Pension trustees will be required to run a competitive tender when selecting their first fiduciary manager under reforms set out by the Competition and Markets Authority (CMA) today.
After carrying out an investigation of the £1.6trn pension market, the CMA found that around half of UK schemes use the same fiduciary manager that they do for investment consultancy.
This has created a competitive advantage for companies offering both services, with incumbent investment consultants often steering trustees towards their fiduciary management services.
Today's proposals will see firms compete through a tender process, which just one-third of schemes currently demand, with the role of existing fiduciary managers retendered within five years.
"We're concerned that pension schemes are not currently putting pressure on the market to get the best value for money," said John Wotton, chair of the CMA's investigation.
"They may lack the information they need to compare competing offers and could be sticking with their existing investment consultant or fiduciary manager when there are better options available."
The CMA also announced today that fiduciary management firms would be required to provide clearer information on fees and previous performance so trustees can make meaningful comparisons.
In addition, it will ask The Pensions Regulator to provide new guidance for trustees, and recommend that the government broaden the Financial Conduct Authority's regulatory scope.
The Pensions and Lifetime Savings Association's policy lead, Caroline Escott, welcomed the recommendations, saying the investigation was an "important step" towards boosting competition.
"One of our members' main concerns about this market is the potential conflict of interest when investment consultant firms steer pension schemes clients to their fiduciary management services," she added.
The statutory deadline for the CMA's final report is 13 March 2019, with stakeholders invited to submit feedback by 24 August 2018.