Professional pension trustee market growing 'rapidly' amid rise in sole trusteeship

The professional trustee market is growing "rapidly" amid an increasing regulatory burden, with particular growth expected in relation to sole corporate trustees, research from Isio has revealed, suggesting that this may lead to further consolidation in the sector.

The group’s Professional Independent Trustee Survey 2021 found that the 12 professional trustee firms surveyed had been appointed to 1,900 pension schemes.

These trustees in turn have responsibility over a “mammoth” £800bn, equal to around six months of UK GDP and around a third of all UK pension scheme assets.

Furthermore, whilst the organisations surveyed were "generally modest in size", with a typical headcount of 50-100 employees, the report found that they are also growing quickly, recording 10 per cent growth in appointments in 2020, as well 14 per cent growth in revenue.

It also found that a number have had private equity investors in recent years, stating that this has fuelled their appetite for growth.

Alongside this, Isio highlighted a "continued rise" in clients exploring a sole corporate trustee model, with one third of professional trustee appointments made being sole corporate trustees, and further growth expected in this area.

It argued that this trend was driven by market demand, particularly from sponsors who want to streamline their pension scheme governance, emphasising that professional trustees are increasingly sole trustees or chair of trustees (41 per cent).

“They have also become more hands-on, often acting as an executive trustee or scheme manager rather than purely a non-executive oversight role,” the report stated. “This means firms have increasing influence over the industry, over millions of pensioners and approaching a trillion pounds of assets.”

Isio argued that this rate of expansion, as well as the shift to appointing professional trustees, and, increasingly, sole trustees, was “inevitably” changing the shape of the market and increasing the likelihood of consolidation amongst firms.

Alongside a trend of expansion, the report also highlighted increasing modernisation, revealing that professional trustees are increasingly younger and reflect greater diversity than 10 years ago, with many viewing this as a career in its own right, rather than an end-career role.

Despite this, there was still "room to improve", with the firms surveyed reporting an average female representation of 39 per cent, and just 7 per cent for the Black, Asian and ethnic minority (BAME) population.

The majority still had a background in the pensions industry, with around a quarter of the trustee representatives having a background as a pensions manager or consultant, whilst a further 25 per cent came from actuarial backgrounds.

Commenting on the findings, Isio partner, Mike Smedley, said: “The professional independent trustees market is a fascinating combination of the large and the small.

“On one hand, you could fit the trustees in our survey on to three London buses. They deal with day-to-day decisions like ruling on recipients of individual death benefits and managing the accuracy of pension payments.

“On the other hand, they have responsibility for £800bn of retirement savings and four million members. They can hire and fire advisers and fund managers in firms that dwarf their own - their influence is phenomenal.

“With this report we wanted to set a benchmark and explore who these trustees are, what is driving expansion and what the future holds against a background of increasing regulation.

“One particular growth area we’re keen to watch is the rise in sole corporate trustee roles, where the firm acts as the only trustee to the pension scheme. One in three appointments are already sole trustee roles and this growth is expected to continue as the model evolves.”

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