Around 10 years ago, many UK companies selected a master trust to meet their auto-enrolment duties. Perhaps that’s you? With all that’s happened in that time, it can make sense to review whether your master trust still meets your needs and you may decide to change your master trust provider. Donna Walsh, Head of Master Trust, Standard Life, talks you through our five point guide to the areas to consider when transitioning from one master trust provider to another.
Since many employers first chose their master trust provider, often looking for a partner with whom to meet their automatic enrolment duties, much has changed. The employer itself and what it needs may have changed over that time too. Certainly, the master trust marketplace, its regulation, its providers and solutions have evolved and developed rapidly over the last few years.
As a result, it can make sense for employers to test the market from time to time on value, quality and innovation. Have you looked at doing this recently? Perhaps the complexity of the task is putting you off – certainly reviewing and, if necessary, selecting a master trust involves analysing multiple factors. Thankfully advisers can help, by scrutinising providers on your behalf.
Whatever the outcome, such a review can be enlightening, even if you decide to “stick”. But what if, after conducting a review, you decide to “twist” and change your master trust provider to one who can better support you and your employees?
We talk you through our five-point guide to achieving a successful transition.
1. Fully scope out the transition
Prior to the move, it’s crucial to consider the scope.
Are you intending to use the new master trust for future contributions only? Or is your intention to transfer existing funds across from the current ceding trust?
If the latter, would the transition just be for current employees (active members of the current ceding master trust) or would it also ideally include former employees (deferred members)?
And what about members with crystallised benefits and/or in drawdown?
You may also want to consider those members who are close to retirement; what impact will a move have on their investments and retirement journey. You may want to treat these members slightly differently.
Of course, what you may want to do is not necessarily what you will be able to do. What are the rules of your existing ceding master trust? For instance, the rights you have as an employer, the conditions of a transfer like this, if any? You should also check whether there are any constraints or conditions in the new receiving master trust rules.
There are pros and cons to all these options and careful thought should be given up front to the precise scope of any move.
Advisers can be invaluable in ensuring a successful transition and, if used, they too should have a clearly defined scope of work covering their involvement up front.
2. Agree a plan with a Project Manager from your selected provider
Companies like Standard Life provide strong project management support as it’s important that members have a smooth, low-risk transition between providers and that all partiers cooperate and communicate openly. Your project manager will establish clear project governance and a project board – ideally including, among others, representation from the ceding provider who can represent the existing trustees.
To establish a timeline, your project manager will need to include key dates and deadlines. These include potential consultation with active employees and any notice periods required by your existing provider. Most importantly, when it comes to setting your timeline, be realistic!
Talk to your existing provider early on to establish if the existing trustees would allow a bulk transfer without member consent. If they agree to this approach, they should tell you what due diligence, if any, they need to undertake on the receiving master trust. If this isn’t possible, then members would need to provide their individual consent to transfer – talk to your new provider about how this could be supported.
Do you have a sizeable amount of assets to transition? Again, early consideration to the most appropriate method of transitioning the assets is key, often influenced by how to minimise the associated costs. Also consider who might actually bear the asset transition costs. Typically, your receiving scheme’s implementation manager would oversee the transition of assets and provide a detailed plan. Often a specialist asset transition manager is assigned to ensure the safe transfer of assets.
Finally, a more technical but very important consideration is whether any members in the existing master trust have any protections which would need to be maintained. This should be established early with your existing provider and flagged to the trustees so they can include it as part of their due diligence activity.
3. Work through the logistics
When moving master trust providers, there are logistical considerations to work through.
There’s legal documentation which you, the employer(s), as well as the ceding and receiving trustees need to sign. Typically, these include:
- Participation deed/agreement – essentially a contract between the employer(s), the receiving provider and the receiving trustees setting out the employer’s obligations in participating in the master trust.
- Transfer agreement – generally required, between the two sets of trustees, where there is a bulk transfer without consent. This agreement details the requirements that the transferring trustee complies with to permit the transfer; any warranties, indemnities and where the transferred funds will be invested.
- Pre-funding agreement – where the receiving master trust is providing a pre-funding facility as part of the asset transition – to essentially minimise or eradicate any out-of-market investment risk to the members – then this document sets out the terms of this facility. One thing to clarify early is which party would be prepared to underwrite the potential, associated liability on this arrangement. It is also worth checking whether your new provider can offer sufficient pre-funding to transfer the assets in one go.
Finally, at a more practical level, you, as the employer, will need to agree and potentially install new administrative interfaces and processes with your new provider. Importantly, your payroll team or payroll provider would need to be engaged early to work through the data requirements and plan for any changes to processes.
4. Communicate, communicate, communicate
Communication is critical. Ensuring members are fully informed about the move should be considered at the outset of planning.
One of the first things to clarify, as employer, is whether a formal employee consultation will be required. This will obviously impact your approach, as well as timescales.
Discussions should also take place with your receiving master trust about the support which they can offer and the communication channels available. This could include a warm-up communication to members, including a Q&A document, a microsite to host information, face to face and/or webinar presentations and videos.
Don’t forget to communicate well with all groups of members to be transitioned – deferred members, if included, will want information and support as much as active ones. It would be advisable to check that the ceding master trust has good and up-to-date data on the deferred population too.
It’s always helpful to include a timeline for members within your communications. This shows key dates, such as when they can expect to join the new scheme, any cut-offs for decisions and associated ‘black out’ period, as well as the proposed date of the transfer.
Where a non-consent bulk transfer is taking place, a 30-day notice period for all transferring members is required from the ceding trustees ahead of transferring the assets. It is important to check how much communication support your new provider can offer and include within your overall implementation and transition plan.
5. Get your governance in place
You will, obviously, want to ensure that you have established a robust framework for overseeing and managing the transition, as well as being able to make decisions in an efficient manner.
You might want to consider whether this framework should continue, albeit in an adapted form, beyond the transition to the new master trust. Whilst the independent trustees and their advisers look after all members in the master trust, employer run governance committees can complement this, monitoring and manging the arrangements against scheme specific objectives.
Finally, keep up with the reviewing. While you’ll probably not be looking to change your new appointed master trust anytime soon, it’s prudent to check you’re happy with the new trust’s exit arrangements. It’s always good to plan ahead for all eventualities.
If you’ve decided to ‘twist’ and change your master trust provider, I hope that our five-point guide helps you think about your approach and what will be involved. Changing your master trust provider is not a simple exercise, but there can be strong rewards for doing so. Just check that your new provider has the expertise and experience to make the transition as smooth and as painless as possible for you and your employees.
Our award-winning Master Trust has been designed to support employers and their employees in the key moments that matter. Listening and adapting to changing needs we aim to provide exceptional service levels to employers and members in the Master Trust. We were delighted to win the Pensions Age Master Trust Offering of the Year 2022, for the second year in a row.