In this arrangement, a board of trustees oversees several (or many) pensions from different companies, all at the same time.
Whilst you still control contribution levels, you give up day-to-day as well as legal responsibility for the scheme. Instead, it is managed by experienced, dedicated trustees – who may be far more hands-on than you are able to be – and falls under their governance structure.
“But hold on Steve,” I hear you say. “In theory, that sounds great. Worrying about our pension scheme takes up a disproportionate amount of my time – I’d love to give that up. But it doesn’t feel right to just hand over management of our pension scheme to someone else. Apart from anything else, how do I know they can be trusted – and that they’ll do a good job?”
It’s a great question – and one with an easy answer…
As I mentioned a couple of weeks ago, the Pensions Regulator is about to launch a process, requiring all Master Trusts to receive authorisation. Without this seal of approval, they will not be able to continue operating.
There is a six-month window to appeal for this authorisation, starting in October.
The first step towards authorisation was a readiness review, which concluded in June.
This was a very serious process, which was reportedly completed by just over 30 Master Trusts.
Our own submission was a hefty 200 pages long, and included answers to questions such as:
• Who is involved in running the Master Trust? Are they fit and proper to do so?
• What systems and process are in place, to ensure that it runs smoothly and efficiently?
• What are the scheme’s financial details, and how is it funded? Does it have the financial strength to run properly and protect members’ assets? (The new legislation will require Master Trusts to hold enough funds to cover even the worst-case scenario.)
Remember, this is just Step 1 – the actual process of authorisation has not even begun yet.
So, you can rest assured that any Master Trust which “passes” has been very closely audited and is fit-for-purpose.
This does throw up a dilemma for companies currently in a Master Trust, or currently considering joining a Master Trust.
While it is clear that the Pensions Regulator is moving at lightning speed to complete this process, it will still be several months until the first trusts to be authorised are announced.
So, how do you decide which one to go with right now?
If you are in an existing Master Trust, you need to start considering whether your scheme will survive. Make sure that they have been through the readiness review and are preparing to submit an application for official authorisation in October.
Some Master Trusts – such as ours – have already been through a voluntary accreditation process and have achieved Master Trust Assurance Accreditation. Those master trusts are likely in a better position to achieve authorisation.
If you are currently going through a selection process, you should wait for your top candidate to get authorisation before signing on the dotted line.
In reality, your own selection process will probably take several months, so chances are that you will not be waiting for very long to get a final answer – if at all.
Of course, not all Master Trusts which receive authorisation are created equal. Just because they are deemed fit and proper to operate doesn’t mean that you will receive the same service or benefits from them.
In my next blog, I’ll address some of the factors you should consider when looking for a Master Trust – beyond basic authorisation to operate….
Watch out for that blog!