Fiduciary management: June 2021 tender deadline for some schemes

The requirement to carry out a competitive tender stems from a Competition and Markets Authority Order introduced in 2019 (the CMA Order). In our August 2019 briefing note about the CMA Order, we noted that:

• Trustees who delegate investment decisions for 20% or more of their scheme assets to a fiduciary manager¹ have been required, since 10 December 2019, to run a competitive tender with at least three unrelated firms.
• Trustees with an existing fiduciary manager who was appointed on or before 10 June 2019, without a competitive tender, have to put the service out to tender in the same way, generally within five years from the commencement date of the existing arrangement.
• If an existing fiduciary management agreement dates from 9 June 2016 or earlier, the trustees have until 9 June 2021 to complete the retender exercise and appoint (or reappoint) a provider.

There are also provisions applicable under the CMA Order where trustees make or accept an increase in the level of scheme assets under fiduciary management which would take the level above 20% of the scheme's assets.

Please also see our August 2019 briefing note (and in particular its Appendix) for information about what the term 'fiduciary management services' means for the purposes of this requirement: the definition is broader than one might expect.

For schemes affected by the 9 June 2021 deadline for competitive tenders, time is now running out. It can be expected that the relatively small number of fiduciary managers will be receiving a large number of invitations to tender/retender in the coming weeks. Schemes are therefore advised to check as soon as possible, if they have not already done so, whether or not they are subject to the June 2021 deadline. If they are, prompt action is recommended to avoid a possible 'bottleneck' as the deadline approaches. If the scheme's deadline is later, this should of course also be noted and steps taken well in advance of it.

It is important for schemes with a fiduciary manager to check the requirements of the CMA Order carefully, to ensure that their processes are fully compliant. Points to watch include:

• Where a tender exercise is carried out, trustees must comply with an additional requirement to give the successful candidate written confirmation that they have been appointed as a result of a CMA-compliant competitive tender process.
• In theory, the CMA Order prohibits trustees from obtaining (or continuing to obtain) fiduciary management services if the relevant provider has not been selected as a result of a competitive tender process where this was required.
• Trustees who have previously carried out a tender process when appointing a fiduciary manager, especially before June 2019, may need to check that their historic tender exercise meets the CMA's requirements (notably, for a process involving at least three unrelated firms). If a previous tender process does not satisfy the CMA's definition of a competitive process, a further CMA-compliant tender process may be required – generally within five years from the commencement date of the existing arrangement.

In addition to the annual statement confirming compliance with the CMA Order which trustees must submit (currently to the CMA, on or before 7 January each year), specific breaches of the CMA Order must also be reported within 14 days of becoming aware of the issue, together with brief details of the remedial steps being taken.

Please get in touch with your usual Travers Smith contact if you would like any assistance in understanding the requirements or in taking matters forward.




_{1 In broad terms the CMA Order triggers a competitive tender when 20% or more in aggregate of a scheme's assets are, or become, covered by fiduciary manager arrangements (whether through single or multiple contracts / providers).  However, the provisions in this area can sometimes be complex and may need specific advice.}