The Pensions Regulator (TPR) has confirmed that 30 master trusts have or will leave the market as a result of their new authorisation regime brought in on October 1.
The TPR has outlined on its website what master trusts should do to meet their criteria and expectations:
1. Fit and proper: all the people who have a significant role in running the scheme can demonstrate that they meet a standard of honesty, integrity and knowledge appropriate to their role.
2. Systems and processes: IT systems enable the scheme to run properly and there are robust processes to administer and govern the scheme.
3. Continuity strategy: there is a plan in place to protect members if something happens that may threaten the existence of the scheme, including how a master trust will be wound up.
4. Scheme funder: any scheme funder supporting the scheme is a company (or other legal person) and only carries out master trust business.
5. Financial sustainability, including business plan: the scheme has the financial resources to cover running costs and also the cost of winding up the scheme if it fails, without impacting on members.
Sharon Bellingham, senior consultant at Hymans Robertson comments on the opening of the master trust authorisation window: “Looking ahead, it’s pretty interesting to think about the market might look like twelve months
from now – survival of the fittest and most committed, who might ship out ahead of the new authorisation regime and who might try but not make it.
“It doesn’t take much crystal ball gazing to see that the consolidation already happening will gain pace. It’s absolutely key to ensure that individuals are protected at all times and it’s also important to avoid chaotic market exits which may dilute confidence in the Master Trust brand. What we’ve seen so far has been controlled and measured, which is exactly how it should be.”
The remaining master trusts (approximately 58) have until the end of March 2019 to either apply for authorisation – costing them up to £41,000, or wind up and transfer members to an authorised scheme.
Jonathan Stapleton, editor-in-chief of Professional Pensions and Workplace Savings & Benefits (WSB) says: “Master trust authorisation is a good start but more needs to be done. The new regime will do more to protect the savings pots of the 10 million savers who are members of master trust schemes.
“But, while the new rules will ensure master trusts are well run and have good systems and processes in place, they won’t necessarily ensure members are in the best schemes.
“Take investment for example. While all authorised master trusts will have a solid, well thought out investment process, this won’t preclude huge variations in performance between different master trust defaults.”
Sabuhi Gard is an investment writer for Incisive Works
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