News that one of the “big three master trusts ” was closing a significant door to new business, came as a surprise to auto-enrolment practitioners. NOW claimed to have voluntarily withdrawn itself from the Pension Regulator’s master trust assurance list, meaning it could no longer market itself to employers choosing a workplace pension through tPR’s website. The Pensions Regulator left us in no doubt that NOW jumped before it was pushed.

Nicola Parish, TPR’s Executive Director of Frontline Regulation, said:

“Those in the master trust marketplace should be in no doubt that we will act if we become concerned about the way schemes are being run, no matter the size of the scheme involved.

“Schemes have a responsibility to meet specific criteria required to remain on the master trust assurance list. If a scheme fails to meet the criteria, we will consider removing it from the list.”

Let’s first establish this does not mean that NOW pensions are a sitting duck for other providers and advisers to blow out of the water. Where NOW pensions is operating properly, there is no cause for concern, many employers report a strong relationship with NOW and have no complaints about it.

NOW is not going to resign its status as an occupational master trust and intends to soldier on till it has put its house together. We will continue to promote NOW so long as we are clear that the intent is real. Do not expect to see me change my back-pack.

NOW are clear about what has happened

Largely as a result of NOW: Pensions’ change of third party administrator, it has experienced some delays processing contributions for a small percentage of clients.

NOW: Pensions has kept The Pensions Regulator fully updated regarding these historic issues and accept that getting these schemes up to date has taken longer than it should due to the complexity of some of the cases, the poor quality data that was sometimes involved and the systems used

Morten Nilsson, NOW’s CEO told the market yesterday

“We feel that while we work to resolve these historic issues and ensure that every scheme is up to date, it’s appropriate to withdraw from the list. We are confident that this work will be completed shortly. Providing our clients and members the best possible service remains our top priority.”

and he accepted that the blame should be shared by NOW itself.

“We should have been more proactive in our communications with affected clients and members regarding these issues and apologise wholeheartedly to those we have let down. In this instance, we have fallen short of the standard of service we aim to provide.”

Our verdict

The Pension PlayPen has since 2013 promoted NOW pensions as a force for good. We like its aims , its management and its governance and we have downgraded its operational capacity with regret.

In our view, NOW has suffered from not having a proprietary administrative platform and from a lack of support from the third party administrators it has chosen to work with. In particular, the decision to move from Equiniti to JLT in the middle of the auto-enrolment staging process now looks a bad one. We were not happy with this decision at the time and I made our view clear to Morton himself.

The problem has been compounded by NOW’s failure to build out to payroll in a consistent way. It has employed a number of systems to collect premiums, some internal some from third party providers. The third party “middleware” providers have not proved as robust as was needed.

The best word to describe the systems architecture on which NOW relies as “messy”.

If this describes the problem – what is the solution?

I have put in bold , one phrase of NOW’s press release which I would challenge. NOW does not have “historic issues” in any meaningful sense, it opened its doors to coincide with the start of auto-enrolment back in 2012, five years is not – in pensions terms- sufficient to justify “historical”.

When you start with a clean slate, you would expect that slate to be clean five years later, but within a couple of years of opening its doors, NOW discovered it had the wrong administrative partner. It seems to have consistently listened to “expert views” on how the problem could be managed out using external partners and the Trustees have let the situation detoriate to a point where it has been forced to close its doors.

The sad truth is that the Trustee board, NOW management and its external service providers have lived in the past and not built for the future. The structures put in place to administer NOW pensions are in conventional terms the right structures, but auto-enrolment demanded more than a rehearsal of what had come before. NOW have only realised this recently.

The solution now is to take back control of its data and this will require recourse to NOW’s parent, the largely state owned Danish pension provider ATP. The Trustees need to be making it clear that NOW has the support of its Danish parent and if it cannot do this, it should be speaking to its members with its concerns.

NOW has over the past two years, been building a large internal operation out of its office in Nottingham and its own auto enrolment site to upload payroll files called the NOW: Pensions Gateway. The feedback from employers using this new service is better but it has not been able to put right the problems of the past.

The cost of restitution of DC problems such as NOW has will be extremely high; we call on NOW’s Trustees to confirm they have confidence that this cost will be met and to be transparent with members, participating employers and their advisers about how this will be done and when.

Apologies are not enough

The plans that NOW are putting in place to restore members to the position they should have been in, prior to the wholesale breakdown of the contribution process before , during and following the transition between administrators, need to be open to scrutiny, not just by the Pensions Regulator, but by all the stakeholders participating in the master-trust.

These plans need to be backed up by a cost analysis and a commitment from the Danish parent that where these costs cannot be met from UK revenues, they will be met from ATP’s reserves.

If such a plan isn’t forthcoming, the public has a reasonable expectation that NOW;pensions be put up for sale and if necessary be required to merge with another occupational master-trust with the capacity and commercial will to take on its problems.

Thankfully, as a longstop, we now have the provisions of the Pension Schemes Act 2017. These should ensure that if NOW cannot sort itself out, force majeure can be applied by Government to put members right. The Bill was enacted as one of the last acts of the last Government and a good thing too.

What of the Master Trust Assurance Framework?

This statement from Nilsson should cause considerable embarrassment to the ICAEW and tPR- joint authors of the MAF.

“NOW: Pensions has always been a huge supporter of the master trust assurance framework and was one of the first providers to adopt it. We’ve since completed the framework three times and remain committed to it.

Despite NOW’s early adoption and maintenance of its MAF status, it has seemingly lost control of a good part of its administration. One wonders what the MAF actually does to protect members from poor controls and administrative malpractice.

This is a question not for NOW, who must get on with putting its house in order, but for the Pensions Regulator which uses MAF as its primary means to promote good quality pensions. As we have said many times at Pension PlayPen, obtaining the MAF is not a sufficient achievement to warrant the promotion that the Pensions Regulator has given to the 23 schemes that hold it.

The Pensions Regulator needs to look at its own choose a pension pages and establish what responsibility it has for NOW’s current failings.

Thanks Damian Stancombe and Barnett Waddingham