Master Trust Authorisation

A complex 92+ employer scheme which commenced pre-2000 with 3 separate sections of membership covering 10,000 active and deferred members and both DB and DC benefits. Broadstone have provided some Trustee services since 2002, and won a tender process to begin providing administration services from 1 December 2018.

The challenge

Due to its multi-employer make-up, the scheme was caught in the recent Master Trust legislation despite it not being a commercial enterprise or a scheme which any external employer could join.  Therefore, the Trustees were required to prepare for Master Trust status.

The solution

Working with the Trustees and the scheme legal advisers Broadstone was a key adviser in compiling the 1,000+ page application. We had input in many sections of the submission including the investment structures, solvency and contingency planning etc. However, of most relevance here was the major input on:

  • Systems and Processes – to demonstrate and evidence how these requirements as required under the legislation have been met. This covered receiving contributions, paying benefits, safeguarding assets, transferring monies securely, appropriate administration systems, reporting, disaster recovery and being able to plan for changes in legislation, benefits and systems – and being able to demonstrate robust methodology for all.

The ability to meet these requirements was assessed through a mixture of evidence based material and site visits by an independent auditor in line with Assurance Framework AAF 02/07. The processes were deemed to exceed the requirements of the framework.

  • Scheme Financial Details (including Financial sustainability and the Business Plan). The funding of the scheme is not typical, with neither the members contributing nor the individual employers directly for benefits or running expenses, but instead via an industry-wide arrangement. It was therefore more challenging to demonstrate sustainability and continuity. Projecting the income stream, and modelling the driver behind it, was key.  However, as the scheme is not a commercial enterprise and the number of active members will stay relatively static, a novel approach had to be taken to demonstrate the sustainability and continuity with the boundaries of the questionnaire which was designed for commercial Master Trusts.

Developing the infrastructure for a single scheme to fit into the wider Master Trust framework, both in terms of governance requirements and ongoing administration and reporting processes.

During the above complex, regulatory and time critical process we also introduced a Flexible Access Drawdown (FAD) facility for the membership to enhance the options available to them. The FAD facility had not been available with the previous administrators but was of particular interest to the unique membership, many of whom have a protected retirement age and all have an unusually short career and, therefore, a potential need to access some of their funds earlier than most. The FAD facility enables the membership to access an appropriate part of their total funds without restricting their ability to make future pensions savings, as many of them make the transition to their second and longer career. The facility has been popular with, and welcomed by, the Trustees and membership.

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