One of the key benefits of fiduciary management is that it gives trustees the time and resources to focus on high-level issues, which should mean they can make more informed decisions about strategy.
Clear and transparent reporting is essential to support trustees in this process. Moreover, good reporting is also crucial in monitoring the progress of the fiduciary manager against their prescribed objectives.
For all UK DB pension schemes, the fundamental long-term goal is to be able to meet future pension payments. This means that the pension scheme's assets should at least match the liabilities at the point they are to be paid. So two key questions for the fiduciary manager are:
- How will they design a strategy to meet this long-term funding goal?
- How will they put it into effect?
Regular reporting should then signal their progress in maintaining or improving the funding level and whether the pension scheme is on track to achieve its goals. Although the overall objective is clear, measuring the performance of a fiduciary manager is more difficult than, say, that of an active UK equity fund manager. The success of the latter can usually be assessed quite clearly by looking at their performance in relation to a benchmark, such as the FTSE All Share Index. The reasons for this performance might then be explained in terms of their ability (or otherwise) to pick stocks which performed better than the benchmark. In contrast, the reasons for a change in funding level might be more complicated to determine. The following checklist sets out the key questions trustees should ask of their fiduciary manager to assess their performance:
Watch our video "Strategy monitoring and staying in control" below
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Schroders has expressed its own views in this document and these may change. Issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU, which is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored. CS1525b
Trustees’ responsibilities are widespread: they include ensuring their pension scheme is well run, protecting members’ benefits and fulfilling their regulatory commitments. Managing the investment strategy forms just one part of these responsibilities,...
In recent years there has been a sharp uptick in the number of UK DB pension scheme trustees implementing fiduciary arrangements. Indeed, this is not a coincidence given the current investment environment trustees are facing.
What the new long-term funding target means for trustees and how good governance can help them stay in control of this target…
The correlation between good governance and investment performance...
Selecting a fiduciary manager is one of the most important decisions trustees can make, given the appointee's pivotal role in setting and implementing a scheme's investment strategy.