On the go: A self-certification regime for defined benefit master trusts was launched on Wednesday that will provide “useful information” for trustees considering a move to such schemes.
Self-certification allows master trusts to utilise a standard template to provide information on their structure and how they operate, and are intended to help trustees who are considering consolidation better understand their options.
Though the self-certificates are not an assessment of the quality of the offering, and do not require all the information required for trustees to fully satisfy their due diligence duties, it is hoped they will be a useful starting point.
The template was drawn up by a working group led by the Department for Work and Pensions, alongside industry bodies including Abrdn, Hymans Robertson, Mercer, the Pensions Management Institute, and the Pensions and Lifetime Savings Association, the latter of which is hosting the templates and has published guidance for completing the process.
The concept of self-certification for DB master trusts stems from DWP’s DB White Paper in 2018, which highlighted the need to draw attention to the wider benefits of consolidation, including these schemes, the PLSA stated.
Guy Opperman, minister for pensions and financial inclusion, said: “Self-certificates will make it easier for pension scheme trustees and employers to consider if a master trust is right for them by providing information on how they work and the benefits they bring.
“Consolidation is key to achieving value for money – driving lower costs and opening doors to wider investment opportunities. I encourage all providers of DB master trusts to submit a self-certificate.”
Joe Dabrowski, deputy director of policy at the PLSA, added: “Schemes of all sizes can be run well and offer value for money, but for those schemes that are interested in consolidation we hope this new self-certification process will facilitate informed discussion.”
The templates were likewise hailed by Mercer as an awareness-raising measure. Mercer partner David Hepplewhite reiterated Opperman’s arguments about the desirability of master trusts, adding that they may represent a “better solution” for legacy pension schemes.
“The combination of economies of scale, professional management, more efficient and diverse investment opportunities, potentially greater value, and often an enhanced member experience offers a compelling proposition for employers, current trustees and ultimately the members,” he said.
“As the government pushes for greater consolidation in the UK pensions market, reflecting trends seen in Australia and the Netherlands, we believe DB master trusts will play an increasingly important role in helping to achieve this.”
DB master trust Citrus confirmed it is to apply for self-certification, hailing the templates as a way to raise the profile of its offering.
Lindsay Davies, trustee secretary at Citrus, said: “This move fully supports the benefits and advantages of master trusts as a viable alternative for standalone DB schemes by providing it with a stamp of authority. It’s just the encouragement smaller DB schemes need to think long term and consider their future funding and governance needs.
“From our experience managing assets of £340m, it’s clear that for employers reducing risks and providing funding cost-savings as well as investment benefits in their DB scheme is vitally important. This has to be done while navigating ever-increasing governance complexities.”
