Are you preparing your first annual compliance statement?

It is time for trustees to send a first notification to the Competition and Markets Authority that they are complying with its investment consultancy and fiduciary management services order

 
In June 2019, the Competition and Markets Authority (CMA) made a final order containing measures to support competition in the investment consultancy and fiduciary management markets.

The order contained two immediate action points for pension scheme trustees:

• Set strategic objectives for your investment consultancy provider.
• If you are thinking about appointing a fiduciary management provider or providers in relation to a total of 20% or more of the scheme’s assets, or making further appointments which will take the total to 20% or more, run a competitive tender before you do so.

The order and related explanatory note also set three longer-term action points:

• Keep the strategic objectives that you set for your investment consultancy provider under review and monitor performance against them.
• If you have already appointed a fiduciary management provider or providers in relation to a total of 20% or more of the scheme’s assets, run a competitive tender.
• Send an annual statement and certificate to the CMA to confirm that you are complying with the parts of its final order that apply to you.

The Pensions Regulator has published guidance to help with the “strategic objectives” and “competitive tender” requirements.

Stalled changes

 
The requirement to send an annual compliance statement and certificate to the CMA had been expected to be replaced with a duty to report on compliance to the Pensions Regulator through the scheme return. However, the relevant government consultation and draft legislation have stalled.

The result is that trustees must prepare their first compliance statement and certificate, for the period December 2019 to December 2020, and make sure these arrive with the CMA between 10 December 2020 and 7 January 2021.

Article 15 of the CMA’s order and the definition of “compliance statement” in article 2 give the detail for the compliance statement. Article 16 covers the signed certificate.

The requirement to submit a statement and certificate is easy to comply with and the trustees’ investment consultancy and fiduciary management providers have similar reporting duties.

Open Trustees comment

 
Almost all pension scheme trustees must prepare and submit a compliance statement and certificate. Trustees should discuss this requirement with their investment consultants and legal advisers, prepare their statement and certificate, and submit them to the CMA to arrive by (we suggest) 6 January 2021. Trustees should also keep a record of what they send to the CMA and when.

If trustees find that they have not complied with any part of the CMA’s order, they should take legal advice. Discovering non-compliance will trigger a requirement to make a report to the CMA within fourteen days.

Now is also a good time to check in against the longer-term action points listed above. Is the first annual review against investment consultancy provider objectives due? If the trustees have already appointed a fiduciary management provider or providers in relation to a total of 20% or more of the scheme’s assets, by when do they need to run a competitive tender?