Navigating Pension Consolidation: Insights for Trustees and Employers

In the evolving landscape of the secondary master trust market, employers are increasingly evaluating their current master trust pension scheme arrangements.
Recognising the Advantages of Bulk Transfers
The Employer's Role vs. Trustee Responsibilities
Understanding the Membership Dynamics
Weighing Costs and Liabilities
Bulk transfers come with financial implications. Trustees must consider advisory, communication, and implementation costs, which employers may agree to cover or may be required to cover. However, trustees may conclude that the transfer is not in members’ best interests during the advisory stage, potentially leaving employers to bear costs without achieving their intended outcome.
Moreover, trustees face potential liabilities arising from member complaints or compensation claims related to the transfer that they had undertaken. To mitigate these risks, trustees could look to seek indemnities from the employer to cover any associated costs. These liabilities could be significant, making it imperative for employers to factor-in indemnity provisions when requesting a bulk transfer.
Trustee vs. Member-Consent Transfers
Receiving Master Trust Provider Pricing
Ensuring Member Interests in Bulk Transfers
It is crucial to understand that while master trust providers should not be reluctant to facilitate a bulk transfer of assets to another scheme, the trustees of the current master trust have a fiduciary duty to prioritise the best interests of their members. This responsibility involves carefully evaluating the implications of a bulk transfer to ensure that it is executed in a manner that is both efficient and beneficial for all parties involved. By focusing on the needs of current members, trustees aim to safeguard their financial well-being and ensure a smooth transition, recognising that there can be clear advantages to pension consolidation from a member perspective. The processes surrounding bulk transfers should not be intended to create barriers but rather to promote a thorough and thoughtful approach that enhances member outcomes and supports the employer's objectives.
Pension consolidation can provide meaningful advantages for members and employers but requires trustees to navigate a complex range of responsibilities, costs, and potential risks. By addressing the distinct needs of active and deferred members, evaluating alternative transfer methods, and effectively managing liabilities, employers and trustees can ensure the process aligns with the best interests of all stakeholders, fostering trust and delivering improved outcomes.
- Principal, DC Consulting
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