A poll recently conducted by Hymans Robertson has shown that over a third (38%) of UK defined benefit (DB) pension schemes with fiduciary managers are struggling to meet the June deadline to comply with the Competition and Markets Authority’s (CMA) retendering rule.
The consultancy said there is now “little time” and that “fiduciary managers will struggle to respond to all tender requests” by the deadline.
As per CMA’s rule and effective from December 2019, any UK scheme outsourcing 20% or more of its assets to a fiduciary manager must go through a competitive tender process. This is defined as involving three or more bids from different companies.
Samora Stephenson, senior investment consultant at Hymans, argues that the ruling is working.
“The purpose of the CMA’s call to retender fiduciary management services was for schemes to not only demonstrate good governance but to ensure that fiduciary management provides value for money for the scheme. It is a concern, then, that over a third (38%) of schemes are estimated not to have started the ball rolling on this.”
He added that “as the deadline looms, this is a real opportunity for trustees to ensure they are getting the best from their fiduciary arrangements”.
He said that trustees are also gaining a better understanding of what is driving their fees and costs. “This retender process allows all schemes to question whether their evolving needs are being met, particularly key when the last 12 months will mean that some schemes are in a very different position compared to last year due to the fallout from COVID-19.”
“If trustees want to avoid a stampede of market activity ahead of June, fiduciary management tendering needs to be at the top of their agendas over the next few weeks. It can take up to two months to run an effective tender process from beginning to end and time is of the essence,” he continued.
He called on shcmes to start tendering their fiduciary mandates in the coming days or weeks. “We really urge schemes to act now as not only will they avoid regulatory wrath but there is the risk that waiting longer could lead to disappointment because trustees’ chosen fiduciary managers may be too busy to participate in tender exercises. Ultimately, rushed tender exercises are less likely to yield good outcomes.”