Industry says master trust framework should be mandatory

The voluntary assurance framework, initiated in May last year, enables trustees of master trusts to demonstrate to employers that their scheme is managed to high standards and was initiated in May last year.

Griselda Williams, head of business development at Trust Pensions, said it has been committed to achieving master trust assurance from the very start, but admitted it is a lengthy process, particularly for new schemes.

“MAF is fairly new - only three schemes have achieved it so far, so it is early days. But we think it should be phased in as mandatory and expect it to become defacto mandatory for any credible provider, particularly in the context of [defined contribution] outsourcing.

“The irony is that we shall end up in a situation where the independent governance and oversight around systems, controls and processes for master trusts under MAF will be more transparent and more prescriptive than those of our competitors in the contract-based market, where regulation remains principles-based.”

She added that while The Pensions Regulator and the Financial Conduct Authority are working on the basis of regulatory parity across workplace pensions, MAF actually sets a very high and detailed bar.

“We need to see something as robust to be put in place for contract-based schemes to ensure that quality can be assured regardless of a scheme’s legal construct.

“We think mandatory MAF will create a suitably high bar to ensure that master trusts develop in a well-structured way that remains fit for purpose.”

Henry Tapper, founder of the Pensions Playpen and a director of First Actuarial, said that MAF is an accounting standard to which all multi-employer schemes should aspire to.

“The MAF gives those managing multi-employer schemes a means to measure the scheme’s performance, identify weaknesses and ensure that any issues are dealt with before they become problems.

“The barriers to entry for a master trust are low, such schemes need carry no reserves and MAF is doubly important as obtaining it is a statement of intent from those running the scheme. Where a master trust shows no intention of gaining the MAF accreditation, those conducting due diligence on it have every right to be nervous.”

He added that it is therefore important in providing members with security, the scheme managers and trustees with a basis for measuring the scheme’s performance, and the employer a means to make the scheme credible.

Andrew Warwick-Thompson, executive director for defined contribution for The Pensions Regulator, told FTAdviser: “We continue to strongly encourage and support all master trusts to adopt the voluntary assurance framework we developed jointly with the ICAEW.

“We are pleased that major master trust providers operating in the automatic enrolment market have already committed to the framework. We call on other providers to follow their lead. We have published a list of schemes that have attained independent master trust assurance.”

The FCA declined to comment as it does not regulate trust-based schemes.

ruth.gillbe@ft.com