Consultancy Mercer calls for a different approach to managing fees for defined contribution (DC) pension plans, which it says have come under ‘intense scrutiny from legislators and regulators’.
Mercer says administrative fees should be priced on a per-participant basis; recordkeeping and investment fees should be benchmarked and negotiated differently; and both the fund vehicle and the asset size should be considered.
In addition, Mercer says recordkeeping and trustee fees should be benchmarked and negotiated at least every year.
Actual fees paid and should also be monitored against contractual requirements while annual reviews should identify opportunities to reduce administrative costs.
“The increased demands placed upon administrators of DC plans, combined with the intense focus on fees, calls for greater attention to fee management,” said Amy Reynolds, Mercer’s US defined contribution investment leader.
“Effective fee management will improve retirement outcomes for plan participants while ensuring that risk is mitigated and plan performance is enhanced for the employer.”
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