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TPR welcomes proposed new powers to regulate master trusts

Ref: PN16-25
Wednesday 18 May 2016

Lesley Titcomb Chief Executive at The Pensions Regulator (TPR) said:

“We welcome the announcement today of a new Pensions Bill which proposes to give us new powers to regulate master trust schemes.

“We have voiced concerns for some time about the need for stronger legislative standards for master trusts and have worked with government and other regulators to improve levels of protection for members.

“We have been calling for a significantly higher bar regarding authorisation and supervision, and we are pleased that today’s announcement proposes to give us the power to implement these safeguards.

“We look forward to working with government over the coming months to develop the strategic application of these proposed new powers to ensure master trusts are strong, durable and well placed to deliver good member outcomes.

“Currently, new master trusts are subject to far less regulatory scrutiny than new contract-based providers and so we have encouraged employers to only choose master trusts which have achieved master trust assurance, or group personal pension plans (GPPs).

“We continue to believe that well run, scalable and sustainable master trusts, along with GPPs, are a good choice for employers seeking to comply with their automatic enrolment duties.”

Editor's notes

  • 86% – 5.9 million – of savers are now in 120 schemes with 5,000 or more members which is a sharp increase since 2013, when there were 80 such schemes. We have also seen an increase in memberships (90% increase, 2.1 million to 4 million) and assets in multi-employer schemes, such as master trusts.
  • Existing legislative and regulatory requirements mean that the requirements to set up a trust-based scheme like a master trust are different to those applicable to providers of contract based schemes such as GPPs. Under Financial Conduct Authority (FCA) regulation, providers and the people running GPPs have to satisfy the FCA that they meet various requirements before they can go to HM Revenue and Customs (HMRC) for the registration of a GPP product for tax relief. There is no equivalent approval process in the master trust environment prior to applying for registration with HMRC for tax relief.
  • Trustees of master trusts must comply with all relevant pensions legislation and in addition, we expect them to meet the standards set out in our codes of practice, and take account of our guidance. There is a risk of regulatory arbitrage arising from the regulatory asymmetry between the market entry requirements for master trusts and the equivalent FCA requirements for providers of GPPs. New master trusts are subject to far less regulatory scrutiny than new contract-based providers.
  • TPR has supported and encouraged master trusts to achieve Master Trust Assurance (MTA), the voluntary assurance framework we developed jointly with the ICAEW. We believe that MTA is a useful independently audited assurance for employers seeking to choose a scheme that meets the standards in TPR’s code of practice for defined contribution (DC) schemes and our DC regulatory guidance.
  • We have published a list of schemes who have obtained master trust assurance and met our other criteria, and our guidance to employers choosing a scheme to comply with their automatic enrolment duties indicates which of these schemes are open to all employers.
  • TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

Press contacts

Matt Adams 01273 662086

Tim Marks 01273 662092