Proposed changes to your IMI pension arrangements
A Master Trust is an authorised pension arrangement that allows groups of employers to combine their pension plans under a single umbrella trust to provide pension benefits for their employees. Two of the main advantages of this group collaboration are increased buying power and lower running costs for the pension schemes. Master Trusts are normally operated by a professional and independent Trustee Board.
IMI and the Trustee Directors reviewed the current IMI pension arrangements to see what options are available to provide flexibility for members, together with security and good governance. Master Trusts offer more strength in numbers, flexibility through combined buying power, lower costs and good governance through the Trustee Board.
Master Trusts also have well developed member support and online tools and invest in the latest technology, meaning you can:
They also offer strong future-proofing against future changes in the pensions environment.
Some things wouldn’t change – the IMI benefits and contribution levels would stay the same. As the new provider, the MMT would be responsible for looking after your pensions account and they could pay your benefits when you take them.
The differences you would see include:
The MMT is managed by Mercer. It already has 43 participating companies, representing around 88,000 members and total assets in excess of £2.4bn. It is governed by an independent Trustee Board.
Any pension savings in the RSP would be transferred to the MMT towards the end of the year.
No. Any transaction costs incurred as a result of transferring your pension savings in the RSP would be covered as part of the transfer to the MMT.
Yes. You would be able to switch your investments within your MMT account online. You could do this at any time, through your device or computer.
No. At this time, there are no proposed changes to the current employee and employer contribution levels.
This is an option available to anyone from age 55. However, please note that there may be tax consequences of taking all of your account as cash. You can take up to 25% of the value of your pension benefits tax free, and the remaining 75% will be taxed at the appropriate rate of income tax in the year that the lump sum is taken. This may mean that tax would be paid at a higher rate than you would normally pay, and could also affect your annual allowance for future pension savings.
Yes. There is a ready-made income drawdown solution within the Mercer Master Trust which would enable you to access your pension savings at no additional cost.
Yes. The Mercer Master Trust offers its members flexibility in how and when they use their pension savings. This includes the ability to start taking drawdown on part of your pension savings whilst still in employment and continuing to contribute.
The Pensions Regulator regulates UK occupational pension schemes like the RSP and the MMT. The Pensions Regulator also oversees the authorisation regime for Master Trust pension arrangements, such as the MMT. The Pensions Regulator's contact details can be found on its website.
IMI only has to legally consult with active members and members who are eligible to join the RSP about the change to IMI’s existing pension arrangements. There is no requirement to consult with deferred members about moving their existing accounts to a new provider.
The MMT currently allows you to transfer in any other DC pension savings that you have previously built up in other plans or schemes with other employers. You may want to speak to a financial adviser before choosing to transfer in previous savings, just to check that it’s the right thing for you to do.
The performance of the MMT funds can be found in the quarterly fund factsheets using the links in the following question. More regular fund performance information is available to MMT members and can be accessed at any time via their personal online account.
Yes – subject to the country you wish to transfer your MMT account to, and whether the scheme can accept the transfer value. However, please note that this is a complex area and you should consider seeking independent financial advice both in the UK and the country you wish to transfer your MMT account to. You can find details of a local Independent Financial Adviser for advice at moneyadviceservice.org.uk. Please also be vigilant and look out for pension scams.
Yes, there would be a charge for a pension sharing order as is currently the case. It would vary depending on whether an internal or external transfer is taken by your ex-spouse.
The security of your pension benefits with the MMT is subject to the regulatory protections for Master Trusts.
If anyone involved in providing services to the MMT (for example, Mercer) failed or was unable or unwilling to provide services, the Trustee would appoint new providers. MMT member assets are held by the MMT Trustee on your behalf.
In the unlikely event of the failure of the investment managers, the MMT Trustee may be able to make a claim for compensation under the Financial Services Compensation Scheme (FSCS). This is because MMT funds are held in an insured, regulated pooled investment vehicle. For investments made through a life policy, the MMT Trustee in certain circumstances may be entitled to make a claim to the FSCS in relation to 100% of the value of the policy. The MMT Trustee receives annual reporting on the security of assets with all of the fund managers to ensure that they remain comfortable with the security of the assets.
In the MMT, if you die before you take anything from your pension it will usually be paid as a lump sum to your nominated beneficiaries. You should complete a nomination of beneficiaries form in your MMT account.
IMI’s objectives are:
IMI believes that Master Trusts offer a long-term solution to the present and future needs of employees and the company. IMI has always, and will continue to, review its pension offering to ensure it meets its needs, and the needs of employees. That means there may be further changes to the pension arrangements in future if better options become available.
IMI is proposing this change because it believes the Master Trust would provide more flexibility and choice for you, as well as having lower running costs.
In a Master Trust, each participating employer has its own section and its own separate agreement with the Master Trust. Any changes to one company’s agreement would not affect the other companies. If another employer decided to leave the Master Trust, went bankrupt, or made changes to their section of the Master Trust, this would not affect IMI.
Major risks, such as insolvency are protected in the Master Trust model. For example, The Pensions Regulator requires that all authorised Master Trusts maintain and evidence access to sufficient capital to ensure that even in a worst-case scenario, such as the Master Trust provider becoming insolvent, capital would be available to support the ongoing operation of the scheme. Under law, members' funds cannot be used to meet arising costs in such an event. Should a significant continuity event occur, the MMT Trustee would seek to move member assets to an alternative provider in the market and minimise any disruption in service to members. No liability is attached to any participating employers above paying member contributions due.
The MMT already has 43 participating companies, which represents around 88,000 members and total assets in excess of £2.4bn. This means the MMT:
when compared with the RSP.
IMI is not alone in coming to this conclusion. A recent Willis Towers Watson report stated that over the seven years since Master Trusts have entered the DC pensions market, 22% of companies have moved to this sort of arrangement and this number is predicted to rise to 35% over the next two years.
IMI completed an extensive review of Master Trust providers. This review included LifeSight. IMI assessed and ranked the providers on a number of measures, including the:
This ensured that the review was fair and that no provider had an advantage over another. The MMT ranked top in this review – IMI considered it better than LifeSight.
IMI would not have control over the individuals that sit on the MMT’s Trustee Board. However, The Pensions Regulator has strict rules about how Master Trusts choose their Trustees, which the MMT has to follow.
The Trustees must be independent. This means the majority of Trustees, including the Chair, must be independent of any company that provides services to the MMT. When choosing Trustees, Master Trusts must use an open and transparent process – and they must describe that process in the Chair’s Statement which is made available to all members. Once in post, Trustees’ roles are term-limited to five or ten years. Trustees' fitness and propriety is reviewed on an annual basis.
IMI would have its own section in the MMT which would be completely separate from other companies’ sections. IMI would be able to choose, and change at any time, the:
IMI would also continue to be responsible for enrolling and re-enrolling new and existing employees into the MMT.
Mercer owns and runs the MMT. The Pensions Regulator requires that all authorised Master Trusts maintain and evidence access to sufficient capital to ensure that even in a worst-case scenario, such as an insolvency event, capital would be available to support the ongoing operation of the scheme. Under law, members' funds cannot be used to meet arising costs in such an event. Should a significant continuity event occur, the MMT Trustee would seek to move member assets to an alternative provider in the market and minimise any disruption in service to members. No liability is attached to any participating employers above paying member contributions due.
In the MMT, there would be no additional cost to you for moving into drawdown and taking an income. There may be costs if you decide to move to a different fund, due to potential transaction costs and different fund charges. However, if you remain in the same fund as the one you used at the end of the drawdown glide path (the Mercer Diversified Retirement Fund), you can remain in this fund post-retirement, with no transaction costs or changes in charges. There are additional charges should you wish to undertake additional services, such as annuity broking or advice, as outlined in the table below.
|At-retirement report and implementation||
Alternatively, these charges can be by means of a fee of 2% of the purchase price of the annuity, capped at a maximum fee of £3,000 per annuity.
|Stage One Advice||£200+VAT*|
|Stage Two Advice and implementation||£400+VAT*|
|In-scheme Advice (QCF 4)|
|Stage One Advice||£250+VAT*|
|Stage Two Advice and implementation||£550+VAT*|
|Access to fact finding, modelling and exploration tools||Free|
|Full Independent Financial Advice|
|Initial advice and recommendation||Costs vary depending on the complexity of the individual circumstances and will be fee based with an annual management charge levied on assets under advice.|
|Implementation of recommendations|
|Ongoing fee including annual reviews|
*VAT will usually be levied at zero rates. This means you will usually not pay VAT.
In the MMT there are a number of ways you can get advice on your options. These options, and the associated costs, are outlined in the previous question.
The IMI Pension Fund was established on 1 October 1970 and closed to future accrual on 31 December 2010.
If you have benefits in the IMI 2014 Deferred Fund, these will not be affected if the proposal goes ahead. The benefits you built up before 31 December 2010 would remain deferred in the Fund until you choose to take them.
The Trustee of the IMI UK pension arrangements is IMI Pensions Trust Limited. The Directors of the Trustee Company would continue to look after the IMI 2014 Deferred Fund if the proposal goes ahead. There would be no link between the MMT and the IMI 2014 Deferred Fund.
No. The funding level of the IMI 2014 Deferred Fund would continue to be measured every three years through an actuarial valuation. The actuarial valuation measures the Fund’s assets (money invested in the Fund) against its liabilities (the cost of providing members’ benefits both now and in the future). The Fund’s assets never have, and never would, include individual members’ accounts in the RSP.
If the Fund does not have enough assets to cover the liabilities, the Trustee Directors agree a recovery plan with the Company. Under the recovery plan, the Company pays significant contributions to the Fund in order to increase the level of assets. This arrangement would continue unchanged if the proposals went ahead.
Yes. IMI is consulting with you because you must have the opportunity to read about the changes being proposed, ask questions about them, and provide feedback if you want to. IMI will consider every comment that employees make during the consultation. If you have concerns about the proposed changes, please submit them through the feedback form. We will consider your feedback and address your concerns.
IMI has the right to change the pension arrangements at any time, providing it consults with members in accordance with the law.
The Pensions Regulator is an independent body that regulates UK pension schemes. Master Trusts are very highly regulated because they hold large amounts of money and the Regulator wants to ensure that money is safe. How the MMT is regulated is outlined below.
The MMT has undergone a very rigorous, formal testing process run by The Pensions Regulator in order to become ‘authorised’. All new Master Trusts have to obtain authorisation before they can operate. This means the Regulator is satisfied that the MMT:
Once authorised, all Master Trusts including the MMT are subject to ongoing supervision from the Regulator. Each year, they must submit a “supervisory return” to prove they continue to comply with the Regulator’s standards.
The process for selection of a Master Trust provider was carried out by a selection panel comprised of RSP Trustees and representatives from IMI. They asked for and received tender documents from six master trusts. The questions focused on quantitative and qualitative areas. While scale was one of the measures that the selection panel considered, they also took into account many other factors as outlined in a previous question. The overarching aim was to come up with a solution that gave improved value to members of the RSP. The MMT was the unanimous choice of all members of the selection panel.
We do not believe that there are any significant implications from Mercer being a US-based company. Mercer has been operating in the UK for 50 years, and the Mercer Master Trust is independently run and managed by Mercer Limited, a UK based subsidiary of Mercer LLC. Therefore, whilst Mercer in the UK ultimately reports to Mercer in the US (which itself reports to Marsh and McLennan Companies), the UK business largely operates independently on a day-to-day basis. We also believe that there are benefits to members in Mercer being a global company, for example the significant purchasing power from Mercer’s global footprint, or the sharing of ideas across different countries. The Trustee Board of the Mercer Master Trust is made up of independent professional Trustees, with no links to Mercer.
Yes. If the change goes ahead, IMI will ensure that the teams involved in facilitating the move to the MMT will have the appropriate training.