Pension schemes must be ready and fully understand the impact MiFID II will have on the way they invest ahead of the implementation deadline tomorrow.

MiFID II will introduce wide-ranging changes to financial services regulation that will affect UK pension schemes and how they use and pay for fund management services.

PLSA investment and defined benefit policy lead Caroline Escott said: “Under MiFID II, schemes will have to deal with a vast range of changes affecting everything from the way in which research is paid for, to the disclosure of cost and best execution information.

“Although this poses challenges to pension schemes and trustees, which need to get to grips with what the new rules mean for them, it also offers an opportunity for in-depth consideration of the value of schemes’ fund management services. For instance, schemes could take advantage of the improved research cost transparency to assess where investment research adds value, or use the cost disclosures to improve their due diligence on managers and think about how to achieve better value for money.

“With the new automatic categorisation of LGPS funds as ‘retail’ instead of ‘professional’ clients, it is particularly important that this sector takes all the necessary steps to be ‘opted-up’ to professional status by their managers. Retail clients do not have access to some asset classes like infrastructure and schemes will need to opt-up as quickly as possible to ensure that their investment strategy is not adversely affected.”

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