Pension scheme trustees are no longer required to submit compliance reports on the tendering of fiduciary management and/or investment consultancy services to the Competitions and Markets Authority (CMA) but, instead, must file them with The Pensions Regulator (TPR).
The change in the process came into effect at the start of October with the introduction of the so-called “sun-setting regulations”, the Occupational Pensions Schemes (Governance and Regulation) (Amendment) Regulations 2022, which enacted revisions to the Investment Consultancy and Fiduciary Management Market Investigation Order of 2019.
Since 2019, trustees have been legally required to hold a competitive tender process in order to appoint a fiduciary manager in relation to 20 per cent or more of a scheme’s assets. They have also been required to set strategic objectives for the investment consultant before being allowed to receive its services.
TPR taking over monitoring
Compliance with these requirements will be now monitored by TPR. In the summer, the regulator’s executive director of regulatory policy David Fairs said: “Robust monitoring of a scheme’s financial advisers can influence the effectiveness of its investment outcomes and ensure it is following long-term plans. It also helps trustees ensure they are delivering value for money for savers.”
He added that since trustees had been required to comply with these obligations and to self-certify their compliance to the CMA for two years, the introduction of the regulations should not place “an additional burden” on schemes.
In our view
At MHM, we think the change is a good and positive step. Reporting via the annual scheme return to TPR is a more sensible option than the temporary arrangement of the past few years. TPR will now have to amend the scheme return, implement a monitoring process and take enforcement action where necessary.
The provisions of the 2019 order which impose prohibitions and obligations on firms which provide investment consultancy and/or fiduciary management services, remain in force with such firms still being required to report to the CMA.
Prompted by investigation
The changes were prompted by a CMA investigation into the investment consultant market that identified weak competition within both the investment consultancy and fiduciary management markets. It noted that these services influenced or controlled decisions affecting pension scheme assets worth at least £1.6 trillion, and the retirement incomes of millions of people, so market weakness had extensive adverse impact.
TPR has issued guidance for trustees of occupational pension schemes that includes setting out the key difference to the CMA oversight process, the potential benefits of setting objectives and understanding legal duties.
If you would like to discuss any of the issues covered in this article in relation to your own pension scheme management, contact us on 01423 229029 or email paul.wilson@mhmtrustees.co.uk.