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The CMA confirms the sun-setting of its Order on IC and FM services

  • United Kingdom
  • Pensions


Trustees must now look to new pensions legislation

On 1 October 2022, the Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2022 (the “Sun-setting Regulations”) came into force. These Regulations brought an end to the Order which the Competition & Markets Authority (“CMA”) made on 10 June 2019 following its investigation into the operation of the fiduciary management and investment consultancy markets insofar as it applies to trustees of private sector occupational pension schemes.

Trustees must now have regard to pensions legislation as amended by the Sun-setting Regulations, instead of the CMA Order. The Order (including obligations to report compliance to the CMA) continues in force for investment consultancy firms, fiduciary managers and joint consultancy-FM firms.


The Sun-setting Regulations amend the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (the “Scheme Administration Regulations”) and the Register of Occupational and Personal Pension Schemes Regulations 2005 (the “Scheme Return Regulations”). 

The new Scheme Administration Regulations provisions apply to “relevant trust schemes” (all occupational pension schemes, subject to certain exceptions) and set out trustees’ obligations on the acquisition, use and oversight of services provided by fiduciary managers (“FMs”) and investment consultants (“ICs”).

The categories of “registerable information” in the Scheme Return Regulations have been extended to include details in relation to trustees’ use of ICs and FMs. Trustees now need to report on these matters to the Pensions Regulator via their annual scheme return, rather than to the CMA in an annual compliance statement and certificate.

In an announcement made on 3 October 2022, the CMA confirmed that its Order had been “sun-set” with effect on and from 1 October 2022 in relation to private sector occupational pension scheme trustees.  In addition, the Pensions Regulator has updated its guidance on trustees’ use of ICs and FMs in light of the amendments made by the Sun-setting Regulations.

Brief reminder

Between 2017 and 2019, the CMA carried out an in-depth market investigation into the use of IC and FM services by pension schemes. It identified certain adverse effects on competition within this market and, as a result, made an Order which, for most purposes, came into force on 10 December 2019 and set out various obligations for trustees on how they select and use ICs and FMs (and for ICs and FMs on how they market and deliver their services to trustees).

The CMA made its Order as a statutory instrument, but it was never intended to be a permanent solution. Conventionally, the authorities primarily responsible for regulating a market subject to an Order of the CMA are expected to introduce specific legislation of their own following the making of the CMA’s Order.  Orders of the CMA are, in this sense, sticking plasters, designed to address an adverse effect on competition while permanent legislation is prepared.

The DWP originally consulted on draft regulations implementing the requirements of the CMA Order on IC and FM services in 2019 and those regulations were expected to come into force in 2020. However, final regulations were delayed as a result of the COVID-19 pandemic. The Sun-setting Regulations were eventually made on 15 July 2022 and came into force on 1 October.  The Regulator’s updated guidance was published in August 2022.

Effect of the Sun-setting Regulations

The CMA Order required occupational pension scheme trustees to set “strategic objectives” for their IC service provider and to carry out a “competitive tender process” for FM services if such services are used in respect of 20% or more of scheme assets.

The Sun-setting Regulations largely replicate the requirements of the CMA Order, subject to a small number of minor differences and one more substantive change. The more substantive change relates to objective-setting for investment consultants. Although the requirement to set objectives continues (albeit not limited to “strategic” objectives – see below), there is now an express requirement for trustees to review ICs’ performance against their objectives on an annual basis and to review the objectives themselves at least every three years or after any “significant change in investment policy” (mirroring the requirement for SIPs).

Helpfully, the Sun-setting Regulations also provide that, where trustees have taken steps to comply with the CMA Order (e.g. by running a competitive tender process for FM services before October 2022), they will not be required to repeat those steps after 1 October 2022 in order to be treated as compliant with the replacement legislation.

The CMA expressly notes that the provisions of the CMA Order which impose prohibitions on investment consultancy firms, fiduciary managers and joint IC-FM firms continue in effect, along with the obligations on such firms to report compliance to the CMA.

Actions for trustees in relation to IC services

Trustees should:

  • ensure they review, and if appropriate revise, their IC’s objectives at least every three years and without delay after any significant change in investment policy;
  • be mindful that this three year period runs from the date the objectives were originally set for the purpose of complying with the CMA Order – for many trustees, this will mean reviewing the objectives (not just performance against them) within a few months of 10 December 2022;
  • note that, unlike the CMA Order, the new requirements do not refer to “strategic” objectives, so the requirement (and expectation) is that broader objectives will be set; and
  • review their IC’s performance against the objectives set for them at least every 12 months.

Actions for trustees in relation to FM services

Trustees should:

  • continue with any plans they have in train to run (what will now be referred to as) a “qualifying tender process” in respect of any existing provider of FM services;
  • comply with the new requirements of the amended Scheme Administration Regulations where relevant in relation to the selection and appointment of any new FM (or the extension of an existing FM mandate to cover more than 20% of scheme assets); and
  • discharge any obligation arising under those requirements by, in essence, using reasonable endeavours to obtain written bids (including pricing proposals) from at least three independent FM providers (and then evaluating those bids).

Actions for trustees in relation to reporting

Trustees will no longer be required to report (and certify) compliance with their obligations to the CMA via compliance statements and certificates submitted by a date in early January each year.  Instead, reporting will be via trustees’ annual scheme returns to the Pensions Regulator, submitted through Exchange.

Review of the new requirements

Interestingly, the Sun-setting Regulations require the Secretary of State for Work and Pensions to review the effectiveness of the new provisions against their objectives and to publish a report on the findings of such review by the end of 2028. Further reviews will need to be carried out from time to time. It is possible that these reviews could lead to the tightening or relaxation of some or all of these requirements in due course.