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Eloise Henderson
Head of Strategic Communications
T: 01293 205335
M: 07741 384460
E: media@bandce.co.uk

Blaise Tapp
Media Relations Manager
T: 01293 205336
M: 07388 943700
E: blaisetapp@bandce.co.uk


 

B&CE have worked in conjunction with our main asset manager State Street Global Advisors to calculate and agree the transaction costs that applied to the funds used within the Scheme for the calendar year 2016.

The annual management charge to members in The People’s Pension is 0.5%. 

Net returns

The net returns to members in the default fund in the period 1 Jan 2016 to 31 December 2016 was 20.51%.

Transaction costs

Total transaction costs in the default fund [i] in 1 Jan 2016 to 31 December 2016 were 0.04%. This is a combination of explicit and implicit costs as outlined below.

Explicit costs

These can be broken down to 0.01% explicit costs (e.g. brokerage fees, stamp duty and custodian fees). This is the figure which can be compared with figures disclosed by other pension schemes.

Fund

Commissions

Taxes

Fees

Total Transaction Costs [i]

 
 

B&CE GI (up to 85% shares)

-0.0025%

-0.011%

0

-0.013%

 

B&CE GI (up to 60% shares)

-0.0018%

-0.008%

0

-0.010%

 

B&CE GI (up to 100% shares)

-0.0031%

-0.014%

0

-0.017%

 

B&CE Pre-Retirement Fund [ii]

-0.0006%

-0.002%

0

-0.002%

 

B&CE Cash Fund

0.0000%

0.000%

0

0.000%

 

B&CE Ethical Fund

-0.0037%

-0.010%

0

-0.013%

 

B&CE Shariah Fund

-0.018%

 

Implicit costs

It also includes 0.03% implicit costs (i.e. the difference between the mid-market price and the actual price e.g. due to the effect on price of placing the bid/making the sale). These have been calculated following the methodology set out by the FCA in its consultation, but not yet adopted into FCA rules. We are not aware that any other pension scheme has reported implicit costs yet.

Fund

Implicit Cost [iv]

B&CE GI (up to 85% shares)

-0.03%

B&CE GI (up to 60% shares)

-0.06%

B&CE GI (up to 100% shares)

-0.01%

B&CE Pre-Retirement Fund

-0.03%

B&CE Cash Fund

0.00%

B&CE Ethical Fund

0.00%

B&CE Shariah Fund

Not currently available

For completeness, we are also declaring two other sets of figures which are separate from the underlying transaction costs incurred by being in the default scheme. The FCA asks that these are split out from the underlying transaction costs.

Anti-dilution levy

The first item is costs or gains incurred by people making contributions or withdrawals from the scheme. The costs or gains fall on those participating in such movements through movements of the price of buying units in the fund.

Fund

Minimum ADL

Maximum ADL

B&CE GI (up to 85% shares)

0.00%

0.37%

B&CE GI (up to 60% shares)

-0.28%

0.41%

B&CE GI (up to 100% shares)

-0.10%

0.33%

B&CE Pre-Retirement Fund

-0.28%

0.28%

B&CE Cash Fund

0.00%

0.01%

B&CE Ethical Fund

-0.06%

0.10%

B&CE Annuity Fund (since launch)

-0.04%

0.67%

Example: if you are buying UK equities the main cost of dealing is the stamp duty tax of 0.5%. For ease of calculation if we had an existing UK Equity fund with £1m of assets and 1m units the price would be £1.000. If a new investor came in with a further £1m the unit price would be swung up by the transaction cost of 0.5% (ignoring the other charges) to £1.005. The new investor would end up buying £1m/£1.005 = 995,024.88 units which is essentially the value of assets less the cost of acquiring them (£4975.12 being 0.5% of the assets bought). This way the net asset value of the fund is unaltered and the existing investors do not incur the cost of trading. The cost to the member transferring in is known as an anti-dilution levy or ADL.

In a two-person example, if someone were withdrawing a smaller amount from the scheme at the same time, compared to the purchaser, they would gain because they would sell at the higher £1.005 price.

In 2016, monthly anti-dilution levies ranged between 0 and 0.3% for the default fund.

Stock lending

The second item is stock lending. This is where stock held in the scheme’s name is lent out on a short-term basis to financial institutions. Stock lending contributed a net 0.03% of revenue towards the return in the default fund. The income generated from securities lending is spilt 70% to the members and 30% to the lending agent; the lending agent guarantees any losses from stock lending, so this additional revenue source creates no risk for the members.


[i] 99.4% of our members are in the default fund, so we have focused on this. We also make a range of 6 other fund choices available to members.

[ii] The total of:

 

  • The average broker commission paid expressed as a cost in basis points, always shown as negative. Averages are computed on a trade-weighted basis.
  • The average taxes paid (if any) expressed as a cost in basis points, always shown as negative when they exist. Averages are computed on a trade-weighted basis.
  • The average fees paid (if any) expressed as a cost in basis points, always shown as negative when they exist. Example of a fee is the U.S. SEC Fee on sales of US securities. Averages are computed on a trade-weighted basis.

 

[iii] The asset allocation of the Pre-Retirement Fund was amended on the 5 September 2016. Figures assume the new asset allocation was prevalent throughout the year.

 

[iv] The average Gain/Loss difference in basis points between the execution price and a benchmark price.  The portfolio instruction determines the primary benchmark for calculating the Implicit Cost of these transactions. As these are passive funds, the primary benchmark used is “Market on close” price for majority of the transactions. Gains are positive, Losses are negative.