Lesley Carline explains why the PMI is setting up an industry-wide master trust group and how it will help provide a collective voice for those running and providing services to schemes
The deadline for master trust authorisation is 31 March 2019, however, schemes with a suitable excuse may apply for an extension of up to six weeks. The process for authorisation has taken some by surprise despite the readiness review process, as both The Pensions Regulator and master trusts have learnt where to focus their efforts.
At the time of writing, there were 13 master trusts that had applied for authorisation by the end of February, one of which has been authorised, eight who have exited the market, 31 who have triggered their exit, and 38 yet to decide.
But it is important to remember why there is a need for authorisation and why some master trusts are exiting the market whilst others continue to develop and flourish. The introduction of auto-enrolment saw a rapid expansion in the number of master trusts operating in the market place, attracted by the potential of large numbers being auto-enrolled into a pension scheme. However, the reality has seen many master trusts not reaching the scales required to be sustainable raising concerns over the governance and operation of these schemes. If vast numbers of members are reliant on them, the prospect of one failing was unacceptable.
The increasing demands on master trusts in terms of governance requirements has culminated in the need for authorisation. This move has been welcomed by most master trust providers and the industry as a whole. Given master trusts are now such an important part of the supply of retirement savings to people, the Pensions Management Institute (PMI), last year created a working party consisting of representatives from a number of master trusts of different types, suppliers to master trusts in the form of technology providers and legal advisers. The remit of the group was to look at delivering thought leadership for its members and the industry as a whole. In light of the potential consolidation of master trusts, the first output was a thought piece on how to look for a suitable master trust. It was a brief document with an attached step by step guide and was shared with PMI members and the wider employee benefits community.
Bringing the group together, showed that there was a desire to work collaboratively for the greater good. As such, it was decided to look at how to overcome barriers to good service delivery. In order to do this, we carried out research looking at various areas from authorisation, governance, skill sets, technology and collaboration. Important findings included:
- Authorisation was universally welcomed but concerns about how it would develop were expressed
- Governance - there was recognition that trustees of a master trust faced different issues and conflicts from say a single trust
- Technology - regulation hampered the development of technological solutions to member engagement, master trusts were ahead of single trusts but still lagged behind other sectors in delivering solutions
- Collaboration - virtually all respondents were keen to continue to work together to look at how to redress some of the issues and to have a voice
The research was successful and so we have now decided to continue with the working party and to create a wider group. It has, so far, extended to over 25 organisations and we aim to provide a collective voice for those running master trusts and for their service providers, to promote and support improvements in master trust governance and service delivery, all while enabling the PMI membership and wider industry to be educated on the issues facing master trusts. We look forward to keeping the industry informed.
Lesley Carline is president of the Pensions Management Institute and a director at KGC Associates
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