CMA order requirement could have ‘flown under the radar’ for schemes

The CMA order requirement to review investment consultants or fiduciary managers against investment objectives every 12 months may have “flown under the radar” for some schemes, XPS Pensions has warned.

The CMA order was published in June 2019 and requires pension trustees to run a tender when selecting a fiduciary manager for more than 20 per cent of their assets and to set objectives for their investment consultants.

The government’s regulations will “broadly replicate” the CMA order and, subject to parliamentary approval, will come into force on 1 October 2022.

The Pensions Regulator (TPR) will oversee the new duties, which trustees have already been complying with since the CMA order came into force on 10 December 2019, rather than the CMA.

Furthermore, TPR will update its published guidance to reflect the final regulations ahead of the regulations coming into force.

XPS pensions advised that, whilst the 12-month check may have been initially tabled as an expectation in the DWP’s June consultation outcome, it was legislated as a requirement, which has gone "relatively unnoticed" by the industry.

XPS, head of fiduciary management oversight, André Kerr: “Whilst many well-run schemes are already doing this, the new requirement for a review at least every 12 months may have gone under the radar for others. It is particularly relevant for schemes that use a fiduciary arrangement, given the low levels of ongoing oversight in the industry.

“We welcome this development as it improves transparency in the industry and keeps monitoring against investment objectives centre stage. By requiring greater dialogue between consultants and clients, these changes will also help build stronger engagement and relationships between industry participants.”

The DWP has committed to a review of the regulations and to publish a report by 31 December 2028. The report will assess to what extent the policy objectives have been achieved and if the regulations are still appropriate.

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