Master trust: Difference between revisions

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A master trust in the UK is a multi-employer occupational pension scheme.

Structure

Traditionally, a trust based pension scheme is established by an employer for its employees. Representatives of that employer will then usually form the majority of the trustee board which is responsible for governing the trust. By contrast, a master trust is typically set up by a provider, often an insurance company. There is one legal trust and one trustee board, but a number of non-associated employers can participate in the scheme. Each participating employer will have one or more sections within the master arrangement. The trustee takes on governance responsibility for each section on things such as investment funds and service providers and will ensure compliance with regulatory duties. The decisions over benefit and contribution levels will normally remain with each participating employer.

Running costs

It is normal for the sponsoring employer to cover the running costs of its trust based scheme, with members having some exposure to investment fees. Within master trusts it is usual for members to bear the majority of scheme costs. Some master trust providers may charge participating employers a set-up or implementation fee, but ongoing employer fees are unusual.^[1]

It is common for pension schemes in the UK to have fewer members than schemes in other nations^[2] meaning that they are less able to capture economies of scale in investments and administration than larger schemes. By pooling the scale of several employers, master trusts should be able to provide access to these savings. However, following the introduction of The Pensions Act 2008, and concerns that members might be overcharged the UK Government announced ^[3] a cap on the fees that could be levied on automatically enrolled members of pensions schemes.

Governance

While master trusts are set up to be separate from their provider, many have questioned the independence of the trustee boards. In a traditional trust based scheme, the trustees are able to replace their service providers, such as administrators or investment managers. However, because of the potential closeness of the provider and their master trust board, the trustees may not have this power in a master trust. In response, the Institute of Chartered Accountants in England and Wales in association with The Pensions Regulator developed^[4] a voluntary assurance framework to provide independent assurance reports for the trustees of master trusts. The framework was designed to evidence the key quality features set out in The Pensions Regulator’s code of practice for defined contribution schemes.^[5]

Growth

Master trust pension schemes have existed for many years, but came to prominence after the introduction of automatic enrolment. In April 2014 ^[6] it was estimated that master trusts had accounted for around two thirds of individuals automatically enrolled in the UK.

References

^ "Table in Pensions World showing key features of a range of master trust pension schemes". Archived from the original on 2015-09-24. Retrieved 2015-01-26.
^ Pension World article setting pout the benefits of master trust arrangements Archived 2015-07-21 at the Wayback Machine
^ Link to the UK Government web page covering the consultations on plans to apply a charge cap
^ TPR announces release of draft assurance framework
^ TPR’s code of practice for defined contribution schemes on the TPR website
^ Professional Pensions Article discussing the One millionth member of NEST

External links

[1] "Table in Pensions World showing key features of a range of master trust pension schemes". Archived from the original on 2015-09-24. Retrieved 2015-01-26.

[2] Pension World article setting pout the benefits of master trust arrangements Archived 2015-07-21 at the Wayback Machine

[3] Link to the UK Government web page covering the consultations on plans to apply a charge cap

[4] TPR announces release of draft assurance framework

[5] TPR’s code of practice for defined contribution schemes on the TPR website

[6] Professional Pensions Article discussing the One millionth member of NEST

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@@ Line 1: / Line 1: @@
-A '''Master Trust''' in the [[UK]] is a multi-employer occupational [[pension]] scheme.
+A '''master trust''' in the [[UK]] is a multi-employer occupational [[pension]] scheme.
 ==Structure==
@@ Line 6: / Line 6: @@
 ==Running costs==
-It is normal for the sponsoring employer to cover the running costs of its trust based scheme, with members having some exposure to investment fees.  Within master trusts it is usual for members to bear the majority of scheme costs.  Some master trust providers may charge participating employers a set-up or implementation fee, but ongoing employer fees are unusual.<ref>[http://www.pensionsworld.co.uk/pw/files/survey_table_3.jpg Table in Pensions World showing key features of a range of master trust pension schemes]</ref>
+It is normal for the sponsoring employer to cover the running costs of its trust based scheme, with members having some exposure to investment fees.  Within master trusts it is usual for members to bear the majority of scheme costs.  Some master trust providers may charge participating employers a set-up or implementation fee, but ongoing employer fees are unusual.<ref>{{Cite web |url=http://www.pensionsworld.co.uk/pw/files/survey_table_3.jpg |title=Table in Pensions World showing key features of a range of master trust pension schemes |access-date=2015-01-26 |archive-url=https://web.archive.org/web/20150924070727/http://www.pensionsworld.co.uk/pw/files/survey_table_3.jpg |archive-date=2015-09-24 |url-status=dead }}</ref>
-It is common for pension schemes in the UK to have fewer members than schemes in other nations<ref>[http://www.pensionsworld.co.uk/pw/article/master-trusts-driving-down-costs-12315141 Pension World article setting pout the benefits of master trust arrangements]</ref> meaning that they are less able to capture economies of scale in investments and administration than larger schemes.  By pooling the scale of several employers, master trusts should be able to provide access to these savings. However, following the introduction of The [[Pensions Act 2008]], and concerns that members might be overcharged the UK Government announced <ref>[https://www.gov.uk/government/consultations/better-workplace-pensions-putting-savers-interests-first Link to the UK Government web page covering the consultations on plans to apply a charge cap]</ref> a cap on the fees that could be levied on [[automatic enrolment|automatically enrolled]] members of pensions schemes.
+It is common for pension schemes in the UK to have fewer members than schemes in other nations<ref>[http://www.pensionsworld.co.uk/pw/article/master-trusts-driving-down-costs-12315141 Pension World article setting pout the benefits of master trust arrangements] {{webarchive|url=https://web.archive.org/web/20150721044044/http://www.pensionsworld.co.uk/pw/article/master-trusts-driving-down-costs-12315141 |date=2015-07-21 }}</ref> meaning that they are less able to capture [[economies of scale]] in investments and administration than larger schemes.  By pooling the scale of several employers, master trusts should be able to provide access to these savings. However, following the introduction of The [[Pensions Act 2008]], and concerns that members might be overcharged the UK Government announced <ref>[https://www.gov.uk/government/consultations/better-workplace-pensions-putting-savers-interests-first Link to the UK Government web page covering the consultations on plans to apply a charge cap]</ref> a cap on the fees that could be levied on [[automatic enrolment|automatically enrolled]] members of pensions schemes.
 ==Governance==
-While  master trusts are set up to be separate from their provider, many have questioned the independence of the trustee boards. In a traditional trust based scheme, the trustees are able to replace their service providers, such as administrators or investment managers.  However, because of the potential closeness of the provider and their master trust board, the trustees may not have this power in a master trust.  In response, the [[Institute of Chartered Accountants in England and Wales|Institute of Chartered Accountants of England and Wales (ICAEW)]] in association with the [[The Pensions Regulator| The Pensions Regulator (TPR)]] developed<ref>[http://www.thepensionsregulator.gov.uk/press/pn13-36.aspx TPR announces release of draft assurance framework]</ref> a voluntary assurance framework to provide independent assurance reports for the trustees of master trusts.  The framework was designed to evidence the key quality features set out in TPR’s code of practice for DC schemes.<ref>[http://www.thepensionsregulator.gov.uk/codes/code-governance-administration-occupational-dc-trust-based-schemes.aspx TPR’s code of practice for DC schemes on the TPR website]</ref>
+While  master trusts are set up to be separate from their provider, many have questioned the independence of the trustee boards. In a traditional trust based scheme, the trustees are able to replace their service providers, such as administrators or investment managers.  However, because of the potential closeness of the provider and their master trust board, the trustees may not have this power in a master trust.  In response, the [[Institute of Chartered Accountants in England and Wales]] in association with [[The Pensions Regulator]] developed<ref>[https://webarchive.nationalarchives.gov.uk/20140711153437/http://www.thepensionsregulator.gov.uk/press/pn13-36.aspx TPR announces release of draft assurance framework]</ref> a voluntary assurance framework to provide independent assurance reports for the trustees of master trusts.  The framework was designed to evidence the key quality features set out in The Pensions Regulator’s code of practice for defined contribution schemes.<ref>[https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-13-governance-and-administration-of-occupational-trust-based-schemes-providing-money-purchase TPR’s code of practice for defined contribution schemes on the TPR website]</ref>
 ==Growth==
@@ Line 29: / Line 29: @@
 ==External links==
-* [http://www.professionalpensions.com/professional-pensions/news/2352950/pension-master-trusts-the-definitive-list-of-providers A list of master trust pension schemes in the UK, provided by Professional Pensions]
 * [http://www.napf.co.uk/Automatic-Enrolment/Providers-of-pension-services.aspx A description of master trust pension schemes on the NAPF website]
-* [http://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment Details about automatic enrolment on the webpage of [[Pensions Advisory Service|The Pensions Advisory Service (TPAS)]]]
+* [http://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment Details about automatic enrolment] on the webpage of the [[Pensions Advisory Service]]
 * [https://www.gov.uk/government/news/standing-ovation-as-auto-enrolment-hits-5-million-and-auto-transfer-launch-plans-are-unveiled Link to UK Government web page announcing five millionth person to be automatically enrolled]