Master Trust Pensions Explained

IORP II Compliance & Requirements


The new EU Directive on the activities and supervision of Institutions for Occupational Retirement Provision (the IORP II Directive) was adopted in 2016.

With the Pensions Authority now becoming more active in their supervision of the Irish occupational pension schemes landscape, the introduction of IORP II provides a comprehensive and wide-ranging suite of legislation that seeks to enhance and harmonise governance and management standards of occupational pension schemes across the European Union.


This applies to both defined benefit and defined contribution pensions, covering a number of areas including professional oversight and governance on member benefits, risk management, and member communications, and will place pension plans, trustees and employers under far greater regulatory supervision.



What is a Master Trust?


A Master Trust is a revenue-approved defined contribution pension scheme and is a fully outsourced solution where everything is done centrally on behalf of multiple non-associated employers who participate.


Its is set up under one legal trust and consists of a board of trustees, which acts as a trustee for the whole trust. Each employer using the trust has its own section within the overall arrangement.



What does this mean for Group Schemes & One Member Schemes?


Group schemes and one member schemes set up on or after 22 April 2021 must now comply with the IORP II legislation. The increasing demands of IORP II resulted in all providers in the market closing their Executive Pension or one member arrangements for new business during the summer of 2022. The solution has been to allow for Small and medium-sized businesses under the Master Trust model which allows the same opportunities to fund for retirement with the governance criteria from IORP II satisfied.

Group Pensions


As a result, the task, and associated costs, of complying with this new regime is leading many employers to explore Master Trusts as an alternative vehicle for providing retirement benefits to employees.


A Master Trust allows an employer to retain a high quality and value for money retirement savings arrangement for employees, while at the same time being able to outsource all aspects of management and regulatory compliance.



Why consider a Master Trust Pension Scheme?


Employers who are looking to provide a value for money retirement savings solutions for employees, while facing challenging regulatory requirements, are now using master trusts for this reason.


Each employer can design and retain control over the key features of their own plan, including benefit and contribution levels and fund choices. All responsibility for the plan’s management, administration, oversight and regulatory compliance are taken upon by the professional trustee board and relevant service providers.


The primary benefit therefore is economies of scale, reducing costs and delivering time efficiencies associated with running a defined contribution pension plan while allowing you to save for your retirement in a convenient and tax-efficient manner.


A brief summary of the benefits included:


1. Significantly reduced compliance costs for employers compared to running their own trust-based scheme.

2. Professional oversight and governance on member benefits.

3. A wide range of funds across different risk profiles, asset classes, fund managers, and investment styles.

4. Flexible contributions, with the option for monthly and/or single contributions.

5. Competitive and transparent pricing options.



Migration of Existing Schemes to a Master Trust


We are now seeing group schemes and one member schemes have previously been set up committing to wind up their scheme and transition to either a Master Trust or another suitable arrangement in 2023 as the Pensions Authority require that is done to avoid potential sanctions for IORP II non compliance.


One member schemes set up on or before 21 April 2021 have a 5-year derogation to the main criteria of IORP II which ends in April 2026 and so can continue to operate as normal for the time being.


4 Implications of NOT transitioning to a Master Trust


1. Employers are still obliged to become IORP II compliant.

2. Employers will have to engage the services of a trustee and Key Function Holders such as Risk and Audit.

3. There are significant annual costs associated with being IORP II compliant outside of a Master Trust.

4. It would require time and expertise.




Where to from here?

Contact us for Financial Advice.


If you need help deciding which option or pension scheme arrangement is best for your business, we recommend that you first seek advice from a Financial Advisor.


With access to most Master Trust providers in the market, our Financial Advisors will sit with you to assess your business and pension needs to determine which Master Trust is right for you and your employees.


Need to speak to a Financial Advisor?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.

Please enable JavaScript in your browser to complete this form.
I need help with: