Pension trustees, who's checking your fiduciary manager's homework?
- Robin Powell
- 38 minutes ago
- 8 min read
Most UK pension schemes that use a fiduciary manager have no independent check on whether it's actually doing a good job. Given the huge variation in performance across the fiduciary management industry, that should worry every scheme member.
Think back to school for a moment. However brilliant your maths teacher was, nobody suggested they should also mark their own exams. The whole point of external marking was independence — someone with no stake in the outcome checking whether the work was any good.
Pension schemes used to work on a similar principle. Trustees made the big investment decisions. They had an investment consultant to advise them, but the final call stayed with the board. If performance disappointed, trustees could see it, challenge it, and change course.
Fiduciary management changed that model. Instead of advising, the fiduciary manager takes over. They make the investment decisions, implement them, and report back to trustees on how things went. It's a bit like asking your maths teacher to set the exam, sit the exam, and mark it too.
That's not automatically a problem. Delegating to specialists can make perfect sense, especially for smaller schemes without deep in-house expertise. But it creates an obvious question: who's checking the checker?
For most schemes, the answer is nobody. XPS Pensions Group research, published in February 2026, found that only one in three UK schemes using fiduciary management have formal independent oversight. The other two-thirds — roughly 550 schemes, managing hundreds of billions of pounds — are relying on their fiduciary manager to grade its own performance.
The performance gap trustees can't see
Fiduciary manager performance varies far more than most trustees realise. Without independent benchmarking, there's no reliable way to know where your manager sits relative to the market.
XPS Pensions Group tracks growth portfolio performance across fiduciary managers covering over £480bn in pension scheme assets. In April 2024, it published its analysis of 2023 results. The best-performing FM growth portfolio returned 13.4%. The worst returned 0.5%. That's a 12.9 percentage point gap — in one year, in an industry that charges for expertise.
This isn't a one-off. In 2019, the spread between best and worst was 12 percentage points. During the first quarter of 2020, as Covid hit markets, it was ten.
In 2023, only one fiduciary manager out of 17 outperformed a simple 60/40 portfolio of global equities and bonds.
A portfolio requiring no skill, no complexity, and minimal fees beat almost the entire FM industry in a strong market year.
Most trustees won't see that comparison. Their FM reports against custom benchmarks — benchmarks the FM helped design. A below-median result looks perfectly acceptable when the measuring stick has been chosen by the person being measured.
The lliability-driven investment (LD) crisis of October 2022 showed what unmonitored delegation looks like under genuine stress. LDI funds sold £25.3bn of gilts in a matter of days as collateral calls cascaded through the system (Pinter, Siriwardane, & Walker, 2024). Schemes with independent fiduciary manager oversight could challenge their FM's crisis response in real time. Those without it had to wait for the FM's own account of what happened, and why.
Fees follow a similar pattern. The IC Select 2025 Fiduciary Management Fee Survey found median total fees have fallen 27% over the past five years. But that drop came through competitive tendering and market scrutiny, not voluntary restraint. Schemes that don't benchmark their costs against the wider market have no way of knowing whether they're still overpaying.
Why trustees didn't ask harder questions
The oversight gap isn't about negligence or laziness. Trustees faced pressures that made challenge feel unnecessary, awkward, or even irresponsible. I've had this conversation many times over the years, and the same explanations keep coming up.
The most common is simple deference. "We trusted the experts." Trustees believed they were appointing specialists whose job was to know more than the board did. Once that mindset takes hold, pushing back feels like second-guessing people you hired specifically because they know better than you.
It's worse where the board lacks deep investment expertise, or where the fiduciary manager controls the data, the reporting framework, and the narrative around both. Trust slid into over-reliance, and nobody noticed the difference.
Then there's the reporting itself. Trustees frequently tell me the materials looked polished and thorough. Performance was framed relative to targets the FM had helped set, smoothed across long time horizons, and explained through attribution analysis few board members felt confident interrogating. The presentation felt transparent. The substance wasn't always there to match.
A related excuse — and it's one trustees often acknowledge ruefully — is the appeal to patience. "We were told the strategy was long term." Poor results were tolerated as the price of discipline. Nobody wanted to be accused of knee-jerk reactions. But patience isn't the same as passivity. And long-term thinking shouldn't mean a permanent holiday from accountability.
Peer effects played a role too. Other large schemes used the same firms. Similar strategies were widely adopted. Consultants reassured boards this was industry best practice. When everyone around you is doing the same thing, the incentive to dig deeper drops sharply.
And something trustees often only realise in hindsight: they underestimated how much discretion they'd handed over. In a traditional advisory model, trustees see every recommendation before it's implemented. Under fiduciary management, decisions happen without that checkpoint. By the time doubts surfaced, changing course felt complex, risky, and politically fraught within the board.
The regulators have already told you to do this
Trustees who think fiduciary manager oversight is optional haven't been reading the regulatory signals. The framework has been building since 2018.
The Competition and Markets Authority (CMA) published its investigation into investment consultants and fiduciary managers in December 2018. It found significant barriers to trustees' ability to assess value. The CMA Order, made in June 2019 with main provisions coming into force that December, required schemes to run a competitive tender before appointing a fiduciary manager to handle more than 20% of their assets. That requirement became law when it was integrated into the Occupational Pension Schemes (Scheme Administration) Regulations in October 2022.
The Pensions Regulator's General Code, effective from March 2024, goes further. Its module on outsourcing and service providers makes clear that delegating investment decisions doesn't mean delegating responsibility. Trustees remain accountable for outcomes. The guidance specifically recommends seeking "independent insights" to verify whether a fiduciary manager is performing.
So the expectation is there. What's missing is enforcement. The CMA mandated competitive tendering at appointment, but there's no equivalent requirement for ongoing fiduciary manager oversight. TPR's General Code sets expectations but relies on trustees to act on them voluntarily.
Nobody checks whether the checking is happening.
That's the gap. Regulation assumes trustees will hold their fiduciary managers to account. The XPS data tells us two-thirds aren't doing it. And the performance evidence suggests that matters.
What good fiduciary manager oversight looks like
Good oversight isn't a tick-box exercise, and it isn't about distrust. It's a structured process that gives trustees the information they need to ask better questions.
Performance comes first. An independent reviewer compares your FM's results against the wider market — not just the targets your FM set for itself. That means sourcing data your FM doesn't produce: how other managers performed over the same period, with similar risk profiles, pursuing similar objectives. The point isn't to find fault. It's to know where you stand.
Costs need the same treatment. Total fees include management charges, transaction costs, and sometimes performance fees that only become visible in the small print. An independent review puts those numbers alongside market comparisons so trustees can see whether they're paying above or below the going rate. Fees that looked competitive three years ago may not be now.
Strategic fit matters too. Investment strategies drift. A scheme's funding position changes, its time horizon shortens, its sponsor covenant evolves. The FM may have adjusted for all of that — or they may be running last year's playbook. An independent eye can spot the gap between where the scheme is and where its investments are pointing.
Periodic market testing deserves attention as well. Not a full re-tender, but a structured check on whether the current arrangement still represents decent value. The CMA required competitive tendering at appointment for good reason. The same logic applies after five years of an ongoing relationship.
And the oversight itself needs governance. Clear terms of reference. A defined reporting cycle. An escalation process for when something doesn't look right. Without that structure, "oversight" becomes an occasional conversation at the back end of a trustee meeting — which is how most schemes ended up here in the first place.
What to do next
Don't wait for the next regulatory push. The tools exist now.
At your next trustee meeting, ask your fiduciary manager three questions. How did our growth portfolio perform against other FMs over the past three years? What are our total costs, including transaction charges and any performance fees? And how does our current strategy reflect changes in our funding position since we appointed you?
If you can't get clear answers, that tells you something.
Then commission a formal independent review. This doesn't need to be adversarial. Most FMs welcome external scrutiny when they're performing well — it validates their work. The ones who resist it are the ones you should worry about.
Build it in permanently. Annual independent performance assessment. A fee benchmarking exercise every two to three years. A full strategic review when circumstances shift. Put it in the scheme's governance calendar so it can't quietly slide off the agenda.
The cost of fiduciary manager oversight is small relative to the sums at stake. The cost of not having it, as the performance data shows, can be enormous.
Time to bring in an external marker
Nobody would let a student mark their own A-levels. Yet that's what two-thirds of UK pension schemes are doing with their fiduciary manager — accepting the grade on the report card without anyone independent checking the working.
You now know why that happens, what it costs, and what the alternative looks like. Independent oversight of your fiduciary manager isn't a luxury or an insult. It's the basic governance discipline that makes delegation work as it should.
Your scheme members are counting on you to get this right. They don't know what a fiduciary manager is. They don't follow performance benchmarks. They trust that someone, somewhere, is making sure their retirement savings are in good hands.
Right now, for most schemes, nobody is.
That can change at your next board meeting. And it should.
Resources
XPS Pensions Group. (2026, February). Fiduciary management oversight survey.
XPS Pensions Group. (2024, April). Fiduciary management performance report 2023.
Pinter, G., Siriwardane, E., & Walker, D. (2024). Fire sales of safe assets. Bank of England Staff Working Paper No. 1,089.
IC Select. (2025). Fiduciary management fee survey.
Competition and Markets Authority. (2018). Investment consultants market investigation: Final report.
The Investment Consultants (Fiduciary Management) Market Investigation Order 2019. Made 10 June 2019.
The Occupational Pension Schemes (Scheme Administration) (Amendment) Regulations 2022. SI 2022/1046.
The Pensions Regulator. (2024). The general code of practice.
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