EC Meeting July 2017

Ref: IFW/GFTU/17/001

19 July 2017

GFTU Executive Committee

GFTU employees entitled to defined contribution benefits

Introduction

The GFTU Section of the GFTU Pension Scheme is effectively closed to new entrants 1 . The entry requirements include a requirement that an applicant for membership is employed by the GFTU under a contract of employment which gives the employee the right to join it, and in practice the GFTU is not offering contracts on those terms. New employees are employed on terms that they are auto-enrolled into a master trust which provides benefits on a defined contribution (DC) basis. The question has arisen whether they could be transferred to a new DC Section of the GFTU Pension Scheme. This might have advantages in:

(a) bringing all of the GFTU’s pension arrangements under one roof;

(b) giving new employees a stake in running the Scheme, possibly by giving them the right to select one or more trustees; and

(c) giving DC members more influence in their pension arrangements.

The first two points need no legal elaboration but the third perhaps does. Master trusts are trust-based occupational pension schemes, usually set up by large insurers to provide DC benefits for any employer which chooses to use it. Although they are theoretically subject to the same requirement to appoint member-nominated trustees as any other trust-based occupational pension scheme, in practice they are created with an independent trustee which is linked to, but nominally independent of the insurer. They are therefore exempt from the usual member-nominated trustee requirements. For reasons of scale the operation of the trust is usually remote from any participating employer and the membership.

Master trusts must have a separate governance committee, but in practice they operate in much the same way as a contract-based stakeholder pension scheme.

1 The PCS Section is formally closed to new entrants.

1