Video transcript: TPR welcomes the Pension Schemes Bill
Interviewer: Andrew does TPR welcome the new bill that’s been announced today?
Andrew Warwick-Thompson. We certainly do yes, we’re very pleased with the Bill. We’ve been calling for changes to the regulation of master trusts for some time. We’re very pleased indeed that we have been given the power to authorise and de-authorise trusts and our concerns are centered mainly around the very low barriers to entry to the master trust market so the legislation proposed, as it is at the moment, nails that issue completely.
Interviewer: What were the risks of low barriers to entry for members? Perhaps members that were coming through on the automatic enrolment journey?
Andrew: Well one of our concerns were that there were people who were coming into the market who may not have been terribly competent. We’ve also seen some instances where people had the wrong motives. And we’ve also seen situations where just through poor business planning master trusts had begun to fall over and there was a risk that members’ benefits would be harmed.
Interviewer: So Andrew how does the bill change the way TPR will approach master trusts?
Andrew: For the first time it gives us proactive powers we’ve never had those before. It means that master trusts will not be able to take on new members until they’ve been approved by us. And it means that we can de-authorise them if something goes wrong so there’s a very clear barrier to the entry now. We will ensure that only competent people are able to set up and operate master trusts and if they cease to meet those requirements for authorisation we will be able to de-authorise them.
Interviewer: So master trusts should expect to have to meet tough new criteria, what sort of criteria are we talking?
Andrew: There will be requirements around the fitness and propriety of the individuals who run schemes, that’s not just the trustees but also other people connected with the scheme itself. There’ll be strict requirements around capitalisation so they must have sufficient capital to be able to run the scheme effectively. And they will also need to ring fence money so that if they do need to wind up for whatever reason the wind up costs are met from that reserve and not from the member funds.
Interviewer: So there are already quite a few master trusts in the market, a hundred or so. How do you envisage the market changing as a result of the bill?
Andrew: I imagine, and this is based on evidence from Australia where they went through a similar process, that there will be a number of master trusts that look at the new requirements and decide not to apply for authorisation and we’re standing ready to help them out of the market if that is the case. There will be some that will not be able to meet the standards for authorisation and will probably wind up as a result of the authorisation process. So we’ll end up with a number of master trusts that meet all of the criteria, they’re strong, they’re well run, they have good governance and administration they have the necessary capital requirements. I don’t know what that number will be but I imagine that it will be less than the 103 or so that we have at the moment.
Interviewer: Do you think we’ll see new operators coming into the market or will it just be the current operators, the good ones, that remain and mop up the people coming through automatic enrolment?
Andrew: I’m sure we’ll see new players come into the market as they see the success of those master trusts in both the automatic enrolment market. But also those master trusts that are starting to develop in the decumalation market there are also master trusts that are focussing on taking over existing occupational DC schemes and consolidating those. There are big opportunities there so I’m sure we’ll see new players but they will all have to apply to be authorised by us before they can open for business.
Interviewer: You’ve talked about schemes having to wind up potentially. What’s your message to members or employers that are currently using master trust schemes that might find themselves in that position.
Andrew: We’ve already set up a team to make sure that we can support employers who are using master trusts for automatic enrolment purposes and for the employees who’ve been automatically enrolled into those schemes not to be prejudiced. In relation to employers, it’s very important from our perspective that we don’t have employers finding themselves in breach of their automatic enrolment duties merely because the scheme that they chose has decided to wind up. From the perspective of the members we’re absolutely convinced and determined that they should not see their pots of money depleted as a result of the wind up.
Interviewer: So Andrew you talked about the authorisation and de-authorisation process, is there some element in between that that they would need to notify you about?
Andrew: Yes there certainly is, a master trust will have a duty to keep us informed about its continuing compliance with the authorisation. So if something changed, if there was a material change in their operation they would need to let us know and that could result in de-authorsation unless it’s corrected very quickly.
Interviewer: Andrew some people have said that TPR is perhaps a bit down on the master trust market that you’re somehow looking to sort of knock it a little bit. Is that the truth or do you actually see them as a good thing?
Andrew: No we actually see master trusts as being the lynchpin of the future DC workplace pensions market. They’ve already proved enormously successful in the AE market. A good master trust will bring exceptionally high standards of governance and administration. They bring economies of scale, they offer their members good value for money, a lot of them are developing new and sophisticated communications for their members. So the good ones are wonderful. What we want to make sure is that they all attain those very high standards so that we have a master trust market that employers and members can rely on in the future.