U.K. retirement plan trustees will be able to rely on their fiduciary duty when transferring assets of their defined contribution plans to multiemployer plans, according to the U.K. Department for Work and Pensions' bulk transfer guidance published Monday.
In an effort to protect participants, the U.K. government proposed an amendment to the Occupational Pension Schemes Regulations 2018 that would help simplify the consolidation process, which many of the workplace plans will undergo in result of the new master trust regime to emerge on Oct. 1 where trusts will need to register with the Pensions Regulator in order to continue to operate. Some one-third of employers want to close their existing plan and move participants to master trusts but they face barriers under the current requirements, according to the U.K. government's data.
"The current process for plan consolidation is very burdensome. Plans can seek consent from every individual participant but this is time consuming and difficult, with low response rates, even after concerted efforts. A 'without consent' approach is available, but the tests to be met are either difficult to apply or serve no useful purpose when used for defined contribution plans," the government said.
Following an industry consultation, the government is removing the requirement to obtain an actuarial certificate for asset transfer without the consent of the participant. The requirement is replaced with a new amendment that removes the obligation for plan sponsors to have an underlying relationship with other employers using the plans for these transfers to occur and extends charge-cap protections for the participants transferred without consent, the government said. Plans which began the transfer have until Oct. 1, 2019, to complete it.
The blueprint for trustee duties published Monday outlines how participants in self-select options can be protected using "time-based trigger" during consolidation efforts. A time-based trigger allows a transfer without active participant consent from a non-default arrangement to a new non-default arrangement without triggering the fee cap restrictions.
"Under the existing legislation, where participants did not actively confirm, prior to a transfer between plan or within a plan, that they wish to be moved into an arrangement which is not a default, then where the plan was being used for automatic enrollment by their employer, they would need to be moved into an arrangement which could be offered within the (fee) cap," the government said.