MEP demands pension providers pay back fees

Pension providers charging “exorbitant” layered fees must give the money back to pension scheme holders, an MEP says.

Sharon Bowles, chair of the European Parliament's economic and monetary affairs committee, says asset management costs are "eating up" more of a fund's growth than an investor eventually gets.

"I was asked in an interview recently what keeps me awake at night," says Bowles.

"The first answer I gave was: 'fund management margins such as in multiple layers of undisclosed fees and its impact on pension returns'.

"Measured as a loss to the investor, the collective management fees represent a larger fall in value than the worst ever crash on the stock market."

Bowles has supplied data on management fees to the government as well as the European Commission, and calls on the Commission to look into the issue.

Research from Lane Clark and Peacock (LCP) says investment management fees paid by pension trustees increased by 11%, or £300m, in the year to 30 September 2010.

LCP says this is not due to better fund performance, but almost entirely to a recovery in market values, with a manager with a £50m emerging markets mandate who failed to beat the market seeing an increase in fees of over £100,000 during the year.

"There is always a temptation not to worry about fees when markets are rising, but the opposite should be the case," says Mark Nicoll, partner at LCP.

"Against the background of continued pension deficits, trustees need to look at the running costs of their pension schemes."