A third of DB schemes 'worryingly close' to fiduciary manager retendering deadline

Holly Roach
clock • 2 min read
The deadline for schemes to complete competitive tender process is 9 June 2021
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The deadline for schemes to complete competitive tender process is 9 June 2021

More than a third of defined benefit (DB) pension schemes are running “worryingly close to the deadline” to comply with the Competition and Market Authority’s (CMA) retendering order, according to Hymans Robertson.

A poll by the consultant revealed 38% of pension scheme trustees with fiduciary managers have not started the retendering process and are planning to review their manager or test the market before mid-June, a move Hymans Robertson warned could lead to a "likely capacity crunch" as fiduciary managers will struggle to respond to all tender requests.

The CMA's order in June 2019 confirmed that trustees wishing to appoint a fiduciary manager for the first time for more than 20% of assets are required to run a competitive tender process, while trustees who have already appointed one without a competitive tender process for more than 20% of scheme assets are required to run a competitive tender process within five years from the original appointment or by 9 June 2021, if later.

Hymans Robertson senior investment consultant Samora Stephenson said 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 therefore a "concern", he added, "that over a third of schemes are estimated not to have started the ball rolling on this".

He said: "As the deadline looms, this is a real opportunity for trustees to ensure they are getting the best from their fiduciary arrangements. As a result of activity driven by the CMA order we are already seeing many schemes benefit.

"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."

He continued: "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.

"Trustees who are compelled to tender their fiduciary mandates before the June deadline should be starting these exercises 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."

See more: Time ticking to complete fiduciary management retenders

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