Defined Contribution  

Growing problem of master trusts failing to check data

Growing problem of master trusts failing to check data

The number of master trusts conducting annual checks on transaction data has declined in 2018, according to research published by The Pensions Regulator (TPR).

In its annual defined contribution (DC) survey published on Friday (14 September) – which polled 441 single-employer schemes and 24 master trusts between January and March 2018 – the watchdog found that only 60 per cent of master trusts comply with the key governance requirement that core scheme financial transactions must be processed promptly and accurately.

This a decrease of 22 percentage points when compared with last year's results, the survey showed.

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There has been a decline in the number of master trusts – which have taken on the majority of new savers since the introduction of auto-enrolment in 2012 – that review their common data quality at least annually, from 98 per cent to 82 per cent.

The gap in the number of schemes which review scheme specific data at least annually has grown significantly, from 91 per cent in 2017 to 60 per cent in 2018.

A TPR spokesperson said: “Master trust authorisation and ongoing supervision will drive up safeguards around these schemes, better protecting members.

“From October 1, trustees of master trusts which want to continue to operate in the market will have to evidence that the scheme meets criteria in five areas. This includes having systems which process financial transactions automatically and securely, and processes to ensure any delays or problems do not impact on members.

“In line with our clearer, quicker, tougher approach, we continue to carry out enforcement work against schemes which do not meet the standards laid out in pensions law, including ensuring transactions are processed promptly and accurately.”

FTAdviser reported on Friday that errors were found in half of the data employers sent to providers on the auto-enrolment contributions of their staff.

Overall, only 23 per cent of all defined contribution (DC) schemes comply with this governance indicator, which is nonetheless an increase of 8 percentage points when compared with the previous year survey.

Another area which defined contribution (DC) pension funds need to improve is to demonstrate they provide good value for members, especially for smaller schemes, The Pensions Regulator stated.

While most DC members – 86 per cent or 6.8 million people - are in schemes whose trustees are adequately carrying out a value for member assessment, a number of smaller schemes are not meeting the standards expected by the regulator, the watchdog stated.

The survey showed that the trustees of just one in 10 small schemes, and one in three medium schemes, are doing everything which the watchdog believes is essential to assess value for members.

This includes trustees having good knowledge and understanding of the costs and charges paid by members, and carrying out an annual assessment of the value the scheme represents.

The survey also found that only 41 per cent of scheme trustees are researching and taking into account what members' value.

In a thematic review into how trustees of small and micro DC schemes are assessing value for members, The Pensions Regulator found that the majority of the 68 chair statements reviewed had inadequate or incomplete explanations of how the scheme’s costs and charges represent good value for members.