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CMA orders shake-up of pension advice market due to lack of competition

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Pension scheme members are at risk of getting a bad deal due to a lack of competition in the pension advice market, according to the Competition and Markets Authority (CMA).

The CMA said today that pension trustees, who oversee companies’ pension schemes, are not given sufficient information to help them choose advisers.

The report found many pension trustees buy fiduciary management services from their existing investment consultants, even if a better deal is available elsewhere.

Investment consultants are often able to steer their customers towards their own fiduciary management services, the report found.

It said only a third of trustees ask fiduciary managers to compete for their business through a tender.

The CMA, which began an investigation into the market in September last year, said the lack of competition could lead to a worse deal for pension scheme members.

The CMA has proposed a number of changes to shake up the market, including compulsory tendering for fiduciary management services and greater clarity over fees and performance.

It called on the Pensions Regulator to issue new guidance to help trustees choose their advice services.

A spokesperson for the Pensions Regulator said: “We welcome the CMA’s final decision on their investment consultants market investigation. Trustees play a vital role in helping to ensure that pension scheme members get the best possible benefits from their investments and it is important that they are able to select good quality advisers.

“We look forward to working with the CMA and others to develop guidance for trustees to prepare for compliance with the additional governance requirements imposed on them by the CMA’s remedies.”

It is understood the CMA will issue an order in the mid-point of next year, giving the industry six months to adapt to the new standards.

The report also called on the government to broaden the scope of the Financial Conduct Authority (FCA) to ensure greater oversight of the sector.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “We welcome the CMA’s in-depth analysis of both investment consultancy and fiduciary management services and support the package of remedies proposed.

“We will continue to work closely with the CMA, Treasury and the Pensions Regulator to implement the CMA’s remedy package and take forward the recommendations in its report.”