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

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

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

From 1 October, TPR will take over monitoring compliance with these requirements from the Competition and Markets Authority (CMA). This follows regulations made last month by the Department for Work and Pensions (DWP).

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.

david fairs

David Fairs, TPR

He added: “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.”

Anthony Webb, head of clients, fiduciary management advice, at Isio, said: “This is a really important announcement because trustees of pension schemes will imminently be required to review the performance of their investment consultant provider against their objectives at least every 12 months, and this applies to reviewing fiduciary managers too.”

Webb noted that while many pension schemes already have these good governance practices in place, not all will.

From 1 October 2022 the Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2022 will come into force.

The regulations – which were finally laid in Parliament on 6 June 2022by the DWP – were initially published for consultation in 2019, however the process was delayed due to the COVID-19 pandemic.

In June 2019 a CMA order placed new duties on trustees with effect from 10 December 2019.

“We have been helping schemes with the critical task of overseeing their fiduciary managers since 2008, and in my opinion, this new legislation is a fundamental milestone in making sure that a minimum investment governance standard applies to all pension schemes,” Webb added.

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