An update on European TLAs and UK FLAs for regulatory reporting

Back in what now feels almost like pre-history, the European Working Group (EWG) came together to provide a standardised reporting template to deliver the data from asset managers to insurance companies for their Solvency II reporting and the Tri-Partite Template (TPT) was born.

Since then, we’ve been swamped by PRIIPs and MiFID II, which have provided opportunities for more three-letter acronyms; the EWG came up with the European PRIIPs Template (EPT) and the European MiFID Template (EMT). Since the start of 2018, these templates have facilitated the data transfer from asset managers to life companies and distributors, respectively, to produce key information documents (KIDs) for ‘mirror’ life funds and to populate clients’ MiFID II costs and charges reports.

In fact, subject to bringing German distributors on board, EMT is well on its way to version 2 already.

Rather overshadowed by the impact of PRIIPs and MIFID II, the FCA set up its Institutional Disclosure Working Group (IDWG – this is the start of the four-letter acronyms), at the end of 2017 to look into how asset managers should disclose costs to institutional investors. The IDWG continues to meet regularly and the Local Government Pension Scheme (LGPS) has reportedly agreed to adopt the final IDWG template, when delivered.

Yet another requirement this year has been for defined contribution workplace pension schemes’ Independent Governance Committees (IGCs) to report to their members on the costs incurred within the scheme and assess the value for money those funds present.

While funds used in insured schemes know who they are and, in many cases, have started preparing to deliver their transaction and other costs through the DC Workplace Pensions Template (DCPT), what has shocked many is that this requirement extends to group SIPPs as well. Often the first a group will know it has funds held in a group SIPP will be when it is asked for its transaction costs. We have no experience yet of how long those schemes will allow the fund groups to turn around that data request.

Given enough time, a fund group may be able to calculate and report those costs on demand, although we’re not convinced it’s a long-term solution. Disclosing transaction costs for all funds in pensions will almost certainly become the standard once the FCA has completed its investigation into non-workplace pensions, which has only just started.

What can’t be supplied on demand is the fair value mid-price (FVMP) of the investment fund, which is needed to help the pension scheme work out its own costs when transacting in the funds. What constitutes a FVMP depends on whether it is a dual-priced fund, single-priced with a dilution levy or has a swinging single price. The industry has devised another template – the Fair Value Price Template (FVPT) – to help with that, because it’s not a price that is supplied already. Regular updates of the FVPT will need to be sent by fund groups to insured DC schemes and group SIPPs.

European requirements and templates may get away with three letters to the four in UK versions, but they all have a few things in common. The arrival of the disclosure requirements has highlighted how many different parties can be involved in the ownership and management of assets, all of whom need the cost information; the importance of delivering the right data to the right recipient can’t be overstated, as regular manual intervention is no longer an option; and disclosing all costs incurred is only going to increase now the regulators have that particular bit between their teeth.

FE has streamlined the collection, validation and dissemination of all of these templates and is ready for the next ones that come along, including for the Insurance Distribution Directive (IDD: three letters, so that’s a Europe-wide directive).

For further information, contact us.