The UK’s competition watchdog has proposed an overhaul of the £1.6 trillion pension investment consultancy sector to tackle competition weaknesses.
The Competition and Markets Authority’s (CMA) 330-page provisional decision comes after an investigation ordered by the Financial Conduct Authority (FCA) into the sector.
The CMA found out that while pension schemes can choose from a range of different firms, there were competition problem within both the investment consultancy and even more so in the fiduciary management markets.
Pension trustees in the UK will have to run compulsory public tenders when appointing their first fiduciary manager, according to the proposals. The report also calls for trustees who have not previously run a tender to do so within five years.
Fiduciary management firms will also have to provide clearer information on fees and how they have performed, the report says.
John Wotton, who lead the investigation, said: “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 CMA says that the proposals would “increase competition in the market and reduce the competitive advantage held by the incumbent investment consultant when it comes to getting new business”.
Investment consultants advise pension trustees, who oversee companies’ pension schemes, on how to invest their funds. Some pension schemes delegate investment decisions to fiduciary managers. These firms have influence over half of all UK households’ retirement savings and work with pension scheme assets worth at least £1.6 trillion.