The Pensions Regulator welcomed the news last week that its concerns over the regulatory controls for master trust schemes may at last be addressed.
On 30 November the Department for Work and Pensions launched a consultation on the draft regulations for the authorisation and supervision of master trusts under the Pension Schemes Act 2017.
A master trust scheme is defined as an occupational pension scheme that:
- is used by more than one employer;
- provides money purchase pensions (either alone or with other benefits); and
- is not a public sector scheme or used only by connected employers.
As of 1 October 2018 a master trust must be authorised by the Pensions Regulator if it is to operate and authorised master trusts will be subject to ongoing Regulator supervision.
As part of the authorisation process the Regulator must be satisfied that a Master Trust scheme meets the five criteria set out in section 5 of the 2017 Act:
- The persons involved in the scheme are fit and proper persons;
- The scheme is financially sustainable;
- Each scheme funder meets specific requirements;
- The scheme’s systems and processes are sufficient to ensure that it is run effectively; and
- The scheme has an adequate continuity strategy.
The draft regulations are intended to provide more detail about what evidence master trust schemes must provide in order to satisfy the Regulator that they meet these criteria.
The draft regulations create three tests to ensure that key people involved in the scheme are fit and proper persons:
- The Integrity Test will involve the checking of evidence relating to bankruptcy, unspent criminal records, director disqualifications, credit history and any previous findings of financial misconduct or contravention of the rules of the Regulator;
- The Conduct Requirement provides for Regulator monitoring of previous and ongoing conduct;
- The Competency Test scrutinises the individual’s experience, knowledge and qualifications to carry out their role.
The draft regulations also set out guidance on the ways in which employers are “connected” and reveal the likely fee payable by a mater trust when applying for authorisation. It is anticipated that an existing scheme will be required to pay £67,000, while for a new scheme the fee will be £24,000. The difference reflects the idea that the Regulator will be required to carry out substantially more work in authorising an existing master trust.
The consultation will run until 12 January 2018.
This blog post was written by Joanne Cutt. For further information, please contact:
Michael Collins, partner, Pensions
T: 0121 234 0236