DWP proposes relaxation of audit rules for master trusts
Consultation launched to exempt collective pension trusts from certain audit rules
THE DEPARTMENT FOR work and pensions (DWP) has proposed to exempt the largest master trusts from some auditing rules.
This comes after The Pensions Regulator (TPR) and the ICAEW published a joint assurance framework for master trusts, which included an expectation that the schemes would be independently audited every year, Accountancy Age’s sister title Professional Pensions reports.
According to the documents, a “master trust” is where, usually, smaller companies band together to create a trust which can manage the pension investments of many companies or individuals.
As a solution, the DWP has proposed to exempt any multi-employer schemes containing at least 500 employers, and where at least two thirds of the employers are not associated with each other, from regulation 4(2)(d) of the rules, which states that auditors may not be anyone prohibited from being an auditor under the Companies Act.
However, in a consultation published on 29 November, the DWP said it is difficult for very large master trusts to comply with all of the independent audit requirements.
It said there is a limited number of audit firms that can audit schemes of such size, preventing them from maintaining independence.
In some cases, the DWP said, the auditors are not only partners within their firms, but officers of charities or not-for-profit organisations as part of their firm’s social responsibility commitment, and where that third sector organisation is a sponsor within a master trust, this can present a conflict of interest.
The department said concerns were first raised over the National Employment Savings Trust (NEST), and the advent of a number of other multi-employer providers has sharpened focus on the issue.
As a solution, the DWP has proposed to exempt from regulation the rules, which states auditors may not be anyone prohibited from being an auditor under the Companies Act, any multi-employer schemes containing at least 500 employers, and where at least two thirds of the employers are not associated with each other.
It asked stakeholders if there are any other types of scheme that are affected by the audit requirements, and whether the 500 employer limit is too high.
The consultation closes on 10 January 2014.