Research reveals 'rapid growth' in professional trustee market

The year to July 2022 saw a 10 per cent increase in UK schemes appointing professional trustees and a 20 per cent increase in sole trustee appointments, analysis from LCP has revealed, with 43 per cent of pension schemes now having a professional trustee.

The research found that sole trustee arrangements now account for a third of professional trustee appointments, with these arrangements seeing growing popularity among larger schemes, driven by the need for simpler governance and cost savings.

LCP explained that although sole trustees have historically be considered a solution for smaller schemes, 2022 has seen a fair amount of activity in the £1bn+ bracket, as eight of the 13 firms now have a sole trustee appointment with assets greater than £1bn.

There has also been a strong drive for sole trustee appointments if a particular project needs expertise, according to the research, with 10 per cent of all schemes with a sole trustee appointment undergoing buyout, and a significantly higher number on the journey to buyout

However, the most common reason for the move to a sole trustee model is the impact of increasing regulation, cited by 45 per cent of respondents, followed by succession planning at 29 per cent and cost at 26 per cent.

In addition to this, it found a quarter of all schemes with a sole trustee group key services with one firm for efficiencies, a trend which LCP suggested is "set to continue" in future.

LCP also predicted that the sole trustee market will continue to expand with double digit annual growth, at a rate that outstrips the appointment of professional trustees to schemes more generally.

This growing demand for a sole trustee model is being reflected in the work of professional trustee firms, with all professional trustee firms having developed a system of governance to help ensure appropriate decision making and efficient delivery of their services.

LCP partner and report author, Nathalie Sims, stated: “The rapid rise in larger pension schemes opting for a sole trustee arrangement is staggering and is testament to the many benefits such as fee saving, quicker decision making and succession planning.

“The ongoing evolution of efficient sole trustee models offered by each of the different firms as well as their increased focus on diversity, equality and inclusion makes the sole trustee model an attractive proposition.

“Ongoing regulatory pressure as well as volatile market movements has resulted in specialist and dedicated support to be high in demand, helping to navigate through the uncertainties and provide comfort that the schemes are well prepared for years to come, making sure that members get the best possible outcomes. We expect that this is only the beginning for the market.”

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