We are only at the start of the Pensions Bill journey: published three weeks ago, there is much to be clarified, debated and fleshed out in the final Regulations. Expectations are for draft Regulations in late 2017 and enactment in 2018. That may seem some time away but preparations must be started soon.
Trustees of master trusts are already required to exercise skilled judgement in many significant areas beyond what is expected for single-employer DC schemes. The governance burden increases further still for smaller or newer master trusts, with the work required in some areas being inversely proportionate to the size of the trust.
The Pensions Bill in its current form represents a material increase in the onus on trustees. The new regime will not be conducive to trustees who dabble in master trust roles, not least because trustees who serve on multiple master trust boards will be better placed to contextualise these requirements when they come into force.
Although the measures are understandable in their outline, some areas are controversial. To a large extent, the Bill codifies what good trustees do already, but it formally passes some duties to trustees that were not required before. Not least of these, it will be the trustees who apply for authorisation from The Pensions Regulator.
In brief summary, the Bill will require trustees to:
- Apply for the authorisation of the trust
- Approve the business plan prior to application, to include systems and processes
- Review the business plan regularly
- Deal with any authorisation refusals and tribunals
- Consider the master trust’s financial sustainability
- Approve the continuity strategy
- Submit annual accounts
- Submit supervisory return on request
- Notify The Pensions Regulator of significant events (a new list of potential events for master trusts, in addition to those already applicable to all schemes)
- Notify TPR where a "triggering event" occurs
- Submit an implementation strategy if such an event occurs
- Comply with continuity requirements and implementation strategy if such an event occurs (this would be a very significant task)
- Report on implementation strategy and deal with "pause orders".
These new duties come in addition to the already high burden placed on master trust trustees. And suffice it to say, there is much more detail within each of these points than we could outline above!
This is already a very challenging area of trusteeship. The Bill will further increase the demands on trustees, with the governance of master trusts fast becoming a specialist area. Certainly not one for the faint-hearted...