Authorisation sees master trust market shrink to 37 providers

On the go: A final total of 37 master trusts have received authorisation from the Pensions Regulator, with the FCA Pension Plan and Salvus Master Trust the last to get the go-ahead on Tuesday.

Following tough new regulation, the market has shrunk in size by nearly 60 per cent, from 90 schemes to 37 authorised master trusts.

The new safeguards were introduced on October 1 2018. All existing master trusts had to prove they were run by fit and proper people, had sufficient financial reserves, and had robust plans and systems in place.

In an update, the pensions watchdog said £524m is now being held in reserve across the market to protect members from paying any costs related to the operation of the scheme.

The update also noted: “We have seen a major shift in the level of financial due diligence applied by DC trustees. For example, in a number of instances trustees took covenant advice on the corporate entities sitting behind master trusts.”

Nicola Parish, executive director of frontline regulation, said: “These tough new requirements better protect the 16m pension pots in master trust schemes, which people will rely on in their retirements.

“More than 50 schemes leaving the market shows that these laws are demanding – and rightly so. It is right that people saving for their retirement should be in a scheme that adequately protects their pension pots and which they can have confidence in.

“The 37 authorised master trust schemes will continue to be closely supervised by us to make sure they continue to operate within the law.”

Authorised master trusts will continue to be supervised by the regulation, with higher-risk businesses subjected to more intense supervision. Risk factors include size, complexities and TPR’s previous interactions with a scheme.

Regular submissions to TPR will include an annual supervisory return, and the regulator will run periodic scheme evaluations against the authorisation criteria.

New master trusts setting up in the market will have to be authorised by the watchdog before opening for business. If authorised, these new models will be intensely supervised in the first years of business to ensure they comply with the law. One application from a new master trust has been received and is being assessed.

A complete list of the pension schemes that have been granted master trust authorisation is below and is available on TPR’s website.