Sharp increase in size of schemes opting for FM

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Fiduciary management is no longer just a solution for small schemes, as new research shows that the average size of a pension scheme taking on a fiduciary manager shot up by nearly 80% during the first half of the year.

In its annual survey of the fiduciary management sector, made public for the first time, fiduciary oversight and selection specialists IC Select found that the average size of a UK pension scheme moving to a fiduciary manager (excluding the two largest schemes) rose to £270m over the first six months of 2021, an increase of £120m compared with the preceding five years, when schemes using a fiduciary manager averaged £150m in size.

IC Select attributes the sharp rise in the size of schemes converting to fiduciary management to trustees being forced to dramatically adapt their practices after the onset of Covid-19, bringing market volatility and home working. 

"The reassessment of governance practices, as a result of Covid, at the same time as a need to react to rapidly changing markets, appears to have given a further boost to the sector," said director and head of research at IC Select, Anne-Marie Gillon.

The UK fiduciary management market has almost doubled in size by number of funds, increasing by 96% over the past five years, and based on assets under management, it has grown by 170% over the same period, according to the survey.

Schemes that had fiduciary management before 2016 had to retender this by 9 June of this year on the instructions of the Competition and Markets Authority. IC Select found that 78% of fiduciary management contracts retendered  over the 18 months to the end of June 2021 were won by incumbent providers.

Other findings include that just 10% of pension schemes that use fiduciary managers receive their strategic advice from a third party, and fewer than a third of schemes (31%) seek independent oversight of their provider.

Donny Hay
Roger Brown