Shake up needed in pension investment market, says CMA
The Competition and Markets Authority has concluded its investigation into the pension investment market by proposing a series of reforms.
The CMA has been investigating investment consultants and fiduciary managers, which advise and help pension trustees invest the funds in company pension schemes, since September.
On Wednesday it published its first provisional report into the sector, and has highlighted a number of concerns, including a lack of information on fees and not enough competition.
Said John Wotton, chair of the investment consultants market investigation: “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.
“They may lack the information they need to compare competing offers and so could be sticking with their existing consultant or manager when there are better options available.
“This is an extremely important sector that influences how well millions of peoples’ pension savings are invested, and it’s vital we take steps to make sure that competition is working properly.”
According to the CMA, investment consultants and fiduciary managers are involved in over half of all UK households’ retirement savings, and work with pension scheme assets worth at least £1.6trn.
The CMA will publish its final report on the sector early next year, but ahead of that is had published a list of provisional reforms.
These included pension trustees having to run a competitive tender when they first appoint fiduciary mangers, with the role being put out to tender within five years for those who have already appointed a firm. Fiduciary management firms should also provide clearer information on fees and on previous performances, allowing trustees to make more meaningful comparisons.
The CMA has also called for improved regulatory control of the sector. It said The Pensions Regulator should issue new guidance on how to choose and scrutinise providers, and that the government should widen the Financial Conduct Authority’s regulatory scope to ensure greater oversight.
The industry now has until 24 August to provide feedback on the proposals. The CMA was first asked to investigate the sector by the FCA.