The new CMA requirements for compulsory competitive tenders have placed more pressure on trustee boards to ensure they go through a proper process to get the right provider - and do not just opt for the easiest route.
Research from Professional Pensions and Goldman Sachs Asset Management, titled A Tale of Two Tenders, clearly demonstrates the need for trustees to take action in line with the competition regulator's concerns - especially given the costs involved in changing provider, which emphasise the need to get the process right first time.
More scrutiny is being placed on pension fund costs in general. The cost of running tenders comes from a pension scheme's resources, and the cost of changing providers can be very high when factoring in trading costs and time out of the market. It is important to note that smaller schemes feel the impact of costs more acutely than larger funds. This means it is vital that trustees conduct a proper, compliant and open tender process to reduce the likelihood of another being required within a short timeframe.
The requirements are not solely concerned with drawing the line between investment consultants and fiduciary managers, however. TPR's focus will be squarely on the requirements placed on pension scheme trustees. With the rapid maturing of many defined benefit pension schemes in the UK, there is limited time for trustees to rectify any mistakes that could put members' benefits at risk.
Therefore, boards need to embrace the tendering process with a positive attitude in an effort to get the best outcomes for members and avoid costly retendering. Appointing and overseeing a fiduciary manager is likely to become a crucial part of a trustee's skillset in the years ahead, but it should not be seen as a burden.
Click here to access the full research report, and hear how the industry has dealt with the CMA's new rule changes ahead of the June 2021 deadline.