The UK Treasury has told pension funds they should avoid allowing soft commissions to be paid on their transactions, and asked the Financial Services Authority (FSA) to examine the practice.

The investigation will look at the way brokers supply fund managers with services in return for commissions. The practice had the spotlight thrown on it by the recent government-led Myners review of institutional investment, which proposed that stockbrokers commissions should be included in the fees fund managers charge pension fund clients. At present commissions are passed on directly to the pension funds.