Out-Law News | 16 Sep 2014 | 11:42 am | 2 min. read
The voluntary assurance framework was published in May, and developed by the Institute of Chartered Accountants of England and Wales (ICAEW). It was created as a means of allowing master trusts to demonstrate compliance with the regulator’s key quality features for DC schemes, which could then be used by auditors commissioned to provide independent assurance reports for the trustees of master trusts.
“Properly run occupational DC master trusts are playing a key role in the automatic enrolment project and so it is vital that such schemes are able to demonstrate high standards through the independent assurance framework,” said Andrew Warwick-Thompson, executive director for DC at the Pensions Regulatory. “I am pleased that we have already seen the first master trust obtain independent assurance since the framework was published in May and expect other schemes to adopt this important accreditation in the coming months.”
“Master trust assurance will give employers the confidence to choose a master trust scheme that can evidence the presence of the key quality features which the regulator believes underpin good member outcomes. It will also help to guard against providers without the necessary resource and competence to operate a high quality scheme,” he said.
Master trusts enable pension scheme providers to manage a DC scheme for several employers under a single trust arrangement. They are particularly popular for businesses which are now legally required to automatically enrol their workforce into a suitable pension scheme, but may not necessarily have the resources and skills to run a dedicated pension scheme.
Although there is no legal requirement that master trusts obtain independent assurance, the Pensions Regulator has made it clear that it expects trustees to do so and to report on their trustee’s operating arrangements on a regular basis. The regulator also plans to establish and maintain a publicly-available list of schemes that have obtained this independent assurance, with the intention that employers refer to it when selecting a master trust to meet their automatic enrolment requirements.
Published in May, the ICAEW framework covers six broad areas based on the Pensions Regulator’s existing principles for DC schemes. These include the essential characteristics of schemes; the need to establish a comprehensive governance framework with clear accountabilities at the start; appropriate scheme administration; and good communication with scheme members, designed to ensure that they are able to make informed decisions about their retirement savings.
Schemes should be designed to be durable, fair and deliver good outcomes for members, while all those accountable for scheme decisions must understand their duties and be “fit and proper” to carry them out, according to the framework. These characteristics and principles should be backed by effective governance and ongoing monitoring throughout the life of the scheme.
“The new assurance framework forms a major part of the regulatory regime for master trusts,” said pensions expert Mark Baker of Pinsent Masons, the law firm behind Out-Law.com. “If done well, assurance will not just be a box-ticking exercise but will help master trusts to meet the high standards that are so important for the future.”
“One key point is the regulator’s two-stage implementation of the framework, meaning that procedures must be put in place in the first year, then compliance with the procedures monitored in the second. This approach is really welcome, particularly for those trusts that have launched more recently and are still finalising their procedures and controls,” he said.