My Lords, I am pleased to introduce this instrument, which brings into pension law various duties of trustees of defined benefit and defined contribution occupational pension schemes relating to the appointment of fiduciary managers and the use and performance review of investment consultants. These duties will replace those currently set out in an order made by the Competition and Markets Authority, the CMA, in 2019 following an investigation into competition in the relevant markets. Compliance with these duties will now be overseen by the Pensions Regulator instead of the CMA.
These regulations contribute to the Government’s objective of improving pension schemes’ administration and governance standards, transparency and decision-making, which will in turn drive better outcomes for the millions of hard-working savers in occupational pension schemes now and for years to come. I am satisfied that the regulations are compatible with the European Convention on Human Rights.
These regulations bring into pension legislation the obligations on trustees of occupational trust-based pension schemes contained in the CMA’s order in relation to the provision of investment consultancy and fiduciary management services. Before setting out more about what the regulations do, it is worth explaining the background to how they have come about.
In simple terms, investment consultancy is the provision of advice to trustees on investment strategy and related matters. Fiduciary management involves the delegation of some investment decisions by trustees to advisers alongside providing advice on investment-related matters. The use of these services has grown over the last decade. The complexity of investments, lack of investment knowledge and challenge of managing defined benefit scheme liabilities has led to an increased dependence on both services. Good investment is a key element in any well-run pension scheme. Trustees are responsible for investment governance and are accountable for any investment decisions taken. They also have a duty to consider proper advice and act in the best financial interests of beneficiaries.
In December 2018, the CMA, following a referral by the Financial Conduct Authority, published its report on its market investigation into the supply and acquisition of investment consultancy and fiduciary management services to and by various investors and
employers. The CMA found that among pension schemes there was a low level of engagement by trustees and a lack of clear and comparable information on which to assess value for money.
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