Pension transparency needs a benchmark

In a first formal collaboration, Top1000funds.com and CEM Benchmarking have teamed up to develop the Global Pension Transparency Benchmark (GPTB). The GPTB establishes a new global benchmark that brings a focus to transparency in a bid to improve pension outcomes for members.

Transparency, or lack of it around costs and other issues, has been a problem area for pension funds over many years, and in the industry there is room for improvement in this area. Transparency is a positive word – it is about being honest and open with stakeholders. With this benchmark we offer a standard for global pension systems and funds to aspire to, and in doing so emphasise the importance of the need for clarity and openness.

CEM has had a long history focusing on cost and financial value for money outcomes. This broadens that view and establishes a new global benchmark that also includes key inputs associated with value generation that are obtained from public disclosures such as  governance, strategy and structure.  It also incorporates sustainability/ESG which pension funds and their stakeholders increasingly consider to be an important  and necessary ‘value’ element.

Cost transparency emerged as an important issue for pension funds post-GFC and many in the industry championed it.  With this new benchmark we want to reframe the narrative away from a narrow and negative focus on costs to a more holistic and positive concept of transparency and include value generation, governance and strategy, and sustainability.

The GPTB, which will launch in February 2021, will initially rank 15 countries on public disclosures of key value generation elements for the five largest pension fund organisations within each country.

The GPTB focuses on the transparency and quality of public disclosures with quality relating to the completeness, clarity, information value and comparability of disclosures.

The overall country benchmark scores will look at four factors: governance and organization; performance; costs; and responsible investing, which are measured by assessing hundreds of underlying components.

Why is transparency important?

“A lack of transparency results in distrust and a deep sense of insecurity.” Dalai Lama

There is plenty of evidence that the lack of transparency has negative consequences for relationships and organisations of all types, whether they be individuals, governments, corporations, or pension funds.  Transparency is: “the right thing to do”, but there are many benefits beyond this simple moral imperative:

• Transparency and accountability go hand in hand and lead to improved decision making
• Improved clarity of purpose that comes from simplifying and communicating complex issues
• Improved relationships and interactions across a broad spectrum of stakeholders including beneficiaries, plan sponsors, regulators, suppliers and concerned citizens
• Ultimately, better outcomes through clarity of purpose, sound goals and accountability for progress.

We have been fortunate to have an esteemed advisory board – all with a unique perspective on the importance of transparency and reporting –who have been instrumental as we have been developing this concept.

The Global Pension Transparency Benchmark advisory board:

• Keith Ambachtsheer, president, KPA Advisory Services; co-founder and board member, CEM, Canada
• David Atkin, former chief executive Officer, Cbus, Australia
• Lorelei Graye, founder, Adopting Data Standards, USA
• Angélique Laskewitz, director, Association of Investors for Sustainable Development, The Netherlands
• Neil Murphy, vice-president, communications, Investment Management Corporation of Ontario, Canada

Top1000funds.com and CEM Benchmarking have long had aligned goals – to highlight industry best practice and drive better pension outcomes globally – and we look forward to revealing more about our joint project in the coming months and we will detail the benchmark results, methodology and process next year.

Amanda White is editor of Top1000funds.com and director of institutional content at Conexus Financial; Mike Heale is principal at CEM Benchmarking.