.