Pension funds rushing to meet the June deadline for compliance of the Competition and Markets Authority’s (CMA) retender of fiduciary managers rule could cut corners leading to poorly negotiated fees and inappropriate mandates, Hymans Robertson has warned.
With the deadline fast approaching, trustees making retender decisions solely based on time pressures could risk undertaking the process without a full commitment leading to poor outcomes for schemes, the consultancy said.
This means the assessment of the mandate and strongly negotiated fees may not be done thoroughly, it added.
In March Hymans conducted a poll that showed that over a third (38%) of UK defined benefit (DB) pension schemes with fiduciary managers were struggling to meet the June deadline.
Samora Stephenson, senior investment consultant at Hymans, said: “The purpose of the CMA’s deadline is for schemes to ensure that fiduciary management provides value for money for pension schemes, while at the same time demonstrating good governance.”
He added: “We are concerned, however, that schemes could be heading into the process without advice as they rush to ensure compliance.”
He argued that a rushed process would risk ”missing out on the best fees and not properly testing whether requirements have changed since mandates were set up”.
Stephenson said pension funds must ensure they don’t put speed first “to make sure this isn’t a wasted opportunity” to have the best fees and the most appropriate mandates in place.
“We believe that savings of up to 30%, a significant saving, can be made with a thorough and professional negotiation process if it is done properly,” he noted.
“If trustees want to avoid making decisions in haste ahead of June, fiduciary management tendering needs to be at the top of their agendas. We urge schemes to ensure that they put full effort into the process and if needed seek help and guidance from advisers for their schemes, regardless of the pressing deadline.”