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The GFTU Pension Scheme currently has two unconnected participating employers – the
GFTU and PCS. It is possible that a revised scheme which has a DC section added to it will
fall within the definition of a master trust, whether or not it operates in the same way as the
large multi-employer trusts that the legislation is aimed at.
The detail of the additional regulation is not yet known, but in outline it will require
authorisation by the Pensions Regulator. That will require the Regulator to assess and be
satisfied about the scheme’s financial sustainability, its business model and plan, its systems
and processes, its continuity strategy, and the “fit and proper” standing of its trustees.
Until it is clear whether or not a revised scheme will constitute a master trust, and if it is, until
the detail of these requirements has been fleshed out, it would be administratively very
burdensome to amend the rules in a manner which, in law, turns it into a master trust.
(iii)
Disclosure
You will also have to consider the additional administrative burden involved if you add a DC
section to the existing scheme. These are mainly in the form of additional disclosure
requirements relating to value for money.
Practicality: financial
If the GFTU sets up a DC section under the umbrella of the existing DB scheme, decisions
will need to be made as to the investment vehicle(s) that will be offered to members. The
design and selection of any such vehicle is something on which only an independent financial
adviser or employee benefits consultant can advise.
There is a growing body of legislation relating to the charging structure which any DC
arrangement must meet. The annual management charge which DC schemes may impose for
the default investment fund it offers is already capped at 0.75% of the fund, and some types
of charges (such as additional charges levied on early leavers) are prohibited. Further
legislative developments are likely to be concerned with transparency.
I do not know what charges are made by the master trust that the GFTU uses. If the GFTU
wants to move away from it and set up an alternative DC section of its own scheme, the
charges which members have to pay will have to be carefully considered: should members
pay more for a structure which provides greater member control and transparency? Or should
the GFTU subsidise the additional cost, if there is one?
Conclusion
Adding a DC Section to the GFTU Pension Scheme could lead to good outcomes for
members in terms of greater control, by the GFTU and the scheme members, over the DC
members’ pension arrangements.