In this section we examine trusteeship. We explain what trusts and trustees are, how trusts are set up, and outline the advantages of setting up a pension scheme under trust. We also look at the responsibilities and duties of the trustees.

A trust is defined as an equitable obligation binding a person to deal with assets over which he has control, for the benefit of persons of whom he himself may be one. Put more simply, it is a way of creating a sense of trust between the parties.

There are three parties involved in a trust: the settlor who establishes the trust, the trustees who administer the trust, and the beneficiaries who will benefit from the trust. In the case of a pension scheme, the employer (the settlor) establishes the trust and the trustees hold the pension fund assets for the beneficiaries.

Subject to the scheme's rules, the beneficiaries may include a variety of people. Please click the link from the Government website to get a better understanding of who these are:

There are also circumstances in which the employer can be classed as a beneficiary in the wider context. In a final salary scheme funded on a balance of cost basis, the employer can benefit from good investment performance by paying lower (or no) contributions. The employer may also be entitled under the rules to any surplus on winding up.

An irrevocable trust is one where the trust assets cannot revert to the settlor except in narrowly defined circumstances, for example in a pension scheme where there are surplus funds after all the benefits are secured and the trust documents permit a refund to the employer.

Trust law has existed for several centuries. There is no one statute which lays down what a trustee must or must not do; the principles have been laid down by the courts at various times. There are several Acts of Parliament that have affected trust law. The effects of the various acts are:

  • To set down minimum standards and rules for the operation of trusts
  • To establish powers to invest in specified investments if a pension fund's documentation gives no broader powers of investment
  • To set down the maximum term for a private trust to continue in operation (but pension funds are exempt under other legislation)
  • To introduce a requirement for member nominated trustees and an expansion of trustee functions for occupational pension schemes
  • To introduce a general statutory duty of care owed by trustees in respect of all of their duties (except in relation to investment) - this operates by default unless a different standard is contained in the scheme's documentation
  • To comply with the Trustee Knowledge and Understanding requirements

Master Trusts

A master trust is an occupational trust based pension scheme set up for multiple employers who are not connected. Each employer has its own division within the master arrangement but there is one legal trust and therefore one trustee board. Employers are deemed to be ‘connected’ if they are part of the same group of companies (including partially owned subsidiaries and joint ventures).

The trustee retains decision making independence for each employer division on things such as investment funds and service providers under a trust-wide governance structure whereas decisions over benefit and contribution levels typically reside with the employer.

Master trusts may appeal to employers who wish to sponsor a trust based occupational pension scheme, benefit from the good governance which accompanies this, but only with minimal involvement with running the scheme. They may also appeal to employers with existing trust-based defined contribution arrangements who no longer feel able to bear the cost burden alone.

Many of the master trusts which have been set up are sponsored by insurance or investment companies. They are also useful for employers in the same industry such as plumbing and the railways, and for automatic enrolment NEST is a well known master trust.

The voluntary master trust assurance framework has been developed by the Institute of Chartered Accountants of England and Wales (ICAEW) in association with the Pensions Regulator (TPR) to enable auditors to provide independent assurance on scheme quality.

TPR expects those running a master trust to obtain independent master trust assurance to help demonstrate that they have standards of governance and administration that meet TPR’s Code of Practice and regulatory guidance for DC schemes.

The Pension Schemes Act 2017 (PA 2017) includes new requirements for master trusts which will require them to meet higher operating criteria.  This will include a new approval regime for master trusts and will give TPR new powers to intervene where schemes are at risk of failing.  TPR will also have the power to authorise and de-authorise master trusts according to strict authorisation criteria.

PA 2017 received Royal Assent on 27 April 2017 and its primary aim is to provide for the greater regulation of master trusts.  Among other things, the Act will:

  • introduce an authorisation regime for master trusts which provide DC benefits
  • require master trusts to demonstrate to the Pensions Regulator (TPR) that they meet certain key criteria on establishment (or, for existing master trusts, when the relevant provisions are brought into force)
  • give TPR new supervisory powers to authorise and de-authorise master trusts according to strict criteria, ensuring that master trusts continue to meet the required standards throughout their existence
  • introduce specific trustee requirements on wind-up or closure of master trusts
  • make provision for Regulations to be published containing further detail

A draft of the Occupational Pension Schemes (Master Trusts) Regulations 2018 was laid before Parliament, in May 2018 following the Government’s response in March 2018 to a consultation launched in November 2017.  The Regulations, when finalized, will implement the new authorisation and supervisory regime for master trust schemes under the provisions of PA 2017 and deal with such things as:

  • the conditions that must be met by master trusts seeking authorisation, and the matters TPR must take into account in its assessments of schemes
  • the authorisation fees payable by new and existing master trusts
  • the scope of exemptions from the regime
  • information and notification requirements.

The regulations are due to come into force generally on 1 October 2018.

The Pension Schemes Act 2017 (Commencement No. 1) Regulations 2018 have now been published and these bring into force from 1 February 2018 the part of PA 2017 that relates to TPR’s Code of Practice on master trusts.  The Code of Practice will include:

  • the process for applying for authorisation of a master trust scheme, and
  • the matters that TPR will take into account in deciding whether it is satisfied that a master trust scheme meets the authorisation criteria.

Code of Practice no.15, ‘Authorisation and supervision of master trusts’ was laid before Parliament in July 2018 (  Separate guidance will also be published by TPR to accompany the code and the authorization and supervision scheme.

Guidance on the authorisation of master trusts is given in TPR’s website at

1. References

This section relates to Trusteeship and can be found in the relevant pages of the Retirement Provision Certificate Study Manual 2023

2.Think about it

Duties and responsibilities

Trustees are the legal owners of the trust assets and they have some important obligations to fulfil. They must act in the best interests of the trust beneficiaries and use their legal ownership of the trust assets for the beneficiaries' benefit.

Can you think of five specific duties or obligations that a trustee is bound to perform?

Write down your answers to structure your understanding/revision.

3. Fact Finding

The trustees appointed to a scheme can be individuals, corporations or a combination of both. However, there are restrictions on who can and cannot be a trustee. Take a look at the table below and decide if they could become a trustee, then check your answer to see if you are correct: 

Scheme Beneficiary

Scheme Actuary

Scheme Auditor

Person disqualified by the Pensions Regulator

An employee

Person convicted of fraud



4. Test

You can now check your knowledge by a short test.  Once completed then check your answers against those given.

Trusteeship Test

Trusteeship Test Answers