Morten Nilsson, CEO of NOW: Pensions said: “Over half of all pension schemes chosen by employers for auto enrolment have been master trusts. As a result, workers saving in master trusts represent the biggest group of savers in the pensions industry with around 6 million in a master trust arrangement.
Well run master trusts are ideal for the auto enrolment market as they enable even small employers to benefit from high standards of governance as the independent board of trustees that oversees the running of the scheme has a statutory duty to ensure that it is being run in the best interests of its members at all times. This means members have the comfort of knowing there is an independent body overseeing decisions on crucial issues such as charges, investment strategy and administration.
But, not all master trusts are the same, and with over 70 operating in the market, not all are going to prove sustainable over the long term. With no clear wind up process, disorderly exits could pose a real threat the savers and tighter regulation is a must.”
Five areas master trust regulation needs to address:
1. Minimum market entry criteria including stringent tests to assess quality, governance and robustness of the business plan
2. Qualified trustee body who are responsible for the oversight of the product to ensure that the best interests of the members are met
3. A duty to maintain an up to date plan for the orderly wind of their scheme and release of members’ funds to alternative pension vehicles
4. Wind up plans to show where the finance will come from to pay for all the administrative costs of dispersing the trusts’ assets to new homes.
5. A regulatory regime which is able to proactively spot inadequate behaviours and governance with teeth to enforce best practice.
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