IAPF developing voluntary value for money standard; regulator not ruling out legislation

The Irish Association of Pension Funds (IAPF) is in discussion with the Irish Pensions Authority to develop a voluntary value for money standard.

The initiative was announced by Ireland’s Pensions Regulator, Brendan Kennedy, at the IAPF Investment Conference 2024 in Dublin today, 13 March, where he also said that if the initiative isn’t successful, he would not rule out introducing a mandatory requirement on reporting value for money.

Kennedy said value for money is an area the Pensions Authority will be focusing on in the future as part of its deeper engagement with schemes. “It’s a truism that one of the simplest ways to improve the outcomes of members for pension schemes is to address excess costs,” Kennedy stated.

In order to address value for money, trustees need two things, according to Kennedy: Firstly, they need a practical methodology to get a handle on the costs, both direct and indirect. Secondly, trustees need a benchmark, to know whether their numbers are good or bad.

“As part of this important topic, the IAPF has been in discussion with us at the authority about a voluntary investment cost transparency standard," Kennedy stated.

"We recognise that such an initiative has potential to be a really significant help to trustees to understand the position of their scheme and to make informed decisions about whether there are issues for them to address.”

He said the Pensions Authority looks forward to working with the IAPF, scheme trustees and managers to make it a success and further details will be revealed in due course.

As part of the initiative the IAPF will be providing a suite of open access templates to provide a standardised way for asset managers to report costs and charges for their clients.

“Although this cost transparency standard is voluntary, it will introduce a de facto standard, and the availability of this standardised information on costs and charges will be important to enable trustees to decide whether they are getting value for money on their investment,” Kennedy said.

“It is a voluntary approach and it is important to say though that if it doesn’t work, we the Pensions Authority will have to consider whether an alternative will be needed because, and we have seen this in other jurisdictions, value for money is one of the crucial measures of how trustees are performing and how well they are fulfilling their duties to their members and beneficiaries.

“If this voluntary approach does not work, we at the authority would look at other initiatives, including, if necessary, going to our parent Department of Social Protection or to the government to discuss the issue of a mandatory reporting standard.

"However, having seen the success of the voluntary approach in the UK, I don’t see any reason why it shouldn’t succeed here, and I would be optimistic and it can be very useful.”

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