Master trust draft assurance framework published

Introduction

TPR and the Institute of Chartered Accountants of England and Wales (ICAEW) have issued a consultation on a draft independent assurance framework for master trusts.

In this Alert:

• Key points
  
• Background
  
• Master trusts
  
• Independent assurance framework
  
• Control objectives
  
• Assurance reporting
  
• Key dates

Key points

• TPR and ICAEW have developed a voluntary assurance framework for master trusts.
• Trustees will evaluate and report on their scheme’s compliance with a set of “control objectives” (which are aligned with TPR’s DC quality features).
• The master trust assurance framework is due to come into force in early 2014.

Background

The success of automatic enrolment depends on employees being enrolled into quality schemes which deliver good member outcomes. TPR has formulated 31DC quality features which build on TPR’s six principles for good quality DC schemes. They represent the standards and behaviours TPR expects DC trustees to attain.

TPR’s new DC code of practice and guidance for occupational trust-based schemes (due to be published in final form in November 2013) are intended to assist trustees to implement the quality features in their scheme.

Master trusts

Master trusts are occupational trust-based DC schemes which can manage the pension investments of many individual companies, and their employees, within a single entity.

As occupational pension schemes, master trusts will need to comply with TPR’s DC code. However, to address TPR’s concern that only providers with durable business models are able to participate in automatic enrolment, master trusts will also be subject to a voluntary independent assurance framework. TPR will encourage employers to select master trusts that have obtained this assurance.

Independent assurance framework

The independent master trust assurance framework aims to help trustees of DC master trusts to demonstrate to potential and existing customers that their scheme is being run to a high standard. Although the master trust framework has been developed specifically for master trusts, it is noted that other DC schemes (such as group schemes) might want to adopt it as good practice.

Control objectives

Trustees will be required to evaluate their procedures against a set of “control objectives”. For example:

• Cash is safeguarded and all payments are suitably authorised and controlled.
• The performance of the funds within the default strategy is checked at regular intervals throughout the year.
• Trustees maintain a documented policy which outlines the requirements of trustees in terms of being fit and proper.

The control objectives cover the majority of TPR’s DC quality features, but the list is not intended to be exhaustive. It remains the responsibility of trustees to ensure that the described objectives address each feature of a good quality DC scheme, as set out in the DC code and guidance.

Assurance reporting

Trustees will need to report annually on the “description, design and operating effectiveness” of the scheme’s procedures for addressing the “control objectives”. Example paragraphs from an illustrative trustees’ report are set out in Appendix 2 of the consultation.

The trustees’ report will be supported by an independent assurance report from a chartered accountant on the governance and administration control procedures of the master trust (a sample is set out in Appendix 3 of the consultation).

Key dates

The consultation closes on 16 December 2013 with the assurance framework due to come into force in early 2014.