The new draft quality-assurance framework for defined-contribution (DC) ‘master trust’ pensions puts too much of a burden on pension funds – and the timing is wrong, according to the National Association of Pension Funds (NAPF).
The association said it had submitted its formal response to the Institute of Chartered Accountants in England and Wales’ (ICAEW) consultation on the draft framework, which the institute set out in October in conjunction with the Pensions Regulator.
The NAPF said it had already welcomed the regulator and audit profession’s focus on improving the quality of master trusts, and launched its own Pension Quality Mark READY scheme to support this.
But Joanne Segars, chief executive of the association, said: “Our consultation response sets out our master trust members’ concerns about the resources the assurance audits will require and the lack of auditors with pensions expertise to carry them out.”
This risked even higher costs, she said, as the audit would be difficult and time consuming.
“The timing is wrong, too,” Segars said. “This work will hit master trusts just as they are hitting the peak demand from employers because of automatic enrolment.”
The ICAEW and the Pensions Regulator should reconsider implementation deadlines, along with the length and number of control objectives, she said.
“We believe a shorter framework targeted at the key issues would be more efficient and could be built upon later,” Segars said.
Under the draft framework, master trusts are expected to get independent assurance from a chartered accountant every year.
It focuses on six areas – main characteristics of scheme design, governance, the people accountable for the scheme, ongoing governance and monitoring, administration and communication to members.
The framework includes a number of ‘control objectives’, based on many of the regulator’s DC principles and quality features.
The NAPF said the most important thing was to encourage good master trusts and make sure action was taken against poorly run ones.
The voluntary audit framework could create extra burdens without solving the underlying problem of poor regulation, Segars said.
“We want to see a single regulator, a greater focus on ensuring strong, independent governance and higher barriers to entry,” she said.
In its formal response, the NAPF said it has set out members’ concerns over several of the 43 proposed control objectives, including their prescriptive nature and how they would keep up to date as policy changed.
Members were also worried expectations or requirements were unclear in some cases, it said.