It has been reported that the Royal Mail pension fund and Sainsbury's pension scheme have both been given refunds from State Street after being double charged by their transition management service.

Up to five pension funds were reported by magazine aiCio to be looking into their past transactions with State Street's transition management arm. 'Multiple funds' had already claimed a reimbursement, said the magazine's source.

It was widely reported that the Royal Mail pension fund – unidentified in the first reports - discovered the overcharging after hiring performance analysis firm Inalytics.

Two senior employees of the State Street transition management scheme, Ross McLellan and Edward Pennings, are believed to have left the firm when Royal Mail flagged up the pricing error last October.

The extra charging came as the transition management division, which looks after assets for pension funds when they are being transferred between asset managers, charged both a management fee and a commission on transitions when clients usually chose one of those two charging models.

State Street quickly moved to reassure clients after news of the error broke last October, drafting in Nicholas Bonn as executive vice president to oversee the effort.

A spokesperson for State Street told Pension Funds Insider: "During 2010 and 2011, State Street agreed to perform transitions on a non-commission basis for a limited number of clients in the United Kingdom. We normally structure our fees as commission arrangements but we have concluded that in a limited number of instances where we agreed instead to a management fee-only compensation structure, our processes surrounding several of these transitions were not properly followed by certain employees."

The spokesperson explained that "we agreed only to a management fee with certain clients, but commissions also were applied that had not been expressly communicated or agreed to with the clients. Following a review of these transitions, we have concluded that some of these transitions raised issues that required reimbursement to our clients, and we have voluntarily notified and committed to reimburse these clients."

The Royal Mail pension fund is the UK's third largest scheme with £47 billion in assets while the J Sainsbury fund is the UK's 47th biggest with £4.8 billion according to Pension Funds Online's top 100 tables.

dbillingham@wilmington.co.uk