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TPR welcomes new powers to protect savers in master trusts

Ref: PN16-46
Thursday 20 October 2016

The Pensions Regulator (TPR) today welcomed the Government’s Pension Schemes Bill which will give it tough new powers to regulate master trust schemes.

For the first time, TPR will have the power to authorise and de-authorise master trusts according to strict authorisation criteria. TPR views authorised master trusts as the lynchpin of the development of a sustainable and safe occupational DC schemes’ market.

Andrew Warwick-Thompson, Executive Director for Regulatory Policy at TPR, said: “We have long called for much stricter controls on master trust schemes and voiced our concerns over the current very low barriers to market entry.

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“We welcome the Pension Schemes Bill as a game changer. For the first time, master trusts will have to be authorised by us before they can open for business. To remain in the market they will also have to demonstrate to us on an ongoing basis that they continue to meet the strict authorisation criteria, including provisions to ensure member funds are protected in the event of a scheme wind up.

“These are tough new measures which will provide consumers and employers with confidence that the master trust market is a safe place to invest their pension contributions.”

Supervision and authorisation will examine all aspects of master trusts operations and governance and those that achieve authorisation will be suitable for any employer that wishes to use them.

Mr Warwick-Thompson added: “We anticipate that authorised master trusts will also offer employers who currently sponsor their own occupational DC schemes an alternative to continuing to run their own schemes.

“There are currently tens of thousands of DC schemes, many of which are struggling to meet adequate standards of governance and administration, and are unlikely to be able to provide value for money for their members. The consolidation of such schemes in to authorised master trusts is likely to be in the best long-term interests of both their members and sponsors.”

Editor's notes

  1. Well run master trusts can bring huge benefits to employers and consumers through high standards of governance and administration, economies of scale, professional scheme management skills, seamless transition from accumulation to decumulation, and good value for members. Together with TPR’s new DC code and guides, authorisation master trusts will help TPR to drive up standards right across the DC market for the benefit of consumers.
  2. For a master trust to become authorised, it will need to demonstrate that it meets the standards required by the authorisation criteria. These set out standards in relation to those running schemes, the financial sustainability of the scheme, the systems and processes needed for good governance and how members’ benefits will be protected if a master trust closes and seeks to wind up.
  3. 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

Tim Marks 01273 662092