On the go: The Pensions Administration Standards Association has launched guidance for master trusts to follow when considering consolidation.
The document creates a best practice framework to assist employers, trustees and advisers, ensuring members’ benefits are correctly recorded and administered, according to PASA.
The guidance focuses on the two most common scenarios for consolidation: a regulated transaction, where a master trust winds up and transfers all of its members to another provider; and unregulated transactions, from a single-employer defined contribution trust to a master trust.
The document was created by PASA’s Master Trust Transition Working Group, set up earlier this year, and contains recommendations on planning, communication, data and asset transition.
According to David Porter, chairman of the working group, auto-enrolment led to a surge in new DC master trusts, with concerns about good outcomes for members leading to a raft of new regulation.
“As a result, these DC master trusts have a high standard to meet, and rightly so. They must ensure high governance benchmarks and new financial reserving requirements,” he said.
“Beyond financial and operational aspects there are also requirements around how one DC master trust transitions to another. This is central to our guidance.”
The final list of authorised master trusts was published by the watchdog earlier this month. The market has shrunk in size by nearly 60 per cent, from 90 schemes to 37 authorised trusts.
Tracy Weller, board sponsor to the working group, noted that the pace of consolidation will continue, with the regulator nudging underperforming schemes into an authorised master trust.
“Once we are in a post-authorisation environment, market dynamics will also come into play,” she said.
“More individual employers are likely to move between these DC master trusts, and more single-employer DC schemes will transition to one of the authorised master trusts.
“Our guidance will support trustees and the wider industry as the market continues to change, evolve and consolidate.”
A spokesperson at the Pensions Regulator said: “We welcome PASA’s guidance, which sets out the practical steps trustees and administrators should take to protect savers when managing a transfer.
“Authorisation is putting safeguards around master trusts, giving reassurance to trustees of both exiting master trusts and consolidating single-employer DC schemes transferring their members into these schemes.
“Prioritising data, as well as putting savers and employers at the heart, including keeping them informed, is key to a successful transfer and continuing confidence in pensions,” they added.
