Now Pensions has removed itself from the Pensions Regulator’s list of schemes that have obtained mastertrust assurance for automatic enrolment, citing historic problems processing client contributions.
A change of third party administrator at the £422m provider had resulted in delays to the contribution process for a small percentage of employers, and led to the decision to withdraw from the list.
The provider will continue to adhere to the regulator’s assurance framework while not appearing on the list. It will also continue to accept new business, believing new clients to be unaffected by the administration difficulties.
We will act if we become concerned about the way schemes are being run, no matter the size of the scheme involved
Nicola Parish, the Pensions Regulator
The mastertrust sector has been the focus of regulatory and legislative scrutiny over the last year, with the publication of the pension schemes bill expected to raise standards and promote consolidation of businesses.
Now Pensions has been under review by the regulator, with the watchdog citing concerns over governance, delayed communication and contribution processing for some members.
It welcomed and supported the mastertrust’s decision to remove itself from the list, which now features 22 remaining schemes.
Nicola Parish, the regulator’s executive director of frontline regulation, said in a statement: “Those in the mastertrust marketplace should be in no doubt that we will act if we become concerned about the way schemes are being run, no matter the size of the scheme involved.”
“Schemes have a responsibility to meet specific criteria required to remain on the mastertrust assurance list. If a scheme fails to meet the criteria, we will consider removing it from the list,” she continued.
Eyeing a swift return
Now Pensions said it was investing heavily in systems, processes and people in order to correct the issue, and expected to complete the work soon.
“We should have been more proactive in our communications with affected clients and members regarding these issues and apologise wholeheartedly to those we have let down. In this instance, we have fallen short of the standard of service we aim to provide,” said CEO Morten Nilsson in a statement.
Once the problems have been rectified, Now Pensions will be able to apply for reinclusion on the mastertrust assurance list.
With 26,000 employers and 1.3 million members, Now Pensions is perhaps not among the under-resourced schemes which formed the primary target of the pension schemes bill and accompanying regulatory tightening.
Tim Middleton, technical consultant at the Pensions Management Institute, said that while the withdrawal was voluntary, the watchdog was “showing that it needs to ensure that high standards are shown by anybody on the mastertrust list”. He expected Now Pensions to do everything possible to return to the list.
Will the market shrink?
It has been argued that tighter regulation of mastertrusts will force providers to consolidate into a market that better serves the consumer.
Middleton said he had not yet seen this happen, but that the plethora of schemes would only shrink in the future, with between 12 and 15 being a reasonable target number of providers.
“It’s not just the standards of governance, it’s also about having a sustainable business model,” he said. “It’s almost inevitable that we’ll see consolidation with the mastertrusts.”
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Consolidation of mastertrusts has already begun to take place, according to Richard Butcher, managing director at PTL.
Butcher said the reason that few cases were “hitting the headlines” was likely because scheme wind-ups have so far been orderly, with accrued assets and existing clients transferred to new providers before the sponsor becomes insolvent.
“What will hopefully happen is that the trustees of those [mastertrusts] along with the sponsors will spot it a reasonable way away,” he said.
Butcher said employers would be responsible for ensuring that their clients do not become non-compliant with auto-enrolment and are switched to another provider for future accrual.
However, he reminded trustees of the obligation they have “in working with the sponsor to ensure that the accrued assets are safeguarded”.
