Terence Flanagan (Dublin North East, Independent)
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116. To ask the Minister for Social Protection if, in her review of pension strategies, she has considered total expense ratio for measuring pension investment costs as a comparator against international players and indigenous providers so that TER could become for pensions what APR is for mortgages; and if she will make a statement on the matter. [49668/13]

Joan Burton (Dublin West, Labour)
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The Report on Pension Charges 2012 was undertaken by my Department, working with the Central Bank and the Pensions Board, and with support from PWC. The primary objective of the report was to gather information on pension charges levied, to assess whether these charges are reasonable and transparent, to report on the findings and to make recommendations. The report highlights a wide range of issues in relation to pension charges and identifies that there are major challenges to be addressed in the two main areas of reasonableness and transparency of charges.

The Report considers the use of the Total Expense Ratio (TER) as a measure to provide clarity of overall pension charges, including implicit investment charges. TERs relate to the costs associated with investment fund management and are particularly relevant to investment management costs because they incorporate the additional operational costs of investment funds, such as fund administration and audit fees. However, as the Report outlines, such costs do not cover the full range of pension charges. For example, administration and distribution costs also impact on pension charging structures, and these costs are not reflected in TERs. A TER and an annual management charge for an investment fund will differ and this variance reflects the additional operational costs of the fund in question. Such additional costs impact on pension savers as they are built into unit prices. Other non‐operational costs such as stamp duty and brokerage commissions do not form part of a TER and may also affect pension savers.

The launch of the Report on Pension Charges was followed by a three month consultation with stakeholders. There was a broad range of views expressed in the submissions received as well as a range of suggestions and proposals aimed at improving various aspects of the pension charging environment. Following the consultation period, it was agreed by Government in April 2013 that the recommendations contained in the report will be implemented, and this work has commenced. A Key Recommendation of The Pension Charges Report was to"Monitor developments and continue efforts to develop a single standard measure that would assess all costs and charges and thereby enable easier comparisons to be made”.

A Pension Charges Working Group is in place to initiate actions that follow up on the recommendations of the report. This group comprises the Department of Social Protection, the Pensions Board and the Central Bank. Each has a core role to play in delivering on the recommendations contained within the Report on Pension Charges and work has commenced in this regard.The Working Group supports the development of a single standard measure to allow comparability of charges and the Pensions Board, Central Bank and DSP will work to examine the potential for this measure of expenses and how charges might be communicated.