The Pensions Authority in Ireland has today published a report on the compliance of master trusts following the 1 July 2022 compliance deadline.

Following the transposition of the IORP II Directive in April 2021 and the publication of the Code of Practice for trustees in November 2021, there has been extensive and ongoing engagement by the Authority with master trusts in preparation for the Authority’s compliance deadline.

In anticipation of the 1 July deadline, the Authority’s supervisory focus for 2022 concentrated on the following key risk areas:

  • trustee structure and director appointments;
  • trustee fit and proper requirements;
  • trustee decision-making;
  • capitalisation;
  • key policies and procedures; and
  • key functions.

The Authority also sought copies of the annual compliance statement for each master trust and confirmation that key documents such as the own-risk assessment and the continuity plan had been prepared.

Overall, and particularly since the Authority first conducted its engagement programme with master trusts in 2020, good progress has been made by trustees in improving governance and management structures and standards for master trusts across the board, the report stated.

However, it noted that these are minimum requirements, and the Authority will apply a more in-depth focus on the requirements of the code as part of the ongoing supervisory review process for all master trusts over the coming months and years.

Furthermore, the Authority expects that master trusts will approach compliance in a more proactive way rather than relying on sustained engagement and prompting from the Authority.

The Authority sees the master trust sector as being of systemic importance for the future of Irish pensions provision, especially considering the large number of small pension schemes that will likely transition to master trusts, the report added.

“In this respect, the Authority will continue to engage extensively with the sector so there can be no doubt about the minimum standards expected to deliver optimum outcomes for pension scheme members,” it said.

The objective of the Authority’s 2022 engagement with master trusts was to ensure master trusts are fit for purpose to offer a viable alternative to schemes that choose to wind-up rather than meet the substantially increased governance and risk management requirements which apply to new schemes since 1 July and will apply to all schemes – other than derogated one-member arrangements – from 1 January 2023.

The Authority has issued individual letters to each master trust and expects their trustee boards and advisers to consider these findings and evaluate their own practices.

It will continue to apply an intensive supervisory focus on master trusts in accordance with its forward-looking, risk-based approach to supervision to ensure these vehicles are appropriate to offer new and alternative pension provision for members.

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