A new assurance framework is published to help trustees of defined contribution (DC) ‘master trusts’ demonstrate to potential and existing customers that their scheme is being run to a high standard.
It is published for consultation by ICAEW and was produced in partnership with The Pensions Regulator.
Assurance over the presence of quality features will provide employers, shopping around for an automatic enrolment scheme, with assurance and confidence in the master trust sector and help them select an appropriate master trust scheme for their workers.
The consultation outlines a set of ‘control objectives’, based on many of the regulator’s DC principles and quality features. The objectives, that cover standards of practice trustees are expected to meet to deliver good member outcomes, should be underpinned by robust control procedures to help these objectives be met.
It is expected that master trusts should obtain independent assurance annually.
Andrew Warwick-Thompson, The Pensions Regulator’s executive director for DC, governance and administration said:
Gaining independent assurance will help manage confidence in this growing segment of the DC market and demonstrate the presence of governance and administration standards that meet our DC code and regulatory guidance.
We encourage employers to select master trusts that have obtained this assurance on the control objectives set out by the ICAEW.
The ICAEW and the regulator have engaged with NAPF and PASA to assess how best their quality standards can dovetail with master trust assurance and these discussions continue.
Henry Irving, head of ICAEW’s Audit and Assurance Faculty, said:
Everybody, whether an employee or employer, wants to be confident that their pensions money is managed properly. Having an independent expert produce an assurance report can help employers assess the master trusts and effectively demonstrate that they operate to a good standard.
We are consulting on the draft framework to make sure it works for practitioners, employers and master trusts. We are keen that all stakeholders take the opportunity to feed back their comments.
The independent assurance framework focuses on six key areas:
Essential characteristics: Schemes are designed to be durable, fair and deliver good outcomes for members.
Establishing governance: A comprehensive governance framework is established at set-up, with clear accountabilities, and responsibilities agreed and made transparent.
People: Those who are accountable for scheme decisions and activity understand their duties and are fit and proper to carry them out.
Ongoing governance and monitoring: Schemes benefit from effective governance and monitoring through their full life cycle.
Administration: Schemes are well-administered with timely, accurate and comprehensive processes and records.
Communication to members: Communication to members is designed and delivered to ensure members are able to make informed decisions about their retirement savings.
While the framework has been developed for master trusts, other larger DC schemes may want to adopt this framework as best practice.
The consultation closes on 16 December 2013, with final guidance planned for publication in the spring of 2014.