Its findings draw on research carried out among 13 major consultancy firms who collectively advise a significant majority of UK pension schemes.
The report uncovers a unanimous view that the PCST market will continue to grow in 2022, with three quarters (76%) of consultancies believing that wider adoption of sole trusteeship is having a positive effect on the pensions industry. This includes 15% who believe this impact has been “very positive”.
With this in mind, two in five (38%) consultancies are anticipating “significant growth” in PCST appointments over the next 12 months.
Almost two in three advisory firms (62%) identify schemes with up to £100m of assets under management as the primary source of PCST appointments. One in three (31%) are busiest supporting schemes of between £100m and £499m.
Demand drivers
Ross Trustees’ research also examines the key motivations driving pension schemes to consider appointing a professional corporate sole trustee. While appointing a PCST will not suit all schemes and their stakeholders, the report names three key attributes which lead some scheme sponsors to adopt this governance model:
• The majority of consultancies (62%) cite the speed and efficiency of decision-making as the strongest attraction to pension schemes.
• One in three (31%) feel the decisive factor behind PCST appointments is the ability to adapt to growing governance requirements for trustees, resulting from ongoing regulatory changes.
• The need for specialist skills to deliver risk transfer projects, such as longevity swaps, was also cited by one firm.
Approximately one in three of Ross Trustees’ appointments are as sole trustee. Its delivery lead, Shehzad Ahmad, played a central role in developing the Association of Professional Pension Trustees’ (APPT) Code of Practice, which sets out the operating standards of sole professional trustees and has been in effect since January 2021.
Commenting on its research findings, Shehzad Ahmad, Trustee Director at Ross Trustees, said:
“Our findings show a broad endorsement of the PCST model in the right conditions, and we echo the view that its wider adoption is having a positive impact on the pensions industry.
“Having experienced first-hand the growing demand for outside expertise to manage a multitude of risks and scenarios, it feels the time has come where the PCST model, backed by industry standards, will continue to come into its own as a viable option for many, although not all, schemes.
“Financial volatility, regulatory scrutiny, stringent legislation and sponsor distress are all likely to play a continuing role in prompting organisations to assess whether their trustee model supports the effective governance of their schemes.
“The need for decisive decision-making in a climate of increasing demands on trustees makes the PCST model a valuable alternative to co-trusteeship. The likelihood of further growth may mean 2022 brings proposition developments from industry to meet schemes’ evolving needs.”
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