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Competition watchdog demands change in pension investment market

The Competition and Markets Authority has found problems with the investment consultancy and fiduciary management markets that work with pension trustees to advise on how they invest their funds.

In a provisional report released today, the CMA found around half of pension schemes choose the same provider for fiduciary management as investment consultancy and firms that offer both services have an advantage over others in the market.

The report found only a third of trustees get firms to compete for their business through a tender process, which means that no competitive pressure is put on their existing consultant or manager to offer the best terms or performance.

The CMA says pension trustees often don’t have enough information on the fees or quality of the service to judge if they are getting a good deal from the firm they use or if they could get better service from another firm.

The CMA says investment consultants and fiduciary managers have influence over more than half of all UK households’ retirement savings and work with scheme assets worth more than £1.6trn.

As a result of the CMA investigation, it has now recommended several changes to those markets.

It says pension trustees selecting their first fiduciary manager must run a competitive tender and trustees who already have a manager must put it out to tender within five years.

It says there must be clearer information provided on fees.

The CMA is also recommending new guidance for The Pensions Regulator to give trustees more advice on how to choose and scrutinise providers.

It also wants the government to broaden the FCA’s scope so there is better oversight of the industry.

CMA investment consultants market investigation chair John Wotton says: “We’re concerned that pension schemes are not currently putting pressure on the market to get the best value for money on behalf of their members.”

The FCA confirmed last September its decision to refer the investment consultant sector to the CMA for investigation.
The FCA first flagged its concerns in its asset management market study, including the potential for vertically integrated business models to create conflicts of interest.


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There is one comment at the moment, we would love to hear your opinion too.

  1. David Cathcart 18th July 2018 at 9:15 pm

    Well it has taken over 25 years for the regulators to accept that an Actuarial cartel control the UK’s occupational pension sector. But with the actuarial profession having a presence in every influential board room, nothing is likely to change anytime soon.

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