CMA issues legally binding order

On 10 June the Competition and Markets Authority (CMA) issued its legally-binding Order to help pension trustees make better decisions for £1.6 trillion of retirement assets that they oversee.

This marks the final step of the CMA’s reform of the investment consultancy and fiduciary management sectors, after its in-depth investigation found significant competition concerns.

The Order takes into account the responses received to the consultation on the draft Order which closed on 13 March.

The Order reflects respondents’ comments in respect of:

• placing a “reasonable endeavours”, as opposed to “best endeavours”, obligation upon trustees to obtain bids for the provision of fiduciary management services from three or more unrelated fiduciary management providers
• further clarification on the test required to prove compliance from a provider’s perspective
• the 20% threshold that relates to mandatory tendering
• additional exclusions from the application of the Order including schemes which have in-house investment advisers and group personal pension
• what is meant by “Marketing Material”
• certain definitions, including the definition of IC-FM
• fee reporting, and
• compliance reporting.

Last week, The Pensions Regulator (TPR) said it would be consulting on what guidance it should give to trustees on how to run a tender in the next few weeks, adding that it intends to “go further” than guidance on fiduciary management.

The consultation is expected to run for six to eight weeks, with a view to having the guidance in place by the end of 2019.

The CMA recommended that the Department for Work and Pensions (DWP) pass the necessary legislation to enable TPR to oversee the duties on trustees. This will allow integration of the CMA’s order into pensions legislation and allow for effective enforcement. DWP said it will move to have legislation in place in 2020.

For our previous article on this topic, please click here.