A new law comes into force today to drive up standards in master trust pension schemes used by millions of people to save for retirement.
Every new and existing master trust will now have to apply to The Pensions Regulator (TPR) for authorisation to show they meet the tough new standards designed to increase safeguards for 10 million members.
Under the legislation, master trusts must have fit and proper people, sufficient financial reserves, robust systems and adequate plans in place to get authorisation and operate in the market.
TPR will then supervise schemes to ensure they continue to meet their legal duties. It has today published the revised supervision and enforcement policy, updated after consultation.
Existing master trust schemes now have six months to file an application to TPR for authorisation to continue to operate in the market, while new master trusts must be authorised before they open for business.
Nicola Parish, Executive Director for Frontline Regulation at TPR, said: "We pushed for extra protections around this market and are pleased that the law has come into force today.
"The success of automatic enrolment has led to rapid growth in master trusts. Authorisation and supervision is vital to ensure 10 million savers can have confidence that their retirement savings are safe."
To ensure master trusts are ready to apply for authorisation, TPR has been in close discussions with providers. It has published a code and guidance with the support of the industry and ran a voluntary readiness review programme which gave schemes an opportunity to provide a draft application to TPR and receive detailed feedback.
Nicola Parish added: "We have worked hard to ensure we have been clear about the evidence we require from master trusts to demonstrate they meet the standards laid out in law.
"It is now up to trustees to review the code of practice and guidance, and submit applications through our portal, which opens today."
New figures released today (PDF, 73kb, 3 pages) show that, so far, 30 master trusts have exited or are exiting the market, leaving 58 which will either need to apply for authorisation or exit in the coming months.
- The Master Trust Supervision and Enforcement Policy has been published alongside industry feedback from the consultation. Supervision has been changed from being routine for all schemes, with additional supervision for those which pose a higher risk, to a scale of intensity depending on the risks posed by a scheme. How TPR will assess the level of supervision a master trust will receive is outlined in section 2.3 of the policy.
- A master trust is an occupational pension scheme that provides money purchase benefits for multiple, unconnected employers.
- The authorisation and supervision of master trusts by TPR was introduced in the Pension Schemes Act 2017 and Occupational Pension Schemes (Master Trusts) Regulations 2018.
- Code of Practice 15: Authorisation and supervision of master trusts and related guidance set out how trustees can satisfy, and continue to satisfy, TPR that a master trust meets the authorisation criteria. When applying for authorisation, a master trust will have to provide evidence to the regulator in five areas to stay in the market:
- fit and proper persons
- financial sustainability
- scheme funder
- systems and processes
- continuity strategy
- 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; 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 TPR’s functions under Part 3 of the Pensions Act 2004 only).
Kimberly MiddletonMedia Officer (DC)