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Pursuing a continuity option during a triggering event guide

This guidance applies to triggering events occurring on or after 1 October 2018. It is intended to support trustees, strategists, administrators and others involved to fulfil their duties in the event that their master trust experiences a triggering event.

Published: November 2018

Key notes

  • For triggering events 1 to 3 a master trust will have to follow continuity option one.
  • For triggering events 4 to 10, the trustees will need to decide which continuity option to pursue.
  • A master trust’s implementation strategy will set out the plan for how the work will be carried out and funded.
  • There are a number of legal requirements, and those involved in running a master trust need to be familiar and comply with them.

What are the continuity options?

Continuity option one is the method by which trustees of a master trust transfer all members out and then take all other steps to ensure the scheme is wound up. This process for master trusts is broadly similar to winding up other occupational pension schemes under general legislation, but master trusts have some additional requirements that must also be met.

Continuity option two is chosen when the decision is taken that a triggering event can be resolved, and the normal operations of the master trust can be resumed.

Where the legislation permits, the trustees of a master trust may decide to resolve the triggering event it has experienced under continuity option two rather than transferring members out of the scheme and winding it up.


For continuity option one, we envisage it will take at least 10 months from an implementation strategy being approved and a trustee default scheme agreed, for all members of the master trust to be transferred out and any other steps necessary to wind up the scheme to have commenced.

This reflects the statutory time limits for actions that must be carried out. See master trust continuity options flowchart (PDF, 33 KB, 1 page).

This does not reflect the total time of the triggering event period but the period to transfer members out.

There are no specific time limits to resolve a triggering event using continuity option two, but we will need to be satisfied that a master trust has sufficient financial reserves to continue with the chosen option and to cover the costs of continuity option one (whether or not continuity option one ultimately applies).

When are the continuity options used?

Continuity option one must be pursued where we have made a decision to withdraw authorisation or where a master trust has never been authorised by us[2].

In all other cases, the trustees may decide to follow continuity option one or continuity option two if they believe the triggering event can be resolved and it is in the members’ best interests to do so.

Continuity option two cannot be followed in any of the following situations:

  • A warning notice (standard procedure) or determination notice (special procedure) has been issued about a decision to withdraw the scheme’s authorisation.
  • Trustees are notified of our decision to refuse to grant the scheme authorisation (this includes where trustees of an existing master trust are notified of such a decision).
  • Trustees receive a notification that the scheme is operating without authorisation.

Footnote for this section

  • [2]Triggering events 1, 2, 2A and 3 under Pension Schemes Act 2017

Moving between continuity options

Most schemes will have only limited financial reserves. If trustees are unable to resolve a triggering event, they may face a situation where they are unable to cover the costs of continuity option one.

Trustees will therefore in practice only have a limited period of time available to them in which to pursue continuity option two if they are to ensure that there are sufficient financial reserves.

We will expect trustees to include in their implementation strategy the conditions and timescales that might lead them instead to pursue continuity option one, including, for example, an indication of the point at which they will consider it is no longer financially viable or in the members’ best interests to pursue continuity option two. For some schemes or some events, this may be a matter of weeks, while other schemes with larger reserves may only be forced to abandon resolution attempts after some months. The implementation strategy must provide the rationale for pursuing the chosen continuity option[3] and we may request further sight of how all relevant considerations were taken into account.

Where, following an analysis of the trustees’ plans and the circumstances of the scheme, we are not satisfied that a scheme is likely to be able to successfully pursue continuity option two as set out in its implementation strategy, we may direct the trustees to follow the strategy and pursue continuity option one. If we are no longer satisfied that the authorisation criteria are being met, we may seek to deauthorise the master trust and it would then be required to follow continuity option one. This will typically only take place after we have engaged with the trustees and, where relevant, the scheme strategist and scheme funder, and we are of the opinion that no resolution is likely.

Footnote for this section

  • [3]See regulation 19(2)(c) of the Occupational Pension Schemes (Master Trusts) Regulations 2018 and paragraph 390(d) of Code of Practice no 15: Authorisation and supervision of master trusts

Implementation strategy

The implementation strategy must be submitted to us for approval before the end of 28 days beginning with the date the triggering event occurred or (for triggering events 1, 2 or 2A) the date when the decision to withdraw or refuse authorisation becomes final. This means that where the triggering event is either a warning notice or determination notice concerning a decision to withdraw authorisation, or the notification of a decision to refuse authorisation, the time limit for submitting the implementation strategy starts when it becomes clear (because all appeals have been finalised) that authorisation is to be withdrawn or refused. For all other triggering events, the time limit for submitting the implementation strategy starts with the date of the triggering event.

The implementation strategy is a critical document which, if continuity option one applies, should set out in detail the plan for how members’ benefits are to be transferred and the master trust wound up as well as, in all cases, demonstrating that there are adequate financial reserves to implement the plan. Under certain circumstances, we may direct trustees to follow certain elements of their implementation strategy, for example where a decision needs to be made and has been delayed.

We have provided a master trust implementation strategy template (Word, 751KB) for the implementation strategy to support trustees in understanding our expectations. While trustees are not required to use this template, it will help them draft a strategy that we will be able to approve. In every situation we expect the implementation strategy to contain details of the following:

  • The triggering event(s) that have occurred.
  • The cause of the triggering event.
  • The materiality of the triggering event.
  • The schedule of charges.
  • The chosen continuity option.
  • The communications plan detailing how and when members and employers will be provided with information and updates.
  • How existing advisers and service providers will be retained throughout the triggering event.
  • Any additional advisers that the trustees intend to use and the capacity in which they will be used.
  • Key decisions already taken.
  • Key decisions that remain to be taken, who will take them and when.
  • Plans to reconcile member investments.
  • Plans to cleanse scheme data and trace members.
  • How scheme investments will be managed and details of any planned changes.
  • How the financial reserves are sufficient to carry out the planned work through a detailed breakdown of expenditure and income.
  • The estimated length of time to resolve the triggering event.

In addition, for continuity option one, we will expect an implementation strategy to do the following:

  • If available, set out the default scheme selected by the trustees, including the rationale for its selection and confirmation that it has agreed to accept all members and employers. The trustee default scheme is the alternate scheme that they propose can be used for ongoing contributions for employers and where members’ accrued benefits will be transferred. It must be an authorised master trust that qualifies as an automatic enrolment (AE) scheme.
  • Where the trustees have not yet selected a default, the strategy should set out their plan for selecting it, including progress made to date, the parameters that will be used to select a default and the date the work is expected to be completed.
  • It should also set out a plan to take any other necessary steps to wind up the master trust once all members and their accrued benefits have been transferred out.

For continuity option two, we will expect the implementation strategy to include the following:

  • How the trustees intend to resolve the triggering event.
  • The time and financial resources available to the scheme before continuity option one must be triggered.
  • Any additional events that may result in a scheme following continuity option one.
  • The parties (if any) that the scheme will be engaging with to help resolve the triggering event.
  • Any significant milestones until the triggering event is resolved.
  • Key risks identified in the resolution process.
  • Key dependencies to successful resolution.
  • The plan to rebuild financial reserves, if required.

We expect and recommend some activities that may not appear essential under continuity option two are carried out, in case a switch to continuity option one is needed. Such activities may include data cleansing and member tracing. These will be necessary to resolve continuity option one, and will support the good operation of the scheme if continuity option two is successfully resolved.

Periodic reporting

After we notify the trustees that the implementation strategy has been approved, schemes must make their first report to us within 14 days. The report should provide us with an update on progress made against the actions set out in the implementation strategy. Particular matters of concern to us will be advised to the trustees by their supervisor or case manager.

After the first report is received, we will advise the frequency or occurrence of the next report(s) that we require. In extreme cases, or at critical stages of implementation, we may require daily updates from trustees. However, in most cases we anticipate reports to be required no more than weekly.

Navigating continuity option one

The structure of continuity option one broadly splits into three main parts.

  • An exercise so that participating employers have the information and support they need to arrange for future contributions to be paid to a new scheme.
  • Transferring all members’ accrued rights out.
  • Any further steps needed to wind up the master trust.

To successfully navigate continuity option one, trustees will need to consider a number of matters for each of the key tasks.

Selecting a trustee default scheme

Selecting an appropriate default scheme[4] for employers and members is one of the most critical tasks for trustees to undertake. We expect trustees to commence this work as soon as they are aware of a triggering event, or that one is likely to occur. The starting point for trustees is the continuity strategy, which should set out the details of how a default scheme would be selected.

We do not believe it is possible to discharge members’ benefits other than by transferring them to another scheme. We would not expect to see consideration of other options such as winding up lump sums.

The default scheme must, in almost all instances, be an authorised master trust that qualifies as an AE scheme. If there is no authorised master trust that the trustees consider appropriate for use as a default scheme, the trustees may consider purchasing suitable policies from a Financial Conduct Authority (FCA) regulated insurer that will secure members’ benefits. We expect that in practice this will mostly apply to members in decumulation.

One key consideration should be how the interests of members are to be protected. We also expect trustees to consider investment options, decumulation, the mix of employers in the scheme and whether the default scheme will accept all members and employers. Trustees should also consider the following:

  • What support or advice they need to support the process and how they will fund it.
  • How they will use the principles set out in the continuity strategy in selecting a default scheme.

The charging structure of the receiving scheme. We do not expect the trustees to seek an exact match of the charges or automatically select the lowest available charges, but to understand the value for money offered by potential receiving master trust schemes.

The implementation strategy must include information about the receiving scheme if known[5], and while we would prefer the strategy to identify a specific scheme, we understand this will not be possible in all cases. Where a decision has not been taken as to what the receiving scheme will be, we expect to see the steps being taken set out in the strategy with a timeline for the work to be completed. We are unlikely to approve an implementation strategy unless it contains a credible plan for identifying a receiving scheme in a timely way so that members’ benefits are protected and the relevant statutory timescales for transfers can be met.

Dealing with funds in decumulation

Trustees need to assess the needs of any members whose benefits are in decumulation and the options offered by potential new schemes. We expect trustees to pay particular attention to this group of members as their needs may be different from the needs of the wider membership. In order to protect the interests of decumulating members, trustees may need to utilise a different receiving scheme or product.

Trustees will also need to consider how they will manage any members who wish to begin decumulation during a triggering event period, and whether they will be able to do this in the master trust or need to transfer out to do so. If decumulation is permitted during a triggering event period, any cut off point will need to be made clear to members.

Data cleansing and member tracing

Accurate and complete data is an essential component in successfully navigating continuity option one. A plan for this work should be put in place in conjunction with the scheme administrator as early as possible, preferably when it becomes clear that a triggering event is likely to occur or as soon as a triggering event occurs.

We expect trustees to manage and monitor progress of this work throughout its duration. They should have an understanding of the extent of any data management and assurance issues discovered. Trustees must have an understanding of any data issues through their governance of systems and processes and this should be reflected in the continuity strategy.

There are several components to this work that need to be considered and acted on.

  • A reconciliation of member data against scheme assets to ensure all contributions have been correctly allocated.
  • All members should be correctly identified and their benefits should be clear. All investment instructions, switches and lifestyling should have been actioned and recorded. Transfers and other issues such as pension sharing and protected entitlements should be recorded correctly.
  • Where there are issues to resolve, prompt action needs to be taken.
  • Accurate contact details should be held for all members and employers. We expect trustees to make reasonable and proportionate efforts to trace missing members, including the use of tracing and existence checking services, and the costs of doing this should be accounted for.

Communicating with participating employers

Employers will understandably be concerned about their master trust entering a triggering event period. Clear communication is critical to provide employers with the information they need to make sure they will continue to meet their AE obligations and to be reassured that members’ accrued benefits are protected.

We will expect trustees to ensure that adequate support and information is provided to employers, and that they will help them manage their employees’ concerns.

The regulations set out the minimum information that must be provided to employers[6], but we expect trustees to set out a communication plan that is appropriate for their master trust and reflects the diverse profile of their employers.

The legislation sets out a number of communications that trustees must send to employers. They will first need to notify the employers that a triggering event has occurred. This must be provided within 14 days of the triggering event occurring and we expect this communication[7] to explain the following:

  • The occurrence and nature of the triggering event and the impact on the master trust.
  • What an implementation strategy is and the date on which it has, or by which it will be, submitted to us for approval. Also make it clear that it will be made available to the employer after it has been approved.
  • The plan for further communications with the employers.
  • How members will be protected during a triggering event period.
  • What contributions need to continue to be paid, and why it is safe to do so.
  • What actions the employers will need to take, and when and how they will be supported.
  • Any services or functions of, or related to, the scheme that will be affected by the triggering event.

A further communication[8] must be provided within 14 days starting with the date of selection of the trustee default scheme or, if later, the date that trustees are notified that the implementation strategy has been approved. This communication is a key decision point for employers and we expect it to include the following[9]:

  • Information on the trustees’ default scheme, including its name. We expect it to include why the trustees consider the default to be an appropriate receiving scheme for their master trust and to highlight any key similarities and differences.
  • The fact that employers may select their own scheme for active members and that any scheme they choose must also be an authorised master trust.
  • The fact that employers must notify the trustees within eight weeks that they have selected an employer default scheme. We expect the notice to also highlight to employers that where they select a default scheme, they are required to notify their workers[10].
  • The fact that, if employers don’t notify the trustees within eight weeks, the trustee default scheme will be used for active members.
  • The expected date for the final contributions to be accepted by the master trust.
  • How employers can continue to comply with their AE duties and actions they will need to take.
  • Where they can get further guidance about the proposed transfer, for example on our website.
  • The timetable for further communications.
  • Updates on the progress of the member transfer work and communications.
  • Confirmation of the date from which contributions must be paid into the new master trust, the actions that employers need to take, and where they can get support.
  • Confirmation of the expected date for accrued member pots to be transferred out not less than one month before the expected transfer date[11].

Moving ongoing contributions

Once the eight week period12 for employers to select a default scheme has ended, the final contributions into the master trust will need to be processed immediately after the date selected by the trustees for contributions to end. The trustees should then ensure that a final reconciliation is carried out to give a final tally of members and their unit holdings.

Where an employer has selected their own employer default scheme, we expect the trustees to write to them and inform them that the employers will have to set up regular contributions. The trustees of the transferring scheme may separately inform the receiving scheme trustees of the date they expect to transfer the accrued benefits.

Where employers are using the trustee default scheme, we expect the trustees to pass details to the receiving master trust for them to contact employers with the necessary paperwork and contribution arrangements. We also expect the trustees to write to employers to provide a direct contact at the receiving master trust and remind them of their AE duties.

Communicating with members

Communicating with members is a substantive exercise in terms of time and cost but it is very important. Its success will depend upon the quality of data and the clarity of messages.

This is likely to be a worrying time for members and we expect you to provide them with clear and accessible communications. This includes consideration of the best way to keep members updated on progress at regular intervals. Legislative requirements should be considered a minimum.

The trustees must provide members with an initial notice within 14 days starting with:

  • the date of notification that the implementation strategy is approved
  • the date you identified the trustee default scheme

We would expect this notice to provide information on what has happened to the master trust and an explanation of the next steps. In addition, it must:

  • include information on where members can get further guidance
  • set out the members’ right to choose where to transfer their benefits (including the option to use their cash equivalent to acquire policies with an FCA-authorised insurer)
  • set out when further information will be provided

A second mandatory notice must then be issued to members within three months starting with the date of issuing the first notice to them, and after the eight week period for employers to select their own default scheme. This means that it will generally be within four weeks of the employer exercise closing.

The purpose of this communication is to enable members to decide where to transfer their benefits. Trustees should make sure members have all the information to make this important decision. It is critical that they understand what their benefits are, what to do next, and have sufficient information about the trustee or employer default scheme to make an informed decision.

We expect the mandatory notice to include:

  • the estimated transfer date
  • information about the trustee or, if relevant, the employer default scheme and default arrangement in that scheme
  • how further information can be obtained
  • where members can get help and advice
  • the options available to members and any limits on where they can transfer to, notifying them that they will be transferred to the relevant default scheme unless they exercise this option
  • the impact on ongoing contributions for active members
  • the fact that members have three months from receiving the notice to make a decision on where to transfer their benefits
  • the information members must provide to select an alternative transfer destination, and when by
  • confirmation that if members don’t respond, their benefits will be transferred to the trustee default scheme
  • when and how further information will be provided

Transfer exercise

Once the three month period for members to make a decision has expired, the trustees need to ensure that all member benefits are transferred out within three months. They may be transferred to a combination of the trustee default scheme, employer default schemes (where appropriate) and in accordance with individual member requests.

Footnotes for this section

  • [4] Paragraph 11 of Schedule 5 of The Occupational Pension Scheme 9Master Trust) Regulations 2018 sets out requirements that must be met by default schemes.
  • [5] See section 27(5)(b)(i) of the Pension Schemes Act 2017.
  • [6] See paragraph 4 of Schedule 5 to the Occupational Pension Schemes (Master Trusts) Regulations 2018.
  • [7] The legislative requirements are contained in regulation 16 of the Occupational Pension Schemes (Master Trusts) Regulations 2018.
  • [8] See paragraph 4 of Schedule 5 to the Occupational Pension Schemes (Master Trusts) Regulations 2018. This is the trustees first notice to employers in the regulations.
  • [9] See Regulation 20 and paragraph 4(4) of Schedule 5 to the Occupational Pension Schemes (Master Trusts) Regulations 2018.
  • [10] See paragraph 5(2) of Schedule 5 to the Occupational Pension Schemes (Master Trusts) Regulations 2018.
  • [11] See regulation 20 and paragraph 9 of Schedule 5 to the Occupational Pension Schemes (Master Trusts)Regulations 2018.
  • [12] See paragraph 5 of Schedule 5 to the Occupational Pension Schemes (Master Trusts) Regulations 2018.

Resolving a triggering event using continuity option two

In order to resolve a triggering event, the trustees must be able to satisfy us that the scheme meets, or in certain circumstances is capable of meeting, the authorisation criteria. We will require sufficient information from the trustees to demonstrate the resolution. This may mean the trustees have to present us with a significant amount of information.

The information required to resolve a triggering event will vary from case to case, depending on the circumstances of the scheme and the triggering event it is attempting to resolve.

We envisage that most schemes following continuity option two will be doing so because of a triggering event arising from scheme funder or financial issues. In these cases, we would expect a scheme to be able to satisfy us that it can or does meet the financial sustainability requirement before we would confirm the resolution of the triggering event. This may be through putting in place a new scheme funder. Alternatively, a scheme may be able to demonstrate that it can operate without the need for a scheme funder, perhaps through existing or increased income, or by lowering the operating costs of the scheme.

We will consider any approach that trustees may wish to make to resolve a triggering event. However, we may use our powers to direct trustees in relation to the implementation strategy where we are not satisfied that the action is appropriate, or where we believe that it has no chance of success. In certain cases, we may use our wider powers to influence or alter the behaviour of the trustees.

The evidence required to satisfy us that the triggering event has been resolved will typically require the completion of a new business plan. Where there is a new scheme funder (or funders), we will have to assess their ability to support the scheme. We will also need to assess the fitness and propriety of the relevant individuals associated with the new funder(s)[13].

It is also possible that trustees may choose to resolve a triggering event that has arisen for non-financial reasons. This appears most likely where the trustees have themselves initiated the triggering event[14]. In these situations, resolution will depend on the trustees being able to demonstrate that the issue or issues that led to the triggering event have been fully resolved.

The evidence to demonstrate resolution will again vary, but we would typically expect it to be equivalent to that required for an application for authorisation. This will allow us to fully assess whether the scheme should be authorised.

Footnotes for this section

  • [13] Code paragraph 41 to 98
  • [14] Triggering event 10, 21(6), PSA 2017

Additional triggering events imposed by TPR

While a scheme is following continuity option two, it is not excused from the requirement to keep us satisfied that in other respects it meets the authorisation criteria. If we are not satisfied, we may take action to withdraw authorisation. If we withdraw authorisation, the scheme will be forced to follow continuity option one. We may also take action where we are no longer satisfied of the ability of the trustees to deliver a resolution, or where we are no longer satisfied of the suitability of continuity option two.

Rebuilding reserves

Where a scheme has depleted its financial reserves in the resolution of continuity option two, we will expect it to rebuild those reserves to their required level. The length of time permitted will depend on a variety of factors. These will include:

  • the amount by which current reserves are below the required amount
  • the income basis of the scheme
  • the strength of any scheme funder(s)
  • the trustees’ preferred time to rebuild reserves
  • forecasts of future growth or cost changes
  • any steps taken to control costs
  • any additional planned or contingent expenditure
  • supervisory concerns held by TPR
  • significant milestones and the profile of the recovery

When setting out a timetable for rebuilding reserves, we would expect it to be achievable and to take place over a short period of time with specified milestones throughout that period. Schemes in this position can expect increased supervision by us, at least until their financial reserves are restored.

Where milestones are not being met we would expect that trustees would inform us of this.

We will not be satisfied that a triggering event is resolved unless we can be satisfied about the feasibility of the plan for rebuilding reserves. If at any time it appears to us that it will be unlikely that a scheme will be able to fully restore its reserves we may take action, which could include measures to withdraw authorisation.

Resolution of other triggering events required

It is possible that having experienced one triggering event, a master trust may experience subsequent triggering events. For example, the trustees may consider that the scheme is at risk of failure and decide that a triggering event has occurred.

If this occurs, it may still be possible for a scheme to pursue continuity option two, although successive triggering events may also be an indication or cause for continuity option one to be followed. Where a scheme experiences more than one triggering event and continues to pursue continuity option two, it will need to satisfy us that it is capable of meeting the authorisation criteria before we agree that the triggering event has been resolved. Where the resolution process includes a number of incremental steps, for example a new scheme funder has to be in place before another triggering event can be resolved, we will normally act to provide an indication as to whether the actions will satisfy us. This may include us taking steps to assess the strength of the scheme funder and key individuals for fitness and propriety

Requirement to notify TPR of a resolution within 14 days

When the trustees believe they have resolved a triggering event, they should provide the necessary information to us within 14 days. It is likely that a scheme will have discussed their possible resolution with their TPR case handler as they move towards resolution.

It will normally be in the interest of a scheme and its members to seek to resolve a triggering event as quickly as possible.

Timescale for TPR to confirm resolution

Once the trustees of a scheme have notified us that they consider their triggering event has been resolved, we will assess the evidence that they have provided. While there is no legislative timescale in which we need to make our assessment, we will try to provide the scheme with an indication of how long it will take. In all cases, we will do so within a timescale that is reasonably practicable in the circumstances of the scheme. The review is likely to take less time where the resolution process has been relatively straightforward, and/or those involved have been open and honest with us and have proactively engaged with us during the resolution process.

In certain circumstances, a triggering event may have been caused by a comparatively minor incident. An example might be where a scheme has multiple funders providing only money purchase benefits and one of the funders goes insolvent. It may be that such an incident does not affect the overall sustainability of the scheme and can therefore be resolved quickly. In some cases, the trustees may believe that resolution has been reached by the time they notify us because the failure of one funder is immaterial.

Continuity option two and mixed benefit schemes

Some mixed benefit schemes with multiple employers are exempt from certain duties in relation to triggering events, and should check the relevant legislation. Such schemes should remember that while they may be exempted from some duties, others still remain.

How TPR will confirm resolution

Once we are satisfied that a triggering event has been resolved, we will confirm this in writing to the trustees of the scheme. At this point, the triggering event period in respect of that triggering event will come to an end and the restrictions applying within such a period will fall away.