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Growth in pension scheme fiduciary market drops to lowest level in ten years

Pension fiduciary market growth lowest in 10 years

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·        Growth in total mandates slows to 9% - a drop from 30% in 2017.

·        Trustees are increasingly seeking independent advice, with oversight sought in two-thirds of new appointments.

·        Majority of schemes show varied level of engagement on ESG-related issues between Fiduciary Managers and Trustees.

Slowdown in growth

The number of defined benefit schemes using fiduciary management saw only 9% growth in the 12 months to June 2018 – the lowest level since KPMG began tracking the pension scheme fiduciary market in 2008 and down on the 30% growth in the previous year.

Anthony Webb, Head of Fiduciary Management research, KPMG said: “In the 12 months to June 2018 we have seen a slow-down in growth in the number of new fiduciary mandates – still a healthy 9% increase but the slowest since we began tracking ten years ago.

“The CMA review is probably a key factor with some pension scheme Trustees adopting a ‘wait and see’ approach while the investigation into Investment Consultancy and Fiduciary Services was carried out. It now seems likely that UK Fiduciary Managers will not significantly change their investment offering to pension schemes as a consequence of the CMA review – so this year may represent a blip rather than a signal for lower growth rates in the long term.”

Independent oversight increased further

Most pension schemes using fiduciary management are yet to fully integrate independent advice in their ongoing operations but independent oversight did increase for new appointments from 60% in 2017 to 66% in 2018.

The number of schemes seeking independent and ongoing oversight of their fiduciary arrangements saw a small rise – increasing slightly from 19% to 21% in 2018.

Room for improvement for engagement with Environmental, Social and Governance (ESG) issues.

The majority of schemes (58%) demonstrated some ESG-related engagement between fiduciary managers and Trustees. However, the remaining 42% of schemes had no formal engagement on ESG over the past year – representing approximately 350 schemes.

Faye Mullen, Assistant Head of Fiduciary Management Research added: “Pleasingly, independent oversight has increased for schemes when appointing new mandates but is still lacking on an ongoing basis. 

“There is room for improvement in how trustees and their fiduciary managers engage on environmental, social and governance (ESG) issues. There is increasing attention on how ESG policies are managed within pension scheme investment strategy, including new requirements for Trustees that were recently set out by the Department of Work and Pensions.


“Trustees, with help from their provider, will be encouraged to demonstrate greater ESG engagement in future, and we look forward to seeing how fiduciary managers help their clients tackle this.”

ENDS

 

NOTES TO EDITORS

·        For media queries only, please contact Ed Fotheringham Smith, PR Manager, 07920 572490, Edward.FotheringhamSmith@KPMG.co.uk

·        The survey results are based on responses received from 15 established fiduciary managers operating in the UK pensions market, with data in the 12 months to 30 June 2018.

·        To see the full report please go to https://home.kpmg.com/uk/en/home/insights/2018/11/2018-kpmg-uk fiduciary-management-survey.html


·        Definitions used in this survey

o  Full delegation – the fiduciary manager is typically engaged under an investment management agreement to manage 100% of scheme assets. The services provided include all or the majority of the following: journey plan design, strategic and tactical asset allocation, growth and matching portfolio structuring, manager selection, implementation and administration.

o   Partial delegation – trustees delegate only a subset of the investment management to provider. The subset may comprise a portion of the scheme assets or a portion of the “full fiduciary” responsibilities. The subset must also be subset of an alternative full fiduciary management service provided by the same firm.

o   Environmental, Social and Governance (‘ESG’) – investing with an awareness of the wider risks associated with the impact of investments on society as a whole.

 Engagement – the inclusion of an ESG item on a trustee or investment committee agenda which has been discussed with the fiduciary manager.

·         For more details of KPMG’s independent Fiduciary Management advisory service, please go to https://home.kpmg.com/uk/en/home/services/tax/pensions/fiduciary-management-advisory.html


About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 14,500 partners and staff.  The UK firm recorded a revenue of £2.2 billion in the year ended 30 September 2017. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 152 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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