Should you be thinking of moving to a Master Trust?

At Zurich, we’ve already seen lots of activity in this area, with many employers choosing to wind-up their Defined Contribution schemes and move into the Zurich Master Trust. 

In recognition of this complex decision, in June 2024 the Pensions Council published a new practical guide for Employers and Trustees to help them make a decision. 

The new guidance sets out some practical steps and considerations to keep in mind when working through the process. 

A Master Trust is a defined contribution company pension scheme which enables multiple employers to coexist under an overarching or ‘master’ trust deed and where each participating employer has their own section in the Master Trust arrangement. 

Between 2021 and 2023 there was a mass switch from traditional occupational pension schemes into master trust arrangements, driven by regulatory deadlines. This has been largely driven by the additional compliance obligations created by the European Union Occupational Pension Schemes Regulations 2021 (IORP II Directive) and the increased costs that go with that. All occupational schemes (apart from one member schemes that were set up on or before 21st April 2021) had to meet the stringent requirements of IORP II or transition into a Master Trust by the end of 2023.  

Today, there are 17 master trust providers in Ireland.* The Pensions Council identified that the market dynamic of moving to a master trust reflects its benefits, including:  

Consolidation: The consolidation of pension arrangements across unconnected employers should lead to benefits of scale being realised.  

Compliance: Employers can outsource regulatory compliance and focus on aspects that add value, such as member communications and education supports.  

Better outcomes: A Master Trust should be able to react more quickly to investment volatility, wider market events and to regulatory or taxation changes.  

Governance: Higher standards of pension governance and oversight can be achieved compared to the generality of standalone trusts. The guidance outlines that the decision to move to a Master Trust is ‘employerled’ and sets out the key roles for both employers and trustees. Employers must select an appropriate pension vehicle, manage the transition in respect of future contributions for existing employees, ensure the documentation enabling participation in the selected Master Trust is fit for purpose; and meet all costs associated with the transfer. When it comes to the due diligence process, the following areas are noted as requiring close attention: 

Documentation: All documentation must be legally and technically correct. Investment switching: Providers have different approaches to the investment strategy of the receiving master trust, and this should be reviewed to ensure that the impact on scheme members is understood. 

Transition process: An ‘out of market’ exposure might arise when assets are transferring, or a pre-funding agreement can be entered into.  

Transition of existing scheme details: All arrangements under the existing scheme need to be reviewed to ensure they are dealt with as part of the transition, including benefit structures and Pension Adjustment Orders.  

Death in service benefits: Employers must consider whether these will be set up under the master trust or as a standalone trust. Treatment of deferred members: In future transfers away from a master trust, it is likely that deferred members will not move, and key considerations relating to deferred members are set out.  

Post transition: Employers should consider how they wish to oversee the operation of the pension arrangement into the future. The full guide is available to read on pensionscouncil.ie 

Never underestimate the importance of long-term, consistent investment outperformance  

At Zurich, we have an enviable track record stretching back over four decades and it’s this experience that ensures we stand out from other pension providers in the Irish market. Our approach to investing puts active management at the heart of our customer proposition and brings consistency to retirement planning.  

We don’t follow fads or fashions – Zurich Investments, our Dublin based investment team, stick to a tried, tested, and trusted approach – one that has delivered consistently for customers. 

Zurich is here to help

Don’t go alone, support is always at hand. The team at Zurich, along with your existing scheme advisor, are happy to help with advice on scheme wind-ups and transitions to Master Trust. The Zurich Master Trust offers employers and scheme members all the benefits they enjoyed under their occupational scheme with none of the regulatory and governance burdens associated with standalone trusts. Zurich Ireland Master Trustee DAC (ZIMT) provides trustee services to the Zurich Master Trust and the ZIMT DAC board brings a balanced combination of expertise, experience and independent oversight to the Zurich Master Trust.