UK pension funds could save a third of active fees

December, 2017 Print

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The average actively managed UK pension fund could save £700,000 a year in fees, according to The Asset Management Exchange (AMX), a digital platform for institutional asset owners.

AMX said the savings could come from the centralisation and standardisation of investment management, administration and trading functions. It calculated that for a £250 million actively managed pension fund, annual investment management costs could be £1.4 million, with administration and transaction costs across five managers adding another £700,000 in fees. It said that by sharing administration and transaction resources through a centralised structure, funds could cut fees by 29-39%, giving savings of £600,000 to £800,000 a year. This is based on investment fees of 55 basis points and administration and transaction fees of 30 basis points.

AMX global head, Oliver Jaegemann, commented: “According to a recent survey by the Pensions Regulator, schemes estimate their total costs to be around £540,000 a year. Our calculations suggest that many UK pension funds could therefore be underestimating their costs by almost four times.” Jaegemann said that greater transparency over fees is a good thing, but that meaningful action is needed to cut fees. “Under the current industry model, each manager and asset owner transacts individually and basic administrative functions are needlessly replicated across a portfolio of asset managers, wasting significant sums.”

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