• Master trust authorisations - a success story Dec 3, 2019
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    A few years back, The Pensions Regulator began to stamp its big ol’ cloven hooves about master trusts. As automatic enrolment was introduced and was hugely successful, more and more employees were being put into workplace pension schemes, and as a result, master trusts grew in popularity.

    For those of you who don’t know what a master trust is, although it sounds like a secret society, it is a term for a Defined Contribution (DC) scheme for unconnected employers to meet their legal duties. But back in 2018, the master trusts were growing in size and becoming behemoths of their former selves, threatening to spiral out of control, and so The Pensions Regulator stopped stamping and stepped in to put a plan in action to rein the master trusts in. The plan was to overhaul the existing legislation for DC schemes which would ensure that master trusts were properly regulated.

    These regulations involved written codes of practice for the industry and from October 2018, existing master trusts were given 6 months to file an application to The Pensions Regulator. In the application they were required to provide evidence that demonstrated that:
    1. The people running the schemes are fit and proper (fit as in healthy, it’s not Love Island, people)

    2. The master trust has good systems and processes in place

    3. A continuity strategy is set out what will happen in case of problems

    4. There is a funder behind the scheme

    5. The scheme is financially stable

    These prerequisites were established to ensure higher standards in the market and to make sure pension savers in master trusts were better protected.

    Well, SPOILER ALERT it’s all been a huge success and The Pensions Regulator recently revealed that the final number of existing master trusts to apply for authorisation has reached 39 (Crikey!), with 6 already authorised, and a remaining 33 awaiting a decision. Authorisation has led to a consolidation in the master trust market in which The Pensions Regulator says it sees “evidence of continuing”.

    Inevitably, not everyone was quite so keen and some schemes decided not to apply for authorisation. As of today, 10 schemes have exited the market and a further 35 have notified the regulator of a triggering event to exit the market. Well to those we say so long and good luck! This also makes room for more because despite applications closing back in 2018 for existing master trusts, new master trusts can apply to enter the market at any time. The only downside (if you’re a glass-half-empty kind of guy) is that new schemes will be monitored more intensely than existing ones because they will not have an operational track record which is, you know, fair enough.

    The Pensions Regulator will no longer be issuing a monthly number publication now that the application period for existing master trusts has ended, but said it will update its list of authorised schemes as more of them receive authorisation. I guess they're not so bad those guys; all of this is to make sure you (yes you!) are protected and that your precious pension pot is in good hooves - I mean - hands.

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