“The trustee training was a very well-paced overview which gave opportunity to explore ideas and question more deeply at key points.”
“Where PSGS are appointed to act in conjunction with an existing body of trustees, we have found that they are quickly able to fit in well and gain the trust and respect of their co-trustees. ”
“Many organisations and people provide the services that clients need. In my opinion, the differentiator is in the way those services are provided and to that extent, Kathy embodies the qualities that I have come to value from PSITL. Kathy is organised but not fussy; diligent but not dogmatic; persistent without being pushy and compliant in a pragmatic way. Whilst she takes ownership and drives issues forward, Kathy is a team player who uses her and her colleagues experience to provide services to her trustee client whilst working closely with those like me representing the sponsoring employer. She works collaboratively with advisers but constructively challenges the scope of services, fees and service standards whenever necessary and makes sure that member needs are always taken into account. I enjoy working with her and trust that she will deliver what is required by the trustee and the members they represent in a manner satisfactory to the sponsoring employer. ”
“Their pragmatic approach helps with quick and easy decision making. Another approach might have made things more difficult.”
“PSGS were overall more professional than others.”
“It’s a pleasure working with key members of the PSGS team: their experience and leadership means that they know how to get the job done, working in partnership with fellow trustees, employers and advisers to achieve the best result for members.”
There are around 79 pension master trusts in existence. It is arguable this is too many - only 22 currently appear on the Pensions Regulator’s (tPR’s) Master Trust Assurance List. The Pension Schemes Act 2017 may ‘thin’ the market with the introduction of the role of ‘scheme strategist’, along with other new requirements. The Act appears to make it deliberately awkward to gain approval for existing and new master trusts.
Planning = survival
Although we await regulations for the final details, trustees and providers of master trusts can - and should - start to prepare for the new requirements now. The focus on planning for the future is considerable. Putting a governance framework in place to meet the new requirements will demonstrate a master trust is ‘fit for purpose’ and may help its long term growth (or survival).
The new regime requires the scheme strategist to prepare a ‘business plan’ and a ‘continuity strategy’ for their master trust. These need to be approved by the scheme funder(s), trustees and any other scheme strategists (so there could be more than one!), before being submitted to tPR, as do any subsequent revisions to the plan.
The key issue is credibility of the business plan and continuity strategy – this will become more important to employers, members and as a new business tool.
The potential for disagreement
As it seems there can be more than one scheme strategist per master trust, there is potential for disagreement about approving the business plan and continuity strategy. There’s also a risk a significant event is not reported - with more than one scheme strategist, notification to tPR could fall between two stools.
The pension trustees also need to approve the business plan. They will need to understand the document presented to them and be comfortable with the content. They may also want to test it - but how? Do the trustees have the skills to do this themselves? Will covenant assessment firms have a role to play? We may find trustees insist on a covenant type report in order to help them approve the business plan.
Circumstances may arise where pension trustees can’t or won’t approve the business plan, or refuse to submit it. The first step here would be to raise the issue with tPR. The nuclear option would be to resign. This would have a significant impact on the operation of the master trust, its approval and credibility. To avoid the worst happening, the master trust provider and trustees need a policy framework that sets out how to deal with issues arising on the business plan or continuity strategy.
Who is the scheme strategist anyway?
The role of master trust scheme strategist could be undertaken by either an individual or a corporate body. This isn’t specified in the Act unlike scheme funder, which must be a body corporate or legal partnership; but tPR sees both roles as being owned by one legal body. This could be the same or separate organisations. Our experience as trustee of two large master trusts is one corporate body will undertake both roles.
The scheme strategist must meet the ‘fit and proper persons’ requirement in order for the master trust to be approved. We await regulations to clarify what this means, but similar tests already exist under company law, FCA rules and HMRC requirements. TPR may adopt these or use the same criteria (fact-based and judgement based) it already applies to trustees applying to join the trustee register.
The scheme strategist is responsible for making business decisions relating to the commercial activities of the master trust. It would be natural to presume the master trust funder would also be the scheme strategist. However, in some cases, this could represent a conflict of interest.
Evolution not revolution
Most master trusts will already have a discontinuance policy in place. I don’t expect much additional work will be needed to revise this to meet any new regulatory requirements for it to become a continuity strategy. It will almost certainly be a case of evolution and not revolution.
For some master trusts, the business plan may be a trickier task to complete as different stakeholders may need it to do different things. It will be pivotal for employers assessing long term viability as part of a master trust selection exercise, so providers will see it as part of their new business toolkit. Trustees will, naturally, see it as a mapping of future security for the scheme and its members. Although these are similar, they are not necessarily the same. The devil will definitely be in the detail…