Investment - Articles - Only 1 in 3 schemes using FM has independent oversight

The proportion of schemes with independent fiduciary oversight has remained stubbornly low and largely unchanged for several years. This is despite ongoing emphasis from The Pensions Regulator and the Competition & Markets Authority on the need for schemes to monitor delegated investment arrangements effectively and independently.

 

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 comparison.

 

In XPS’s latest Investment Briefing, published today, XPS Group offers new perspective on the FM landscape, arguing that the 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.

 

Being structured so cost is not a barrier to good governance, particularly for schemes with assets below £100m

Providing clear KPIs, peer benchmarking, fee and terms analysis, and practical, actionable recommendations

Demonstrating how oversight leads to better governance discipline and decision-making over time

 

André Kerr, Head of Fiduciary Management Oversight, XPS Group said: “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.”