Sole trustee appointments grow 30% year-on-year as large professional trustee firms grow their influence over scheme operations.
Research by LCP and published today (24 September) shows that 51% of DB schemes have a professional trustee on the board.
The consultancy surveyed 15 professional trustee firms that between them work with 2,480 schemes – 49% of the 5,050 DB schemes in the Pension Protection Fund’s 7800 index.
These firms also accounted for 1,178 sole trustee appointments, equivalent to just over 23% of all DB schemes. The number of schemes with a sole trustee has grown by 30% year-on-year.
The reach of the five most influential professional trustee firms extends to 90% of all DB assets, LCP reported. It also recorded significant growth in staffing, with more than 190 people having become professional trustees in the past year.
The data underscores the systemic importance of professional trustee firms to the UK DB market. The Pensions Regulator (TPR) has highlighted this and is already seeking to work with these firms to ensure optimum outcomes for the members they serve.
Measures include the introduction of a professional trustee register and the regulator working more closely with the biggest providers.
Sarah Smart, chair of TPR, said: “We recognise the risks and opportunities presented by the development of the market and the various ownership models: the potential for higher standards and greater assurance as well as the concentration of decision-making in the hands of a few and detaching decisions from the membership.
“As set out in our Corporate Plan, we will continue to target our approach to the market in a strategic way, with savers’ interests at the heart of our approach.”
LCP said it expected more involvement from the regulator including the potential development of a dedicated regulatory framework for professional trustee firms.
Expanding services
As DB schemes mature and the regulatory regime grows more complex, recruiting in-house expertise has become more difficult, LCP said.
This means many DB schemes are looking to outsource more and more services, including administration and investment management. At the start of this month, LCP itself was awarded a contract from the £11.8bn National Grid UK Pension Scheme to provide executive and governance services.
The consultancy said it had also observed an increase in “streamlined” sole trustee services “to meet the growing demand for efficiencies”. These also include a wide range of services including investment management.
Nathalie Sims, partner at LCP and head of strategic pension relationships, said: “This year’s report comes at a crucial time as the pensions landscape rapidly evolves through increased growth, new government reforms and interest from TPR.
“Following another year of significant growth in the professional and sole trustee sectors, the focus is now on how the industry will adapt – with accelerated growth, demand for streamlined offerings, and greater oversight from the Pensions Regulator shaping the future.”
LCP’s research follows similar surveys by WTW and Aon that have produced similar results. In June, Aon’s survey found that the majority of schemes had a professional trustee on the board, based on a poll of 152 schemes.
WTW, meanwhile, reported a sharp increase in recruitment that reflected more appointments for professional trustee firms.
