UK - Pension schemes should be legally obliged to perform due diligence before appointing a fiduciary manager, consultants say.
Muse Advisory and law firm Wragge & Co have warned that trustees potentially face serious conflict of interest issues if they fail to do so.
Muse Advisory director Mark Hodgkinson said: "Over the last few years we've been surprised to see firms converting their traditional consultancy clients to fiduciary management with seemingly little due diligence on the part of the pension fund trustees."
He said trustees needed to project forwards four or five years and ask themselves what they would do if fiduciary management had not worked out the way they had anticipated.
"After all, trustees would traditionally look to their consultant to advise them on the selection of the best investment managers, so it might be expected that they would want to be careful to appoint the fiduciary manager that appears best equipped to fulfil their needs successfully."
Wragge & Co pension team partner Paul Feathers said his firm had advised numerous clients on awarding fiduciary management mandates.
He said: "It is essential for trustees, when appointing a fiduciary manager, to undertake a much higher level of due diligence to discharge their obligations under the Pensions Act 1995. Trustees must ensure that the appointed firm has the right level of knowledge, expertise and experience."
Cardano client manager Phil Page said he backed the call completely and was surprised that firms were awarding mandates without undergoing due diligence.
"In our experience, we've always been involved in a formal due diligence process before being appointed - maybe that's because we only set up in the UK in 2007 and all our clients are new clients" he said.
Page said trustees should go one step further and appoint independent trustees or advisers to monitor the ongoing performance of fiduciary managers.
"If you've got an investment expert, the level of discussion and challenge is higher - which is good for the scheme and the fiduciary manager," he said.
Enhanced powers for The Pensions Regulator (TPR) to prosecute and fine company directors who "wilfully or recklessly" put their defined benefit (DB) pension scheme at risk will be hard to enforce, commentators say.
Melrose has pledged to contribute up to £1bn to GKN's pension schemes as part of a final offer to acquire the engineering business.
Existing master trusts will be forced to pay £41,000 when applying for authorisation under the upcoming regime, the government has confirmed.
UPDATE 2 - DWP publishes DB white paper: Stronger powers for TPR, DB chair statements to be introduced
The Pensions Regulator (TPR) will be given the power to fine company bosses who deliberately puts their defined benefit (DB) schemes at risk, the government has confirmed.