Final mastertrust assurance framework released: key points

The voluntary framework was set up to enable mastertrust trustees to show that their schemes are a managed to a high standard.

The industry bodies hope to answer concerns that scheme members, especially the auto-enrolment population, might not be getting a fair deal if the multi-employer schemes are not up to scratch. 

The framework sets out control governance and administration objectives for trustees to report against, which are themselves aligned with the regulator's defined contribution quality features. 

Andrew Penketh, head of pensions at accountancy Crowe Clark Whitehill, and chair of the working group that provided the framework, said of the code: “It’s allowing mastertrusts to demonstrate that they have got controls in place to meet those quality features.

“Auto-enrolment business is going to be high-volume, low-margin business and it is going to need a mastertrust that is willing to see it out for the long term.”

The ICAEW issued a consultation on the framework in October of last year and received 26 responses from professional organisations, law firms, consultancies and mastertrusts themselves. After the consultation the number of control objectives was reduced to 38 from 43. 

In response, concerns over the cost and the height of the barriers to entry to unsuitable providers, embedded in the framework, were again raised by industry figures. Some respondents to the survey had complained that the objectives were too prescriptive: 

Source: ICAEW

The consultation response stated: "We have reduced the detail in some control objectives so they are less prescriptive, eg in relation to decumulation we have removed the detailed disclosure timeframes and referred to the regulator's DC regulatory guidance."

Early industry responses focused on the regulatory burden versus the benefit in dissuading unsuitable providers. Morten Nilsson, chief executive officer of mastertrust Now Pensions, said in a release: "Having a voluntary assurance framework will increase the financial and administrative burden on reputable players while those who it is intended to target will simply turn a blind eye.

"It also does nothing to address barriers to entry which are far too low."

Yearly reporting

Trustees will be expected to make an initial report by summer 2015 and annually thereafter. But there were concerns about frequency of reporting, with some suggesting a triennial approach. 

However, the regulator said the high level of activity in the DC market due to auto-enrolment meant annual reporting was more prudent. 

The cost of the assurance framework was also noted by respondents who said it would require a significant amount of resources to audit, but the regulator's response pointed to its desire to deter the smaller, weaker providers from the market:

Source: ICAEW

If the assurance framework itself does not deter poor-quality schemes, industry experts have suggested it may yet be that the high-volume, low-margin nature of auto-enrolment business shrinks the market instead.

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