The Pensions Authority in Ireland has published an employer guide on defined contribution master trusts, outlining key issues to consider when selecting a master trust.

The authority noted that the transposition of the IORP II Directive earlier this year has imposed significant additional obligations on trustees of pension schemes, including the directors of companies acting as trustees.

As a result, many employers are considering whether or not it is cost-effective to run their own pension scheme, as well as who has the necessary skills, qualifications and commitment to meet the new fit and proper requirements for scheme trustees. The authority said that these changes are leading many employers to consider the alternative of master trusts for future pension provision.

In its employer guide, the authority has set out several issues to consider such as whether the trustees of the master trust are qualified to carry out the role and whether they meet the requirements of the Pensions Act, 1990, as amended, and the Pensions Authority’s Code of Practice for trustees.

Employers are also advised to ask about the costs of the master trust. The authority highlighted that it is particularly important to understand these costs, whether it is offering good value for money, how much its competitors charge.

On the issue of investments, employers should check to see if the investment choices offered to members are clearly explained and whether they are appropriate. The authority said that it is important to remember that too much choice may not be a good idea and may lead to confusion. In addition, the authority advised employers to ask for examples of the communications that will be provided to members and check if they are clear and easy to understand.

“It is important that employers with existing pension schemes engage with the trustees and their advisers as soon as possible to understand the impact of the recent legislation. Where it is unlikely that the trustees can meet the new obligations in the current pension scheme, or the cost is prohibitive, employers and trustees need to take action.

“If a decision is made to move to a master trust it is important that employers shop around and choose a well-run master trust that offers value for money for their employees. The Pensions Authority will continue to provide information and support to employers and trustees,” the authority stated.

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