PLSA IC 19: TPR to consult on trustee guidance for FM tendering process in June

The Pensions Regulator is set to consult on its guidance for trustees looking to tender for fiduciary managers in June, but warned that they must protect themselves in the meantime.

Speaking at the Pensions and Lifetime Savings Association (PLSA) Investment Conference today, 7 March, TPR investment consultant, Brendan Walshe, said the regulator has been approached by a couple of schemes who were looking to tender, but which did not wish to fall foul of the regulator’s guidelines, expected to be finalised by the end of the year.

It follows the Competition and Market Authority’s (CMA) findings into the investment consultant and fiduciary management markets, which will require pension schemes to run a competitive tender before choosing a fiduciary manager for more than 20 per cent of its assets, in order to drive up standards and decrease costs across the industry.

The guidelines will look at helping trustees assess what services they are getting from their fiduciary manager, and why they are getting it, which will be measured on “some sort of score card”. Trustees will also be able to leave feedback on the process.

Speaking to Pensions Age, Walshe said: “It’s quite difficult because we haven’t published anything yet and we can’t until the CMA’s report is final, so its one of those chicken and egg things. That’s why we are aiming to publish at the end of June.

“It’s a challenge and one of the key protections for trustees is to document the process, why are we doing this, what decisions did we make and why did we make these decisions? Then that’s a fair and transparent manner and if the findings in hindsight tend to be wrong then that’s a different manner.

“It would be very hard for us to turn around and say that’s wrong. But if they make no attempt during the process then that’s a different issue.”

TPR is intending to publish its draft guidelines for consultation in June or July, at the same time the CMA is set to issue the final order. It will consult for six to eight weeks.

“Our expectation is that we will have final guidance issued by the end of the year and ideally by the end of October. We want it to be out there by the time the order comes into effect which will be December this year,” Walshe added.

“Along the line is the legislation element, by the time this gets reported through the scheme return it will be 2021 before everything is fully enforced.”

The Department for Work and Pensions will legislate for the remedies in 2020, but it is likely to be in 2021 when schemes will officially be required to report it through their scheme return.

The timeline does little to play fears that some investment consultants are already misleading their trustees over the proposed CMA remedies.

XPS Pensions head of investment issued a stark warning to trustees, and accused some investment consultants of “spinning” the CMA’s investigation findings.

The process also means that the CMA and DWP will responsible for overseeing the proposed remedies, before TPR can enforce its guidelines.

“I think the CMA draft order has set out quite clearly you need at least three groups to form part of the tending that are completely independent. Most people recognise what good practice looks like, what we will set out in guidance is ideally you would set out the fee.”

The DWP is set to deliver its official response to the CMA’s investigation next week, supporting its findings.

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