Ask the Expert: Irwin Mitchell

Here, Penny Cogher, Partner at Irwin Mitchell provides you with the answers you need…

Who will have mastery of the new Mastertrust requirements under the Pension Schemes Bill?

The Bill addresses the risk of a mastertrust failing and members’ pension savings being used to pay for the costs of winding up the scheme. Mastertrusts, multi-employer schemes where each employer has its own sub-scheme within the trust, have increased in popularity but legislation has lagged behind until now.

Under the Bill, Mastertrusts must meet 5 tough new requirements:

1. Persons involved in the scheme are fit and proper
2. Sufficient financial sustainability
3. The scheme funder (its sponsor) provides adequate assurance about its financial position and only carries out activities that relate directly to the Mastertrust scheme
4. Have sufficient governance and administration systems
5. Have an adequate continuity strategy

As not all Mastertrusts currently comply, work is needed to bring all existing Mastertrusts up to scratch. We expect some Mastertrust providers to pull out of the market or change their offerings because of the Bill. There is also the potential of a PPF type rescue fund being established for failing Mastertrusts. A cap on exit charges will also be introduced.

The Pensions Regulator will authorise and supervise Mastertrusts and help if an orderly exit is needed – if a Mastertrust provider fails or withdraws from the market. It has already fined some Mastertrust providers this year for failing to have a chairman’s statement about the Mastertrust so seems prepared for this role.

If, as an employer, you are thinking of transferring your DC pension benefits to a Mastertrust you may want to delay until all the new requirements are known as currently few, if any, Mastertrusts are state of the art.

 

For more information, please contact Penny Cogher via email at penny.cogher@irwinmitchell.com or call 02074 008798