Bringing real value to the new CMA requirements

19th January, 2021

  • The Competition and Markets Authority (CMA) issued an Order in 2019 requiring trustees of defined benefit pension schemes to competitively tender fiduciary management services. The Order also included reporting obligations and, in that regard, a little over a week ago, the deadline passed for trustees to complete and submit statements to the CMA confirming compliance with the key aspects that applied to them; namely:

    1. the establishment of objectives for their appointed investment consultant; and
    2. the need to ensure that fiduciary management arrangements were established in a manner consistent with the CMA requirements around competitive tendering.

    Arguably, the statements were a bit symbolic. If trustees were not, in practice, compliant, they already had a duty to inform the CMA as to the breach when they became aware. That said,  before Covid-19 disrupted so many aspects of our lives, it had been expected that the CMA orders would have been replaced by detailed regulations; so, perhaps a pass can be given for the statements not having much value.

    As trustees, the process of signing the statements should, however, highlight a few important points:

    1. Have the objectives that were agreed with the investment consultant helped generate a better level of advice and service ?
    2. Do they remain fit for purpose?
    3. How should they evolve?

    We believe that trustee boards should allocate some time at their next meeting, whilst this matter is fresh in their minds, to critically review the objectives, and the performance against the objectives. This will help them to best ensure that excellent value is obtained from their relationship with their investment consultant. Furthermore:

    1. If a fiduciary management approach is in place, are the trustees clear on what needs to be done, and by when, to ensure compliance with the CMA requirements? 
    2. Do they have enough knowledge and support on their board to understand and execute on these obligations?

    Trustee boards need to pay urgent attention to these issues as many of the fiduciary management mandates will need to be completed by June of this year and undertaking a compliant competitive process will take time and resource.

    Whilst often new requirements such as the CMA orders can feel like bureaucracy, we believe real value can be accessed if trustee boards follow through on the points above.

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    • Published byDavid Fogarty

      David is a Director of Dalriada Trustees Limited based in London. He is an experienced Accredited Professional Trustee and pensions actuary, whose focus over recent years has been on investment strategy and risk management. David is currently trustee to a £2bn...

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