The Pension Regulator’s (TPR) authorisation of master trusts and their ongoing monitoring is a direct acknowledgement of this. Continuity Option 1 accepts there will be master trusts exiting the market. But as the market begins to mature, we have to recognise employers and trustees will also decide to move between master trusts. It’s imperative any transition involving a master trust is managed consistently and in line with industry best practice, as well as with Regulatory requirements. This is regardless of whether it’s between master trusts or a transfer from a single employer DC scheme and a master trust. We have a duty to ensure peoples’ retirement outcomes are not adversely impacted by any transition. Administration is critical to that and so is the accurate transfer of responsibilities from one trustee to another.
Clearly, with the added authorisation requirements and ongoing supervision, master trusts have a high standard to meet. And rightly so. This extends beyond their financial and operational aspects to the process of transitioning one to another. While Regulation mandates the approach in some situations, it also provides a robust framework all single employer DC schemes transferring to a master trust would benefit from adopting. This together with the PASA Guidance on Master Trust Transitions and other PASA related guidance, creates a best practice framework. These will assist trustees and advisers in ensuring members benefits are correctly recorded, transitioned and ultimately administered by the receiving master trust.
A successful transition ensures members’ data is transferred safely, effectively and securely. By following best practice for data transition, data quality is improved and ensures members’ past benefits are successfully moved from one provider to another. Making sure their contributions are invested correctly in accordance with the new provider’s investment solution provider, or any self-select option. It also means all the correct steps have been taken and members have received the correct level of communication surrounding the transfer of their benefits and their new pension provider.
At the start, it’s important to be clear whether the transition is regarded as a non-regulated or a regulated transition because the steps you need to take will be different in each situation:
· A single employer trust decides to move their pension scheme and pension administration to a master trust provider. This constitutes as a non-regulated transition.
· An existing master trust transitioning to an alternative master trust under Continuity Option 1 and overseen by TPR. This constitutes as a regulated transition.
Good member outcomes need pension schemes to hold and maintain good data and keep high quality records. TPR expects good records to be kept by trustees, managers and providers of pension schemes. This will be monitored through master trust supervision and if they don’t, they can be fined. Poor record-keeping can lead to delays in the transition process and be expensive if things go wrong.
The aim of the PASA Guidance on Master Trust Transitions is to support both regulated and non-regulated transitions. Getting the asset transition wrong can have an enormous effect on members’ fund values. It can lead to huge amounts of costly re-work and, potentially, a large payment to compensate for any investment loss due to poor management or errors in the process.
In all aspects of the transition, the devil is as ever, in the detail. Only with thoughtful planning and awareness of the needs of the schemes involved, members rights, regulatory requirements and adherence to best practice will these important transitions succeed. PASA’s aim in creating the Guidance is to help make sure this never becomes a problem.
David Porter, Chair of the Master Trust Transitions Working Group.
