In a survey of its members, the UK-based Investment Management Association (IMA) has found that managers of 94 per cent of UK pension fund assets will be complying in full with the Pension Fund Disclosure Code when it comes into effect in full on 1 July 2003.
The Code was announced in 2002 to assist pension fund trustees’ understanding of the charges and costs levied on pension funds. Its aim is to improve transparency by providing a comprehensive, clear and standardised reporting format. Full implementation has required substantial changes to systems and procedures for many firms, as few existing systems were able to report in the required manner.
The IMA has been running a daily help-desk service and held two workshops to provide members with a forum to discuss the technical and practical issues arising from the Code. A progress review will take place later this year to ensure that the information provided to trustees is proving useful and can be provided in a cost-effective way.
“Despite a background of difficult market conditions, the investment management industry has delivered on its promise to provide pension fund trustees with much more transparent reporting of the costs incurred on their behalf,” says Richard Saunders, Chief Executive of the IMA. ” This was a key recommendation of the Myners Report and managers look forward to an informed dialogue with pension fund clients on these matters.”
Ken Ayers, Chairman of the NAPF Investment Council, added: “This is good news for NAPF members but they need to remain vigilant. Where an investment manager reporting to a pension fund client does not mention full compliance the fund representatives should ask why. Level 1 and Level 2 reports should be examined by pension funds and any areas of less than full understanding should be discussed with investment managers. Investment managers are delivering their side of the deal. The onus now rests with pension funds to make intelligent use of the information provided.”
IMA says firms managing the remaining 6% of pension fund assets may well be complying with the Code, but the smaller managers did not participate in the survey. One member has been delayed in its compliance with Level Two due to internal restructuring. They intend however, to meet the requirements in due course.
The Pension Fund Disclosure Code was published by IMA in conjunction with the NAPF in May 2002, as a result of recommendations in the Government’s response to the Myners Report. Fund managers can only claim compliance with the Code if they comply with all aspects of both Level One and Level Two. Level One Disclosure addresses company-wide policies, in-house processes and procedures in relation to the management of costs incurred on behalf of clients. Level Two Disclosure provides client-specific data, identifying transaction costs to an extent and level of detail that provides meaningful information for trustees.
The total value of pension fund assets managed by IMA members in the UK is 490,878 million, and assets worth 460,073 million will be in compliance with the Code.