Professional trustee firms are beginning to dominate the pensions landscape with the top 12 firms alone now appointed to 1,900 schemes with around £800bn of assets and posting business growth of 14% per annum, a report from Isio finds.
The consultant's Professional Independent Trustee Survey 2021 found that a growing regulatory burden and a desire for improved governance is driving rapid growth in the professional trustee market.
And it said, while professional trustee firms are not new, the evolution of the traditional trustee model for UK pension schemes is accelerating the growth of a "small but incredibly powerful industry".
Appointments and scheme assets
Note: The chart shows the number of pension trustee appointments held by each firm together with an estimate of the total assets in those pension schemes. The asset figures are heavily influenced by appointments to the very largest schemes.
In addition to its findings on the influence of the 12 firms it analysed - which have influence over around one-third of all UK occupational pension scheme assets - Isio's research also found that one-third of trustee appointments are now as sole corporate trustees, with sole responsibility for running a pension fund.
Isio partner Mike Smedley commented: "The professional independent trustees market is a fascinating combination of the large and the small.
"On one hand, you could fit the trustees in our survey on to three London buses. They deal with day-to-day decisions like ruling on recipients of individual death benefits and managing the accuracy of pension payments. On the other hand, they have responsibility for £800bn of retirement savings and four million members. They can hire and fire advisers and fund managers in firms that dwarf their own - their influence is phenomenal.
Smedley added: "With this report we wanted to set a benchmark and explore who these trustees are, what is driving expansion and what the future holds against a background of increasing regulation. One particular growth area we're keen to watch is the rise in sole corporate trustee roles, where the firm acts as the only trustee to the pension scheme. One in three appointments are already sole trustee roles and this growth is expected to continue as the model evolves."
A growing industry
Isio said the 12 firms it surveyed estimated that around 50% of pension schemes have a professional independent trustee and expected that the majority of schemes will appoint one or more over the coming years.
It also found that, while the trustee firms are generally modest in size, with a typical headcount of between 50 and 100 employees, they are growing quickly, reporting 10% growth in appointments and 14% growth in revenue in 2020. A number have also had private equity investors in recent years, fuelling their appetite for growth.
A more modern, but expert approach
Isio said that with this expansion comes a modernisation - and noted that professional trustees are increasingly younger, looking for a career rather than a wind-down to retirement, and reflect greater diversity than ten years ago.
It said roughly a quarter of the trustee representatives in the survey had a background as a pension manager or consultant, with another 25% coming from actuarial backgrounds. The remainder is made up of a mix of lawyers, investment experts, covenant advisers and trustees with broader business backgrounds.
Isio's trustee survey was carried out with 12 firms and data was collected via a combination of a questionnaire and an interview with a senior individual, usually the chief executive. In addition, Isio invited other mid-tier professional trustee firms to provide information about their size and services.
Trustee directors and their support teams