Title Page
Contents
The Authors 12
Abbreviations 13
Glossary 15
Summary 23
1. Introduction and methodology 31
1.1. Summary 31
1.1.1. Overview 31
1.1.2. Coverage 31
1.1.3. The exploratory research: literature review and stakeholder interviews 32
1.1.4. The feasibility survey 32
1.2. Research background 32
1.3. Research objectives 33
1.4. A two-stage research programme 34
1.4.1. Research strengths and limitations 35
1.5. Pension schemes and costs included in the research 35
1.5.1. Pension schemes included in the research 35
1.5.2. Costs included in the research 35
1.5.3. Costs excluded from the research 36
1.6. The exploratory research: literature review 36
1.6.1. Objectives and coverage of the literature review 36
1.6.2. The five large-scale surveys of pension scheme administration costs 36
1.6.3. Alternative data collection methodologies and technical documents 37
1.7. The exploratory research: stakeholders interviewed 38
1.8. Survey questionnaire design 39
1.8.1. Scheme-related costs covered and level of detail sought from schemes 39
1.8.2. Scheme-related costs covered and level of detail sought from employers 42
1.8.3. Non-scheme-related employer costs in respect of pensions issues 42
1.9. The feasibility survey 43
1.9.1. Sample and recruitment process 43
1.9.2. Agreement to participate and number of questionnaires returned 45
1.9.3. Data review 47
1.9.4. Follow-on depth interviews 47
2. Findings relating to whether and how to conduct a large-scale quantitative survey 49
2.1. Summary 49
2.2. The coverage of existing quantitative surveys and other information sources 50
2.2.1. The adequacy of existing information 50
2.2.2. Profiling the data available from existing quantitative surveys 51
2.2.3. The implications of the exploratory research into non-survey-based approaches 53
2.3. How can a quantitative survey be implemented successfully 54
2.3.1. The views of stakeholders 54
2.3.2. The experience of the feasibility survey 56
3. Types and levels of annual scheme running costs – indicative findings 63
3.1. Summary 63
3.1.1. Overview 63
3.1.2. Defined benefit trust-based schemes 63
3.1.3. Hybrid and sectionalised trust-based schemes 64
3.1.4. Defined contribution trust-based schemes 65
3.1.5. Contract-based schemes 65
3.1.6. Employers' non-scheme-related pensions costs 66
3.1.7. Estimates of changes in costs over the past year and three years 66
3.2. Scope 66
3.3. Defined benefit trust-based schemes 67
3.3.1. Use of third party services 69
3.3.2. Breakdown of services provided by the main third parties and range of expenditure incurred with them 70
3.3.3. Investment manager costs 73
3.3.4. Investment profiles 75
3.3.5. Relationship between investment size and approach, and management costs 76
3.3.6. Examples of specific investment manager mandates 79
3.3.7. Nature and scale of in-house costs 79
3.3.8. Who bears which costs 81
3.3.9. Total running costs 83
3.4. Examples of differences among defined benefit schemes 88
3.4.1. Two widely differing frozen schemes 88
3.4.2. Comparing examples of small and medium, closed DB schemes 89
3.4.3. Comparing large and very large, closed DB schemes 91
3.4.4. Comparing two very large, open DB schemes 92
3.5. Hybrid and sectionalised trust-based schemes 94
3.5.1. Use of third party services 95
3.5.2. Breakdown of services provided by the main third parties, and range of expenditure incurred with them 96
3.5.3. Investment manager costs 97
3.5.4. Investment profiles 99
3.5.5. Relationship between investment size and approach and management costs 100
3.5.6. Nature and scale of in-house costs 101
3.5.7. Who bears which costs 101
3.5.8. Total running costs 102
3.6. Defined contribution trust-based schemes 103
3.6.1. Use of third party services 104
3.6.2. Breakdown of services provided by the main third parties, and range of expenditure incurred with them 105
3.6.3. Investment manager costs 107
3.6.4. Investment profiles 107
3.6.5. Nature and scale of in-house costs 108
3.6.6. Who bears which costs 109
3.6.7. Total running costs 110
3.7. Contract-based schemes 111
3.7.1. Use of third party services, excluding investment management 112
3.7.2. Investment manager costs 112
3.7.3. Investment profiles 112
3.7.4. Nature and scale of in-house costs 113
3.8. Employers' non-scheme-related pensions costs 113
3.8.1. DB trust-based schemes 113
3.8.2. Hybrid and sectionalised trust-based schemes 114
3.8.3. DC trust-based schemes 114
3.8.4. Contract-based schemes 115
3.9. Estimates of changes in costs over the past year and three years 115
3.9.1. DB and hybrid trust-based schemes 115
3.9.2. DC trust-based schemes 116
3.9.3. Contract-based schemes 116
4. Conclusions regarding whether and how to conduct a large-scale quantitative survey of scheme running costs 117
4.1. Summary 117
4.2. Why is there a need for a new large-scale survey 118
4.2.1. The overall opinion of stakeholders 118
4.2.2. The implications of the exploratory research into non-survey-based approaches 118
4.2.3. Why data from the existing quantitative surveys are insufficient 119
4.3. How can a quantitative survey be implemented successfully 119
4.3.1. Will appropriate respondents agree to participate 119
4.3.2. Will they complete the survey 120
4.3.3. Will the data gathered be comprehensive, consistent and accurate 121
4.4. How should a future large-scale survey differ from the feasibility survey 122
4.4.1. Reducing topic coverage 122
4.4.2. Coverage – which schemes to include 124
4.4.3. Coverage – schemes, but not employers 124
4.4.4. Next steps 125
Appendix A. Summary of findings from a literature review: the administrative and other running costs of pension schemes 127
Appendix B. Copy of the scheme questionnaire used in the feasibility survey 163
Appendix C. Copy of the employer questionnaire used in the feasibility survey 197
Appendix D. Copy of the revised question set tested during the depth interviews with some respondents who had returned a questionnaire 221
Appendix E. Copy of the guidance notes to accompany the scheme questionnaire used in the feasibility survey 223
Appendix F. Copy of the guidance notes to accompany the employer questionnaire used in the feasibility survey 231
Appendix G. DWP letter to potential participants 235
Appendix H. Initial thoughts on a large-scale survey 237
References 240