The Pensions Regulator to monitor activities of trustees

The regulation of the duties of pension trustees and advisers will change next month.

The Pensions Regulator (TPR) will replace the Competition and Markets Authority (CMA) and oversee the regulation of trustee duties when the Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2022 come into force from 1 October.

TPR has revised its guidance on the tender process for fiduciary management services and trustees setting objectives for their investment consultants.

Watchdog investigation

The change comes after the CMA investigated the provision of Investment Consultancy (IC) and Fiduciary Management (FM) services to pension schemes.

Investment consultancy advises trustees on investment strategy and related matters. Fiduciary management involves the delegation of some investment decisions by trustees to advisers alongside providing advice on investment-related matters.

Adverse effect on competition

The CMA provisionally found an adverse effect on competition and likely customer detriment for trustees and in turn the employer sponsors of Defined Benefit schemes and the members of Defined Contribution schemes.

On 12 December 2018, the CMA published its final report on its market investigation, but COVID-19 delayed implementation.

It found:

  • There was a low level of engagement by trustees
  • There was a lack of clear and comparable information to assess value for money
  • Customers were being steered by consultants towards their own higher-cost fiduciary management services

Since December 2019, trustees have been legally required to run a competitive tender process when appointing fiduciary managers in relation to 20 per cent or more of scheme assets.

Value for money for savers

They have also been prohibited from receiving investment consultancy services without having set strategic objectives for their investment consultancy provider.

David Fairs, TPR’s Executive Director of Regulatory Policy, 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.

“Since trustees have been required to comply with these obligations and to self-certify their compliance to the CMA for two years, the introduction of these regulations should not place an additional burden on schemes.”

For help and advice on related matters, please contact us today.

Posted in News.