Independent Oversight Made Clear

On 12 November 2024, Peter Dorward, Managing Director of IC Select, joined Chris Brown and Helen Norman on the Burgess & Salmon Pensions Pod to discuss “How to Approach Fiduciary Manager Assessment for DB Schemes.” During the episode, Peter unpacked the regulatory landscape surrounding trustee responsibilities and emphasized the importance of raising the bar in evaluating investment advisers.

You can listen to the full podcast, here.

Trustees of Defined Benefit (DB) pension schemes carry a heavy responsibility in ensuring the performance and suitability of their investment advisers and fiduciary managers. On the Burgess & Salmon Pensions Pod, Peter Dorward, highlights how independent assessment can support trustees in achieving this goal.

This blog post explores key points from the discussion, explaining why independent advice is crucial to effective governance and long-term scheme success.

Historical Context

In the wake of the CMA Orders (2019), trustees were tasked with setting and assessing investment objectives quickly to meet compliance deadlines. As Peter explained:

“Historically, because it had to be done so quickly, it was being done by the adviser… So the starting point was not a good starting point and was never what the TPR or CMA intended.”

?These objectives were often:

• Qualitative in nature: Offering little to no measurable benchmarks.
• Plain vanilla: Lacking depth or sophistication.

This approach effectively perpetuated the status quo, with trustees relying heavily on their advisers without gaining new insights or governance capabilities.

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The Case for Independence

Peter emphasised that independent advice transforms the process by ensuring:

1. Clear and Measurable Objectives: An independent organisation works with trustees to establish robust investment objectives that go beyond basic reporting.
2. Accountability: Independent oversight hold fiduciary managers and advisers to a higher standard, removing conflicts of interest.

“Having an independent view means the objectives are actually reviewed, set, and assessed for the trustees, by the trustees, with the help of an independent organisation like IC Select.”

This independence ensures trustees have the necessary tools to make informed decisions, thereby reducing the risk of merely rubber-stamping adviser recommendations.

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The Sponsor’s Perspective

Sponsors, like trustees, have a vested interest in the scheme’s success. As Peter noted:

“A sponsor will have their own adviser… and would expect some sort of independent view of how the service provision is actually operating.”

Without an independent assessment, sponsors are left relying on the same advisors responsible for delivering the service—a clear conflict that undermines governance and trust.

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Why Independence Is Critical for Governance

Investment and investment governance typically account for 80% of the cost of running a pension scheme. The stakes are high, with investment outcomes directly impacting:

• Scheme assets.
• Funding requirements.
• The ability to pay benefits to members.

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Peter highlighted this starkly:

“If you’re not paying that sort of attention and not doing this independently, then when would you?”

An independent organisation brings the necessary expertise to:

• Analyse quantitative data thoroughly
• Assess qualitative aspects such as service quality and alignment with objectives
• Uncover hidden risks or inefficiencies, ensuring no “skeletons” remain unexamined.

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A Better Path Forward

Independent assessment is not just about compliance; it’s about raising governance standards. By engaging experts who understand the complexities of fiduciary management, trustees can:

• Gain meaningful insights into their scheme’s investment performance.
• Ensure value for money and alignment with scheme objectives.
• Build confidence among stakeholders, including sponsors and members.

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As Peter concluded:

“If you don’t do that, then you’re never going to be able to actually scratch the surface and really see where the skeletons may be hiding.”

For trustees, the independence of fiduciary manager oversight is not just a regulatory requirement; it’s an opportunity to enhance governance and safeguard the future of their schemes. By partnering with experts like IC Select, trustees can ensure their schemes are not only compliant but also positioned for long-term success.

If you’d like to learn more about independent investment oversight and how it can benefit your scheme, get in touch with IC Select.