CMA proposes pension investment reforms

CMA has published a report proposing several reforms to allay its concerns over competition in the investment consultancy and fiduciary management sectors. CMA was concerned that:

  • many pension schemes (around half) choose the same provider for fiduciary management that they use for investment consultancy. CMA is concerned the investment consultant can encourage this and it means that companies that offer both services have an advantage over those that do not;
  • only one third of pension trustees use a tender process, thus putting little pressure on their existing managers or consultants to offer the best terms or highest performance. CMA proposes to require pension trustees to appoint their first fiduciary manager on a competitive tender basis, and those that already have a manager must put the role out to tender within 5 years; and
  • pension trustees often lack enough information on fees and quality of service to be able to judge whether they are getting a good deal. CMA proposes firms should provide clearer information on fees and how they have performed for other clients.

CMA also proposes that the Pensions Regulator should issue new guidance to provide trustees with more advice on choosing and monitoring providers, and that FCA should have greater powers of oversight of the industry.

CMA has asked for comments by 24 August, and must submit its final report by 13 March 2019.