All employers must now automatically enrol eligible workers into a workplace pension scheme. They also have to contribute to it. Often, employers will use a master trust – sometimes called a ‘multi-employer pension scheme’.
What is a master trust pension scheme?
Some employers offer their own workplace pension scheme that are only available to that employer and its employees.
A master trust pension scheme provides a workplace pension that can be used by many unrelated employers and their employees. This is why they’re also known as multi-employer pension schemes.
There are many large master trust schemes for employers and workers, including NEST, which is the workplace pension master trust set up by government.
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Features of a master trust pension scheme
Most master trusts that are used for automatic enrolment are defined contribution schemes. And they work in a similar way to other defined contribution pensions.
You get tax relief on your contributions into the pension scheme, which is a government subsidy to boost your savings. Plus, you get the benefit of your employer’s contributions.
The money that you and your employer pay into your pension is invested. And when you retire, you can draw the money out in any way you want.
You can usually take up to 25% of your pot tax-free – and you pay tax on the rest.
Different schemes will have different charges and different investment choices. Some might also restrict who can join and how much can be paid in each year.
Your employer decides which master trust pension scheme they want to use.
If you’re an employee and you want to find out more about your workplace pension, whether it’s a master trust or not, it’s best to talk to your employer.
If you’re an employer looking to set up a new workplace pension, or switch to another scheme, it’s a good idea to talk to a regulated financial adviser. They’ll help you choose. Financial advisers can also offer regulated financial advice, through the workplace, to employees.
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How are master trust pension schemes managed?
All workplace pension schemes are governed by a board of trustees – and master trusts are no different.
The trustees have a number of legal duties. This includes making sure the scheme is run in the interests of its members. For example, the trustees are responsible for managing the scheme’s investments.
A master trust must have a minimum of three trustees – although most have more. And most board members must be independent of the administrator, as well as the employers using the scheme.
Plus, the trustees have to comply with The Pensions Regulator’s Code of Practice.
The Pensions Regulator authorises and supervises master trusts. The code of practice is based on different elements that contribute to ‘good member outcomes’. Examples include:
- protecting members’ money
- effective and efficient administration of the scheme
- and value for money for members.
The Pensions Regulator also has a list of pension providers who have said they are open to smaller employers. You could also speak with an employee benefit consultancy.
