Remainers
There will be fewer master trusts in the market, but those that remain will hopefully be more robust. Raising standards in schemes looking after millions of new savers can only be a good thing – on that, I hope we all agree.
The fifty odd pages of The Pension Regulator’s (TPR’s) systems and processes questionnaire delve into the detail in great depth, looking not just at schemes, but also any providers or suppliers who are contracted to deliver part of the service. Yes, there is a fee payable to the regulator, but £41,000 is a very small consideration in the bigger picture of preparing for authorisation. This, as schemes are all too aware of, is not a walk in the park, but should ultimately be best for savers.
Remainers may have significant negotiations ahead – will they look to acquire exiteers, and if so, how? The much-discussed secondary market has seen many employers switch providers, consolidate legacy schemes, and in some cases, look to standardise their pension offering to all staff. There is even the option of purchasing those looking to wind up at the same time applying for authorisation and some opportune remainers will be looking to grow market share.
TPR has a six-month window to communicate the success or otherwise of a master trust application for authorisation – meaning a finite list of remainers is still a further half year away.
Exiteers
Those planning to leave will need to check with the regulator that they have the necessary continuity strategy – TPR has a twenty-page handbook on this (fun fact – did you know that you have 28 days to submit your implementation strategy following a triggering event, such as exiting the market, occurring?).
For those not applying for authorisation – where to? Without knowing which schemes will be authorised, where should they go? They don’t have to transfer to a master trust, especially if no suitable schemes are available, but they must have the financial resources to continue.
Assuming they have the funds, they can sit tight until the results are out and the options can be reviewed. That does at least create some time to really dig into those twenty pages on continuity strategies, as well as to consider options for a merger or an orderly transfer. Each has different implications for the funder, administrator and trustees.
Whether an exiteer is looking to merge or go down the orderly transfer route they will need to ensure a streamlined method – it will get very messy, inefficient and unpleasant without proper understanding, planning and execution. Demonstrating a record of strong operational process to minimise frictional costs and time will ultimately create value for a merging scheme. Why? Because the data analysis and enhancement (if necessary) followed by transformation before migration can become a significant obstacle (not to mention expense) to the receiving scheme. Any value agreed on acquisition can quickly dissipate through due diligence and migration.
Being ‘data ready’ as an exiteer provides acquiring remainers with more cost certainty; and the exiteer will be in good shape to complete a wind-up post transfer.
However, whether you are remaining or exiting, the clock is ticking…
Matt Dodds is a director at ITM