Lighthouse Group is to transfer its auto-enrolment business to Smart Pension after a strategic review by the business concluded the incoming master trust regulations would significantly increase the associated costs.
Following the announcement by the Pensions Regulator (TPR) of a new authorisation regime for master trusts, which comes into operation on 1 April 2019, the national financial advisory group began a strategic review of its Corporate Pensions Trust (CPT).
This is the unbundled master trust incorporating the Lighthouse Pensions Trust, the group’s proprietary solution for small and medium-sized businesses looking to meet their obligations to provide auto-enrolment compliant workplace pension schemes.
According to Lighthouse, the review has decided TPR’s new regime “will significantly increase the annual running costs, both in the year of initial application for authorisation and in all subsequent years, as well as the capital required to be held to meet any future wind-up costs”.
It added: “The group has now determined it would not be in the best interests of shareholders to continue to provide financial support to the CPT to enable it to apply for master trust authorisation. This decision has been communicated to the CPT Trustees.”
The Lighthouse review also considered alternative scheme providers to which the participating employers and members of the CPT might be able to transfer and identified the Auto-Enrolment Master Trust operated by Smart Pension, which is part-owned by Legal & General, as the most appropriate candidate.
‘Highly competitive market’
Lighthouse chief executive officer Malcolm Streatfield said: “Given the investment made by the group to date in establishing and maintaining the Lighthouse Pensions Trust, the significant increase in operating costs that will arise from TPR’s new authorisation regime, and the highly competitive market for the provision of auto-enrolment compliant workplace pension schemes, the maintenance by the group of the Lighthouse Pensions Trust, within the Corporate Pensions Trust, could no longer be justified.”
He added that heads of agreement between Lighthouse and Smart Pension have now been signed with the proposed transfer having been approved by the trustees of the CPT – subject to the Auto-Enrolment Master Trust obtaining authorisation from TPR – while the impact of the proposed transfer was “expected to be broadly cost neutral in 2019 and should provide a small net income stream after associated costs from 2020 onwards”.