Could regulated tendering be the endgame for the DWP’s trusteeship consultation? Some in the industry seem to think so, writes Pensions Expert editor Nick Reeve.
It’s nearly six years since rules were introduced requiring pension schemes to run a competitive tender for fiduciary manager appointments. Evidence since then has shown very little effect on the growth of the sector – in fact, it appears to be going from strength to strength.
Could we see a similar requirement being introduced for professional trustees? This is certainly the implication of many responses to the Department for Work and Pensions’ (DWP) consultation on trusteeship and administration. Even some professional trustee firms seem open to the idea (in stark contrast to the consultants who rebelled so strongly against regulatory intervention in the fiduciary management space…).
When the Financial Conduct Authority first launched its investigation into consultant-owned fiduciary managers nearly a decade ago, there were some who predicted that businesses would be forced to spin off to address conflicts of interest. Similar conflicts exist (at least in theory) within some professional trustee firms that offer other services, but I don’t think for a moment we will see these firms broken up as a result of this consultation.
It also won’t be the end of bundled services. Many consultancy groups still offer multiple services to trustee boards bundled together despite greater regulatory scrutiny, and there are clear advantages to this approach. But if the DWP’s work leads to a higher bar when justifying bundled services, it can only be a good thing.
Another big theme this week has been retaining the voice of the member. The Association of Member-Nominated Trustees has long been concerned that unchallenged sole trustee appointments weaken member representation, and hopes that formal tender processes could address this in part.
Meanwhile, the Trades Union Congress voiced similar concerns in a new report, published yesterday, in which it called for greater member representation in master trusts. Perhaps ShareAction’s suggestion of corporate-style annual general meetings could gain traction in this regard?
Download the new episode of our podcast, Always A Pensions Angle, on Monday, when I’ll be covering these issues in more detail with my colleague Thomas Parker of LAPF Investments.
Nick Reeve is editor of Pensions Expert.
