DWP legislation on CMA final order to come into force from 1 October

Government legislation that will take forward the recommendations set out in the Competition and Markets Authority’s (CMA) final order will come into force from 1 October 2022.

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.

This is a delay from the original date proposed in the consultation, which was launched after the CMA order was published, due to reprioritisation brought on by the onset of the Covid-19 pandemic.

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.

“The government acknowledges the scope of DWP regulations is greater than the CMA order,” the government’s response noted.

“The government recognises there are additional reporting requirements under DWP regulations, and these are detailed in the Impact Assessment.

“The CMA order requires trustees to check their compliance, complete details on the statement, sign and send to the CMA. Since DWP regulations broadly replicate the CMA order, trustees will already be reporting against the vast majority of the compliance statement.

“DWP regulation broadly replicates the CMA order, therefore we do not expect familiarisation to be a significant additional burden.

“By the time DWP regulations have been introduced trustees would have already been complying with the CMA order for at least two years, and trustees would have been able to draw upon TPR guidance to assist compliance during that period."

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.

Commenting on the DWP's consultation response, Cardano partner and co-head of clients, Patrick Cunningham, said: “We are pleased the government intends to change regulations this autumn, turning into law most features of the CMA’s order, including common sense provisions like mandatory tendering for fiduciary managers and setting objectives for investment consultants.

"These changes in the way services are bought and evaluated will facilitate good governance, ultimately reaping benefits for scheme members and corporate sponsors.”

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