Nearly one in four schemes required to re-tender for their fiduciary management services ahead of the Competitions and Market Authority’s (CMA) 9th June deadline have yet to do so, new research shows.
A survey of over 20 UK fiduciary managers by XPS Pension Group suggests 248 schemes needed re-tendering, compared to the CMA’s estimate of up to 500 schemes. The research also found that the process has led to widespread cuts in fees, which have in some cases been reduced by as much as 50 per cent.
XPS says its report shows that out of the CMA’s estimated 500 schemes, up to 100 have moved back to an advisory relationship with the remainder, mainly partial mandates, being reclassified as not FM or not required to adhere to the CMA order. Of those currently going through a re-tender process, 37 per cent had completed the re-tender, 40 per cent were in progress and 23 per cent were yet to start, as of 16th April 2021.
Of those that had already been completed, 81 per cent of schemes retained their existing managers and 19 per cent changed their manager.
In a poll of more than 200 pensions professionals, five times more thought the CMA order had led to better outcomes than those that disagreed, while 55 per cent believed fiduciary management appointments should be re-tendered every 3-5 years, compared to 40 per cent who disagreed and 5 per cent who were undecided.
XPS says its research finds that fiduciary managers are relatively untested when it comes to end-game planning for schemes, and that there is a wide variation in the approaches that different FMs take to de-risking as schemes mature. De-risking approaches are currently likely to be driven by the size of the scheme and the opportunity set of the FM in question, rather than trustees’ investment beliefs and preferences, it says. The research highlights the consideration that trustees should give to end-game strategies when selecting or retendering their fiduciary management appointments.
XPS Pensions Group head of fiduciary management oversight André Kerr says: “Our research suggests that many trustees have left re-tendering very late, with the 9th June 2021 deadline fast approaching. This could lead to a lack of choice for trustees. With 81 per cent of mandates staying with the incumbent fiduciary manager, it could suggest a box ticking exercise. However, our experience of over 30 re-tenders has found that every retender process has added value. Benefits to trustees have included, new improved investment strategies and significant reductions in fees ranging from 10 to 50 per cent.”
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