As Standard Life’s master trust achieves ICAEW accreditation, what is the significance of the benchmark and where does it fit within the pensions regulatory landscape?
Q&A with Standard Life head of workplace solutions Alan Ritchie
Q. What does achieving master trust assurance framework accreditation mean for a scheme?
A. There are two key reasons why advisers, employers and employees should be looking for master trusts that meet the standards that have been developed by The Pensions Regulator and the Institute of Chartered Accountants in England and Wales to assess the quality of schemes.
First, it shows that the scheme has stood up to a robust kick of the tyres. Going through the process, which Standard Life has recently done, involves detailed scrutiny of a lot of important issues, covering security of assets, governance, assessment of investment options, people management and assessment of value for money. The process involves drilling deep into all of these areas to ensure that qualifying schemes will do the job they are designed to do for the long term.
Second, accreditation demonstrates a commitment to the market at a time when the number of master trusts is ballooning. Getting ICAEW master trust assurance framework accreditation involves quite a big commitment of time and money. Organisations and individuals using the scheme can be sure that providers with accreditation are genuinely committed for the long haul.
Q. Where does the master trust assurance framework fit within all the other regulatory controls in the pensions landscape?
A. There is an unprecedented amount of regulatory controls out there: independent governance committees on the contract-based side; value-for-money obligations on trustee boards; TPR and the Financial Conduct Authority both overseeing pensions; the Pensions and Lifetime Savings Association’s Pension Quality Mark; and the internal controls of the providers themselves.
From a provider perspective, we felt it was important to engage with what we thought was the highest benchmark we could attain, which was the ICAEW master trust assurance framework. It is the benchmark highlighted as best practice on TPR’s website and should give employers and scheme members assurance that a scheme is being run by a provider that is committed to delivering good value over the long term.
Q. What will be the market impact of some providers achieving ICAEW master trust accreditation when others do not?
A. The initiative creates an area where employers and scheme members can start to feel their trust in pensions being rebuilt. Trust in pensions is essential if the nation is to provide for the retirements of its citizens.
With a plethora of master trusts being launched, it is hard not to assume that achieving accreditation is a hallmark of a firm that will be around for the long term.
Whenever there are lots of new entrants to a market, a typical outcome is that some fall by the wayside. The pensions minister and TPR are both worried about what would happen if this should come to pass. In the event that a master trust were to become financially unsustainable and unable to proceed, we could see the costs of the wind-up and transfer to a new provider being borne by the scheme members’ funds.
Hopefully that will never happen but the master trust assurance framework has been created to highlight schemes where such an outcome is considerably less of a risk.
It is questionable whether there is room in the market for so many master trusts. Those that are well resourced and robustly constructed should be in a strong position to survive.