Master Trust is top option with new pension rules, says expert

Employers and trustees must choose either ‘own trust’ model or transition to a Master Trust to manage new IORP II requirements

Mairéad O’Mahony, head of wealth solutions, Aon Ireland.

Employers and trustees have less than four months to comply with IORP II pensions rules, warns Mairéad O’Mahony, head of wealth solutions at Aon Ireland.

The rules were signed into law in April 2021, with employers to fully comply by end of December. Key changes include how pension schemes are governed, how they manage risk and how the Pensions Authority will supervise the market.

Mairéad O’Mahony said: “The deadline may still come as a surprise to many employers around the country. And, despite being designed to ensure better member outcomes, IORP II will nevertheless result in additional costs and governance requirements for employers around the country.

“At Aon, we’re here to help businesses understand the level of additional requirements placed upon them by IORP II, and to support them as they choose which model to adopt to ensure compliance into the future, whether that’s their ‘own trust’ model or a Master Trust.

Employers and trustees must decide to either maintain their current ‘own trust’ model or transition to a Master Trust, a multi-employer pension plan, to better manage IORP II requirements.

“If businesses decide to maintain an ‘own trust’, they need to ensure they engage in the necessary preparations to ensure their own standalone pension plan complies with IORP II by the end of this year,” said Mairéad.

“Otherwise, they can explore the option of a Master Trust, where responsibility for governance and compliance, investment strategy, manager selection and monitoring and administration of the scheme rests with the Master Trust provider. A Master Trust is an effective way for an employer to manage the costs and mitigate the risks associated with new IORP II rules.” 

However, with only nine Master Trust providers currently operating in the Irish market, O’Mahony is urging employers looking to adopt this solution need to start reaching out to providers now. 

“There are just nine Master Trust providers operating today in the Irish market, which means that employers looking to switch to a Master Trust need to reach out to providers very soon, or they may risk having to maintain their ‘own trust’ approach for longer than they had wished.

“Whatever route employers choose to go down, it’s crucial that they make the changes that are required of them as soon as possible, so that they can move forward with greater speed and confidence to the next phase, leveraging the robust new governance frameworks brought about by IORP II to improve retirement savings outcomes for all.”