Over a third of trustees of UK defined benefit (DB) have seen their costs rise by over 50% in the past year, according to research from TPT Retirement Solutions.
All 100 trustees of DB pension schemes polled by TPT said they had seen an increase in running costs, unanimously seeing increases of at least 5% in the past year, with 90% finding costs had risen by over 10%. On average, trustees said they had experienced a 37% increase in running costs.
The increase in costs was mostly attributed to actuarial services (19%), technology and data services (19%), and covenant services (13%). Legal and administrative services (both 8%) were least often noted as the costs with the highest increase.
Beyond increasing costs, almost all trustees polled (99%) said they had found the pace of new regulations a major challenge in the past year.
In particular, nearly four in 10 trustees (38%) said that new ESG-related regulations, such as Taskforce on Climate-related Financial Disclosures, were the most challenging to deal with.
The new DB Funding Code and General Funding Code were seen as the most challenging by 22% of trustees, while the same number (22%) instead considered the Pension Schemes Act 2021 as the most difficult piece of regulation to navigate.
Alongside these challenges, 29% of trustees polled viewed accessing different asset classes as a significant challenge they are facing. Almost a quarter of respondents raised pensions dashboards readiness (24%), covenant negotiations (23%), and scheme administration (23%), as major issues they currently face as a trustee.
Nicholas Clapp, commercial director at TPT Retirement Solutions, said: “Our research has found trustees are finding the current regulatory and price environment very challenging.”
He added that as the regulatory environment becomes more complex, costs will likely continue to increase as trustees increasingly rely on advisers to support them.
He noted that a 37% increase in running costs is “unsustainable” and makes it important for trustees to assess the value for money that they are receiving.
“It is the perfect time for trustees to review the current operating model and to explore options to mitigate these increasing expenses,” he said, adding: “Managing running costs is particularly important if a scheme is considering run on as part of its endgame solution.”
Read the digital edition of IPE’s latest magazine
No comments yet