U.K. considers automatic enrollment

LONDON — The U.K. government is considering an automatic-enrollment system to encourage employee retirement savings, Minister for Pensions Stephen Timms said at a National Association of Pension Funds conference Nov. 17 in London.

"Our own case study research has shown auto-enrollment to be effective," he said, adding it would boost contributions to defined contribution pension plans by simplifying the process for employees while reducing administrative costs for employers.

The idea will be addressed as part of a more comprehensive set of pension reforms to be proposed by the government's pensions commission, led by Adair Turner, vice chairman of Merrill Lynch Europe.

A separate study by Fidelity International indicated automatic enrollment could increase the number of employees joining defined contribution plans by more than 40%. In the United States, automatic enrollment can increase 401(k) participation up to 90%, compared with 25% to 43% for plans without automatic enrollment, according to the same study.

PITTSBURGH — The investment management fee retirement plan participants should pay for an actively managed equity portfolio dropped by almost 10% over the past year, according to a study by Invesmart, a national retirement financial services firm.

The management fee for a "best-of-breed" institutional quality mutual fund on an "all-equity" portfolio — defined as 65% U.S. large-cap, 20% U.S. small-cap to midcap and 15% international equity — slipped to 57 basis points as of Sept. 30, from 63 basis points a year earlier, according to a news release. The study looked at net investment management fees, excluding servicing and marketing factors such as 12(b)-1 fees.

Invesmart applies a number of screens designed to identify investment advisers that achieve top-quartile results over the long term with consistent investment styles by reliably "hitting singles and doubles," Rob Rossi, Invesmart's director of investment research, said in a telephone interview.

For the latest year, the screens winnowed a universe of 2,400 mutual funds from 200 fund families down to 64 funds from 34 families. By asset class, the average pure management fee by those best-of-breed managers dropped to 44 basis points for large-cap U.S. equities, from 48; to 88 basis points for small-cap to midcap U.S. equities, from 95; to 61 basis points for international equities, from 73; and to 40 for U.S. fixed income from 44.