Written evidence from the Deloitte Pensions Services Limited DBP0064

Introduction to our organisation

This response is sent on behalf of Deloitte Pensions Services Limited, as Provider of the Deloitte Pensions Master Plan.

The Pensions Master Plan is a sectionalised occupational defined benefit (DB) pension scheme for non-associated employers. It is a DB master trust consolidation vehicle designed to bring the benefits of reduced costs and improved governance to DB pension schemes.

For the avoidance of doubt, the Pensions Master Plan is not a DB superfund, and seeks to maintain the employers’ responsibilities (“employer covenant”) to schemes that choose to join.

Our reason for submitting a response is that as Provider of the Pensions Master Plan, we believe strongly in the benefits of DB scheme consolidation. We also have significant practical experience of helping pension schemes consolidate, with more than £1 billion of assets having transferred into the Pensions Master Plan since its creation in 2016.

Our response

Our answers below focus on areas where we consider that our experience of DB pension scheme consolidation is relevant to your inquiry. In particular, our answers focus on consolidation into DB master trusts, rather than superfunds, buy-outs or other consolidation options.

3. What should the Pensions Regulator (TPR) do to improve the quality of trustee boards?

In our view, DB consolidation can improve the governance of DB pension schemes and the quality of trustee boards. Good governance enables better decision making that will benefit members, trustees and employers.

Assisting good governance was one of our aims in designing the Pensions Master Plan. Our structure includes a central Master Plan Trustee, which has professional trustee directors, who issue a compliance statement for completion by each section annually. The statement provides an additional opportunity for section trustees to reconsider and verify their compliance with a number of legislative and regulatory requirements.

In addition, several pension schemes that have transferred to the Pensions Master Plan have chosen to appoint their choice of professional trustee to their new section, whereas previously the scheme had been operated by “lay” trustees. In our experience, the consolidation process encourages wider consideration of the optimal governance structure for the pension scheme’s future – and for our clients has tended to lead to an increased professionalisation of trustee boards.

We believe that encouraging DB scheme consolidation would lead to an improvement in the quality of trustee boards and of pension scheme governance.

4. What, if any, further steps should be taken to encourage DB scheme consolidation?

The Pensions Master Plan and other DB master trusts have the ability to reduce the costs of pension schemes that choose to join through economies of scale.

While we have seen a number of schemes joining the Pensions Master Plan, we believe there are many more schemes that could benefit from DB scheme consolidation.

Work carried out by the Defined Benefit Master Trusts Working Group (which included the Department for Work and Pensions and ourselves, amongst other parties) resulted in the DB Master Trust Self-Certificates currently hosted on the Pensions and Lifetime Savings Association’s website. These have been beneficial in raising awareness of DB master trusts and their key features. However we believe further action could encourage a greater pace of consolidation.

We believe that greater encouragement should be given to trustees and employers to seek value for money in their operation of DB pension schemes, and to consider DB master trusts as an option for reducing the costs and improving the governance of their scheme. This could take the form of positive statements around consolidation options or guidance on how consolidation can be carried out appropriately.

In addition we believe future developments in pensions legislation and regulation could be reviewed to verify that they either encourage - or do not discourage (e.g. through unintended consequences) - consolidation via DB master trusts.

5. Are there any circumstances in which consolidation should be mandatory?

Our view is that consolidation by DB pension schemes should be voluntary. Our approach to DB consolidation recognises the individual nature and circumstances of each pension scheme, and seeks to preserve that individuality while allowing the scheme to benefit from economies of scale and lower costs.

Summary

We are encouraged by the Committee’s interest in consolidation and will be pleased to provide further information or assistance as may be helpful.

If you would like to discuss any of the points raised in this response, please contact me using the details below.

April 2023

Deloitte Pensions Services Limited is registered in England and Wales with registered number 09447994 and its registered office at 1 New Street Square, London, EC4A 3HQ, United Kingdom.

Deloitte Pensions Services Limited is a subsidiary of Deloitte LLP, which is the United Kingdom affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.