LCP research reveals 20% surge in use of sole trustees

The consultancy said its report on Professional Corporate Sole Trustees (PCSTs), published today (4 October) found the year to July 2022 had seen a 10% increase in professional trustee appointments with the number of sole trustee appointments growing at twice that rate.

It said, overall, 43% of pension schemes now have a professional trustee with one-third of those being a sole trustee arrangement.

The consultancy's sole trustee report is based on a survey of responses from 13 professional trustee firms appointed to 2,174 schemes with over £1,200bn of assets.

LCP said the popularity of sole trustee arrangements was growing even for larger schemes, driven by a need for simpler governance, cost savings and endgame planning - noting that eight of the 13 firms it surveyed now have a sole trustee appointment with assets greater than £1bn, adding the largest sole trustee client is now £4bn (LawDeb Pension Trustees) followed by £2.4bn (Independent Trustee Services).

It added there had been a particularly strong drive for sole trustee appointments if a particular project needed expertise to manage a buyout, member options exercises or benchmarking of existing advisers.

The consultancy said it expected the sole trustee market to continue to expand with double digit annual growth at a rate that outstrips the appointment of professional trustees to schemes more generally.

LCP found the most common reason for the move to a sole trustee is the impact of increasing regulation - with 45% of those surveyed saying that increasing regulation was the main reason for the move followed by succession planning at 29% and cost at 26%. 

Partner and report author Nathalie Sims said: "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, equity and inclusion (DE&I) makes the sole trustee model an attractive proposition."

She added: "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."

LCP said other key findings from its report were: 

• DEI has become a huge focus for professional trustee firms with trustees increasingly drawn from a wider range of backgrounds, together with a shift towards younger trustees and a close to 60:40 split of male vs female trustees.

• Professional trustee firms are taking the sole trustee model seriously: all of them have developed a system of governance to help ensure appropriate decision making and efficient delivery of their services. Many have a newly appointed head of sole trustee.