Master trust defined contribution pension solution
18 January 2023
Master trust defined contribution occupational pension solution
The DC occupational pension scheme of choice
The Irish occupational pension schemes landscape is rapidly changing following the introduction of the new IORP II regime. IORP II is a comprehensive and wide-ranging suite of legislation that seeks to enhance and harmonise governance and management standards of occupational pension schemes across the European Union. It introduces new requirements for Irish occupational pension plans, both defined benefit and defined contribution, covering a number of areas including governance and risk management, plan management and member communications, and will place pension plans, trustees and employers under far greater regulatory supervision.
The task, and associated costs, of complying with this new regime is leading many employers to explore master trusts as an alternative vehicle for providing retirement benefits to employees. A master trust allows an employer to retain a high quality and value for money retirement savings arrangement for employees, while at the same time being able to outsource all aspects of management and regulatory compliance.
When it comes to new defined contribution pension schemes, it is clear that the majority are now being established under a master trust.
Master trusts currently exist within the general occupational pensions regulatory framework, including IORP II. Over time, the regulatory framework applicable specifically to master trusts will expand and they will become subject to the highest levels of regulatory supervision and oversight by the Pensions Authority.
Employers, and members, can therefore take comfort from the fact that their retirement savings within a master trust will be subject to the highest standards of governance and compliance
What are master trusts?
A master trust is a defined contribution retirement benefits savings vehicle. Like a regular occupational pension scheme, it is established under a trust, but instead of it containing one pension plan for one employer, the trust contains multiple individual employer plans. Each of these plans has its own fund which is entirely separate from all the others.
They are established by a commercial provider and have a single board of independent trustees appointed by the provider. A range of investment funds is made available.
Master trusts are a bundled, fully outsourced solution – everything is done centrally on behalf of the employers who participate. The primary benefit therefore is economies of scale, reducing costs and delivering time efficiencies associated with running a defined contribution pension plan, without sacrificing quality.
Why consider a defined contribution master trust pension solution?
Are all master trusts the same?
The new regulatory environment in Ireland (including IORP II and anticipated master trust specific legislation and regulations) is envisaged to be such that all master trusts will be subject to the same rigorous ongoing scrutiny.
However, in choosing a master trust, it is important that employers carry out appropriate due diligence on a number of specific areas. The Pensions Authority has advised employers that they need to understand what master trust options are available in the market and ensure that the prospective master trust meets all regulatory standards and expectations. This includes matters such as how the master trust is capitalised, trustee qualifications, fund charges and choices, member communications and conflicts of interest matters.
They should also be considering other factors too, such as the extent to which employers can be involved, the master trust provider’s scale and experience, or the quality of the technology used.
Not all master trusts are the same, either with respect to their preparedness for the new regulatory environment, or indeed the specific features and services provided to employers and members.
In addition, it is important to assess the extent to which master trusts offer future proofing to keep pace with evolving market needs.
Why choose the Mercer Master Trust defined contribution pension solution?
As the longest established (since 2006) corporate master trust in Ireland, the award winning Mercer Master Trust occupational pension solution is a tried and tested retirement and death benefits solution delivering strong outcomes to members and employers across a breadth of company sectors and sizes.
By combining our scale and expertise, we deliver the most compelling master trust experience in the market. Mercer is passionate about, and strongly committed to, master trusts. We will continue to be one of the key innovators in this field not just in Ireland but also across the globe.
Before accessing this website you must read and accept the following terms and legal notices.
You are about to enter a website intended for sophisticated, institutional investors based in Europe. The information contained herein is intended only for investors who are Professional investors or Eligible Counterparties as defined in Markets in Financial Instruments Regulations 2017 (the “MiFID II Regulations”). Any person unable to accept these terms and conditions should not proceed any further.
In Europe, Mercers Outsourced Chief Investment Officer, Delegated Solutions and other Investment Services delivered through Mercer Funds are delivered by Mercer Global Investments Europe Limited (“MGIE”). Mercer Global Investments Europe Limited, trading as Mercer, is regulated by the Central Bank of Ireland. Registered Office: Charlotte House, Charlemont Street, Dublin 2, Ireland. Registered in Ireland No. 416688.
Information about Mercer strategies and solutions is provided for informational purposes only and does not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities, or an offer, invitation or solicitation of any specific products or the investment management services of Mercer, or an offer or invitation to enter into any portfolio management mandate with Mercer. None of the content on Mercer.Com should be considered as advice. No actions should be taken based on this content without first obtaining professional advice. Mercer makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. Past performance does not guarantee future results. The value of investments can go down as well as up, so you could get back less than you invest.
Mercer reserves the right to suspend or withdraw access to any page(s) included on this Website without notice at any time and accepts no liability if, for any reason, these pages are unavailable at any time or for any period. The solutions, products and services described in these pages are not available in all jurisdictions.