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Regulation

U.K. pushes ahead with CMA reforms for trustees seeking to hire fiduciaries, consultants

The U.K. Department for Work and Pensions plans legislation to free up the financial advice services market following an investigation into the U.K. consultants market by the Competition and Markets Authority.

The CMA investigation into the investment consultancy and fiduciary management service found trustees were often denied clear information from consultants that would help them weigh options to get better retirement incomes for plan participants.

Following the probe, the CMA recommended that the Pensions Regulator develop guidance to help trustees in running a competitive tender process for fiduciary managers and consider how the guidance could also be used to support trustees when looking for investment consultancy services.

To help investors find better value for money advisory services in the 1.6 trillion ($2.1 trillion) retirement market, the U.K. government wants to improve competition and ensure better disclosure of fees and performance.

To that aim, the DWP said Tuesday it will draft legislation to enable the Pensions Regulator to oversee the duties of defined benefit and defined contribution plan trustees. DWP will produce draft regulation and consult on it this year. The regulations are intended to take effect in 2020 and replace the CMA order, which is expected by summer.

"We will introduce DWP regulations, which put the CMA's remedies, insofar as they apply to trustees, into the main body of pensions law," DWP said. "As well as allowing TPR to more effectively monitor compliance, it will integrate the monitoring function with the production and maintenance of guidance, allowing TPR to update one in the light of insights from the other."

The proposed remedies are expected to encourage trustees to better engage and monitor the value of the services they use. Under the recommendation from the U.K. Treasury, which also endorsed the CMA remedies, the Financial Conduct Authority will cover activities of investment consultants.

"Changes we are proposing will have a positive impact on millions of people's pension pots," Guy Opperman, U.K. Minister for Pensions and Financial Inclusion, said in a news release.

"The market sometimes restricts trustees' ability to find the best value for money, meaning that defined benefit funds are less affordable and more difficult to fund while defined contribution schemes face higher costs and reduced returns for members," Mr. Opperman said. "We want trustees to be better equipped and engaged when accessing services which have a huge influence on decisions affecting how much their members will have to live on in retirement."