Only one in three UK pension schemes using fiduciary management currently has independent oversight in place, despite pressure from regulators to introduce this.
Both the Pensions Regulators and the Competition & Markets Authority have highlighted a need for schemes to monitor delegated investment arrangements effectively and independently.
But this latest research, from XPS shows the majority are failing to do this. Regulators have said that without independent oversight, trustees and scheme members are heavily reliant on fiduciary managers to assess and report on their own performance — limiting effective challenge and wider market comparisons.
The research from XPS shows a lack of independent oversight is particularly acute among smaller pension schemes, where cost is often cited as a barrier, despite regulatory expectations applying regardless of scheme size.
In its Investment Briefing, XPS calls on oversight providers to elevate industry standards structuring services so cost is not a barrier to good governance, particularly for schemes with assets below £100m. It also says it wants to see
Providers offer clearclear KPIs, peer benchmarking, fee and terms analysis, and practical, actionable recommendations.
XPS Group head of fiduciary management oversight André Kerr says: “We don’t let students mark their own homework, so why does the industry still allow fiduciary managers to assess their own performance? We have seen numerous cases where scheme performance has been good despite the fiduciary manager, not because of them.
“Independent oversight is essential if trustees are to understand whether value is genuinely being added.
“With the majority of schemes still lacking formal oversight, there is a growing gap between regulatory intent and what is happening in practice. Fiduciary manager oversight should be treated as a core part of good governance, not an optional extra.”