The code of practice for master trust authorisation has been published for consultation today by The Pensions Regulator (TPR).
From October this year, master trusts will have to apply to TPR for authorisation to operate in the market.
The code outlines how master trusts will be expected to meet the new authorisation criteria and what they will need to evidence for TPR to grant authorisation and to continue to operate in the market.
More than half of people who have been automatically enrolled into a workplace pension scheme by their employer are saving into a master trust scheme.
The size of the market has grown since the launch of automatic enrolment – from 270,000 members in 2010 to nearly 10 million people today with £16 billion of savings.
Anthony Raymond, Acting Director of Regulatory Policy at TPR, said: “As the master trust market grew we had concerns about the lack of regulation for these schemes and so we lobbied the government for stricter rules.
“The publication of our code of practice marks another important step towards establishing a market with stronger safeguards and which pension savers can have confidence in.
“We are being clear about our expectations of master trusts and will not authorise schemes which fail to meet the necessary standards, both in applications for authorisation and during supervision.
“If an existing master trust chooses not to apply for authorisation or does not meet the authorisation criteria it will have to wind up and exit the market. New master trust schemes have to be authorised before they can begin to operate in the market.”
The consultation about the code of practice will run until 8 May. Authorisation will commence on 1 October and existing schemes will have six months from that date to apply to TPR for authorisation.
- A master trust is a scheme which provides pensions for multiple employers which are not connected with each other. 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
- The code of practice provides more information about what evidence master trusts will have to provide to prove they meet the criteria in each of the five areas.
- There are currently 81 master trust pension schemes according to the DC Trust Report 2017.
- 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).