How master trust regulation is evolving
Master trust supervision has evolved to focus on investments, data and innovation, the Pensions Regulator (TPR) has said.
During an industry event on Monday, the regulator explained that it was evolving its supervision of master trusts to focus on investments, data quality and standards, and innovation at retirement.
Neil Bull, TPR’s executive director of market oversight, told an audience of master trust chairs, trustees, scheme strategists and funders that the move would see master trusts become the “gold standard for pension provision”.
He said: “Value has to be the guiding light for all that we do. For our engagement with master trusts that means: A focus on investments. A focus on data quality and standards. And a focus on innovation at retirement.”
He explained that the shift followed the success of the master trust authorisation and supervisory regime, introduced in 2019, which significantly raised the bar governance and administration.
Bull added that he wanted master trusts to see their relationship with TPR as a partnership, seeking to mitigate potential harm to savers, identify opportunities, and deliver value for money.
He also called on master trusts to candidly share their thoughts with the regulator, so it can address issues and improve its understanding of the marketplace.
Investment oversight
TPR is set to significantly increase its scrutiny of how master trusts set their investment strategies and deploy assets. This follows a government report published in November that highlighted the importance of good outcomes from default funds, as these served approximately 94% of all master trust members.
Master trusts may have already observed changes in how TPR engages on investment issues, Bull said. For example, multi-disciplinary teams from TPR have begun working with master trusts’ investment and strategic experts, as well as trustees.
Bull said TPR was likely to be more challenging over how a master trust’s approach to investments delivers for savers. It will also investigate how a master trust is seeking the best possible long-term risk-adjusted returns.
Trustee boards can also expect the regulator to interrogate investment decision making and to request deep dives into systems and processes.
Bull added: “Our visits need not be cause for concern but seen instead as a learning opportunity for us both. This will mirror the activity we see in the private sector when master trusts showcase their offer to employers explaining their operations.”
One event attendee, commenting on LinkedIn, said it was “helpful to have a regulator with a clear agenda”, and praised CEO Nausicaa Delfas’ “laser-like focus on value”.
“Happily, this does not mean trying to simply drive down prices, but to establish best practice and new standards,” they added.
Further reading
Fewer schemes, more data: TPR’s changing workload (22 May 2024)
TPR boss outlines consolidation drive (13 March 2024)
A new-look Pensions Regulator (26 February 2024)