The DAA Defined Contribution (DC) Retirement Savings Scheme, for workers at Dublin Airport and Cork Airport, has become the first Irish pension scheme to complete the country’s Cost Transparency Standard (CTS).

The voluntary CTS was introduced by the Irish Association of Pension Funds (IAPF) with the full support of the Pensions Authority and the Department of Social Protection (DSP) in July 2024.

It is hoped the initiative will enable trustees to better understand the investment costs they pay and to benchmark these costs against their peers.

DAA DC Retirement Savings Scheme trustee, Charles Coase, detailed the “very easy” process of completing the CTS in a session at the IAPF Winter Conference yesterday, 28 November. He said that when it was introduced “there was enthusiasm from the trustee board to have a go”.

The scheme outsourced the work to ClearGlass, which is working with the IAPF to facilitate the introduction and implementation of the CTS. Coase said ClearGlass has “a well-established process” and engage directly with the investment manager, which in this case was Legal and General Investment Management (LGIM).

The cost of the process of outsourcing to ClearGlass was “modest”, Coase said.

“[ClearGlass] has standard templates, which many of the managers are now very familiar with. The managers provide the information back to ClearGlass and then ClearGlass produce the analytical reports for us.

“So, in fact, the trustees, the investment advisers, don't need to do anything and because LGIM has done a great deal of work with ClearGlass in the UK, they were able to turn it around very quickly,” Coase said, adding that it took a few weeks to obtain the reports.

The scheme was provided with two reports; one shows the cost of the mandate, including underlying operating costs within the mandate, in addition to the annual management charge.

“That was new news, we didn’t know the scale of the trading activity, or the costs associated with that trading activity,” Coase said.

The second report plotted the scheme’s mandate on a matrix of cost and performance relative to equivalent mandates from all other managers within the ClearGlass database.

“You can see if your costs are above or below the median. Is your performance above or below the median? That can give you either reassurance or points to raise with the investment manager if there’s identified room for improvement…. We thought our costs were pretty reasonable and we were delighted to see that we are getting a good rate from LGIM,” he said.

“More important is the comparison of cost and performance, are you getting value for money relative to performance, we were very happy with that for the main mandate. There were some other areas we wanted to have a follow-up question, dig into the data a little bit more with LGIM and understand if there was some opportunity that we should go after. Overall, they were a very useful and clear set of reports.”

Providing his thoughts on the CTS, Coase said for a large DC scheme it is “absolutely well worth doing” but he was not sure if he would undertake the CTS for a defined benefit (DB) scheme.

“It is a different dynamic in DB. Clearly, the members are not paying the costs of the scheme. I understand that finance directors might be keen to know if they are getting good value for money but there are some mandates within DB, particularly the liability-driven investment (LDI) mandate where performance is not really relative to other schemes or the market, it’s relative to the liabilities. I think it needs a little bit more thought,” he said.

Furthermore, he was against making the CTS mandatory, which has been mooted by the Pensions Authority if take-up is low, as he does not think it will be “worth it” for smaller DC schemes.

“I have some very small schemes and, frankly, I don’t think it would be worth it for those. There are some where they have their investments in an assurance wrapper, and it doesn’t really seem sensible there. I’m a fan of encouraging schemes to do this, maybe even comply or explain, but let’s focus on the larger schemes where there’s more money at stake and let the smaller schemes have the flexibility to take it on if they think it will be worth it for them,” Coase concluded.

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