Watchdog probe into pension investment ‘could boost transparency for councils’

13 Nov 17

A probe into the competitiveness of pension investment consultancy firms could mean more regulation for organisations giving advice to local authorities but greater protection for clients.

Neil Sellstrom, treasury management and pensions advisor at CIPFA, told Public Finance a Competition and Markets Authority investigation into investment consultancy and fiduciary management services for pensions funds “could have a potential impact” for local authorities.

“[Pension advice] might be more regulated, with extra governance, more transparency,” he said. “There might be more reviews of contracts that are already in place.’

Although he added that change was a “few years away” if the government did decide to put any recommendations into effect and better regulation gives “greater comfort” to the client.

The CMA decided to launch the investigation after “serious” concerns were raised by the Financial Conduct Authority (FCA) in September.

Investigators are looking to see if there are any market features that “prevent, restrict or distort competition”. If it does find competition concerns, the CMA will decide whether and – if so – what action is needed to resolve them. 

The watchdog has appointed an investigation group, which will act as the decision maker in the case. This will be chaired by John Wotton, one of the CMA’s designated inquiry chairs.

Wotton said: “It is extremely important that the investment consultancy sector works effectively for its clients, which include many of the UK’s biggest pension funds, and we want to ensure we are looking at the right issues.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “Investment consultancy services play a significant role advising pension fund trustees when they are procuring asset management services.”

The probe affects organisations advising both the public and private sector. This is the first time that the FCA has made a market investigation reference to the CMA.

The CMA is currently gathering information from the sector in an investigation that is timetabled to continue until a statutory deadline of 13 March 2019. A final report will then be produced.

Did you enjoy this article?