Over 80% of both defined benefit (DB) and defined contribution (DC) schemes would recommend their investment consultancy to a scheme with similar needs, the National Association of Pension Funds (NAPF) has found.

However, the NAPF's investment consultants' performance survey found that the percentage of schemes who would recommend their investment consultancy to a scheme with similar needs was lower among DC schemes at 80% than DB schemes at 86%.

Joanne Segars, NAPF chief executive, said: "It's clear that overall pension schemes value highly the advice and expertise their investment consultants provide, although the difference in satisfaction levels between DB and DC schemes is something to watch as the number of DC schemes and assets in those schemes will grow quickly."

The NAPF said that DB schemes rated their consultants positively for providing explanations of technical issues and clear communications for decision making; providing proactive advice; and providing well-researched and objective advice, among other criteria.

However, only 35% of respondents had a formal process to evaluate their investment consultants' performance, with 22% having no process in place; and only 40% of schemes rate their consultancy as providing 'very good' or 'excellent' value for money although respondents did feel fees were clear and correctly aligned with scheme objectives.

Regarding DC schemes, 88% of DC schemes rated their consultants positively for understanding their DC schemes, while 83% were satisfied with their consultants' recommended approach for a default strategy.

However, fewer respondents were satisfied on advice offered to members on the fund range and advice on pre-retirement investment options as compared to the advice provided on default strategy and scheme design, while 28% of respondents did not rate their consultancy as providing value for money.

The NAPF said that it will develop a practical guide to help trustees properly evaluate their investment consultants' service.

The survey also revealed that 28% of DB scheme respondents had in-house investment expertise; this grows to 48% of funds over £1bn, but shrinks to 11% of funds of less than £250m.

Segars said: "The growth of in-house expertise over the last four years, especially for larger DB pension schemes, indicates that it is here to stay and we expect to see further growth, driven by schemes looking to lower costs and test consultancy advice.

"In the future we may see a more collaborative approach between in-house investment sub-committees and external investment consultants, especially among larger pension scheme funds."

Stewardship was a new topic for the annual survey and only 30% of respondents were 'very satisfied' with their consultants' stewardship capabilities, with 48% 'fairly satisfied' and 3% 'fairly dissatisfied'.

Segars said: "The level of satisfaction from schemes of their consultants' stewardship capability is disappointing, especially as we know pension schemes have growing expectations in this area.

"This survey and last year's NAPF engagement survey both highlight the need for a clearer and more robust procedure on stewardship to be put in place."

First published 05.03.2014

monique_simpson@wilmington.co.uk